U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

53–845 PDF 2010

S. Hrg. 111–634 

A PRESCRIPTION FOR WASTE: CONTROLLED 

SUBSTANCE ABUSE IN MEDICAID 

HEARING 

BEFORE THE

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

OF THE

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

SEPTEMBER 30, 2009 

Available via http://www.gpoaccess.gov/congress/index.html 

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 


ph44585 on D330-44585-7600 with DISTILLER
(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

ROLAND W. BURRIS, Illinois 

PAUL G. KIRK, JR., Massachusetts 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

JOHN MCCAIN, Arizona 

GEORGE V. VOINOVICH, Ohio 

JOHN ENSIGN, Nevada 

LINDSEY GRAHAM, South Carolina 

ROBERT F. BENNETT, Utah 

MICHAEL L. ALEXANDER, Staff Director 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND INTERNATIONAL SECURITY 

THOMAS R. CARPER, Delaware, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

MARK L. PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

ROLAND W. BURRIS, Illinois 

JOHN MCCAIN, Arizona 

TOM COBURN, Oklahoma 

GEORGE V. VOINOVICH, Ohio 

JOHN ENSIGN, Nevada 

JOHN KILVINGTON, Staff Director 

JOHN COLLINS, Professional Staff Member 

BRYAN PARKER, Staff Director and General Counsel to the Minority 

DEIRDRE G. ARMSTRONG, Chief Clerk 


ph44585 on D330-44585-7600 with DISTILLER
(III) 

C O N T E N T S 

Opening statement: Page 

Senator Carper ................................................................................................. 1 

Prepared statements: 

Senator Carper ................................................................................................. 31 

Senator McCain ................................................................................................ 34 

WITNESSES 

WEDNESDAY, SEPTEMBER 30, 2009 

Gregory D. Kutz, Managing Director, Forensic Audits and Special Investigations, U.S. Government Accountability Office ................................................... 6 

Penny Thompson, Deputy Director, Center for Medicaid and State Operations, 

Centers for Medicare and Medicaid Services ..................................................... 8 

Ann Kohler, Executive Director, National Association of State Medicaid Directors ........................................................................................................................ 10

Joseph Rannazzissi, Deputy Assistant Administrator, Office of Diversion Control, U.S. Drug Enforcement Agency, U.S. Department of Justice .................. 12 

ALPHABETICAL LIST OF WITNESSES

Kohler, Ann: 

Testimony .......................................................................................................... 10 

Prepared statement .......................................................................................... 67 

Kutz, Gregory D.: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 36 

Rannazzissi, Joseph: 

Testimony .......................................................................................................... 12 

Prepared statement .......................................................................................... 72 

Thompson, Penny: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 52 

APPENDIX 

Questions and responses for the Record from: 

Mr. Kutz ............................................................................................................ 79 

Ms. Thompson ................................................................................................... 86 

Ms. Kohler ......................................................................................................... 89 

Mr. Rannazzisi .................................................................................................. 91 

Charts submitted for the Record by Senator Carper ............................................ 93 


ph44585 on D330-44585-7600 with DISTILLER

ph44585 on D330-44585-7600 with DISTILLER
(1) 

A PRESCRIPTION FOR WASTE: CONTROLLED 

SUBSTANCE ABUSE IN MEDICAID 

WEDNESDAY, SEPTEMBER 30, 2009 

U.S. SENATE, SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, FEDERAL SERVICES, AND INTERNATIONAL SECURITY, OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 3:13 p.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Thomas R. Carper, 

Chairman of the Subcommittee, presiding. 

Present: Senator Carper. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. The hearing will come to order. 

Thank you for your patience. It is one of those days that I wish, 

as I have talked about in years past, about cloning people, so I 

could be in two places at once. 

Actually next door in the Hart Building, we are marking up 

health care reform legislation in the Finance Committee, and I 

would very much like to be there. I need to be here, but I also want 

to be there. The topics of what we are doing over there and actually 

what we are going to be talking about here kind of overlap, so 

there is a fair amount of synergy. 

Sometimes I joke that until we get this cloning thing down pat, 

so I can be in two places at once, what we ought to do is use cardboard cutouts. I joke about getting the cardboard cutout, not the 

kind that stands up, but the kind that you could sit down. 

Then I could cut out the mouth, my mouth in the cardboard cutout. I could sit here, and somebody on my staff could be right behind the cardboard cutout and speak the words: The Committee 

will come to order and next witness and stuff like that. 

At the end, folks in the audience would probably say, ‘‘He seemed 

kind of stiff today.’’ 

We decided not to pursue that. So I will have to ask you to bear 

with me. 

We are going to start voting on the floor around 4:30 p.m. So my 

goal is to have a chance to hear from all the witnesses and ask 

some questions and get some answers. Probably one or two of our 

colleagues will show up as well. 

Over the past several months, the American people and those of 

us in Congress have engaged in an unprecedented conversation 


ph44585 on D330-44585-7600 with DISTILLER
2 

1The chart referred to appears in the Appendix on page 95. 

2The chart referred to appears in the Appendix on page 94. 

about our Nation’s health care system. In fact, it may be, I think, 

the most important issue that I will work on during the time that 

I am privileged to serve here in the U.S. Senate. 

While there are a few things that we disagree on, and the media 

is always very good to focus on those, I think almost everyone 

agrees that our system is broken, as it is. We spend more and more 

money on health care than any other country. We do not get better 

results. We could demonstrate in a lot of cases, we do not get better 

results. A lot of folks do not have health care coverage at all. 

We can do better than that. 

The focus for me has been, and continues to be, not just extending coverage to people who do not have it, not just improving the 

quality of health care, but making sure that as we improve the 

quality of health care, improve outcomes, we actually rein in the 

growth of costs. 

When you have a country where we are spending almost 16, 17, 

18 percent of our GDP for health care, then I think the next closest 

country is maybe 10 percent of GDP. That isn’t good. And, when 

our health care costs are growing by two or three times the rate 

of inflation and most other countries are not, that isn’t good either. 

I have a chart over here that our staff member, John Collins, has 

prepared for us. As you can see, we look at health care expenditures per person. We go back to about 1960, and we run it up at 

least through 2007. 

According to the information, I think they are using the Centers 

for Medicare and Medicaid Services (CMS) as the source, but we 

start in 1960, with about $148.1

Today, the idea that we are spending more than $7,400 or $6,400 

or something in between, a huge amount of money—the idea that 

if we continue to go ever upward, we are doomed. We are not only 

doomed at the Federal level with Medicare costs and Medicaid 

costs. The States are in huge trouble, and our employers are in 

trouble, so are a lot of folks who do not have coverage today and, 

frankly, will not have coverage in the future if we do not do something about it. 

While there are a number of reasons for the rise in health care 

over the past couple of decades, it is clear that prescription drugs 

are one of the main drivers of this increase. 

We have another chart here,2 and we look at the average cost of 

pharmaceuticals per person, starting again in 1960, about $14 for 

every one of us. 

It is hard to believe, but as 2007 was coming to an end, we were 

between $700 and $800 in prescriptions per person, and that is obviously an unsustainable increase. I am told it is an increase of 

about 740 percent. That is just not sustainable. 

The way medicine is practiced today has changed over time, as 

we know. Drugs are now offered to patients who just a few years 

ago may have been recommended for surgery or received no treatment at all. The whole new generation of painkillers has been developed to bring comfort to patients who, before, may have had to 

simply live with their pain. 


ph44585 on D330-44585-7600 with DISTILLER
3 

1The chart referred to appears in the Appendix on page 93. 

Their benefits have been proven but so have some of their potential dangers, and that is the dangers of the painkillers. While these 

drugs bring relief, they also have the potential for patients to become dependent or even addicted to their powerful effects. 

The next chart gives us a chance to look at the growth from 1994 

to 2004.1 During this period of time, the population grew by about 

12 percent. Use of drugs grew by about 68 percent, and the abuse 

of drugs grew by about 80 percent. 

More Americans abuse prescription drugs than the number who 

have used cocaine, heroin, hallucinogens, Ecstasy and inhalants, all 

combined. 

The Drug Enforcement Administration classifies drugs that are 

most likely to be abused into a specific category they call controlled 

substances, a term we have all heard. 

A few months ago, we asked the Government Accountability Office to see whether some Medicaid beneficiaries might be abusing 

the system to obtain these powerful drugs to fuel their own addictions or maybe to sell those drugs on the street. 

GAO investigated controlled substance prescription claims. They 

looked at five States. They looked at North Carolina. I think they 

looked at California, Texas, New York, and Illinois. In total, those 

States, if you add up their populations, it is about 40 percent of our 

Nation’s population. I think they also made up about 40 percent of 

the controlled substances claims that were paid for by Medicaid. 

What GAO found were tens of thousands of Medicaid beneficiaries and providers involved in fraudulent or abusive purchases 

of controlled substances through the Medicaid program. 

GAO found three major sources of fraud and abuse involving controlled substances. 

The first included beneficiaries engaged in a practice commonly 

known as doctor-shopping. Over 65,000 Medicaid beneficiaries in 

the five states that GAO examined were going to six or more doctors for the same type of controlled substance. In one case, GAO 

found two beneficiaries working together to acquire Oxycodone, a 

powerful prescription painkiller, from over 25 prescribers and nine 

different pharmacies. In these types of cases, beneficiaries were either feeding their addiction or selling the extra pills on the street. 

Drug dealers made the profit while guess who floated the bill— 

Medicaid. And, who is Medicaid? Well, it is us. The States pay basically about half of the cost and the Federal Government the rest. 

Fraud and abuse of the Medicaid system also appears to be going 

on beyond the grave. Comparing Medicaid claims to Social Security 

data, GAO discovered thousands of controlled substance prescriptions were received by dead beneficiaries or they were written by 

dead doctors. In one case, a beneficiary submitted a Medicaid application using the Social Security number of a person who died in 

1980. This beneficiary stayed on the Medicaid rolls for 3 years and 

during that time received thousands of controlled substance pills 

and over $200,000 in medical treatment. 

GAO’s report also found more than 65 doctors and pharmacies 

that the government knew were bad apples but were not taken out 

of the Medicaid system. Providers who were barred from Federal 


ph44585 on D330-44585-7600 with DISTILLER
4 

1The chart referred to appears in the Appendix on page 96. 

health care programs for fraud and abuse convictions were still 

writing or filling prescriptions through Medicaid. In one specific 

case, a physician who had been banned after being convicted for 

writing fraudulent controlled substance prescriptions was still having his prescriptions paid for by Medicaid nearly 2 years after the 

incident. 

