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67–369 PDF 2011

RED TO BLACK: IMPROVING COLLECTION OF

DELINQUENT DEBT OWED TO THE GOVERNMENT

HEARING

BEFORE THE

SUBCOMMITTEE ON GOVERNMENT ORGANIZATION,

EFFICIENCY AND FINANCIAL MANAGEMENT

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

MARCH 11, 2011

Serial No. 112–12

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.fdsys.gov

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

ANN MARIE BUERKLE, New York

PAUL A. GOSAR, Arizona

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

TREY GOWDY, South Carolina

DENNIS A. ROSS, Florida

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

MIKE KELLY, Pennsylvania

ELIJAH E. CUMMINGS, Maryland, Ranking

Minority Member

EDOLPHUS TOWNS, New York

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, District of

Columbia

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

DANNY K. DAVIS, Illinois

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

CHRISTOPHER S. MURPHY, Connecticut

JACKIE SPEIER, California

LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director

ROBERT BORDEN, General Counsel

LINDA A. GOOD, Chief Clerk

DAVID RAPALLO, Minority Staff Director

SUBCOMMITTEE ON GOVERNMENT ORGANIZATION, EFFICIENCY AND FINANCIAL

MANAGEMENT

TODD RUSSELL PLATTS, Pennsylvania, Chairman

CONNIE MACK, Florida, Vice Chairman

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

PAUL A. GOSAR, Arizona

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

EDOLPHUS TOWNS, New York, Ranking

Minority Member

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

ELEANOR HOLMES NORTON, District of

Columbia

(III)

C O N T E N T S

Page

Hearing held on March 11, 2011 ............................................................................ 1

Statement of:

Lebryk, David, Commissioner of Financial Management Service, U.S.

Department of Treasury ............................................................................... 4

Letters, statements, etc., submitted for the record by:

Lebryk, David, Commissioner of Financial Management Service, U.S.

Department of Treasury, prepared statement of ........................................ 8

Platts, Hon. Todd Russell, a Representative in Congress from the State

of Pennsylvania, prepared statement of ...................................................... 3

(1)

RED TO BLACK: IMPROVING COLLECTION OF

DELINQUENT DEBT OWED TO THE GOVERNMENT

FRIDAY, MARCH 11, 2011

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON GOVERNMENT ORGANIZATION,

EFFICIENCY AND FINANCIAL MANAGEMENT,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 10:24 a.m., in room

2247, Rayburn House Office Building, Hon. Todd Russell Platts

(chairman of the subcommittee) presiding.

Present: Representatives Platts, Amash, Gosar, Guinta, Towns,

and Norton.

Staff present: Ali Ahmad, deputy press secretary; Drew Colliatie,

staff assistant; Linda Good, chief clerk; Beverly Britton Fraser, minority counsel; Kevin Corbin, minority staff assistant; and Carla

Hultberg, minority chief clerk.

Mr. PLATTS. This hearing of the Subcommittee on Government

Organization, Efficiency and Financial Management will come to

order.

First, I want to apologize to my colleagues, our witness, and others for the delay in starting. We typically have about an hour and

40, hour and 45 minute commute; today it was about 2 hours 40,

2 hours 45 minutes. Thankfully, I hope all the individuals who

were in the accidents that I passed are safe and glad I was not in

them, but apologize for keeping you waiting. But we are glad to be

here today for this important oversight hearing.

I want to thank our witness for being here today to discuss efforts to collect delinquent debt owed to the Federal Government.

While this is certainly a financial management issue, it also is an

accountability issue. Part of accountability is making sure that people fulfill their obligations, whether those obligations are to pay a

fine, a penalty, or to repay a Federal loan or to pay child support.

Each and every day the people at Treasury’s Debt Management

Service do all they can to demand accountability, while being sensitive to the rights and circumstances of debtors.

This hearing coincides with the release of the Fiscal Year 2010

Annual Debt Report, which provides a detailed look at Treasury’s

activities. We look forward to discussing that report, as well as

some of the proposals in the President’s budget.

We are honored here today to have Mr. David Lebryk with us.

Commissioner Lebryk is Commissioner of the U.S. Department of

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the Treasury’s Financial Management Service. As Commissioner,

he provides leadership, policy direction, and guidance for financial

management programs, including payments, collections, debt collection, and governmentwide accounting and financing reporting.

Commissioner Lebryk, I appreciate your submitting your written

testimony here today and I have had the chance to review that, as

well as the report. I also appreciate your reference to our joint

predecessor for former Chairman Towns and myself in referencing

Chairman Horn. It was quite an honor to serve with him when I

first came to Congress in 2000, and he was a great leader of this

subcommittee, as well as on a number of efforts, as you reference

in your statement. As the author of the Debt Collection Improvement Act, Chairman Horn certainly worked tirelessly on this issue

that we are going to talk about here today, and certainly honored

to follow in his footsteps and continuing his efforts in partnering

with three of my colleagues.

Also want to thank you for your service in general. As one who

believes in the ideals of public service, appreciate what you give

back to our country and our fellow citizens. The ranking member

and I look forward to working with you, along with our subcommittee colleagues, and being partners in this important effort of

achieving accountability for the American people.

I now recognize the ranking member, Mr. Towns from New York,

for the purpose of an opening statement.

[The prepared statement of Hon. Todd Russell Platts follows:]

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Mr. TOWNS. Thank you very much, Mr. Chairman, and thank

you for arranging this hearing.

As this Congress continues to debate the Nation’s budget, we are

looking to identify sensible cost-cutting measures and ways to increase revenue to the Federal Government. This hearing considers

the collection of debt owed to the Government, which is an important revenue stream in these tough economic times. I thank the

chairman for holding this hearing.

Collection of Federal Government and State debt is an essential

way to help fund Government operations, maintain key programs,

and help reduce the Federal deficit. It is also an extremely effective

method of collecting delinquent child support obligations to help

meet the needs of the children who depend on that support.

In the years since this subcommittee began examining debt collection, there has been great improvement. The Treasury Department has taken the tools that the Congress provided in the Debt

Collection Improvement Act of 1996 and has expanded its reach to

increase the volume of delinquent debt the Government recoups.

From 1996 to the end of fiscal year 2010, Financial Management

Service has collected more than $49.7 billion for Federal and State

agencies. This is a commendable result compared to the collection

level before 1996.

Treasury continues to improve its offset and cross-servicing programs. FMS has ramped up its efforts in collecting delinquent tax

and non-tax debt owed by Federal employees. The doctors and hospitals who receive Medicare payments and Federal contractors are

working on identifying other payments that the Government can

target for collection. There is more than $625 billion in outstanding

debt to the Government. We are actively collecting $422 billion of

that balance. In fiscal year 2010, we actually recovered $5.3 billion.

It is clear, Mr. Chairman, that there is much more work that

needs to be done, and I am looking forward to the testimony today

of our witness and, as a result of this, I hope we can continue to

move forward as we have done over the last few years. I thank

very much, Mr. Chairman. I yield back the balance of my time. I

am anxious and eager to hear from our witness.

