U.S. GOVERNMENT PUBLISHING OFFICE

WASHINGTON : 

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

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

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

97–382 2015

MEDICAID PROGRAM INTEGRITY: SCREENING OUT 

ERRORS, FRAUD, AND ABUSE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

JUNE 2, 2015 

Serial No. 114–48 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

TIM MURPHY, Pennsylvania 

Chairman 

DAVID B. MCKINLEY, West Virginia 

Vice Chairman 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

H. MORGAN GRIFFITH, Virginia 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

DIANA DEGETTE, Colorado 

Ranking Member 

JANICE D. SCHAKOWSKY, Illinois 

KATHY CASTOR, Florida 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

YVETTE D. CLARKE, New York 

JOSEPH P. KENNEDY, III, Massachusetts 

GENE GREEN, Texas 

PETER WELCH, Vermont 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(III) 

C O N T E N T S 

Page 

Hon. Tim Murphy, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 3 

Hon. Diana DeGette, a Representative in Congress from the state of Colorado, 

opening statement ................................................................................................ 4 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 6 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 7 

Hon. Fred Upton, a Representative in Congress from the state of Michigan, 

prepared statement .............................................................................................. 68 

WITNESSES

Seto J. Bagdoyan, Director, Audit Services, Forensic Audits and Investigative 

Service, U.S. Government Accountability Office ............................................... 9 

Prepared statement .......................................................................................... 11 

Answers to submitted questions ...................................................................... 74 

Shantanu Agrawal, M.D., Deputy Administrator and Director, Center for 

Program Integrity, Centers for Medicare and Medicaid Services, U.S. Department of Health and Human Services .......................................................... 23 

Prepared statement .......................................................................................... 25 

Answers to submitted questions ...................................................................... 78 

SUBMITTED MATERIAL

Subcommittee memorandum .................................................................................. 69 

(1) 

MEDICAID PROGRAM INTEGRITY: SCREENING 

OUT ERRORS, FRAUD, AND ABUSE 

TUESDAY, JUNE 2, 2015 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:16 a.m., in room 

2322 of the Rayburn House Office Building, Hon. Tim Murphy 

(chairman of the subcommittee) presiding. 

Members present: Representatives Murphy, McKinley, Burgess, 

Blackburn, Bucshon, Brooks, Mullin, Collins, DeGette, 

Schakowsky, Castor, Yarmuth, Clarke, Kennedy, Green, Welch, 

and Pallone (ex officio). 

Staff present: Noelle Clemente, Press Secretary; Jessica Donlon, 

Counsel, Oversight and Investigations; Brittany Havens, Oversight 

Associate, Oversight and Investigations; Charles Ingebretson, Chief 

Counsel, Oversight and Investigations; Michelle Rosenberg, GAO 

Detailee, Health; Chris Santini, Policy Coordinator, Oversight and 

Investigations; Alan Slobodin, Deputy Chief Counsel, Oversight; 

Jessica Wilkerson, Oversight Associate, Oversight and Investigations; Jeff Carroll, Democratic Staff Director; Ryan Gottschall, 

Democratic GAO Detailee; Ashley Jones, Democratic Director, Outreach and Member Services; Chris Knauer, Democratic Oversight 

Staff Director; Una Lee, Democratic Chief Oversight Counsel; Elizabeth Letter, Democratic Professional Staff Member; and Tim Robinson, Democratic Chief Counsel. 

OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA 

Mr. MURPHY. Good morning. I convene this hearing of the Subcommittee on Oversight and Investigations. We are here today to 

discuss a continuing and increasingly expensive problem, waste, 

fraud, and abuse in the Medicaid program. I guess one way I could 

put this is, for centuries people have tried to deal with the issue 

is there life after death, and apparently there is in Medicaid, and 

we will get to the bottom of that today. 

Last year the Medicaid program provided medical services for ap- proximately 60 million people at a cost of $310 billion. But during 

that same year, the Centers for Medicare and Medicaid Services estimate that the improper payment rate was 6.7 percent, or $17.5 

billion. This is an increase of almost one percent, or over three bilVerDate Nov 24 2008 11:49 Dec 01, 2015 Jkt 037690 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-48 CHRIS
2 

lion, from the previous year. It is a troubling trend, especially as 

the program continues to expand. 