The problems outlined in GAO’s report have fairly simple solutions that, in many cases, already exist. Proper data-sharing agreements and basic fraud prevention controls would go a long way in 

stopping much of the abuse that we will be discussing here today. 

Unfortunately, each State has developed its own individual approach without regard for the best practices and models available 

to them, and this has resulted in programs full of holes. 

It is clear that the Centers for Medicare and Medicaid Services 

needs to do a better job of providing guidance and regulatory enforcement for the States. At the same time, States need to take 

greater responsibility for preventing and rooting out fraud, waste, 

and abuse from their own backyards. 

As a recovering governor, that is how I describe myself, a recovering governor, I understand the unique challenges that come 

along with running a State Medicaid program. 

And, as many of you know and have heard me say before, if it 

is not perfect, make it better. That is one of my core values. We 

all share a responsibility to do just that with Medicaid. 

GAO’s findings are troubling, and I look forward to an honest 

and frank discussion here today about what needs to be done to 

make sure that these abuses do not continue and to make sure that 

we recover some funds here for Federal taxpayers and for State 

taxpayers and reduce the likelihood that we will be tapped again. 

As a member of the Finance Committee, we have had a lot of discussion about how to pay for health care reform. I share the President’s belief that any plan we pass in Congress this year should 

not add a dime to our deficit going forward. It actually should reduce deficits. One of the ways that we can do that is through cutting the fraud, waste, and abuse in our current public health care 

systems. 

We can go a long way in paying for health care by eliminating 

this sort of abuse we will be discussing today. This is just the tip 

of the iceberg. There is a whole lot more that goes on beyond this. 

Before I close and turn to our witnesses, we have one more chart 

I want us to take a look at. I used to be the father of two teenage 

boys. One is now still 19; the other is 21. But we learned that one 

out of five teenagers has abused controlled substances—one out of 

five.1 That is a number that troubles me, and my guess is it troubles everybody in this room, as it should. 

The dangers of prescription drug abuse have become better 

known in the past few years as celebrities and other public figures 

succumb to their lethal effects. However, less widely publicized are 

the millions of American teenagers who abuse the same drugs. Unfortunately, they are doing so at a rate that causes alarm for me, 

and I suspect for many others. 


ph44585 on D330-44585-7600 with DISTILLER
5 

I make this point so it is clear, while there is a financial cost to 

this fraud and abuse of controlled substances paid for by Medicaid, 

let’s not forget there is a human cost as well. Prescription drug 

abuse is the fastest growing addiction in the United States today. 

The difference between a street drug like cocaine and a prescription pain pill is that in many cases the Federal Government is paying to feed this addiction with taxpayer money. Aside from our financial responsibilities, we have a social responsibility to ensure 

that our public health care system is not used to further intensify 

and subsidize a public health crisis. 

With that in mind, I want to thank our witnesses for joining us 

today. I especially want to thank GAO for the work that you all 

have done to help put a big spotlight on this problem and this challenge that we can confront. 

Our first witness today is from GAO, Greg Kutz. He has been before us on other occasions. He is the Managing Director of GAO’s 

Office of Forensic Audits and Special Investigations unit. He has 

served GAO since 1991 and is responsible for overseeing high-level 

forensics audits and investigations on fraud, waste, and abuse in 

our National Government. He has plenty of work to do, and we are 

glad you do it. Thanks very much for joining us. 

Our second witness is Penny Thompson, Deputy Director for the 

Center for Medicaid and State Operations within the Centers for 

Medicare and Medicaid Services (CMS). Ms. Thompson recently 

joined CMS after 8 years in the private sector and has over 20 

years of direct Medicare and Medicaid program experience. 

We thank you for your service and welcome you back to the government, at least for today. 

I also want to acknowledge the presence of Ann Kohler, Executive Director of the National Association of State Medicaid Directors. Ms. Kohler has spent over 20 years in the health care administration field, including 4 years as a Medicaid Director for the 

State of New York, the largest Medicaid agency in the country. 

One of your colleagues or former colleagues from New York was 

actually very helpful in helping us fashion an amendment that 

helped us, in the health care markup, helped us actually change 

the incentive system to better incentivize States to work with the 

Federal Government to do post-audit recoveries particularly in 

cases of fraud. So we can go out and get that money and share the 

money with the States and with the Federal Government in ways 

that made sense for both the State and the Federal Government. 

New York, through Medicaid programs, past and present, is actually helping us again today. 

The final witness is Joe Rannazzisi, Deputy Assistant Administrator for the Office of Diversion Control in the U.S. Drug Enforcement Administration (DEA). Mr. Rannazzisi began his career as a 

special agent with DEA in 1986. In his current position, he oversees major pharmaceutical investigations for the Agency. 

And, we thank you for joining us. We thank all the witnesses for 

joining us. 

I think we have indicated to you that we ask you to hold your 

statements to about 7 minutes. If you run a minute or so beyond 

that, we will let you slide. We will go start voting, a series of three 

or so votes, at 4:30. I want to make sure everybody has a chance 


ph44585 on D330-44585-7600 with DISTILLER
6 

1The prepared statement of Mr. Kutz appears in the Appendix on page 36. 

1The chart referred to appears in the Appendix on page 00. 

to present their thoughts and give me a chance to ask some questions and give you a chance to answer them. 

Again, Mr. Kutz, you are welcome to proceed. Your full statement will be made a part of the record. So, please summarize as 

you see fit. Thanks. 

And, again, to all of you, thank you for being here. This is important. It is not important just for our kids, and it is important for 

them—not just important for health care concerns in this country, 

that is important. 

But also in terms of in a day and age when you are running huge 

budget deficits, where we just finished the last 8 years running up 

more debt than we did in the previous 208 years of our Nation’s 

history, and in a year when we are on track to run up the biggest 

budget deficit ever, and looking ahead for the next 10 years we are 

looking at the prospect, if we do nothing, of accumulating another 

$9 trillion worth of debt, it is important that we look under every 

rock and find ways that we are spending money inefficiently, inappropriately or, in some cases, fraudulently and stop that and recover the money as much as we can. 

This is just a great place to do that kind of work. So we appreciate your help in enabling us to do that. Mr. Kutz. 

TESTIMONY OF GREGORY KUTZ,1 MANAGING DIRECTOR, FORENSIC AUDITS AND SPECIAL INVESTIGATIONS, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr. KUTZ. Mr. Chairman, thank you for the opportunity to discuss the Medicaid program. 

Today’s testimony highlights the results of our investigation into 

fraud and abuse related to controlled substances paid for by Medicaid. My testimony has two parts. First, I will discuss the results 

of our investigation, and, second, I will discuss our recommendations. 

First, we identified Medicaid dollars fraudulently used by drug 

addicts and for the sale of addictive drugs on the street. Specifically, 65,000 individuals received prescriptions for the same controlled substance, as you mentioned, from six or more doctors. And, 

as you also said, this practice is referred to as doctor-shopping. 

Our testimony today focuses on an investigation of five States 

and 10 frequently abused controlled substances. Medicaid paid $63 

million for these prescriptions. We recognize that some of the 

65,000 individuals may not have been doctor-shopping. However, 

we believe the $63 million estimate is understated. For example, 

this amount excludes the substantial cost of unnecessary office visits and trips to emergency rooms by addicts to get their drugs. 

Examples of doctor-shopping that we found include an Illinois 

drug felon using her child to obtain ADHD medication from 25 doctors. She admitted her addiction to Ritalin and using her child in 

a doctor-shopping scheme to satisfy this addiction. 

A New York woman using a scheme involving 10 doctors to satisfy her addiction to Ambien. The monitor on my left,1 and for 

those in the audience, on my right, shows monthly prescriptions 


ph44585 on D330-44585-7600 with DISTILLER
7 

1The chart referred to appears in the Appendix on page 00. 

2The chart referred to appears in the Appendix on page 00. 

from two of these doctors that, as you can see, were filled within 

5 days. 

And, an Illinois woman selling Vicodin and Duragesic patches on 

the street. One user of these drugs died of an overdose. The prescribing physician has been indicted for contributing to the fatal 

overdose of at least three individuals. 

Again on my left shows the street values of Ambien, OxyContin 

and Adderall as reported by the National Drug Intelligence Center.1 As you can see, the sale of just one prescription of OxyContin 

can result in a profit of over $2,700 for a drug dealer. 

As an estimated $87 billion of the stimulus package represents 

increased Federal payments for Medicaid. These increased payments started retroactive to the beginning of fiscal year 2009. Unfortunately, it appears that fraud and abuse related to several of 

our cases continued into fiscal year 2009. As a result, millions of 

dollars of stimulus money is likely paying for the types of fraudulent doctor-shopping schemes that I just described. 

We also identified 65 Medicaid providers and pharmacies barred 

from Federal health care programs that wrote or filled $2.3 million 

of controlled substance prescriptions. 

Examples include a New York physician barred for submitting 

false Medicaid claims. This physician prescribed 350,000 controlled 

substance pills to 773 individuals, costing $764,000. 

And, a California physician barred for incompetence, malpractice 

and negligence. This physician prescribed 142,000 controlled substance pills to 600 individuals, costing $109,000. 

We also mentioned that Medicaid, as you said, paid for prescriptions written either for dead beneficiaries or submitted by pharmacies using the names of dead doctors. 

For example, one California man was accepted into the program, 

using the identity of the individual that the monitor shows he died 

in 1980.2 Medicaid paid for $200,000 of claims for this identity 

theft scheme, including prescriptions for Vicodin. 

And, in New York, a man fraudulently received 1,000 Methadone, Xanax, and other pills that were prescribed for his deceased 

wife. 

The problems we identified were caused by weaknesses in the 

Medicaid fraud prevention program. One of the key controls is to 

make sure that the known fraudsters and criminals are properly 

excluded from this program. However, we found that none of the 

States screen providers or pharmacies against the GSA Federal Debarment List. 

The 65 providers and pharmacies that should have been excluded 

from Medicaid had felony convictions for controlled substances, 

welfare fraud, grand theft, grand larceny, and Medicaid fraud. We 

recommend that the States periodically scrub their data to make 

sure that these fraudsters are kept out of the Medicaid program. 