Mr. PLATTS. Thank you, Mr. Towns.

We will now proceed to Commissioner Lebryk. Commissioner, as

the practice and rule of the House, we swear in every witness, so

if I could ask you to stand and raise your right hand.

[Witness sworn.]

Mr. PLATTS. The clerk will note that the witness answered in the

affirmative.

We would like you to proceed. We have 7 minutes on the clock,

but if you need a little more, as the only witness, we are certainly

glad to give you some additional time.

STATEMENT OF DAVID LEBRYK, COMMISSIONER OF FINANCIAL MANAGEMENT SERVICE, U.S. DEPARTMENT OF TREASURY

Mr. LEBRYK. I will try to stay within that timeframe.

Thank you, Chairman Platts, Ranking Member Towns, and distinguished members of the subcommittee, thank you for the opportunity to testify before you today on something which we take very

5

seriously, and that is the collection of delinquent debt owed to the

Federal Government. I ask that my entire statement be read into

the record.

Mr. PLATTS. Without objection.

Mr. LEBRYK. Thank you.

Chairman, Congressman Horn was a tremendous champion of

the Debt Collection Improvement Act in 1996, so I want to spend

a moment and pay our respects to him for the efforts that he did.

We had a lot of spirited conversations with Chairman Horn during

those early years and we all shared a very common objective, and

that was to make sure we were doing the best interest of the American taxpayer. He was quite a champion of this act and the work

that we are doing at FMS, and we are very much appreciative of

that.

This marks the 15th anniversary of the Debt Collection Improvement Act and a lot has been accomplished in that time. I want to

thank you again for holding this hearing to demonstrate Congress’s

interest in the Federal Government’s activities. I also want to commend the leadership of you, Chairman Platts and Mr. Towns, for

your interest in our operations. We look forward to that continued

partnership and working together to improve the things that we

do.

We are proud of the role that we play in providing this essential

service to the Federal Government and to the citizens that we

serve. We take that responsibility quite seriously and we place a

great deal of importance on demonstrating value to the American

public in carrying out our responsibilities.

FMS collects delinquent debt on behalf of Federal and State

agencies in accordance with the Debt Collection Improvement Act

and other applicable laws. We embrace the goals of the DCIA to

maximize collections, while minimizing the cost to the Government

in that effort. We carry out the statutory responsibilities effectively

and efficiently, with seriousness of purpose. Collecting debt is part

of our core mission. I think we are one of the few Government

agencies that has, if maybe the only agency that has debt collection

as part of its core mission.

We are constantly looking for ways to improve our efforts and

the centralization of collection of debt owed to the Federal Government, and I will go into a little bit later some of those efforts that

we have ongoing right now to do even better than what we have

been doing in the past.

The DCIA requires agencies to refer most of their debts to FMS

with 180 days of delinquency. We encourage agencies to refer debts

to us sooner. We have two major mechanisms with which we collect

the debt. One is something called the Treasury Offset Program,

which is effectively a means of matching Federal payments against

delinquent debt files. So it is a highly automated, highly efficient

process; the premise being that we shouldn’t be making payments

to someone who owes debt to the Federal Government. The attempt

is to intercept those payments before they are actually made and,

as I mentioned, that is a highly efficient mechanism.

The second mechanism that we use is called cross-servicing, and

that is more actively working the debt. We do things like write letters to debtors; we refer debts to private collection agencies; we

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refer debts to the Department of Justice for litigation; we use administrative wage garnishment to attach the wages of working

debtors; and we report debts to credit bureaus.

While we strive to collect the maximum number of dollars possible, we are also aware of the needs of the debtors to be treated

fairly. We are mindful that not every debtor is financially able to

repay their debts, and debtors are provided the appropriate due

process rights allowed to repay debts over time. We take great care

to protect the privacy rights of individuals and have robust measures in place to guard the security and sensitivity of financial and

private data.

Also part of our very core mission in our values within our organization is that we treat debtors as we like to be treated ourselves,

and that is something that permeates all of our workers and the

process of their efforts. We recognize that we have to be serious

and tough at times, but we also realize we need to treat people respectfully and as we would like to be treated ourselves.

Since 1996, FMS has collected more than $47.9 billion on behalf

of the Federal and State agencies. We have collected $5.4 billion in

delinquent debt in 2010, including $2.1 billion of delinquent child

support. In fact, that child support is something that, while we are

quite pleased to help the Federal agencies and the U.S. Government, it does give us some sense of strong purpose of what we do

is important and adds value to the American families and children.

We are also on track this year to increase our collections over

last year. At this point, we are approximately 8 percent ahead of

where we were last year at this time with respect to our collections.

We expect to continue growth in the coming years and we have a

7-point strategy plan in order to increase those collections, which

I would like to get into a little bit later, and we expect a strong

period of sustained growth. We also have a couple legislative proposals in place which, in totality, will bring an additional $5 billion

in collections to the Federal Government over the course of the

next 10 years.

One key area of delinquent debt I know oftentimes of interest is

Federal debt owed by Federal employees. Since the passage of the

Debt Collection Improvement Act, FMS has collected $340 million

from Federal employees, including $277 million in delinquent tax

debt. In 2010, FMS collected $85 million from delinquent Federal

employees, an increase of 61⁄2 percent from 2009.

The second area which has received a fair amount of attention

recently is Medicare payments. FMS intercepts Medicare payments

to doctors, hospitals, and other providers who owe delinquent tax

and non-tax debts. Since 2008, FMS has collected $136 million

from payments to Medicare providers who owe delinquent debts,

including $107 million in tax debts.

A third area that we have been increasing our efforts is debts

owed to States. We have the ability to help States who I think are

very much in need right now of revenues, so we use the Treasury

Offset Program as a way to collect funds on behalf of States. Most

recently, Kentucky just joined the program, and in the first week

of the program they collected close to $2 million. In the first month

they collected $4.7 million through the State reciprocal program.

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We also, most recently, based on legislation passed by Congress,

are working to collect State unemployment compensation debts

where there has either been overpayments or fraud in the unemployment program. New York was one of the first programs to sign

on to the program recently, and in the first 2 days of the program

collected $2.8 million. Wisconsin, the second State to sign on, collected $640,000 in its first day. So we see a lot of opportunity to

help States and assist States in fulfilling and getting repayment for

either overpayments or fraud in various programs that are out

there.

I mentioned the seven-point strategy that we have at FMS to increase collections over the course of the coming years. Those strategies I think include increasing our call center capability. Last year

we handled 4.3 million calls from debtors trying to resolve debts.

We are implementing state-of-the-art collection tools, we are increasing the effectiveness and efficiency of our debt collection processes, and we are also reaching out and establishing an agency

council with which we can work with our sister agencies to improve

and look at best practices and sharing of more information to improve governmentwide collections.