Unfortunately, the Medicaid program is far too accustomed to 

fraud. In fact, the Government Accountability Office has designated 

the Medicaid program as a high risk for fraud and abuse since 

2003, and it has been the subject of multiple GAO and Department 

of Health and Human Services Office of Inspector General Reports 

over the past several years, including a GAO report being highlighted today. 

In 2012 the Committee requested GAO identify and analyze indicators of improper and potentially fraudulent payments to Medicaid beneficiaries and providers. In a trustworthy study, another 

in a longtime examining Medicaid fraud, GAO has reported that 

CMS needs to take additional actions to improve provider and beneficiary fraud controls. GAO found that thousands and Medicaid 

beneficiaries and hundreds of providers in just four states: Arizona, 

Florida, Michigan, and New Jersey, were involved in possible improper or fraudulent payments during fiscal year 2011. For example, almost 200 deceased beneficiaries received at least $9.6 million 

in Medicaid benefits. About 8,600 beneficiaries received payments 

by two or more states, totaling at least $18.3 million. 

The Social Security numbers for about 199,000 beneficiaries did 

not match the Social Security Administration databases. About 90 

medical providers had their medical license revoked or suspended 

in the state in which they received Medicaid payments. At least 47 

providers had foreign addresses as their location of services, including Canada, China, India, and Saudi Arabia. About 50 providers 

who received Medicaid payments were excluded from the Federal 

program for a variety of reasons, including patient abuse, or neglect, fraud, theft, bribery, and tax evasion. 

GAO acknowledged that regulations issued in response to the Affordable Care Act may have addressed some of the improper payment indicators found in GAO’s analysis. For example, CMS created a tool called the Data Services Hub to help verify beneficiary 

application information, but questions remain whether this tool has 

been properly implemented, and if the states have been able to effectively use this tool to combat waste and fraud. In fact, just a few 

weeks ago, a Reuters report found that more than one in five of the 

thousands of doctors and other health care providers in the U.S. 

prohibited from billing Medicare are still able to bill state Medicaid 

programs. 

The report included disturbing stories, such as a Georgia optometrist who claimed he conducted 177 eye exams in one day, yet remained on South Carolina’s Medicaid rolls for almost a year after 

he pleaded guilty in Georgia. In another instance, an Ohio psychiatrist routinely over-reported the time he spent with patients, and 

even billed for no-show patients. CMS revoked his billing privileges 

after he was convicted of felony Workers’ Compensation fraud, yet 

he continued to work in the Illinois Medicaid program, getting paid 

$560,000 for services or prescriptions he wrote after his Medicare 

provider revocation. Shockingly, on the day he was being sentenced 

in Columbus, Ohio, he also claimed that he saw 131 group therapy 

patients at his Illinois practice. 

3 

Now, these stories, we know, are unacceptable. Medicaid fraud 

undermines the integrity of the program, denies our most vulnerable the services they deserve, and waste taxpayers’ hard earned 

dollars. I hope we will hear today about the steps that can be taken 

to further combat fraud in the Medicaid program. That is what we 

want to focus on. And GAO has recommended some common sense 

steps that would reduce fraud, such as issuing guidance to states, 

better identifying beneficiaries who are deceased, and the availability of automated information through Medicare’s enrollment 

database. 

In light of the history of fraud in the Medicaid program, and its 

growing size, however, will these steps be enough? Will we be here 

again in another 2 years discussing the same thing? And with the 

Medicaid program continuing to expand, the Committee is concerned that the opportunity and motivation to defraud the program 

will only increase. 

So I would like to thank our witnesses who are here today. You 

have the ability to save the taxpayers a massive amount of money. 

We hope to hear from you today how you plan to do that, and we 

are grateful for your presence. 

[The prepared statement of Mr. Murphy follows:] 

PREPARED STATEMENT OF HON. TIM MURPHY

We are here today to discuss a continuing and increasingly expensive problem: 

Waste, fraud, and abuse in the Medicaid program. 

Last year the Medicaid program provided medical services for approximately 60 

million people at a cost of $310 billion. But during that same year, the Centers for 

Medicare and Medicaid Services estimated that the improper-payment rate was 6.7 

percent or $17.5 billion. This is an increase of almost 1 percent or over $3 billion 

from the previous year. This is a troubling trend, especially as the program continues to expand. 

Unfortunately, the Medicaid program is far too accustomed to fraud. In fact, the 

Government Accountability Office has designated the Medicaid program as a high 

risk for fraud and abuse since 2003. And it has been the subject of multiple GAO 

and Department of Health and Human Services Office of Inspector General reports 

over the past several years, including a GAO report being highlighted today. 