We also found that Medicaid paid for controlled substances for 

1,800 individuals after they had died. Medicaid also paid for prescriptions submitted using the names of 1,200 dead doctors. We 

recommend that beneficiary and provider data be periodically 


ph44585 on D330-44585-7600 with DISTILLER
8 

1The prepared statement of Ms. Thompson appears in the Appendix on page 52. 

matched against death records and the results used to prevent 

fraud. 

In conclusion, our work clearly shows fraud and abuse in the 

health care program designed to help our Nation’s poorest and 

most vulnerable citizens. Perhaps more troubling is the use of taxpayer dollars to finance drug abuse in our Nation. I am hopeful 

that CMS and the States will use the results of this investigation 

to improve their fraud prevention programs. 

Mr. Chairman, that ends my statement, and I look forward to 

your questions. 

Senator CARPER. Good. Thanks for that statement, Mr. Kutz, and 

thank you very much, to you and your colleagues at GAO who have 

done this work and all five States to help point out the very troubling findings, but not just to point out the findings, but also to 

help point out a way that we can attack them. 

Thanks so much. 

Mr. KUTZ. Thank you. 

Senator CARPER. Ms. Thompson, please proceed. Again, welcome. 

TESTIMONY OF PENNY THOMPSON,1 DEPUTY DIRECTOR, CENTER FOR MEDICAID AND STATE OPERATIONS, CENTERS FOR 

MEDICARE AND MEDICAID SERVICES, U.S. DEPARTMENT OF 

HEALTH AND HUMAN SERVICES 

Ms. THOMPSON. Thank you, Mr. Chairman. I am very pleased to 

be here and have an opportunity to sit with my colleagues and discuss this important topic, and I thank GAO for the work that it has 

done. We have agreed with all the GAO recommendations and look 

forward to working with the Agency as we implement those corrective actions. 

I have submitted written testimony for the record, but in my oral 

remarks I would like to draw your attention to what are, I think, 

the most critical points I would like to make about protecting the 

Medicaid program from fraud and abuse, not only with respect to 

controlled substances but also with regard to the hundreds of billions of dollars we pay out every year for health care services of 

all kinds. 

First, commitment is critical. This Administration has placed 

program integrity at the very center of its management agenda. 

The Secretary of Health and Human Services (HHS) has stressed 

to us that we literally cannot afford to allow scarce health care dollars to be diverted to unproductive purposes or for unlawful means. 

She has asked us to step up our game and work closely with our 

Federal and State colleagues to ensure that we do everything that 

we can to prevent, detect, and respond to fraud and abuse in the 

Medicaid program. 

Second, like any other program expending hundreds of billions of 

dollars each year, virtually millions and millions of transactions, 

tens of millions of beneficiaries, the last data that I looked at 

showed that we had about 60 million unique eligible individuals 

served by Medicaid in fiscal year 2007. We are making payments 

to very large numbers of providers and entities, and we have the 


ph44585 on D330-44585-7600 with DISTILLER
9 

challenge of protecting that program from fraud and abuse, and it 

is substantial. 

In order to be successful, it is critical for the Federal and State 

governments to work effectively together. States will always be the 

first line of defense, and they have obligations to meet in that regard. At the same time, the Federal Government can do a lot to 

help. 

We have had some good success in using Federal dollars designated for Medicaid program integrity, to support seminars and 

training for both State and Federal staff, focused on Medicaid program integrity. 

We have sent Federal employees onsite to work alongside State 

staff as they addressed specific vulnerabilities or problems within 

their State borders. 

We spent time and effort reviewing State processes and procedures and providing feedback to States on their performance. 

We have invested in data analysis and data-mining and algorithm development to identify areas in which we think we can 

work more effectively with States to address vulnerabilities. 

We are also a few weeks away from releasing our 2008 Medicaid 

Payment Error Measurement. This is the annual measurement 

that we do, that shows us where we stand with regard to payment 

errors in Medicaid, and that is an important benchmark for us to 

use as we look at where we need to promote program improvement, 

particularly with regard to payment accuracy. 

We look forward to accelerating our analysis and audit activities 

to help inform and expand State efforts and to testing some new 

ideas and tools with our State partners. 

Third, a number of the issues that GAO raises in this very good 

piece that they are releasing today are really examples of systematic issues that we have in the larger Federal and State enterprise, 

in which critical data are housed inside various databases, sometimes different formats and different data models and sometimes 

different fields, codes, and definitions. While we can ensure that we 

are accessing this data and incorporating into our payment systems 

today, our ultimate challenge is to unlock that data from their silos 

and to enable the exchange of that information across the enterprise in an automated and real-time or near-time fashion. 

Within Medicaid, CMS and the States have been working on systems modernizations to get our processing environments more modular, more standardized and more interoperable, so we can more 

easily set up interfaces to and from internal and external data 

sources and feed that data into the production flow, eliminating the 

need for manual downloads, data transformations, and rekeying. 

Fourth, the specific issue of controlled substances illustrates an 

area in which we have to pay close attention nationally. To the extent that some of the health care products we pay for on behalf of 

beneficiaries can be abused or have street value, we must be especially vigilant. I have noted in my testimony that we plan some additional actions to ensure that we are all paying very strict attention to the possibilities of doctor-shopping and diversion, and we 

look forward to talking more with GAO, DEA, and NASMD about 

their ideas. 


ph44585 on D330-44585-7600 with DISTILLER
10 

1The prepared statement of Ms. Kohler appears in the Appendix on page 67. 

I look forward to today’s hearing and continuing our conversations in the future, and I would be happy to answer any questions 

you might have. 

Senator CARPER. Great. Thanks so much for that testimony and, 

again, for joining us today. Ms. Kohler, you are recognized. 

STATEMENT OF ANN KOHLER,1 EXECUTIVE DIRECTOR, 

NATIONAL ASSOCIATION OF STATE MEDICAID DIRECTORS 

Ms. KOHLER. Good morning and thank you for having me here. 

I represent the 50 States, the District of Columbia, and the territories Medicaid programs. 

When discussing fraud, waste, and abuse in Medicaid, it is really 

important to remember that it is a joint program. The State and 

the Federal Government pay for the program. 

And, we also welcome GAO’s work and because States are just 

as anxious to reduce these problems as the Federal Government is, 

as Ms. Thompson points out, we cannot afford to spend a single 

State dollar in error, or Federal dollar. So we are very anxious to 

work together on this. 

Abuse of controlled substances clearly is not just a Medicaid 

issue. Some of the data you pointed out earlier shows that it is a 

real national issue. We want to work with our Federal partners 

and the other insurance companies to help reduce these problems. 

Medicaid has spent over $200 million, the States, in their fraud 

activities, but they recovered over $1.3 billion. 

Senator CARPER. For every dollar spent, how much did we recover? 

Ms. KOHLER. Usually, it is like a one in 10 ratio overall. 

I just want to share a few activities that States have done. Of 

course, I agree with you totally that it is not perfect. We are going 

to continue to work on it. 

The first is tamper-resistant prescription pads. I was also Medicaid Director of New Jersey, and this was found to be an incredibly effective tool, and we thank Congress for putting it into the 

Deficit Reduction Act. Having a prescription pad that cannot be 

erased or whited out and copied has been very effective in New Jersey. I think we would certainly hope that Congress would consider, 

right now it is only a mandate for Medicaid, but in New Jersey we 

implemented it for all payers, and it really has been very helpful. 

We are also doing a lot of work on E-prescribing, to have a computer system do a lot of the work, and we have drug utilization 

boards that will match against these to prevent the kinds of things 

that you saw where people were able to go to multiple doctors and 

get multiple prescriptions filled. 

We have secret shoppers that go in and present, make believe 

they are a client and try and identify problem doctors. 

We do lock-in programs where we limit the client to one doctor 

and one prescription if we have found that they appear to be doctor-shopping. 

Data-mining is critical to our ability to identify fraud, waste and 

abuse, and we will expand our use of that. And, we want to work, 

as Ms. Thompson said, each data silo, we need to break them down 


ph44585 on D330-44585-7600 with DISTILLER
11 

and have them work together and find better ways to work across 

States and share our data. 

But we still have issues and things we have to work on. We 

thank CMS for the Medicaid Integrity Program. The training that 

they have given to the States has been incredibly helpful to us. 

We recognize that State budgets are very strained right now. As 

I am sure 48 States are in deficit, which makes it difficult to hire 

the auditors that we need to hire. Again, we thank the Medicaid 

Integrity Program for providing some Federal staff to do some of 

this work. 

Senator CARPER. Let me interrupt again. You mentioned hiring 

State auditors. Is any of the collection work being done on a contingency basis? 

Ms. KOHLER. No. 

Senator CARPER. OK. 

Ms. KOHLER. We have Federal rules on contingency. 

Senator CARPER. We will come back to that. Thank you. 

Ms. KOHLER. OK. One issue that gets raised frequently, and I 

spoke to your staff about, is what we affectionately call the 60-Day 

Rule which says that States need to give the Federal Government 

their share of any overpayment within 60 days of identifying it 

even if they can never collect it. That has had a bit of a damper 

on States because they are concerned. 

Senator CARPER. I bet it has. Somebody should do something 

about that. 

Ms. KOHLER. We hope so, and Senate Finance is talking about. 

Senator CARPER. No, we are not just talking. We actually adopted the amendment. 

Ms. KOHLER. Oh, wonderful. 

Senator CARPER. We just did it earlier this week. 

Ms. KOHLER. Well, thank you very much because that is a very 

big issue for States. So we are very glad. 

Senator CARPER. It is hard to say to States, you ought to go out 

and follow up on fraudulent cases and where you think the money 

is being fraudulently misspent. By the way, even if you have not 

concluded the investigation, you have not recovered the State’s 

share, you have to cough up the Federal share after 60 days. We 

should not be surprised we do not get a lot of money by doing that. 

Ms. KOHLER. Right. Let me give you an example of one State. 

They have been very aggressive in suing manufacturers over the 

issue of best price when Medicaid is supposed to get the best price, 

and they have won some pretty significant judgments against 

them, but they are all on appeal. So probably the State will not be 

getting any money anytime soon, but, under the rule, they have to 

give the Federal Government half of these very large judgments. 

So we thank you very much for that change in the 60-Day Rule. 