With that, I see I have just hit exactly 7 minutes, so I will end

where I started, to once again thank you for allowing me to testify

in front of you. I want to emphasize again that we are very proud

of the role that we play in providing essential services to the people

and to the Federal Government, and we place great importance on

demonstrating value to the American people and fulfilling these responsibilities, and we very much look forward to working with this

committee to fulfill those responsibilities. Thank you.

[The prepared statement of Mr. Lebryk follows:]

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Mr. PLATTS. Thank you, Commissioner. Appreciate your testimony, as well as, again, your written information you provided. I

will start with a couple questions myself.

In fact, rather than starting myself, because of being the one

that was last in the room, I am going to go to my ranking member

first, and then to my colleagues, who have been very patient, and

I am going to go last, actually. So, Mr. Towns, if you are ready, I

will yield to you for purpose of questions.

Mr. TOWNS. Thank you very much, Mr. Chairman, but you don’t

have to punish yourself for being last.

Why is it that the Government, after 2 years, delinquent debt,

you stopped pursuing it? In the private sector, it is seven or nine.

I think it is 7 years. So why would they be able to pursue it much

longer than the Government?

Mr. LEBRYK. Well, in many cases the Government, for example,

on student loan debt, it does not ever get extinguished, so the capability exists for the Federal Government to continue to pursue that

debt really through the life of a debtor and, as a result, we often

talk about if we are not able to collect that debt during the working

years, as one reaches Social Security, we have the ability to offset

Social Security payments up to a certain level to continue to collect

on those debts. So those debts stay on the books for a long time.

There are some debts that are actually—and there is maybe

some distinction here. The Federal Government will write a debt

off, and that is really an accounting entity; it basically, in accounting purposes, you are required as an entity to say what is the fair

value of an asset or a liability on your books. It doesn’t mean that

we stop collecting the debt. OK?

So there is a distinction there which is you can write something

off and show on your books that it has a value of, let’s say, 10 cents

on the dollar. On the other hand, we, as the Federal Government,

will continue to collect on that debt and hopefully collect 100 cents

on the dollar, unless it has been written off entirely as not collectible.

So a fairly small percentage of the number. So if you look at the

numbers, I think it is roughly $25 billion has been written off, but

only about $41⁄2 billion has been considered not collectible and truly

extinguished as no longer being pursued for debt collection purposes; and that is usually something that someone has been in

bankruptcy and the entity no longer exists and therefore is not

being collected against.

Mr. TOWNS. Thank you very much. I understand that direct and

guaranteed loans account for most of the delinquency: Education

Department, the SBA and the USDA. These loans are no doubt

necessary because they are often made in private sector where

credit is unavailable to maybe inadequate. And the Federal objective needs to be achieved, I understand that, for example, some

education loans, small business loans, and support for farmers. But

what I don’t understand, and maybe you can explain to me, is the

type of debt that is owed to Social Security Administration and the

Department of Defense. I don’t understand why we have loans

there.

Mr. LEBRYK. The Social Security debt is really about overpayments, it is about improper payments and overpayment. So what

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ends up happening is Social Security will work those improper payments up to a point. When they no longer have a sense that they

can collect it up to that point, they will refer it to us and it becomes

a delinquent debt. So there are situations where, particularly in

the SSI program, which is income-based, there are situations where

someone will have some income which will push them out of eligibility but still, nevertheless, the payment has been made. Do SSA

will go back and try to retrieve that overpayment and, if they can’t,

then it ends up in the delinquent debt portfolio.

Mr. TOWNS. What about the Department of Defense?

Mr. LEBRYK. I am less familiar with the delinquencies that are

in DOD. Conjecture here. I wonder whether they are contract

debts. I am just not sure. Perhaps they could be overpayments in

some of the medical programs too. But I can look into that more

fully for you.

Mr. TOWNS. Will you do that and get back to us on it?

Mr. LEBRYK. Because I could understand the others, but those

two. And now that you explained the Social Security one.

Are there a lot of overpayment situations?

Mr. LEBRYK. I think every day 3,000 people pass away, and as

a result of that Social Security has to have systems which look at

if you have been making a payment to someone for years on end,

they are required to get that information and to stop those you are

required to report that information immediately. Sometimes that

doesn’t happen. And there are various data bases which they try

to call to see whether they have actually captured that payment

that shouldn’t be made, but it is not a perfect process. Also in the

case of SSI, where the rules can sometimes be confusing about eligibility and non-eligibility, you can have situations where there are

the overpayments.

Mr. TOWNS. Who is sort of responsible for notifying Social Security that the person has expired? What is the process?

Mr. LEBRYK. It is the family that is required to report it immediately to Social Security.

Mr. TOWNS. Thank you very much, Mr. Chairman.

Mr. PLATTS. Thank you, Mr. Towns.

Mr. Guinta.

Mr. GUINTA. Thank you, Mr. Chairman, very much.

And thank you, Commissioner Lebryk, for being here. I have a

few specific areas of concern. First of all, could you just let me

know what area for FMS provides the most challenge, the greatest

challenge in terms of debt collection? Is there any one area that is

more difficult than another?

Mr. LEBRYK. The Debt Collection Improvement Act has been

enormously successful in getting agencies to participate. In the

early years and some of the hearings we had with Chairman Horn

at that time was really getting tough on the agencies because they

weren’t referring debts to us. I think that process has really, we

have had a success there in terms of agencies now referring debts

to us, for the most part, at the 180 days. We also, in some of the

early years, had challenges getting all the payment streams in. So

DOD makes payments and the Postal Service makes payments,

and we had challenges making sure those payment streams were

being offset. That process now I think is working very, very well.

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I wouldn’t necessarily point in any one particular area except to

say that I think that we are not as sophisticated in the Government as we should be with respect to how we are looking at delinquent debt. The private sector is much further along than we are

right now in looking at how you work debts in the portfolio.

So when I mentioned the seven strategies earlier about where

FMS thinks that we need to go, we need to do a better job of analyzing the debts and which debts are more collectible, which is debt

scoring; a better job of making sure, when we have partial information, that we have the capability of cleaning that information up

in an automated fashion. I think that there are other practices that

the agencies could be doing which we need to be working with

them on the pre-180 day about how do you interact with a debtor.

Mr. GUINTA. Right now you don’t see until 180 days. What would

be the agency process for the mechanism at 60 or 90 days?

Mr. LEBRYK. They would have their own internal processes. To

answer your first question, I think that there is a lot of opportunity

for agencies to be more scientific and disciplined in what they are

doing pre-180, and part of it what I would say, this gets to, I think,

the value of the DCIA and centralization, is we think about this

everyday. That is our job. We think about debt collection practices

and how you are going to manage your debt portfolio.

I don’t necessarily think that it is probably as widespread across

Government that is their core mission. So I think that there is a

lot of opportunity to do a better on that, and that pre-180, for obvious purposes, the sooner you try to collect the debt, the better

chances you have of collecting it.