In 2012, the Committee requested GAO identify and analyze indicators of improper or potentially fraudulent payments to Medicaid beneficiaries and providers. 

In a just-released study-another in a long line examining Medicaid fraud-GAO has 

reported that CMS needs to take additional actions to improve provider and beneficiary fraud controls. 

GAO found that thousands of Medicaid beneficiaries and hundreds of providers 

in just four states—Arizona, Florida, Michigan, and New Jersey-were involved in 

possible improper or fraudulent payments during Fiscal Year 2011. For example, almost 200 deceased beneficiaries received at least $9.6 million in Medicaid benefits. 

About 8,600 beneficiaries received payments by two or mate states totaling at least 

$18.3 million. The Social Security Numbers for about 199,000 beneficiaries did not 

match the Social Security Administration databases. About 90 medical providers 

had their medical licenses revoked or suspended in the state in which they received 

Medicaid payments. At least 47 providers had foreign addresses as their location of 

service, including in Canada, China, India, and Saudi Arabia. About 50 providers 

who received Medicaid payments were excluded from the federal program for a variety reasons including patient abuse or neglect, fraud, theft, bribery, and tax evasion. 

GAO acknowledged that regulations issued in response to the Affordable Care Act 

may have addressed some of the improper-payment indicators found in GAO’s analysis. For example, CMS created a tool called the Data Services Hub (hub) to help 

verify beneficiary applicant information. But questions remain whether this tool has 

been properly implemented and if the states have been able to effectively use this 

tool to combat waste and fraud. 

In fact, just a few weeks ago, a Reuters report found that ‘‘more than one in five 

of the thousands of doctors and other health care providers in the U.S. prohibited 

4 

from billing Medicare are still able to bill state Medicaid programs.’’ The report included disturbing stories such as a Georgia optometrist, who claimed he conducted 

177 eye exams in one day, yet remained on South Carolina’s Medicaid rolls for almost a year after he pleaded guilty in Georgia. In another instance, an Ohio psychiatrist routinely overreported the time he spent with patients and even billed for 

no-show patients. CMS revoked his billing privileges after he was convicted of felony 

workers’ compensation fraud. Yet, he continued to work in the Illinois Medicaid program, getting paid $560,000 for services or prescriptions he wrote after his Medicare 

provider revocation. Shockingly, on the day he was being sentenced in Columbus, 

Ohio, he also claimed that he saw 131 group therapy patients at his Illinois practice. 

These stories are unacceptable. Medicaid fraud undermines the integrity of the 

program, denies our most vulnerable the services they deserve, and wastes American taxpayers’ hard-earned dollars. 

I hope we will hear today about the steps that can be taken to further combat 

fraud in the Medicaid program. GAO has recommended some common sense steps 

that would reduce fraud, such as issuing guidance to state to better identify beneficiaries who are deceased and the availability of automated information through 

Medicare’s enrollment database. In light of the history of fraud in the Medicaid program and its growing size, however, will these steps be enough? Will we be here 

again in another two years discussing the same thing? With the Medicaid program 

continuing to expand, the Committee is concerned that the opportunity and motivation to defraud the program will only increase. 

I would like to thank our witnesses joining us today-you all have the ability to 

save the American taxpayer a massive amount of money, and we hope to hear from 

you today on how you plan to do that. 

Mr. MURPHY. And I now recognize the Ranking Member, Ms. 

DeGette of Colorado, for 5 minutes. 

OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF COLORADO 

Ms. DEGETTE. Thank you, Mr. Chairman. Good news on a bipartisan basis, we are against waste, fraud, and abuse, as usual, in 

the Medicaid program, and everyplace else. I have been on this 

subcommittee now 19 years, and we have had a whole series of 

hearings over the years. And as you accurately point out, Mr. 

Chairman, it goes from administration to administration, Medicaid 

seems to be particularly vulnerable to issues like fraud, and we 

have to continue our oversight. So when you say will we be here 

again in 2 years? Probably. We will probably be here in 10 years, 

because this kind of a problem takes ever vigilance by this Committee. 

The GAO report we are talking about today tells us that the 

Medicaid program, like many other large programs, like Medicare, 

defense contracts, and private insurance plans, experience thousands of improper, and possibly fraudulent, payments every year. 