So, in conclusion, let me just say that—— 

Senator CARPER. Did you say, in collusion? 

Ms. KOHLER. No. In conclusion, fraud is not just a Medicaid 

issue. It is one that our health care system needs to deal with entirely, and we are committed to working with the States and the 

Federal Government and GAO to help identify ways to reduce 

fraud, waste, and abuse in the Medicaid program. 

So, thank you very much. 


ph44585 on D330-44585-7600 with DISTILLER
12 

1The prepared statement of Mr. Rannazzisi appears in the Appendix on page 72. 

Senator CARPER. Thank you. Mr. Rannazzisi. 

TESTIMONY OF JOSEPH T. RANNAZZISI,1 DEPUTY ASSISTANT 

ADMINISTRATOR, OFFICE OF DIVERSION CONTROL, U.S. 

DRUG ENFORCEMENT ADMINISTRATION, U.S. DEPARTMENT 

OF JUSTICE 

Mr. RANNAZZISI. Good afternoon, Mr. Chairman. On behalf of 

Acting Administrator Michelle Leonhart, I want to thank you for 

the opportunity to provide testimony today regarding the problem 

of prescription drug abuse, the illegal distribution of controlled substance pharmaceutical and associated Medicaid fraud. 

The mission of the DEA Office of Diversion Control is to maintain the close system of distribution as envisioned by Congress 

when it enacted the Controlled Substances Act. To accomplish this 

task, DEA must balance the need to prevent, detect, or investigate 

the diversion of controlled substances and listed chemicals while 

ensuring there is an adequate supply to meet the legitimate medical, commercial and scientific needs of the country. All controlled 

substance diversion ultimately weakens the integrity of the closed 

system of distribution. 

Though DEA does not have a direct role in investigating health 

care fraud, we do review paper copies of debarment orders from 

CMS on a monthly basis, and we use that information from those 

debarment orders to obtain voluntary surrenders of DEA registrants or seek orders to show cause against the registrations 

where appropriation. 

DEA continues to review its methods of operations in an effort 

to enhance its ability to help identify or prevent fraud, waste, and 

abuse of resources. We work to ensure that all of our resources are 

being utilized in a most efficient and effective manner possible. 

I would like to take this opportunity to discuss a few examples 

of how we have developed systems that are secure, efficient, and 

available for use by health care professionals and registrants. 

We have implemented an E-commerce initiative, CSOS, which is 

the Control Substance Ordering System. It allows businesses to 

order controlled substances electronically. The system improves efficiency by reducing costs, errors, and paperwork while providing 

a secure platform to help prevent diversion. The system has been 

upgraded and now uses state-of-the-art technology and reduces operating costs by more than $6 million annually. 

A registrant is required to report to DEA any significant loss or 

theft of a controlled substance. DEA recently improved this system 

to allow for a more efficient electronic reporting system where registrants will help identify breaches in the closed system of distribution. 

We are finalizing a rule that will allow for electronic prescribing 

of controlled substances. The proposed system is anticipated to reduce errors, trim costs, and improve health care delivery while increasing security. 

And, our Office of Diversion Control is working internally on integrating various electronic database systems that traditionally 


ph44585 on D330-44585-7600 with DISTILLER
13 

have been stovepiped. Once completed, the total integration of 

these systems will allow DEA to better identify areas of diversion. 

DEA recognizes that State also play a significant role in curbing 

waste, fraud, and abuse of Medicaid reimbursements. To assist in 

this endeavor, DEA makes its registrant database available in a 

variety of ways: 

First, registrants can perform an online check of the current status of another registrant’s DEA registration via the DEA web site. 

DEA also provides on a weekly basis a download of the registrant 

database to 28 specific States that have requested it for use in 

their health care fraud investigations. 

Additionally, DEA provides the registrant database to the National Technical Information Service (NTIS), under the U.S. Department of Commerce. NTIS, in turn, sells this information to the 

general public. 

As pointed out by a recent GAO study, there are several independent systems currently in use that, if paired with other systems’ agencies, may be able to better identify potential avenues of 

fraud, waste, and abuse. To this end, DEA is already working with 

the Social Security Administration to obtain data that would identify deceased practitioners and reconcile that information with 

DEA’s registrant database. 

DEA has reached out to the Centers for Medicare and Medicaid 

Services for electronic access to databases that identify individuals 

who have been debarred from participation in the Medicaid program. DEA is reviewing its ability to modify the registration process and inquire whether or not an applicant has ever been convicted of Medicaid or Medicare fraud and whether they have ever 

been currently debarred from receiving reimbursements from Medicaid and Medicare. 

Finally, representatives of DEA and HHS Office of Inspector 

General have met within the last several weeks to discuss the 

sharing of information as well as forging a strong investigative 

partnership that involves controlled substance diversion and health 

care fraud. 

Although health care fraud is not specifically within the statutory authority of DEA, these crimes are often linked to other 

crimes that do fall under DEA’s investigative authority. To become 

more efficient and to have a greater investigative reach, DEA is establishing a total of 62 Tactical Diversion Squads across the United 

States which will be deployed in two phases. These groups will utilize investigative talents of diversion investigators, special agents 

and task force officers from Federal, State, and local law enforcement, and State regulatory agencies. 

The primary mission of the Tactical Diversion Squads will be to 

conduct criminal investigations involving the diversion of controlled 

substances, pharmaceuticals, or listed chemicals. These investigations frequently identify criminal acts that can be the root cause 

of debarment actions under Title 42. These investigations often result in criminal, civil, and administrative action against DEA registrants. 

One method that currently helps States identify the causes of 

waste, fraud and abuse is the use of the Prescription Drug Monitoring Program (PDMP). Currently, there are 33 States that use 


ph44585 on D330-44585-7600 with DISTILLER
14 

some type of PDMP. DEA is a strong and long-supporting advocate 

of the PDMP. Timely reporting prescriptions to PDMPs and the 

greater use by participants within those States will only improve 

the usefulness and success of such systems. 

In conclusion, DEA will continue to detect, prevent, and investigate the diversion of controlled substance pharmaceuticals. We 

will continue to refine our methods and processes to identify and 

address controlled substance diversion. 

I want to thank you for holding this hearing and the opportunity 

to testify, and I look forward to addressing any questions you may 

have, sir. 

Senator CARPER. Mr. Rannazzisi, thank you very much. 

The first question I want to start off with is each of you, I do 

not know if you have had a chance to read the testimony of your 

colleagues. Some of you have, maybe some of you have not. 

But let me start with Mr. Kutz. As you listened to the comments 

of our other witnesses, did anything kind of pop out to you that 

says, you know that makes a lot of sense and why do we not do 

that or maybe that does not make a lot of sense? 

From each of our three witnesses, what kind of raises its head 

for you as something that maybe we should work on? 

Mr. KUTZ. The use of electronic records and data-sharing to prevent the doctor-shopping. I think we saw these drug utilization review programs in place in theory. In practice, they did not all work 

as effectively as each other. In some cases, you had information 

available for the pharmacist, for example, that could have actually 

been used to deter people from doctor-shopping, but they had soft 

edits in place, and it was easily overridden. 

Senator CARPER. You said they had soft edits in place? 

Mr. KUTZ. In other words, it was not mandatory that you rejected what was clear doctor-shopping, so you could override, 

whereas other States had more of a hard edit where the prescription was denied. So that issue of giving the pharmacist a point of 

sale, electronic information that can determine doctor-shopping has 

promise to address this issue, in my judgment. 

Senator CARPER. All right. Ms. Thompson, the same question, 

what did you hear from your colleagues at the witness table that 

said, that is a good one? 

Ms. THOMPSON. Well, if I can follow up on the point that Mr. 

Kutz just made, data inside of silos is killing us—the fact that people do not have access to important information because it does not 

happen to reside in their own production systems. 

Senator CARPER. When you say people do not have access in 

their own production systems, what kind of people? 

Ms. THOMPSON. Whether it is the pharmacist looking at the data 

inside of a pharmacist’s environment, whether it is a State individual who is looking at a drug utilization review but does not have 

access to the law enforcement data, whether it is the sanctioned 

data that has to be gotten and pulled down rather than simply 

moving automatically in the background into the processing environment, it is one of the reasons why we are making such significant investments in things like systems modernization and 

modularity and exposing business processes so that data can be 


ph44585 on D330-44585-7600 with DISTILLER
15 

better shared across those organizational divisions and systems divisions. 

The other thing that I would build on from Ms. Kohler is this notion that the problems that we face in Medicaid are not much different than the problems that we face in Medicare and not much 

different than the problems that we face in private insurance. I 

think that the need to collaborate organizationally and to attack 

some of these problems as a health care enterprise is also a point 

that I would build on as well. 

Senator CARPER. All right, thank you. Ms. Kohler, same question. 

Ms. KOHLER. OK. Well, I could not agree more with what has 

been said already. 

Senator CARPER. You can say it again, if you want. 

Ms. KOHLER. OK. We need to build technology that can provide 

real-time information to the providers, to the patients, so that we 

know Ann Kohler has been to five doctors over the past month and 

gotten prescriptions for these five drugs. 

We need to be able to link that data. We need to be able to send 

it across State lines. And, we need to be able to find a way to better 

automate matches so that we could, for example, match Medicaid 

against vital statistics every month and identify. 

Senator CARPER. Now do you think some States are doing a better job of that than others? 

Ms. KOHLER. Some States have been able to put more resources 

in it than others. I know New York has a very active Medicaid Inspector General. New Jersey has just appointed one, so they are a 

little bit further behind. But it is an area that is very important 

to States. The State of Washington is very active, and all States 

really want to find ways to reduce fraud. 

Electronic health records are very important to the Medicaid directors, and a number of States have been working diligently to implement records. I always bring up the State of Alabama who has 

98 percent of their people in their database. Ninety-eight percent 

of all Alabamians are in the electronic health record system maintained by Medicaid, so that they are able to share information back 

and forth. 

Senator CARPER. That is pretty amazing—98 percent of all Alabamians. 

Ms. KOHLER. That is very amazing. 

Senator CARPER. We are proud of the work we are doing in Delaware, but I do not think we are 98 percent. That is pretty amazing 

for Alabama. 

Ms. KOHLER. Yes. For the electronic health records. 

Senator CARPER. All right, Mr. Rannazzisi. 

Mr. RANNAZZISI. I believe that the information-sharing piece is 

important, and I agree with my colleagues about the drug utilization review. 