Mr. GUINTA. And then when you write off, does it vary when you

are going to write that debt off based on your assessment of the

likelihood of collection, or is it just at a date certain you are essentially writing it off?

Mr. LEBRYK. OMB encourages agencies to write off debts at 2

years. As I mentioned, though, there is a distinction there, which

is writing off is different than stopping collection activity.

Mr. GUINTA. Right.

Mr. LEBRYK. So, really, those that are really being written in sort

of what our sense of the word written off means is a fairly small

percentage, and that is usually in the case of either bankruptcy or

the entity doesn’t exist anymore and you can’t really go after anything anymore.

Mr. GUINTA. But that is happening roughly at the 2-year mark

for that uncollectible written off debt?

Mr. LEBRYK. I don’t know this for certain, but my guess is if you

really went back and looked, it is probably happening further out

than 2 years, that agencies are continuing to hold these things for

a long period of time and really doing everything that they can,

and really probably in a much longer period of time are actually

making that assessment, unless they know for a fact that the entity no longer exists or the person doesn’t exist.

Mr. GUINTA. Do you have data on a 1-year, 2-year, 3-year, 4-year

debt and the ratios at which you are collecting and the costs it is

for us and for the agency for that collection at those different periods?

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Mr. LEBRYK. One of the seven strategies is for us to have better

analytical capability in looking at the debts, and we have some

rough information about that, but not information that gives me a

lot of confidence that I can say that this is the percentage that we

are doing at 180 to 360. I think we need to do more work in that

area, and that is one of the areas that we are applying more resources within FMS to really help agencies understand that better.

Mr. GUINTA. I think it would be fair to say that if we could improve the collection rate anywhere between the 60 to 360, we would

probably have a greater percentage of debt collected and you would

have, obviously, a lower write-off.

Mr. LEBRYK. Correct.

Mr. GUINTA. Obviously, you are spending the best or you are

maximizing our resources at the earlier period. So anything that

can be done to improve that and allow agencies, whether it is educating agencies or whether it is an oversight issue for us, please

feel free to convey that so we can give you the tools that you need

to improve in those particular areas.

Mr. LEBRYK. Thank you.

Mr. GUINTA. Thank you.

Mr. LEBRYK. We have looked at private sector experience in this

area on consumer debt, which is a little bit different than some of

the debt that we have, and your assessment is absolutely right that

when you are working at debt in that 60, 90 to 180 day period, you

have a much higher chance of collectibility than when you are

working at debt in the 2-year or the 3-year timeframe. That is

something that we have been talking to the agencies about, is

whether it is instances where they should be referring to us sooner

for that reason.

Mr. GUINTA. Thank you, Mr. Chairman.

Mr. PLATTS. Thank you, Mr. Guinta.

Dr. Gosar.

Mr. GOSAR. Yes, thank you.

I kind of want to go back to what you said to my colleague, Mr.

Guinta. The cross-servicing program is used by agencies required

to report that delinquent debt to the Treasury for recovery efforts.

In fiscal year 2010, Treasury was able to recover roughly about

$123 million out of $107 billion. Can you tell me why that is so

low? I mean, we are talking about a penny on the dollar.

Mr. LEBRYK. I mentioned the two programs that we have. One

is the offset, the automated offset. So that full amount that you referenced, 107, is actually being hit against offset, the payment

streams, and that is where you are getting a high bulk of that $5.4

billion that we collected.

For a variety of reasons, we don’t use cross-servicing on the full

amount, and part of that is there are a number of exemptions that

apply that don’t allow us to do cross-servicing on all the debts that

are referred to us, and that is the active working of those debts.

So there are a variety of exemptions that include bankruptcy, forbearance, debt in litigation. There is also an important category

where that number of 104 is. There are approximately $36 billion

of it which is being cross-serviced at Education and HHS.

So while the number I am going to tell you is that we are only working at cross-servicing on that portfolio around $14 billion, it

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has gone up a little bit in the last couple of months, now closer to

16, education is working $36 billion of that through their crossservicing mechanism that they have on student debt portfolio. They

collected, last year, close to $600 million on that portfolio, so there

is another number that is there.

The second thing which I would say is that we only report what

we captured in cash. One of the things on our cross-servicing program is administrative wage garnishment. So when you look at administrative wage garnishment and repayment agreements, there

is roughly another $500 million that we have in the pipeline that

we are getting bits at a time, whether they be payments that are

being done on a monthly basis, along the way from a debtor. So

there is some excess there.

And the final reason is the nature of Federal debt is not great

debt, and we are oftentimes the last resort of people getting loans

that they can’t get someplace else. So the collectibility on that portfolio is much lower than it would be if you had a better quality of

debt, for example, consumer debt in many ways has a higher collectibility than much of the debt that we have given the nature of

our debtors.

Mr. GOSAR. Isn’t there a way that we can report that, then? I

mean, it seems to me like you want to itemize this. If I am looking

at delinquencies, I want to look at, if I have a payment plan,

shouldn’t I have a number that I am looking at that are end payment in lieu that are up to standard? That gives me another parameter, because if I have payments coming in lieu of, then I don’t

have to spend as much time into that area; it is just a maintenance

type issue.

Mr. LEBRYK. Yes.

Mr. GOSAR. Then I can concentrate my efforts more into the

other areas of the problem. And it seems to me like the advantage

would be to share all this information start to finish, not at 180

days. Am I right?

Mr. LEBRYK. Sharing the information with respect to?

Mr. GOSAR. All debt.

Mr. LEBRYK. Interagency should be this will real time watching

this. It is no different than the private sector is looking at this categorically across a business.

Mr. GOSAR. Yes.

Mr. LEBRYK. Was it coming from this area, this area, this area,

and we can concentrate it. Many hands make light work.

Mr. GOSAR. Yes.

Mr. LEBRYK. And that is one of the reasons why, when we go

through our seven strategies in terms of analytical tools, this is

some area which I think there is a lot of work that can be done

within the Federal Government that we are pursuing, and that is

looking at that portfolio and saying which debt has a greater likelihood of collectibility than another debt.

Also, I think a very important set of tools that we have in place

right now, or we are putting in place right now is we have something called partial matches. If a debt comes in that says John Q.

Public that lives on Main Street and the payment file says John

S. Public on Main Street, we kick that debt out because we are not

100 percent sure it is the same person.

22

We now have more automated tools in which we can say John

Q. and John S. living at this same address are probably the same

person. So we should be doing that offset rather than what we are

doing right now is returning that debt to the agency and saying

you need to clean it up.

So the centralized value of that is that we FMS can be doing a

better job of that in the front end. Last year there were close to

150,000 partial matches. We are estimating that if we were able to

clean those partial matches up, that we would have $100 to $200

million more in collections simply by doing that.

So this is my point about us being smarter and more analytic

and using more modern tools to do the things about segmenting

that portfolio and working it in a more disciplined way.

Mr. GOSAR. One more question. I am looking at your chart in re- gards to delinquent collections, particularly of the $47.9 billion.