Last year CMS found an estimated improper payment rate of 6.7 

percent, which amounted to about $17.5 billion for the Medicaid 

program in 2014. 

Now, as I said, and you said, like many other programs, Medicaid fraud is not unique to this Committee. In our report, which 

was published in 2003, which was 12 years ago, we said, ‘‘Committee hearings last year revealed that the cost of the Medicaid 

fraud program could exceed $17 billion every year. This year, 2003, 

the Committee will examine ways in which states could adopt more 

rigorous enrollment controls to keep unscrupulous providers out of 

their programs, and improve their program integrity standards.’’ 

And we had laudable efforts since that time. Truly, $17 billion in 

5 

2003, and about $17 billion now, even with the Medicaid expansion, that is not something to be proud about, although I guess we 

should be glad it doesn’t seem to be getting a lot worse. Nonetheless, Congress, and the Administration, and the governors all 

across the country need to focus on improper payments. 

There is something exciting, though, that I think may actually 

make a major difference going forward. Under the Affordable Care 

Act, a number of important measures were enacted to prevent or 

reduce improper payments in the Medicaid and Medicare programs. For example, the ACA provided nearly $350 million in new 

funds for anti-fraud efforts. It provided new authorities to the Secretary of HHS to help shift from a traditional pay and chase model 

to a preventative approach, by keeping fraudulent suppliers and 

providers out of the program before they commit fraud. And now 

we have in place a host of new and enhanced anti-fraud penalties 

to deter those attempting to improperly bill Medicaid or Medicare. 

These are important new tools, and I think they can help safeguard 

the program. I am looking forward to hearing from CMS and GAO 

on how these efforts are working, and how they expect to build 

upon efforts to strengthen Medicaid at both the Federal and State 

levels. 

I think it is important to put this discussion of improper payment rates in context with large scale financing of other public and 

private sector programs. For example, I can cite endless examples 

of major defense contractors receiving improper payments from the 

Pentagon. Last year the Washington Post revealed that one company improperly charged the government more than $100 million 

for services. DOD alone reported it had made $1.1 billion in improper payments for fiscal year 2011. 

Overbilling occurs across all sectors of the government, and we 

have to figure out why that is happening, and how we can 

strengthen our financial controls across the government to prevent 

this kind of overpayment and fraud, and find new ways to protect 

taxpayers. And so I think the GAO does a really important job, 

both here, in helping strengthen the Medicaid program, and many 

other places. 

I have a lot of questions about the finding and recommendations, 

some of which may go beyond the scope of the report. For example, 

and this is in context of the ACA too, the audit relies on data from 

fiscal year 2011. As we implement these ACA provisions that have 

gone into place since that time, I would be interested to know, are 

they really making a difference on the data in the 3 or 4 years 

since that time? The other issue we need clarification on is the 

basis of the four states that were chosen for this audit. 

So, as I say, I really want to thank the agencies for coming in 

and helping us. Anything we can do to strengthen the controls to 

prevent overpayment and fraud is great with me, because the hard 

working Americans in all 50 states rely on these Medicaid services, 

and they also rely on the fact that their tax dollars are going to 

best serve this country. Thank you, Mr. Chairman. 

Mr. MURPHY. Thank you. Now I will recognize Dr. Burgess for 

5 minutes. 

6 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. Thank you, Mr. Chairman. This is an important 

hearing we are having today. Medicaid, a program that is entirely 

under our jurisdiction in the Energy and Commerce Committee, is 

a vital program that covers and provides care for some of the nation’s most vulnerable populations. This Committee does have exclusive legislative jurisdiction over Medicaid, and it is our responsibility to ensure that the long term sustainability of Medicaid is assured through proper oversight. 

Inefficient and misdirected payments within the Medicaid program have substantive budgetary, access, and provider impacts 

that ultimately affect patients. If states do not have the proper 

tools available for monitoring enforcement, there can be lasting effects on the nation’s Medicaid recipients, and the providers of their 

care. CMS has reported improper payments well over $17 billion 

for fiscal year 2014 for the Medicaid program, an increase of nearly 

$3 billion from the prior year. That is a trend that should concern 

all of us. Each of those dollars that is spent inappropriately is a 

dollar not spent on a patient, and is, in fact, a wasted taxpayer dollar. 