I would like to concentrate more on the use of Prescription Drug 

Monitoring Programs, though. Prescription Drug Monitoring Programs, in the States that they are operating in, work very well. It 

is the ability of a doctor to get into a system and see if his patient 

is actually seeing multiple doctors within a certain time period or 

visiting multiple pharmacies. 


ph44585 on D330-44585-7600 with DISTILLER
16 

The key with the Prescription Drug Monitoring Programs is all 

the prescriptions have to be placed in that program, but all the doctors are not accessing the program. If you are a Medicare or Medicaid doctor, maybe the time is to mandate that because the fact 

of the matter is you have great systems, but if only 5 or 10 or 15 

percent of the doctors are using those systems, it is being underutilized. 

A system like the system in Kentucky, the KASPER system, is 

a perfect example, or the Ohio system, where the doctors, the pharmacies and the regulatory boards are using the systems to the best 

of their ability, and they are finding things. 

Senator CARPER. Who is? 

Mr. RANNAZZISI. Kentucky, under the KASPER system and Ohio, 

I do not remember the name of their system, but those two. The 

Kentucky system is basically the gold standard system within the 

Prescription Drug Monitoring Programs, and Ohio has a very good 

system as well. 

Senator CARPER. OK. 

Mr. KUTZ. If I could comment on that too because we saw the 

doctors were not using that database, and so really if you want to 

step back in the process, I said the drug utilization reviews (DURs) 

because it was the last line of defense. But, here, you could prevent 

the doctor from writing the prescription in the first place which 

means they never get to the pharmacy and do not have a chance 

to do the doctor-shopping. 

If that could ever work, which we did not see it working by the 

way—if it could work, and it did not work because people were not 

using it. I mean that is what we saw. It could be better. 

Senator CARPER. It did not work because? 

Mr. KUTZ. The doctors were not looking. I mean they were prescribing. All the doctors we interviewed said I did not know that 

this person has gone to 50 other doctors, but they could have had, 

in some States, the data available to see in fact that person had 

gone to 50 other doctors for Ambien or OxyContin or whatever the 

case may be. 

So that would mean to me earlier in the process, if you could get 

it done there, the prescription would not be written in the first 

place. 

Senator CARPER. Let me go back to I do not know who it was. 

Maybe it was you, Ms. Kohler. Somebody was talking about tamper-resistant prescription pads. 

Ms. KOHLER. Yes. 

Senator CARPER. I think you were, and I think you also mentioned the E-prescribing. There is a big piece of funding in the 

stimulus package, about $20 billion. 

Ms. KOHLER. Yes, and we thank you for that. 

Senator CARPER. It is designed to help move us toward electronic 

health records for a lot more folks. 

To the extent that at some point in time we have a majority of 

people in this country having electronic health records for them, 

and we move toward closer to 100 percent, to what extent does that 

help fix this problem? 


ph44585 on D330-44585-7600 with DISTILLER
17 

Ms. KOHLER. Well, I think it is going to be very helpful. As a 

matter of fact, before we started, Ms. Thompson and I were talking 

about that and our work together. 

We thank Congress for that money that is going to be critical to 

States to get them off the ground. Some States have gotten transformation grants earlier from CMS, and they have been working on 

their electronic health records, which is how Alabama came to have 

such a high percent in their database. 

It will give providers an opportunity, like the drug diversion, 

drug monitoring program. Before you prescribe, you will be able to 

see what the person has received. 

So I think the first wave of them will be driven off the claims 

processing systems that are in place, like Alabama’s is right now, 

but eventually States will get more sophisticated and be able to 

add enhancements to their programs. I think it will be very important. 

Senator CARPER. I was in Cleveland, Ohio, about 3 weeks ago to 

visit the Cleveland Clinic, not as a patient but as a student. My 

staff and I went to better understand how Cleveland Clinic, like 

Mayo Clinic, like Geisinger in Pennsylvania, like Intermountain 

Health and Kaiser Permanente and the big health co-op, Group 

Health in Washington State, how they provide better health care, 

better outcomes, for less money. 

One of the things that we spent a fair amount of time talking 

about was their IT, information technology, and how they have 

harnessed that into the delivery of health care. They talked about 

the inability of doctors. 

We will say you have a patient who is seeing several doctors in 

their system. Each of the doctors may be prescribing more and 

more medicines, and a doctor decides to prescribe yet another medicine. Before the prescription can be filled, their system, the technology is such that it can actually say this is a new drug that is 

being prescribed, these are the five that this patient is already taking, and if this drug does not work in concert with the other five, 

that prescription will not be written or filled. 

It would seem to me that kind of technology might really help 

us in a situation where we have somebody trying to get the same 

prescription filled by a bunch of doctors, dead or alive. That could 

go a long ways toward fixing the problem. 

Let me follow up with Mr. Rannazzisi. I want to go back to something you were saying just a minute ago, but according to your testimony 33 States have operational Prescription Drug Monitoring 

Programs, eight more States have passed legislation to put such 

programs in place. I might be wrong, but I think that Delaware is 

not on either list. 

In States like Delaware that apparently do not yet have these 

programs, who is responsible for monitoring controlled substances, 

and, in your view, what can be done to get these monitoring programs active in every State, including the First State. That would 

be Delaware. 

Mr. RANNAZZISI. Yes, sir. Well, I do not know. Whenever we go 

out to talk to the States, the regulatory bodies, the State associations, we always tout how wonderful the Prescription Drug Monitoring Programs are, and there is money available. Between the 


ph44585 on D330-44585-7600 with DISTILLER
18 

Harold Rogers Grant program and then the NASPER, there is 

more than enough money available. 

I think certain States just do not want to jump into the program 

because one thing we hear over and over again is privacy issues. 

People feel that data are somehow going to get out to non-authorized personnel. I believe that is what Florida’s biggest problem was 

before they passed it, was privacy issues. 

Law enforcement in most cases does not have direct access. I 

know the Drug Enforcement Administration definitely does not 

have access unless we request access on a case-specific basis. So I 

do not really understand why a State would not jump into the program. It just seems like the next step to prevent diversion, nationwide. 

Senator CARPER. I was just talking with our staff member, John 

Collins, about finding out which States have not gotten on board 

and just sending a friendly letter, maybe one that Senator McCain 

would join me in signing, to the governors of the States where they 

are not doing it and just encourage them to do so. Maybe that 

would be helpful. 

Mr. RANNAZZISI. Thank you. 

Senator CARPER. I want to go back to financial incentives. States 

are, as more and more of our witnesses said, finding it very difficult to balance their budgets. They are running huge deficits in 

a lot of cases. 

We are fighting a tough battle in Delaware, and I think I heard 

on the radio the other day Pennsylvania, 3 months into the new 

fiscal year, still had not adopted a budget, and a lot of States are 

struggling. 

How do we, given the plight of States, the rising cost of Medicaid, 

the inability to fund education programs and a variety of other programs that flow from runaway health care costs, runaway Medicaid 

costs, how do we better incentivize the States to do what they need. 

One, to reduce the abuses that are going on but, two, to reduce the 

outflow of funds that represent their share, the 50 percent share 

of Medicaid costs? 

How do we do this better? How do we get them to do what is 

in their own best financial interest? 

Obviously, one of them is the 60-Day Rule, which we have taken 

steps to address and fix in the health care markup, where now 

States can go up to a year to identify fraud in Medicaid, not have 

to cough up the Federal share after 60 days, even when the States 

do not have the money. I think that goes a long ways, I hope, in 

incentivizing the States. 

But, hopefully, that will be in the final bill that the President 

signs into law this year. Beyond that, what do we need to 

incentivize the States? 

I went to Ohio State as an undergraduate. I studied economics, 

not nearly enough, but one of the things that has always intrigued 

me, not only as an undergrad but a graduate student, and now to 

this day I have always been intrigued by how do we use economic 

incentives, how do we use financial incentives to shape good public 

policy behavior. As we do our health care legislation, we are trying 

to find all kinds of ways to do that. 


ph44585 on D330-44585-7600 with DISTILLER
19 

But how do we use financial incentives, economic incentives, to 

shape the kind of behavior from States or from providers or doctors 

or whomever? How do we do that better? 

Ms. KOHLER. Well, a number of States are doing pay for performance right now, that they are actually paying you more money if 

you have a good outcome. 

Senator CARPER. They are paying money to whom? I am sorry. 

Ms. KOHLER. To the providers. 

Senator CARPER. And, in this case, the providers being the doctors, the pharmacies? 

Ms. KOHLER. The physicians, mainly. 

In the case of fraud, waste, and abuse, right now, the Federal 

Government funds the Medicaid program 50–50 for their activities. 

They fund the attorney general’s office 75–25. So, certainly a 

change of that and allowing States to have a 75–25 match would 

help them. 

Senator CARPER. I am sorry. Say that again. 

Ms. KOHLER. The Medicaid fraud staff in the attorney general’s 

office of every State, the Medicaid Fraud Control Units are 

matched at 75 percent Federal dollars, 25 percent State dollars. 

The same staff doing the same kind of work but in the State Medicaid agency is matched at 50–50. 

Senator CARPER. OK. Now in terms of when the investigations 

recover money that has been fraudulently spent or misspent and 

it is recovered, is it returned to the States and is the distribution 

of the recovery? 

If the State and the Federal Government are 50–50 on Medicaid, 

I presume half would go to each. In some States’ cases, the States 

are putting up 40 percent, the Federal Government, 60 percent. I 

think in some cases it is as much as 70–30, Federal-State. 

Ms. KOHLER. That is how it is returned to them, according to 

what your match rate is. 

Senator CARPER. Thank you. 

Others talk to me about, again, using financial incentives to 

shape good public policy behavior. We know what we have in place. 

We know how we are trying to improve on that. What else can we 

do, should we do, anyone? 

Mr. KUTZ. Well, I would just say that the doctor-shopping and 

other things here we talked about, there is the other savings you 

get if you eliminate some of this, of the trips to the emergency 

rooms and the unnecessary office visits, which we did not calculate 

how much those are, but they may very well be more than the cost 

of the drugs. 

Senator CARPER. Oh, yes. Did you not mention that in your 

study? I thought you did. 

Mr. KUTZ. Yes, I did, and I think that is important. That is not 

an additional financial incentive, but if you fix some of the doctorshopping, you will have the added benefit of savings with less office 

visits and possibly trips to emergency rooms. 