You are collecting 48 percent of that as delinquent child support.

How much of that has actually been in dialog with law enforcement, support with law enforcement? Because I know in Arizona

it is huge, and that is where we are getting a lot of delinquent

child support being picked up.

Mr. LEBRYK. Yes. We do the child support program on behalf of

the States. So the child support obligations that we are collecting

for are State obligations. So with respect to when the State or the

locality is working with local law enforcement, it would be done at

that level rather than at the Federal level.

Mr. GOSAR. OK. One last question. Do you prioritize each of

these debts? You know, in the private sector we look at low-hanging fruit and what is the hardest to get. Do you prioritize? And

which one do you find easiest; which do you find the worst?

Mr. LEBRYK. The answer right now, we treat all debts equally,

which is not the right answer. What we really need to be doing

right now is looking at that portfolio more systematically and strategically and saying what is the low hanging fruit.

Mr. GOSAR. Can we have a proposal to you as to how we

prioritize that? I would love to see that.

Mr. LEBRYK. It is, and it comes down to the tools that we are

putting in place right now, and one of the tools is actually looking

at the portfolio and doing debt scoring and saying, OK, based on

these characteristics, you have a much greater likelihood of collecting this kind of debt than you would another kind of debt, and your

efforts would be more useful spent here than it would be like we

are doing right now, which is everything is the same. So we chase

a lot of dead ends right now.

Mr. GOSAR. And when you are doing that, can we also see the

percentage what our costs are? As a consumer and advocating for

the consumer, we would like to see what the costs are to recover.

Mr. LEBRYK. Yes.

Mr. GOSAR. Because sometimes you are spending a lot more than

you are actually getting in return, and we have to be more fiscally

responsible.

Thank you.

Mr. LEBRYK. The one thing I would say on that last point is we

are very proud of this statistic, which is for every dollar that we

spend on debt collection, we return $53 in collections. That is the

23

efficiency element that we are very proud of, which is a pretty good

return.

Mr. GOSAR. But you can get better, right?

Mr. LEBRYK. We can get better, and that is exactly what I was

going to, we can do better than that.

Mr. PLATTS. Thank you, Dr. Gosar. You earned the extra time by

your patience and my late arrival.

I will yield to myself now.

Commissioner, again, appreciate your work and your staff and

the serious approach that you are taking. I guess an initial question I have is when you look at your numbers and you shared in

your testimony where you jumped 7.3 percent from 2009 and 67

percent over the years back to 2005, if you had to point to most

significant change or actions that resulted in that 67 percent jump,

what would you reference?

Mr. LEBRYK. Everyone is playing together now, in a way that

they were not playing before.

Mr. PLATTS. Meaning departments and agencies? Internally within your department or across the spectrum of the Federal Government?

Mr. LEBRYK. I think maybe it is everyone is hitting stride now.

I would just say that we now are getting the payment streams in

that should be in; we are getting the debt referrals that we should

be getting in. I think that plays a significant role. I also think that

the amount of delinquent debt has grown too, so there is an element there of there is more volume to go against.

But I also think it really speaks to this is why I think we are

really at a stage to go to another level now. I think that we have

a very strong infrastructure in place to do what we need to do, and

now we need to be smarter than what we are doing.

Mr. PLATTS. And that goes to Dr. Gosar going from $52 to $60, $70. Sky is the limit, right?

We appreciate that you reference a number of specific legislative

proposals, both pretty straight forward, both on the 100 percent

collection, you know, on basically vendor payments, Federal contractors, Medicare providers, and then also to assist with State collection being able to collect even if the person is now residing outside the State they owe.

I guess the first question on those proposals is those aren’t new.

I know they were in the 2011 budget proposal as well. And I know

our committee staff started working with your office on legislative

efforts along the route of these proposals. What would you say

would be the biggest opposition to those proposals, and what have

you heard, if anything, for those who don’t support either of those?

Mr. LEBRYK. The legislative process is never easy, and one of the

things that we have learned over the years is that we have frequently submitted legislative proposals in multiple years, and they

ultimately get done, but they tend to get done over time. So I really

would be surprised if there would be a lot of opposition to either

of those two, except from those who are delinquent on their Medicare or contractor obligations, because they do make a lot of sense.

Mr. PLATTS. And I agree and, again, we look forward to working

with you and your office on trying to speed up that legislative process a little bit. In the 2011 budget proposal, there were some addiVerDate 11-MAY-2000 15:17 Jul 29, 2011 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67369.TXT KATIE PsN: KATIE
24

tional legislative proposals, and I don’t believe they were accomplished yet, at least not all. Do you want to highlight any of those

additional proposals that we should have on our radar in addition

to the ones specifically in the 2012 proposal?

Mr. LEBRYK. One of the things is dealing with incentives. I think,

for the most part right now, when a debt is delinquent and we collect on it, the fee that is attached to that, whether it be from the

private collection agency or the fee that we charge, is added on to

the debt. There is an negative incentive for Medicare debt in which

that fee is not legally eligible to be taken added on to the debt and,

therefore, it either has to be absorbed by the trust fund or by the

appropriated moneys from the agency. That is a real negative incentive for referring debts, and I think that——

Mr. PLATTS. For Medicare referring it to you because of this.

Mr. LEBRYK. Yes. The cost to Medicare, since they can’t recoup

it. That is right.

Mr. PLATTS. OK.

Mr. LEBRYK. That would be one. I think, other than that, we

have made some progress on some of those other ones. I think some

of the other ones have actually moved through several committees

and we are hoping that they will come to conclusion in this session.

Mr. PLATTS. On the fee that is, what type of fee amount, roughly? Is it a percentage of the debt?

Mr. LEBRYK. There are two fees that potentially could be attached to that. One would be our offset fee, which is roughly $17

per offset. The other fee is if we refer it to a private collection agency, the fee is usually around 28 percent or so on that.

Mr. PLATTS. That is what is being paid to once you get to a PCA?

Mr. LEBRYK. Exactly.

Mr. PLATTS. OK.

Mr. LEBRYK. And on most other debts, we add that on to the

debt. So if there is a $100 debt, it becomes $128 debt and the debtor is the one beating the responsibility. On Medicare debts presently that is not the case.

Mr. PLATTS. OK. One more question here, then we will go to another round for Members, if they would like. On administrative

wage garnishment, in your testimony you talk about the 25 agencies that are participating now and you continue to work with nonparticipating agencies to encourage. I guess my question is why

isn’t everyone participating? Why aren’t they taking advantage of

this opportunity to collect what is owed their agency, the American

people?

Mr. LEBRYK. This is one of those areas where, as we have gotten

more mature in the Debt Collection Improvement Act, it is clear

that there are barriers for the agencies to do their work. Administrative wage garnishment has a—there is a sense, right or wrong,

that you need to go to a court in order to get that garnishment.

One of the things the DCIA did was say that the Federal Government can do an administrative wage garnishment without a court.