I do want to point out that the recently passed H.R. 2, that this 

committee had a great hand in getting started, and shepherding 

through the legislative process, and ultimately it was signed by the 

President, but it did have a number of anti-fraud provisions contained within. Most of those pertained to the Medicare system, but 

I do wonder if some of those examples may not also be extrapolated 

to the Medicaid system. Specifically, Mr. Chairman, Section 502, 

preventing wrongful Medicare payments for items and services furnished to incarcerated individuals, individuals not lawfully present, 

and deceased individuals. That may be something worthy of study 

that the CMS may want to consider for the Medicaid system as 

well. 

I am also concerned about allowing entities engaging in fraud to 

continue to receive Federal funds. We want to ensure provider participation in Medicaid, and patients should never be faced with a 

choice of no care or low quality care from those providers. The Office of Inspector General has the authority to exclude entities that 

employ deceptive business practices within the Medicaid program. 

In 2014 Ranking Member DeGette and I looked into the practices 

of certain dental management service companies within the Medicaid program which not only provide managerial services to dental 

clinics, but also, in fact, actually own these clinics, and have direct 

control over the operations and finances of the clinics. We became 

very concerned because this corporate structure was resulting in 

failure to meet basic quality and compliance standards. 

Unfortunately, many of these practices have continued, despite 

Federal Government intervention. The Office of Inspector General 

may initiate a corporate integrity agreement, but these deceptive 

entities may dissolve under bankruptcy, only to re-emerge under 

new management. The Office of Inspector General has the authority to exclude individuals and entities that have engaged in fraud 

and abuse related to Federal health programs, including Medicaid. 

Following our investigation, we sent a letter to the Office of InspecVerDate Nov 24 2008 11:49 Dec 01, 2015 Jkt 037690 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-48 CHRIS
7 

tor General recommending that OIG consider excluding any corporate entity that employs deceptive practices that result in substandard care. 

So we are grateful that some action was taken over that, but it 

is incredibly important that there be a way to exclude someone who 

is engaged in deceptive practice, and prevent that process of dissolving, and then re-emerging in another corporate form. We must 

ensure that states have the proper tools available to ensure that 

tax dollars are never fraudulently wasted in the Medicaid program, 

and that access for Medicaid beneficiaries is subsequently protected. 

Mr. Chairman, I thank you for the recognition, for the time, and 

I will yield back. 

Mr. MURPHY. Gentleman yields back, and—if there is anybody 

else on our side who wants the remaining 50 seconds? And, if not, 

we will move over to the Ranking Member, Mr. Pallone, for 5 minutes. 

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Mr. Chairman. For decades Medicaid 

has been a lifeline for tens of millions of hard working Americans 

across the country. That is why we must make sure that the resources we devote to this program are administered efficiently and 

effectively. Every dollar lost to misuse or fraud of our Federal 

health programs is one less dollar available to fund essential lifesaving medical services for Americans. Cutting down on waste, 

fraud, and abuse is, and must remain, a priority for CMS, state 

Medicaid programs, and this Committee. 

Some of my colleagues on the other side of the aisle have expressed concerns that expansion of Medicaid will put state budgets 

in an untenable position and increase fraud, and that is simply not 

true. Beneficiary access and program integrity efforts are not competing goals. Smart, effective regulation reinforces both goals simultaneously. 

In the short time since states have had the option to expand 

Medicaid, those states have already realized significant qualitative 

and economic benefits, as uncompensated care rates drop, and 

states are able to collect more revenue. Expansion makes good economic sense, and good moral sense. For instance, in my home state 

of New Jersey, projects a nearly $150 million decline in charity 

care in fiscal year 2016, with savings from the Medicare expansion 

totaling nearly $3 billion through 2020. Let us also not forget that 

Medicaid coverage lowers financial barriers to access, increases use 

of preventative care, and improves health outcomes. Making the 

program available to more vulnerable Americans is a great achievement, and one that I am very proud of having played a part in. 

But, of course, it is now more important than ever that we act 

as good stewards of Medicaid dollars, and ensure that the benefits 

of this program are available for generations to come. That is why, 

when we passed the Affordable Care Act in 2010, we included a 

number of measures to strengthen program integrity and reduce 

fraud in the Medicaid program. In 2011, for example, CMS estabVerDate Nov 24 2008 11:49 Dec 01, 2015 Jkt 037690 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-48 CHRIS
8 

lished procedures to screen providers and suppliers based on their 

risk levels so we can prevent fraud before it occurs. This has 

changed the traditional pay and chase model towards a preventative approach by keeping fraudulent suppliers out of the program 

before they can commit fraud. 