Senator CARPER. That is a good point. Any other ideas, please? 

Ms. THOMPSON. I would also just add, following up on the point 

that Ms. Kohler made. 

Typically, the way that the Federal Government supports States 

and their activities is through the Federal match, and we do have 


ph44585 on D330-44585-7600 with DISTILLER
20 

various levels of matching for different kinds of activities. We have 

had good success when we provided 90 percent funding for development of IT systems. We provide 75 percent funding for skilled medical professionals as well as the 50 percent funding for general administrative activities. 

And, it is true that we have a 75 percent match—again, these 

are statutory match amounts—for the Medicaid Fraud Control 

Units. 

I also think that it is true that by providing some of the technical 

assistance and training, sometimes these are matters of I do not 

know what to do or I do not know if I have the problem. And so, 

the idea of sharing information is very important—the idea of providing measurement, so people have quantifiable information to 

understand where they stand, either in terms of error rates or in 

terms of things like performance measures, as we go through and 

look at program integrity operations. 

I think then being able to follow back up on corrective actions 

and assess whether or not those corrective actions have been taken. 

That is an important element of this as well in order to achieve the 

success that we want to achieve. 

Senator CARPER. OK. I have several questions I want to get to 

before we adjourn around 4:30, but this would be a question probably for Ms. Thompson and for Ms. Kohler. 

I bet a lot of people are going to read the report that GAO has 

graciously provided for us. They are going to wonder why some 

fairly common-sense things were not done, have not been done. It 

sounds like some are being done, but give us a better idea. 

Why would States not require a Social Security number or other 

basic information on a claim before it was paid? 

Second, why is basic data-sharing between Federal or State 

agencies not happening or not happening enough to stop this sort 

of fraud? 

Ms. THOMPSON. I will go first and then jump in with any other 

thoughts. 

Ms. KOHLER. OK. 

Ms. THOMPSON. With regard to Social Security numbers, we do 

allow States to enroll individuals without a Social Security number 

as long as the individual can demonstrate that they have applied 

for a Social Security number. 

It is also true that there are some beneficiaries who have religious objections to providing Social Security numbers, and we allow 

them to use a Medicaid identification number. 

And, there are a couple of waiver programs in which we allow 

States to, for very narrow program purposes, not collect Social Security numbers, but in those cases we actually make some adjustments to the Federal match to account for the fact that they are 

not doing that part of the process. 

So, generally speaking, we would expect very much to see Social 

Security numbers as part of the determination process and as part 

of the beneficiary file. 

Is there anything else that you wanted to mention about Social 

Security numbers? 

Ms. KOHLER. Yes. I think the main thing is that you cannot deny 

Medicaid eligibility if the person has not given you a Social SecuVerDate Nov 24 2008 09:39 Oct 19, 2010 Jkt 053845 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 P:\DOCS\53845.TXT SAFFAIRS PsN: PAT

ph44585 on D330-44585-7600 with DISTILLER
21 

rity number. So States try to get them as much as they can, but 

they cannot deny eligibility if the person does not give you one. 

And, remember, a lot of Medicaid clients are children. We are 

adding babies every day. We are adding them before they get their 

Social Security number and then hoping that the parents will come 

back and give us one. 

Senator CARPER. Good luck. 

Ms. KOHLER. It is a challenge. It is an enormous challenge, and 

we recognize that. 

Senator CARPER. That is called the triumph of man’s hope over 

experience or woman’s hope over experience. 

Ms. THOMPSON. With regard to going and getting the exclusion 

data and going and getting the death data, we were having conversations about this. I think we have provided guidance around 

how to do this and when to do it. 

Actually, not long ago in 2008, we provided some information 

around Arizona’s process for looking at vital statistics. The IG’s office in HHS actually had done a report looking at death data and 

had identified Arizona as one of those States that seemed to have 

a handle on this. They seemed to be doing it right. They actually 

had looked at a number of different States, and Arizona was the 

one State that had zero errors with regard to some of that death 

data. So we circulated that information and made States aware of 

what Arizona was doing. 

In that particular case, Arizona had made the investment. They 

had found the resources and made the investment to combine a lot 

of that vital record data in one place and make it available to a 

number of their State program offices, and that was working quite 

well. 

I think what we need to do is follow up more forcefully, and we 

will plan to do that in the coming months, to really ask for information from each State about what their controls are and how they 

access these data, whether they know that they are available, 

whether they access them, who accesses them, how do they come 

into their systems, how often do they access those data. 

Then I think once we have that kind of a report card across the 

States, to really sit down with others and talk about what is it that 

we need to do to improve this, so we have more consistency and 

avoid these gaps and problems. 

Ms. KOHLER. I agree 100 percent. 

Senator CARPER. The National Governors Association has a Center for Best Practices. It is really a clearinghouse for good ideas, 

and some you probably have heard, maybe used. In the 8 years I 

was governor, we really sought in the NGA to strengthen it and to 

make it a more effective tool for all the States. 

I used to say most of the problems we face in Delaware, some 

other State had grappled with, and we figured out how to solve 

those problems. What we needed to do was to learn from the other 

States. 

Some of you talked about silos. States can be silos too. But a lot 

of the best ideas are out there. We just need to identify them, be 

able to find contacts in other States who have been working on a 

problem, and get their help. We find a lot of States are proud of 


ph44585 on D330-44585-7600 with DISTILLER
22 

what they have done and more than willing to provide that assistance. 

Not only do we have the National Governors Association, which 

includes all the governors of all 50 States and the territories, but 

we also have a National Association of State Budget Directors. 

These are men and women who go to wake up every morning, worrying about budget deficits, and go to bed at night, maybe sleepless 

nights, and worry about what to do about their budget deficits. 

To what extent are we using entities like the National Governors 

Association, like their Center for Best Practices, that clearinghouse? 

To what extent might we be using the National Budget Directors 

organization, to take these ideas and to infuse these ideas that in 

some cases are being incorporated or working, to better inform the 

other States and to, frankly, get people excited about addressing 

social problems but also addressing their budgetary shortfalls? 

Just think out loud on that, if you will. 

Ms. THOMPSON. We do work very closely with them and share information back and forth, to share with our respective members, 

both the NGA and NASBO. 

Senator CARPER. NASBO stands for? 

Ms. THOMPSON. National Association of State Budget Officers. 

Senator CARPER. Thank you. 

Ms. THOMPSON. I worked in OMB for a while, in New Jersey. So 

I worked with all the organizations. I worked with NGA, NASBO 

and NASMD at points in my career. 

It is getting the State people to talk too, among themselves. 

Sometimes there are silos, and hopefully they are working on that 

too. 

We do also spend a lot of time with NGA as well as NASMD. 

Senator CARPER. What is NASMD? 

Ms. THOMPSON. National Association of State Medicaid Directors. 

Senator CARPER. Thank you. 

Ms. KOHLER. In fact, we were down speaking with the budget officers just a few weeks ago. So we try to maintain those connections and ensure that we are talking with all the constituencies in 

the States that can help us solve these problems. 

Senator CARPER. All right. Any other thoughts on this before we 

move on? 

OK, we have about 10 minutes to go, and I would like to ask a 

couple more questions. This one is for Mr. Rannazzisi. 

Mr. Rannazzisi, prescription drug abuse is the fastest growing 

addition. As I said earlier, prescription drug abuse may be the fastest growing addiction in this country of ours. In my own State, 

there has been a rash of pharmacy and home break-ins with 

thieves looking specifically for controlled substances. I doubt that 

Delaware is the only State where that is taking place. 

How widespread is the use of public health programs like Medicare and Medicaid in acquiring these sources of drugs by addicts 

or by dealers and do you have any hard numbers on how many 

pills on the street might actually be paid for by the government? 

You do not have to say this is the number but like some idea of 

a percentage. Less than 10 percent, I presume, but just some idea 

of how widespread this problem is. Any idea at all? 


ph44585 on D330-44585-7600 with DISTILLER
23 

Mr. RANNAZZISI. How widespread is the use of Medicaid and 

Medicare? 

Senator CARPER. Yes, Medicaid and Medicare dollars being used 

to fraudulently acquire drugs. I know that we use Medicare and 

Medicaid legally to acquire a lot of drugs, but without using dead 

doctors, dead patients, and that sort of thing. But how widespread 

is the problem? 

Mr. RANNAZZISI. Sir, I do not think we have statistics that I 

could go to, to determine that. That is something we could look 

into. 

As you have said before and as the testimony has revealed, the 

prescription drug abuse problem is out of control. I think in 2007 

we had 6.9 million non-medical users of prescription medication, 

psychotherapeutic. I cannot pare that down to how many of those 

people were using medications obtained illegally through Medicaid 

and Medicare, but it is something I could look at. 

Senator CARPER. OK, fair enough. 

This is a question for Mr. Thompson, and I do not know if Mr. 

Thompson is in the audience. 

Ms. THOMPSON. I did not bring him along today. 

Senator CARPER. But, since he is not here, I am going to ask Ms. 

Thompson, his wife, to respond for him. 

Ms. Thompson, what are the consequences for those beneficiaries 

who are caught defrauding the Medicaid program and can their actions ever cause them to be removed from the program? 

Ms. THOMPSON. This is a thorny question. If a beneficiary is convicted and incarcerated, then they are disenrolled from the program because they are no longer covered by Medicaid, and that 

really is the trigger for that kind of an action. There is actually 

today no specific exclusion authority for a beneficiary, per se. 

There are enforcement actions that can be taken to control beneficiaries in terms of how they get their services and from whom— 

the lock-in provisions that Ms. Kohler mentioned, where we direct 

beneficiaries to particular providers, and we will only allow for 

services to be delivered and paid through those particular providers. So that is a way that we address beneficiaries that we believe are abusing the program. 

Senator CARPER. OK. If you were able to design a system from 

the get-go, right from the start, redesign it, any thoughts on how 

you might do that, on this front? 

Ms. THOMPSON. With regard to beneficiaries? 

Senator CARPER. It sounds like we do not remove somebody from 

the program until they have been maybe arrested, charged, convicted, put in jail. Then we take them off. I do not know if that 

is the right approach or not. If you think it is not, any ideas what 

might be a better approach? 

And, if you want to answer that for the record, you are welcome 

to do so. 

Ms. THOMPSON. I will take that opportunity to give you an answer for the record. 