Now, you have to allow a hearing if someone wants to appeal the

amount owed or whether their ability to pay. That has turned out

to be a barrier to the agencies. It is not part of their core mission.

You know, they are not going to want to set up hearings like that

25

and they are uncomfortable with the administrative wage garnishment process.

Mr. PLATTS. And that hearing process is individual to every

agency?

Mr. LEBRYK. Yes, it is. It is. So one of the things we are looking

at FMS is whether we should be providing that as a centralized

service to remove that barrier to use of administrative wage garnishment.

I think Chairman Horn was looking at that the record said, from

his perspective, any debtor who had an income stream should be

subject to some sort of agreement before they are made a payment

by the Federal Government when he was talking about the administrative wage garnishment provision, and I think there is a lot of

validity to that, that we should be doing more as the Federal Government.

The other thing what has happened right now is that we have

left administrative wage garnishment with each agency, so they

have to put a regulation in place in order to do the program, which

we have given them a model language and we provide it to them

and it is something that is fairly easy for them to do but, nevertheless, it is a hurdle.

So I think that our ability to provide more of a centralized service is something which is an area that is worth exploring more

fully.

Mr. PLATTS. And I would encourage that because it would make

sense, because it is going to vary by some agencies like Department

of Ed having a lot of debt that may relate to student loans. But

another smaller department or agency having small amount of debt

or not that often, perhaps, to have their own administrative hearing process versus a centralized. I think that is something where

Treasury could play an important role and that we get everybody

participating.

Mr. LEBRYK. And there is a second piece on that we have found

in our own dealings, is that if a file doesn’t have good information

in it, it is hard for the agency to track that information down. So

if you are looking for a good phone number, you are looking for a

good address, and one of the areas where we think we can provide

a more centralized service is providing that service to agencies,

saying if you are looking for a debtor, you can run it through our

process so that you can find that person, get a phone number, get

the information that you need in order to move forward more efficiently.

Mr. PLATTS. Yes. And having just sat through the hearing with

GAO on the duplicative programs that the Federal Government has

from last week in the full committee, I think it is a good example.

Whenever we can eliminate administrative overhead by eliminating

duplication, we want to, and these are areas that I think would be

very helpful.

Mr. Towns, do you have other questions?

Mr. TOWNS. Yes, I do, Mr. Chairman.

Just thinking in terms of the Social Security overpayment, I

guess the first thing, would you need additional legislation to support above and beyond what you have already proposed? And the

26

reason I ask that question, why couldn’t we ask the undertaker to

give the Social Security number when a person expires?

Mr. LEBRYK. Social Security does maintain a death data base or

a post-death data base.

Mr. TOWNS. How does that work?

Mr. LEBRYK. I am not familiar. I do know that they looked at the

exact proposal that you are referencing, and that is, should the funeral homes be required to submit the data to a data base, and

they did a pilot a couple years ago in which they actually paid the

funeral homes for the information, every time they submitted the

information.

I think what they found at that point was that they didn’t have

the money to continue with that and that if in fact it was required,

you could have a more, getting to your point, you could have a

much better data base, a more perfect data base, which would go

a long way toward avoiding those payments to someone who

shouldn’t be getting it. So I think it is an area that deserves further attention.

Mr. TOWNS. Yes, because I think just leaving it to the family to

report, I am not sure that is going to work to be able to cut down

on the overpayments.

Mr. LEBRYK. And to clarify one other point, the financial institutions also report back into the system as well when someone has

been deceased. So if they are aware of the information from a bank,

it will come back in as well.

Mr. TOWNS. Oh, OK. The other thing is you mentioned state-ofthe-art tools. What do you mean by state-of-the-art tools?

Mr. LEBRYK. The private sector has done a lot more with segmentation of the portfolio, different mechanisms and tools that are

more effective than others of how you actually reach certain debtors. But also more, I think, to the point is that business intelligence tools and looking at data bases and mining those data bases

for certain characteristics is an area that the private sector is doing

a lot more of than what we are doing in the Federal Government,

and it is an area which I think has a lot of opportunity for us to

be doing better.

So it is really looking at these data bases and looking at lots of

different data and saying there are certain debtors here with certain characteristics that would lead us to believe that we have

more collectibility on one kind of debt or another. It is also those

automated tools I mentioned to you before about when a debt

comes in and the information may not be perfect, can you, in a

highly automated way, clean that data up more effectively about

addresses and phone numbers and those kinds of things within the

file; and the private sector is much more advanced.

I would also say that with respect to our working in the crossservicing side, that we should be more systematic in scripts that

we are using so that when a collector is working a list of debts,

that they are given the information in automated fashion so when

the automated phone call is made or the automated outreach is

made, that they have, based on that debt, they have scripts that

they are using to be more efficient on how they are collecting the

debts; they are not spending 10 minutes on a debt, that the better

27

way would be to spend 1 minute on that debt if they are more concise and disciplined in that approach.

So those are the kinds of things that we are looking at in terms

of our call centers and our opportunity to collect debt in those

state-of-the-art tools.

Mr. TOWNS. Do you need additional legislative support above and

beyond what has been proposed? Do you need additional?

Mr. LEBRYK. For the moment I would say no. I do think, however, that as we pass the 15th anniversary of the Debt Collection

Improvement Act, that there are opportunities for us to discuss

whether there is more that can be done more generally. So we don’t

have anything more than what we have in the 2012 budget, but we

are always looking at the 2013 budget and we are looking beyond

about other ways that we might be able to have other pieces of legislation that would help us, and we are happy to work with the

committee on that.

Mr. TOWNS. Thank you very much.

On that note, I yield back, Mr. Chairman.

Mr. PLATTS. Ms. Norton, did you have any questions for the witness?

Ms. NORTON. Not at the moment.

Mr. PLATTS. OK, thank you.

I have a long list, so I will yield back to myself.

On the reciprocal arrangements with States, and you referenced

Kentucky being the newest one and how quickly they reaped the

benefits of participating, I wanted to make sure I understood the

process. States beyond the four that are currently signed up, are

we still collecting debts for any that are not signed up to help us

collect Federal debt?

Mr. LEBRYK. Our terminology gets complicated, but we are actually collecting State income tax debt for a lot of States, more than

those four. So we do have, on the State income tax side, there is

work that is being done for when a Federal income tax payment

is made, that it can be offset and given back to a State.

The state reciprocal program gets a little bit more narrow and

allows—I am sorry, it broadens the types of payments that we can

offset, so we include vendor payments at that point so that the

State can participate that way. And, vice versa, we actually collect

debts from the States, we collect them from the States when they

are making payments. So it is reciprocal, we both get benefits from

the arrangement.

Mr. PLATTS. Once they are participating in that program.

Mr. LEBRYK. Yes, they are.

Mr. PLATTS. Currently, though, there are States that were collecting State tax, income tax owed and sending it back. I will use

Pennsylvania, my home State. But Pennsylvania is not collecting

Federal income tax owed to us from any payments they are making.