There are a number of other ACA anti-fraud measures that have 

impacted the Medicaid program positively over the past few years. 

These include new and enhanced penalties for fraudulent providers. These new authorities allow the Inspector General to exclude from Medicaid any provider that makes false statements on 

an application to enroll or participate in the program. The ACA 

also requires state Medicaid agencies to withhold payments to a 

provider or supplier pending investigation of a credible allegation 

of fraud. The law also significantly increased funding to fight Medicare and Medicaid fraud. 

So I want to hear today about how all these measures have 

worked, and about how CMS is implementing regulations to better 

protect patients and legitimate providers. Although the ACA made 

significant steps to reduce fraud and abuse in the Medicaid program, I know there is always room for improvement, and I am glad 

the GAO is here today to share their findings and provide constructive advice about how can we make the Medicaid program even 

stronger. 

But I want to caution against applying GAO’s findings too broadly. First, the analysis focused on four states, Arizona, Florida, 

Michigan, and New Jersey, and its findings are not generalizable 

across the country. Second, the report looked at data from fiscal 

year 2011, before many of the ACA anti-fraud provisions went into 

effect. GAO acknowledges several times in a report that CMS has 

since made changes to address improper payment issues. Third, I 

want to make the point that many of the potentially improper payments listed in this report are likely examples of provider fraud, 

not beneficiary fraud. The GAO report lists examples such as billing under deceased beneficiaries’ identities, or billing on behalf of 

currently incarcerated beneficiaries. Given that these beneficiaries 

are hardly in a position to defraud the government, I think it is 

likely that many of these are examples of provider fraud. 

So, Mr. Chairman, good program integrity helps to ensure that 

beneficiaries receive the care they need, so I look forward to hearing from CMS and GAO how these latest efforts are being implemented by the states. I don’t know if anybody wants my 30 seconds—otherwise I will yield back. Thank you. 

Mr. MURPHY. Thank you, I appreciate that. We will proceed onward. It is good to see we are all on the same team today, focused 

on this, and our witnesses are part of this too, so I would like to 

introduce the witnesses for today’s panel, make sure I get the 

names right. It is Seto Bagdoyan, did I get that right? Good, thank 

you. The Director of Audit Services in the U.S. Government Accountability Office Forensic Audits and Investigative Services Missions Team. Welcome here. 

And Dr. Shantanu Agrawal—you have been here before, welcome 

back—is the Deputy Administrator and Director of the Center for 

Program Integrity at the Centers for Medicare and Medicaid Services. 

9 

I will now swear in the witnesses. As you are aware, the committees holding investigative hearing and when doing so, has the practice of taking testimony under oath. Do either of you have any objections to testifying under oath? Neither of you do, thank you. 

So, as the Chair, I would advise you that under the rules of the 

House and rules of the Committee you are entitled to be advised 

by counsels. Do either of you desire to be advised by counsel during 

your testimony today? And both of you say no to that, so, in that 

case, if you would please rise, raise your right hand, I will swear 

you in. 

[Witnesses sworn.] 

Mr. MURPHY. Thank you. You are now under oath, and subject 

to the penalties set forth in Title 18, Section 1001 of the United 

States Code. You may now give a 5 minute summary of your written statement. You know how to watch the red light in front of you. 

Stick with that, and I guess we will start off with Mr. Bagdoyan. 

TESTIMONY OF SETO J. BAGDOYAN, DIRECTOR, AUDIT SERVICES, FORENSIC AUDITS AND INVESTIGATIVE SERVICE, U.S. 

GOVERNMENT ACCOUNTABILITY OFFICE; AND SHANTANU 

AGRAWAL, M.D., DEPUTY ADMINISTRATOR AND DIRECTOR, 

CENTER FOR PROGRAM INTEGRITY, CENTERS FOR MEDICARE AND MEDICAID SERVICES, U.S. DEPARTMENT OF 

HEALTH AND HUMAN SERVICES 

TESTIMONY OF SETO J. BAGDOYAN 

Mr. BAGDOYAN. Chairman Murphy, Ranking Member DeGette, 

and members of the subcommittee, I am pleased to be here today 

to discuss results of GAO’s recent report on Medicaid beneficiary 

and provider fraud controls. As you know, and as you mentioned, 

Mr. Chairman, Medicaid is a significant expenditure for the Federal Government and the states, with combined outlays of about 

$516 billion in fiscal year 2014, involving millions of beneficiaries 

and providers. 