[The information supplied by Ms. Thompson follows:] 


ph44585 on D330-44585-7600 with DISTILLER
24 

INFORMATION SUBMITTED FOR THE RECORD 

Fighing fraud is one of the Obama Administration’s top priorities. However, at 

this time, the Administration is still analyzing the advisability of Medicaid exclusion 

authority for a beneficiary who participates in Medicaid fraud activities. From a program perspective, the Administration would need to consider numerous factors prior 

to supporting an exclusion policy, including: 

• The existing legal system and due process and whether exclusion of a beneficiary should be contingent upon a conviction and/or civil court judgment and 

service time for such a conviction and/or judgment. 

• The clear definitions needed to determine that a beneficiary knowingly participated in an activity that warrants such an exclusion and how such exclusion may or may not apply to beneficiaries who are unknowingly caught up 

in a fraudulent scheme. 

• The population Medicaid serves, in that the Medicaid population has particularly high mental health needs. Exclusing a beneficiary with such a need may 

put the beneficiary at risk for a mental health or substance use relapse. 

• The scope of a beneficiary exclusion and whether certain hardship factors, including permanent loss of public or private insurance, should be included in 

determining whether to apply the exclusion and tow hat degree. 

• The Administration’s goal to ensure coverage for all Americans to lower 

health care costs and consideration of whether Medicaid exclusion authority 

may deny Medicaid coverage to some of the most vulnerable and medically 

needy individuals in our country. 

Aside from Medicaid beneficiary suspension or exclusion uthority, States can address beneficiary fraud through Surveillance and Utilization Review Sysems, pre-authorization of services, and a restricted recipient or ‘‘lock-in’’ program. 

Mr. KUTZ. Can I just say something on that? 

Senator CARPER. OK. 

Mr. KUTZ. I mean I think the perception of the risk of getting 

caught and prosecuted is very low, and that does encourage people 

to do this. I mean, first of all, the drugs are free, and so you are 

getting controlled substances for free. So whether you are an addict 

or a dealer, your cost of goods sold is one or two dollars possibly 

for a co-pay. 

But I think that issue is we saw a lot more activity on the provider and the pharmacy side than the beneficiary with respect to 

people that were committing fraud. There is not a lot done to those 

committing fraud on the beneficiary side. 

Ms. THOMPSON. I will, if I could, just add a point, though. 

Senator CARPER. Sure. 

Ms. THOMPSON. I will, in drawing back to some of the initial remarks that you made about the human cost here. To the extent 

that beneficiaries are suffering from addiction problems and that is 

causing their drug-seeking behavior, I think part of what we want 

to do is find those beneficiaries not just because of the financial 

cost that they are imposing on the program but because they in 

fact have a health issue that we need to intervene and address. 

And so, I would say that with respect to that kind of behavior, 

that does represent a health program that the Medicaid program 

is there to try to help address. 

Senator CARPER. Back to Mr. Kutz, Mr. Kutz, earlier this year, 

a representative from Health and Human Services reported to us 

that for Medicaid the improper payment rate estimate for 2008 was 

10.5 percent. Are today’s findings relating to doctor-shopping, deceased beneficiaries, deceased doctors, likely to be part of the 10.5 

percent estimate of fraud in the Medicaid program? 


ph44585 on D330-44585-7600 with DISTILLER
25 

Mr. KUTZ. I expect many would not be because the improper payment rate has errors, and it has fraud in it, but it also has things 

in it that are not necessarily fraud, and there is a lot of fraud that 

is not in the improper payment rates. 

So, if you are talking about doctor-shopping, unless you actually 

did data-mining around the case picked, that is probably a statistical sample that projects that, you would not know because there 

was a legitimate beneficiary, a legitimate provider, a legitimate 

prescription and everything else looked good on paper. So it may 

be a lot of these would be outside of the actual calculation of an 

improper payment rate because fraud is very hard to detect even 

when you pull a transaction. 

We had to go out and interview the pharmacist, the doctor, the 

prescriber to determine these cases. Plus, we had to have all the 

data available to look at how many pharmacies and doctors that 

they had gone to for these drugs. So, unless you did that for each 

case that was projecting out the 10.5 percent rate you described, 

it would be hard to get them all. 

Senator CARPER. OK. Last question, Ms. Thompson, in your testimony, you say CMS conducts reviews of State Medicaid Integrity 

Programs every 3 years. I think that is what you testified. Why is 

there such a long time between these reviews? Could more frequent 

exams help create better programs in the States? 

Ms. THOMPSON. Well, I think in part that is the initial program 

that we established after we received the authority under the Medicaid Integrity Program, that gave us dedicated resources including 

the ability to hire Federal staff to provide that kind of oversight 

and technical assistance. 

I think one of the things that we need to do in addition to looking 

at the periodicity of those reviews is really focus them on performance. We have really focused on structure and process, I would say, 

more so than outcomes and performance. 

I think I see us moving towards an approach in which we are 

testing some of the propositions that we are talking about here 

today—what are your controls for different kinds of issues—and 

really ensuring that the actual operational environment is sound 

from a program integrity perspective. 

Senator CARPER. I am going to just ask us to recess for a moment. I am going to check and see if I need to run to my Finance 

Committee markup. I will be right back. 

So we are going to recess for about 3 minutes. I will be right 

back. 

[Recess.] 

Senator CARPER. I think we have time maybe for one more before 

we start voting in the Senate. 

Mr. Rannazzisi, according to GAO, one long-term care pharmacy 

dispensed controlled substances to over 50 beneficiaries after they 

died because the nursing homes did not notify the pharmacy that 

they died before the drugs were delivered. 

How does DEA ensure that there is no diversion of drugs at a 

nursing home for such situations and why cannot the nursing 

homes return the drugs back to the long-term care pharmacy? 


ph44585 on D330-44585-7600 with DISTILLER
26 

Mr. RANNAZZISI. Let’s start off, a lot of nursing homes are not 

DEA registrants. So we have no inspection authority, so we cannot 

actually enter the premises with a notice of inspection. 

Senator CARPER. When you say a lot, would that be most? 

Mr. RANNAZZISI. Many. A lot of States do not, States do not generally license them for controlled substances, and therefore we do 

not license them for controlled substances. 

As far as the destruction, since a nursing home is considered basically a caretaker, they coordinate or they maintain the medicine 

for the patient. When that patient expires and the medication is 

there, the problem is since they are not registrants, the Controlled 

Substances Act has given them no vehicle to return those medications to a registrant which would be a reverse distributor. 

There is no mechanism within the Controlled Substances Act. 

Anytime a non-registrant turns around and distributes to a registrant, that is an illegal distribution under the law. It is going to 

require some type of statutory change for us to change that. 

But, in the meantime, we have offered through regulation the 

ability for nursing homes to do different things in order to prevent 

an accumulation of those drugs. For instance, automatic dispensing 

machines within the nursing homes, that way, they do not have to 

maintain a large amount of controlled substances. They could just 

go to the automatic dispensing machine, take what they need, and 

that is a secure machine. 

For Schedule II medications, we are allowing for Schedule II 

medications pharmacies to partial fill. That way, they do not have 

to have 100 tablets. They could fill every day, every 2 days, every 

3 days without expending that prescription. A normal Schedule II 

prescription, once it is filled, it is done, and you cannot partial fill. 

In this case, we are giving them the opportunity to do partial fills. 

We are allowing doctors to fax Schedule II prescriptions into the 

pharmacy for small amounts. Schedule II prescriptions normally 

not allowed to be faxed, but for a patient in a long-term care facility we are giving the doctor the opportunity, instead of prescribing 

a large amount, prescribing smaller amounts via fax. That way, it 

can maintain a very small amount onsite, on-premise, rather than 

maintain a large amount. 

It is a difficult situation with the nursing homes, and I understand what they are going through right now. We are attempting 

to work with Congress to figure a way for a statutory change. 

Senator CARPER. This has been a good hearing. We would not 

have as good a hearing as we have had without the good work done 

by GAO. Again, we want to express our thanks to everyone from 

GAO who has participated in the work that has been done on this. 

Thanks very much. 

Plenty of work still to do, and what you have done at GAO helps 

inform us and gives us a better path forward, actually several 

paths forward. 

In terms of takeaways, I always ask for takeaways from hearings 

like this, and I probably should ask that before we leave. 

But, in terms of what we ought to be doing, the people who sit 

on this side of the dais, in the Senate and the House and our staffs, 

what should we be doing to help address the problems of the abuse, 

the idea that Federal taxpayers through Medicaid are literally 


ph44585 on D330-44585-7600 with DISTILLER
27 

coughing up a lot of money that none of us have at the State or 

Federal level, to help facilitate the purchase of controlled substances, illegal substances, in some cases to make money for drug 

dealers, in other cases just to feed habits. 

We talked a little bit about what we are doing at the Federal 

level. A lot of money we have provided through the stimulus package, $20 billion for IT programs, to extend those in States across 

the country. Obviously, from what I have heard here today, that is 

a very good idea. 

The notion that we ought to give States more than 60 days in 

cases of fraud before they have to pay over to the Federal Government our share of whatever might have been defrauded would give 

States the opportunity to actually investigate, recover the money 

and to incentivize them to do what they ought to be doing. 

Those are some ideas that are my takeaways. 

But, in terms of what else we should be doing and our staffs and 

people that serve on this Subcommittee, what should be our 

takeaways, really to add to our to-do lists? Mr. Kutz. 

Mr. KUTZ. Well, I think hearings like this are good, and certainly 

the things that we do, my unique unit that does the forensic audits 

and investigations, coming with these real-life case studies of fraud 

is useful to you and the other witnesses at the panel here today, 

just to help with concrete solutions. You are not talking at a real 

high level. Now you are talking down at a real fraud level and how 

did they actually get into the system and what can be done to prevent this in the future. 

So I think that is a healthy discussion, and it is good for you to 

understand what is going on, Members of Congress, and I think it 

helps the people sitting at the table just to see what we have actually found on the cases in particular. 

Senator CARPER. The idea of States doing more and us trying to 

work through the National Governors Association, the Center for 

Best Practices there, also the idea of working with the State Budget Officers and maybe Medicaid managers—I had not thought until 

just now that every State has an attorney general, and they have 

some interest in these issues as well. If we are smart, we will reach 

out to them, too. 