Mr. LEBRYK. Right now I think that we did do a test run with

Pennsylvania and found that if they were participating in the State

reciprocal program using vendor payments, I think that they could

collect an additional $29 million to $30 million a year based on that

program. I do believe, and my staff can correct me if I am wrong,

though, that we are actually offset on tax information with the

28

State of Pennsylvania right now, and I don’t know what that number is in terms of what has been sent back.

Mr. PLATTS. But I guess what I am focused on is if we are helping States out, whether they are in the reciprocal program or not,

with their State income tax, it sounds like we are still helping

them collect State income tax, even if they are not helping us collect Federal income tax.

Mr. LEBRYK. I believe that is correct. They can correct me if I

have that wrong.

Mr. PLATTS. They are shaking their heads yes, that I have it

right.

Mr. LEBRYK. Good, OK.

Mr. PLATTS. I think. IRS does that, correct.

Mr. LEBRYK. I would say on the State reciprocal last year, I think

of the two States that were participating at that time, I think that

we sent $16 million in their direction and they sent $12 million in

our direction.

Mr. PLATTS. I think getting all the States participating would be

great. And if they don’t want to, then they need to understand I

guess what I am getting after is we are not going to keep helping

to collect State debt if they are not going to help collect Federal

debt.

Mr. LEBRYK. Right.

Mr. PLATTS. So they have an incentive to be part of the program.

Mr. LEBRYK. Yes.

Mr. PLATTS. And I don’t know within the Department if you have

that authority to send that message or that is something we need

to look at legislatively and saying that you can go to the State saying as of a year from now we are not going to be able to help you

unless you help us, something maybe we want to look at.

On certain types of debt that are exempt from participating top

or the cross-servicing, I notice one of them is debts owned by foreign sovereigns. Can you expand on that? What type of debt would

be owed us by a foreign sovereign and what type of payment would

we be making that we couldn’t then attach even though they owe

us money?

Mr. LEBRYK. I will have to get back to you on that one, I don’t

know the rates or the debts that are in there.

Mr. PLATTS. OK. Our focus is about Americans that owe a debt,

and we are trying to collect it. Well, if there are foreign entities

that owe America a debt, they shouldn’t be getting a payment from

us for something else, in my opinion. So if we could look into that

a little deeper, that would be great.

Mr. LEBRYK. OK.

Mr. PLATTS. Let me catch up on my notes here. When I get the

testimony ahead of time, it gives me less time to review and make

notes. On the issue of debts that are not going to be written off,

how do you go about—and it was kind of addressed a little bit earlier, but—in determining—I mean, obviously some, death, you

know, the person is deceased, the debt is not going to be collected.

But in other ones where you reference financial hardship or other

reasons, how do you assess that to say, hey, no, we are going to

give up, as Mr. Towns referenced, 2 years versus, hey, we are going

to keep it and 4 years from now, hey, that person who was having

29

a hardship might be in the money now and, hey, we still want

them to pay what they owe.

Mr. LEBRYK. We rely heavily on the program agency to make

that determination, in large measure because they are more familiar with the program characteristics, as well as the debt is actually

on the agency’s books, so they are the ones who are ultimately responsible for the debt.

Mr. PLATTS. OK.

Mr. LEBRYK. So we have not spent a lot, we don’t really get behind what those decisions are other than that we know that they

are usually based on bankruptcy or the entity no longer existing.

Mr. PLATTS. Give me 1 second here. On the report that was submitted about your debt collection efforts, in there it references in

the executive summary that you, in essence, are reporting what the

head of each Federal agency provides you to then compile, in essence, and then forward to Congress. Are there agencies that are

not complying and not providing their debt collection effort information to you?

Mr. LEBRYK. The good news is we feel pretty good that we are

getting most of the debts that are referred to us. I think it is hard

for us to say that we are getting 100 percent, because every now

and then we learn about some part of a program that is not being

referred to us.

Our agency council that we are establishing, that is one of the

areas where we want to make sure that we are working with agencies more closely to make sure we understand that they really are

referring all the debts that they should be referring to us. But, as

I said, it is really one of the great success stories of DCIA is that

in the early years it was very difficult to get the referrals to us for

a variety of reasons, whether the debts were in the format, whether

they were documented the right way, whether we had the automated systems in which to transfer information. And we really

made a lot of progress in that area.

I wish I could say with complete confidence that we are getting

100 percent. I know we are doing pretty well; we are up in the high

90’s. I can say that with some degree of confidence. But whether

we are getting every single one, I think there is some more work

that we can do on that.

Mr. PLATTS. I will wrap up, and then, Ms. Norton, I will yield

in just one moment.

As you are working with departments and agencies, if they are

reticent, for whatever reason, to cooperate and participate in either

being more proactive on the wage garnishment or just in providing

the information in a timely manner to you to pursue, this subcommittee certainly stands ready to bring some added leverage to

your efforts. I know you are, as a department, kind of a peer department agency to many of these entities, but sometimes just the

fact that the subcommittee is interested in looking at a certain

agency that they are not fully going after debt as they should be,

we are glad to do that, and again in a partnership way. We just

want to make sure we are all on the same page.

I am maybe not the only, but one of few that paid my last student loan to the Federal Government as a Member of Congress. It

took 11 years, but my wife and I didn’t miss those payments beVerDate 11-MAY-2000 15:17 Jul 29, 2011 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\67369.TXT KATIE PsN: KATIE
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cause it was our debt and we were glad to fulfill it. It allowed us

to advance ourselves, so we expect others to fill their obligations as

well.

With that, I will yield to the gentlelady from the District of Columbia, Ms. Norton.

Ms. NORTON. Well, Mr. Chairman, you weren’t glad to fulfill it,

but you knew that it was your duty to fulfill it.

Mr. PLATTS. Actually, I was glad to fulfill it so I could get it off

the books and start putting that money toward my kids’ education

in the years to come.

Mr. TOWNS. He knew we were going to have a hearing. [Laughter.]

Ms. NORTON. I have a question about doctors and Medicare.

There had been a doctor who was delinquent—and I need to know

what delinquent means—in Federal tax obligations could have 15

percent of the payments withheld, and now there is a proposal in

the 2012 budget for 100 percent.

Now, at first blush, that seems par for the course; you know,

they are doctors, they ought to be able to pay their taxes. On the

other hand, there is huge concern in the Congress about the rapid

attrition of physicians even willing to see Medicare patients. So I

am obliged to ask you what your view is of this 100 percent that

would include Medicare, apparently all contractors.

And, again, on the face of it the fairness of it is clear, but what

do you think that would do for doctors who, in fact, are seeing

Medicare patients, getting, they will tell you, a few cents on the

dollar, getting very little of what they believe they are entitled to,

and they will only point to what in fact they can get if they jettison

Medicare and take only people who are willing to come without

Medicare, so much so that some elderly are willing, in order to

keep their physicians when they jettison Medicare, to pay for the

entire amount themselves. So there will be many elderly who could

not.