Ms. THOMPSON. The only other item that I would add is that I 

think that we should take a look at how available and costly are 

some of the data feeds that we are asking States to access and if 

we can make that easier. If we can facilitate some of that access 

through free data and even create some hubs of that data to make 

it easier for a single point, for them to come in and get all of that 

information, I think that would be something we should take a look 

at. 

Senator CARPER. All right, thank you. 

Ms. Kohler, again, takeaways for what my colleagues and I and 

our staffs ought to be doing? 

Ms. KOHLER. I think everything that was said here. Some, perhaps, changing the Federal match to make it consistent with what 

the attorney generals get would help States also. 

Senator CARPER. OK, thank you. Mr. Rannazzisi. 

Mr. RANNAZZISI. As far as the Prescription Drug Monitoring Programs, anything that you could do to promote those because it realVerDate Nov 24 2008 09:39 Oct 19, 2010 Jkt 053845 PO 00000 Frm 00031 Fmt 6633 Sfmt 6601 P:\DOCS\53845.TXT SAFFAIRS PsN: PAT

ph44585 on D330-44585-7600 with DISTILLER
28 

ly helps us, helps the States identify diversion and ferret out diversion. 

I just want to bring your attention back to the nursing home program. There is S. 1292 and a companion bill, H.R. 1359 in the 

House, that addresses that issue on disposal. 

Senator CARPER. S. 1292. 

Mr. RANNAZZISI. S. 1292 is a Senate bill. 

Senator CARPER. Do you know whose bill that is? 

Mr. RANNAZZISI. Ms. Klobuchar and Mr. Grassley, and Mr. Stupak in the House. 

Senator CARPER. All right, good. 

I understand that we have about a 15-day comment period that 

is open if some of my colleagues have additional questions to share 

with you. If you get those questions, please respond to them 

promptly and fully. 

I appreciate the efforts that all of you have made in your various 

roles to address the challenge we have discussed today and others 

that I am probably not even mindful of. 

There is something for all of us to do here and to do better. As 

I said earlier, everything I do I know I can do better, and I think 

the same is true for all of us, and we need to do better here. We 

are doing better in some results, in some respects, but we need to 

do better still. 

I will close with this. I shared this with my colleagues as we 

were marking up in the Finance Committee, on the issue of the 60 

days for States to begin turning over money to the Federal Government for frauds, fraudulent funds that the States have not even recovered and trying to explain why that was a good idea. 

When I led off introducing my amendment, I said that a number 

of years ago, earlier in this decade though, the Congress adopted 

and President George W. Bush signed into law, legislation creating 

the Improper Payments Act. We said in the Improper Payments 

Act, we want States to start identifying improper payments, overpayments, or underpayments and not only to identify improper 

payments but to report them, and not only to report them but to 

try to reduce them, and then not only to reduce them but to try 

to recover monies that have been improperly paid, especially when 

monies were overpaid. 

So it had three things: Identify the improper payments, stop 

making them, and eventually recover the improper payments. 

Last year, using contract auditors in three States, some $700 

million worth of improper payments in the Medicare program were 

recovered—$700 million, and that is a lot of money. 

What we are doing now through the work of CMS and others, 

contract auditors that they have retained, is we are going after not 

just improper payments or overpayments in those three States. We 

are going to turn to all 50 States. If we can collect $700 million in 

three States, what do you think we can do in 50 States? 

I think, as I understand it, we were not doing all of Medicare A, 

B, C, D. It was not the full nine yards, but it was part of Medicare. 

But now I think we are going to go back, and it is even in the legislation we were just working on, that says let’s do the cost recovery 

in all parts of Medicare, including the Medicare Prescription Drug 

Program. 


ph44585 on D330-44585-7600 with DISTILLER
29 

And, using what we have learned in Medicare, let’s see if we cannot do a better job in Medicaid. 

At the end of the day, we are going to recover a lot of money. 

In a day when States are going broke practically and Medicaid is 

the big cost driver there, we are going to help, I believe. In the 

Medicare program which is supposed to go bust in about 7 years, 

8 years, we are going to make a difference there too. 

So this is real important work, and we just want to continue to 

build on the good work that is being done and do it even better. 

We are going to be sending letters to all of the governors. I think 

we said about 10 or so governors that were not participating in one 

of the programs, including my State, to make sure they are aware 

of it and the opportunities lost. 

I think we might want to mail letters to the attorney generals 

and share with them maybe some best practices and draw to their 

attention what is being done. 

I want to share in the letter to the governors, the best practices 

in Alabama. It is still almost too good to be true, but I will shame 

the other States. If Alabama can be doing this, why are you not? 

We have some outreach to do. 

I do not know that I am going to ask that we reconvene this 

group, maybe with somebody from CBO, but we might want to do 

that within less than month, where our staff has the opportunity 

to talk with you again, maybe even with me, or with the Republican staff too, to come back and revisit what we discussed here 

and after we have some follow-up questions. 

I do not want this just to be a one-time only discussion. I want 

to make sure this is not just an ongoing discussion but really that 

we have built an action plan and get more good work. I think CBO 

should be a part of that, going forward. 

All right, well, I am out of time and you probably are as well. 

My thanks to everybody for being with us, again, for the great 

work by GAO, and I will look forward to continue work with you 

in the months to come. Thanks so much. 

This hearing is adjourned. 

[Whereupon, at 4:42 p.m., the Subcommittee was adjourned.] 


ph44585 on D330-44585-7600 with DISTILLER

ph44585 on D330-44585-7600 with DISTILLER
(31) 

A P P E N D I X 


ph44585 on D330-44585-7600 with DISTILLER53845.001
32 


ph44585 on D330-44585-7600 with DISTILLER53845.002
33 


ph44585 on D330-44585-7600 with DISTILLER53845.003
34 


ph44585 on D330-44585-7600 with DISTILLER53845.004
35 


ph44585 on D330-44585-7600 with DISTILLER53845.005
36 


ph44585 on D330-44585-7600 with DISTILLER53845.006
37 


ph44585 on D330-44585-7600 with DISTILLER53845.007
38 


ph44585 on D330-44585-7600 with DISTILLER53845.008
39 


ph44585 on D330-44585-7600 with DISTILLER53845.009
40 


ph44585 on D330-44585-7600 with DISTILLER53845.010
41 


ph44585 on D330-44585-7600 with DISTILLER53845.011
42 


ph44585 on D330-44585-7600 with DISTILLER53845.012
43 


ph44585 on D330-44585-7600 with DISTILLER53845.013
44 


ph44585 on D330-44585-7600 with DISTILLER53845.014
45 


ph44585 on D330-44585-7600 with DISTILLER53845.015
46 


ph44585 on D330-44585-7600 with DISTILLER53845.016
47 


ph44585 on D330-44585-7600 with DISTILLER53845.017
48 


ph44585 on D330-44585-7600 with DISTILLER53845.018
49 


ph44585 on D330-44585-7600 with DISTILLER53845.019
50 


ph44585 on D330-44585-7600 with DISTILLER53845.020
51 


ph44585 on D330-44585-7600 with DISTILLER53845.021
52 


ph44585 on D330-44585-7600 with DISTILLER53845.022
53 


ph44585 on D330-44585-7600 with DISTILLER53845.023
54 


ph44585 on D330-44585-7600 with DISTILLER53845.024
55 


ph44585 on D330-44585-7600 with DISTILLER53845.025
56 


ph44585 on D330-44585-7600 with DISTILLER53845.026
57 


ph44585 on D330-44585-7600 with DISTILLER53845.027
58 


ph44585 on D330-44585-7600 with DISTILLER53845.028
59 


ph44585 on D330-44585-7600 with DISTILLER53845.029
60 


ph44585 on D330-44585-7600 with DISTILLER53845.030
61 


ph44585 on D330-44585-7600 with DISTILLER53845.031
62 


ph44585 on D330-44585-7600 with DISTILLER53845.032
63 


ph44585 on D330-44585-7600 with DISTILLER53845.033
64 


ph44585 on D330-44585-7600 with DISTILLER53845.034
65 


ph44585 on D330-44585-7600 with DISTILLER53845.035
66 


ph44585 on D330-44585-7600 with DISTILLER53845.036
67 


ph44585 on D330-44585-7600 with DISTILLER53845.037
68 


ph44585 on D330-44585-7600 with DISTILLER53845.038
69 


ph44585 on D330-44585-7600 with DISTILLER53845.039
70 


ph44585 on D330-44585-7600 with DISTILLER53845.040
71 


ph44585 on D330-44585-7600 with DISTILLER53845.041
72 


ph44585 on D330-44585-7600 with DISTILLER53845.042
73 


ph44585 on D330-44585-7600 with DISTILLER53845.043
74 


ph44585 on D330-44585-7600 with DISTILLER53845.044
75 


ph44585 on D330-44585-7600 with DISTILLER53845.045
76 


ph44585 on D330-44585-7600 with DISTILLER53845.046
77 


ph44585 on D330-44585-7600 with DISTILLER53845.047
78 


ph44585 on D330-44585-7600 with DISTILLER53845.048
79 


ph44585 on D330-44585-7600 with DISTILLER53845.049
80 


ph44585 on D330-44585-7600 with DISTILLER53845.050
81 


ph44585 on D330-44585-7600 with DISTILLER53845.051
82 


ph44585 on D330-44585-7600 with DISTILLER53845.052
83 


ph44585 on D330-44585-7600 with DISTILLER53845.053
84 


ph44585 on D330-44585-7600 with DISTILLER53845.054
85 


ph44585 on D330-44585-7600 with DISTILLER53845.055
86 


ph44585 on D330-44585-7600 with DISTILLER53845.056
87 


ph44585 on D330-44585-7600 with DISTILLER53845.057
88 


ph44585 on D330-44585-7600 with DISTILLER53845.058
89 


ph44585 on D330-44585-7600 with DISTILLER53845.059
90 


ph44585 on D330-44585-7600 with DISTILLER53845.060
91 


ph44585 on D330-44585-7600 with DISTILLER53845.061
92 


ph44585 on D330-44585-7600 with DISTILLER53845.062
93 


ph44585 on D330-44585-7600 with DISTILLER53845.063
94 


ph44585 on D330-44585-7600 with DISTILLER53845.064
95 


ph44585 on D330-44585-7600 with DISTILLER53845.065
96 

Æ 


ph44585 on D330-44585-7600 with DISTILLER53845.066