First of all, what does delinquent mean? Do you think the 2012

budget legislative proposal is in effect now? Because it is a legislative proposal; I don’t know if it is in the appropriation or what. The

word delinquent is not clear to me. Would you explain, one, how

this would operate? I am particularly interested in Medicare doctors. I understand why they would be folded in with other contractors, but I would like to know what delinquency would in fact result in this 100 percent and what effect you think it would have

on Medicare providers willing to continue to provide Medicare to

the elderly.

Mr. LEBRYK. Thank you. We are very supportive of the proposal;

it would yield close to $750 million over the 10 year period, which

is a sizable amount. With respect to the underlying program issues,

as we——

Ms. NORTON. Why was it at 15 percent? That didn’t work? Did

the 15 percent, which does seem to be a fairly low amount, why

was the number increased from 15 percent to 100 percent?

Mr. LEBRYK. I suspect it has to do with the $750 million over 10

years.

Ms. NORTON. Somebody wanted the money.

Mr. LEBRYK. Which is the ability to collect the money sooner.

31

Ms. NORTON. It was coming in too slowly. OK.

Mr. LEBRYK. Yes. With respect to delinquency, agencies and

debtors have due process rights, so to the extent that a Medicare

provider has a delinquency, they would be notified and have the

ability to either have a hearing or some sort of discussion about

whether that is the appropriate amount which they are being

charged. They also have, in most cases, the ability to say whether

there is financial hardship, whether they have the ability to repay

and whether there are other repayment agreements that they can

get into to satisfy that delinquency.

Ms. NORTON. So even with this 100 percent, do you believe a

physician could in fact work out something with the IRS the way

the average citizen does to pay a certain percentage, or would he

nevertheless, because he is ‘‘delinquent,’’ have to abide by the 100

percent?

Mr. LEBRYK. At FMS, for example, when these debts are referred

to us, we do oftentimes have compromise authority in which we

work with the agencies to say, you know, is there a better way to

collect this debt? Is there a more reasonable way to have either repayment agreements or some sort of mechanism to make sure that

we have better collectibility. And the process has to be working

with the debtor to do that.

With respect to the impact on the program, one of the things

which we don’t have a lot of expertise in, because there are so

many programs out there, is the underlying purpose of a program

and the underwriting standards that are given. So why a payment

is made, under what circumstances is not something that we at

FMS or Treasury would have a very good feel for. I think——

Ms. NORTON. Would a delinquent, let’s say, physician be one who

had ignored the opportunity after a hearing to work out something

for himself and finally gets on this list. The only way he can get

the money is to get on this list to get 100 percent from you?

Mr. LEBRYK. Yes. And so when the debt is referred to us at 180

days, we will do a variety of things. We will then do a process of

our own in terms of contacting the debtor and making sure that

they know that they are either going to——

Ms. NORTON. So he gets another chance.

Mr. LEBRYK. He gets another chance on it, yes. And then we

would be working with the agency to say, you know, is this the

right thing to be doing in this particular circumstance?

Ms. NORTON. Can I take it, since this is in fact the law now, is

that the fact?

Mr. LEBRYK. The 15 percent is the law right now.

Ms. NORTON. No, no, the 100 percent, when does that become effective?

Mr. LEBRYK. If the legislation passes.

Ms. NORTON. So this is not yet law?

Mr. LEBRYK. It is proposed legislation.

Ms. NORTON. But you all strongly support it.

Mr. LEBRYK. Yes, we do.

Ms. NORTON. The administration strongly supports it.

Mr. LEBRYK. Yes.

Ms. NORTON. Have there been hearings?

Mr. LEBRYK. I don’t believe there has been.

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Ms. NORTON. Thank you, Mr. Chairman.

Mr. PLATTS. Thank you, Ms. Norton.

The effort in helping to move this legislation is something that

we are very involved with and want to help make happen, and I

think—and I apologize I didn’t hear all of the answer because of

a conversation here, but when we talk about Medicare providers,

the type of debt that we are talking about—you may have referenced this and I apologize—is the story where you have a doctor

who got student loans, paid their way through school with the help

of the American taxpayers, is out making a good or whatever income, but is not paying back those loans.

Once that is discovered, Medicare can say you are getting paid

by the taxpayers; we are going to take some of that to pay off that

debt you owe. That would be an example of a delinquent debt that

a doctor has. It is not related to their medical provision of services,

it is related to the education they got.

Mr. LEBRYK. Correct. Or whether it be tax debt, in the case of

delinquent tax debt. Correct.

Mr. PLATTS. OK.

Mr. LEBRYK. Yes.

Mr. PLATTS. Mr. Towns, did you have anything else?

Mr. TOWNS. Just a quick question.

Mr. PLATTS. Yes.

Mr. TOWNS. We want to be helpful, I want you to know that, in

every way, but I didn’t feel comfortable with your answer in reference to if a person moves from one State to another, in terms of

the collection process. I didn’t feel comfortable with your answer.

Help me.

Mr. LEBRYK. OK. Well, right now what happens is we don’t have

the ability that if you incur a debt in one State and then you move

to another State, because of certain restrictions, we no longer can

actually pursue that debt, or the State can no longer pursue that

debt against someone who has moved from, let’s say, Pennsylvania

to New York. And so the provision that we are asking for is that

you can in fact continue to pursue that person if they move to another jurisdiction.

Mr. TOWNS. The last part of that is, you know, in some instances

people might not have the resources to pay at a given point, but

then at a later date they come in to a lot of money or something.

How do you deal with that?

Mr. LEBRYK. That is one of the reasons why very few debts are

extinguished in our process and why they stay in the data base for

a long period of time and will continue to be worked for a long period of time. We do actually, with respect to debtors who are under

financial hardship, we do try to work out repayment agreements.

We do try to make sure that we put terms in there.

As I mentioned under cross-servicing, close to $500 million of repayment agreements are in there, administrative wage garnishment orders are in there to allow us to collect that debt over a period of time. An administrative wage garnishment is at 15 percent,

so you are not garnishing someone’s entire wages; you are garnishing a percentage that allows us to collect small pieces of that debt

until it is satisfied.

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Mr. PLATTS. Thank you. We are going to keep the record open

for 7 days, and I know two specific issues, one with the Defense

debt that Mr. Towns referenced and then my inquiry on the foreign

sovereigns and what type of debt we would be talking there versus

payments that we are making to these foreign sovereigns; and if

there is any other materials that you think would be relevant.

I will conclude with one, again, appreciation for your patients

and my colleagues’ patience with my late arrival, and especially

our interest and willingness to partner with you and your agency

in really improving the process to make sure that what is owed the

American people is paid and that we make sure you have the tools

to be able to do that.

Mr. LEBRYK. Thank you for your leadership and thank you for

allowing us to testify today.

Mr. PLATTS. Thanks for being here.

The record will be open for 7 days and this hearing stands adjourned.

[Whereupon, at 11:30 a.m., the subcommittee was adjourned.]

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