These numbers, as members mentioned, are all expected to grow 

as a result of the expansion of Medicaid under the Affordable Care 

Act. A program of this scope and scale is inherently susceptible to 

error, including improper payments, as well as fraudulent activity. 

In fact, as mentioned again, CMS reported an estimated improper 

payment rate of 6.7 percent, or $17.5 billion, for Medicaid in fiscal 

year 2014, compared to 5.8 percent, or $14.4 billion respectively, in 

FY 2013. Also, earlier this year we reported that Medicaid remains 

on GAO’s high risk list in part because of concerns about the adequacy of fiscal oversight of the program, including improper payments. 

With this backdrop, I will now discuss our report’s key findings. 

Overall we found thousands of Medicaid beneficiaries and hundreds of providers were involved in potentially improper or fraudulent payments during fiscal year 2011, the most recent year for 

which reliable and comparable data were available in the four selected states we reviewed, namely Arizona, Florida, Michigan, and 

New Jersey. These states accounted for about 9.2 million beneficiaries, and about 13 percent of all fiscal year 2011 Medicaid payments. 

10 

More specifically, examples of potentially improper or fraudulent 

payments include about 8,600 beneficiaries had payments made on 

their behalf concurrently by two or more of the selected states, totaling at least $18.3 million. The identities of roughly 200 deceased 

beneficiaries received about $9.6 million in Medicaid benefits subsequent to the beneficiary’s death. Some 3,600 individuals received 

about $4.2 million worth of Medicaid services while incarcerated in 

State prison facilities. 90 providers had suspended or revoked licenses in at least one state in which they received payment. Associated Medicaid claims totaled at least $2.8 million. 

To its credit, as, again, mentioned in opening statements, CMS 

has taken some regulatory steps to make the Medicaid enrollment 

process more rigorous and data-driven. However, gaps in beneficiary eligibility, verification guidance, and data sharing persist. 

For example, in 2013, CMS required states to use electronic data 

maintained by the Federal Government in its data services hub to 

verify beneficiary eligibility. According to CMS, the hub can verify 

key application information, including state residency, incarceration status, and immigration status. 

However, CMS regulations do not require states to review Medicaid beneficiary files for deceased individuals more frequently than 

annually, nor specify whether states should reconsider using the 

more comprehensive Social Security Administration’s full death 

master file in conjunction with state reported death data when 

doing so. As a result, states may not be able to detect individuals 

that have moved to, and later died, in another state, or prevent the 

payment of potentially fraudulent benefits to individuals using 

their identities. Accordingly, additional guidance from CMS to 

states might further enhance program integrity efforts beyond 

using the hub. 

In closing, our findings underscore that, as Medicaid’s numbers 

grow as expected, both the Federal Government and the states 

need to maximize their efforts to promote program integrity by preventing and reducing potential for improper payments and fraud. 

Our recommendations to CMS, which the agency has accepted, are 

designed to enhance its toolbox to this effect, help narrow the windows of opportunity for improper payments and fraud, and provide 

reasonable assurance that Medicaid eligibility controls are functioning as intended. 

Mr. Chairman, members of the subcommittee, this concludes my 

statement. I look forward to your questions. Thank you. 

[The prepared statement of Mr. Bagdoyan follows:] 

11 


97382.001
12 


97382.002
13 


97382.003
14 


97382.004
15 


97382.005
16 


97382.006
17 


97382.007
18 


97382.008
19 


97382.009
20 


97382.010
21 


97382.011
22 


97382.012
23 

Mr. MURPHY. Thank you. Dr. Agrawal, you are recognized for 5 

minutes. 

TESTIMONY OF SHANTANU AGRAWAL 

Dr. AGRAWAL. Thank you. Chairman Murphy, Ranking Member 

DeGette, and members of the Subcommittee, thank you for the invitation to discuss CMS’s efforts to strengthen Medicaid. Enhancing program integrity is a top priority for the Administration, and 

an agency-wide effort at CMS. We share the Subcommittee’s commitment to protecting beneficiaries and ensuring taxpayer dollars 

are spent on legitimate items and services, both of which are at the 

forefront of our program integrity mission. 

I would like to make three major points in my testimony today. 

First, Medicaid program integrity is a shared state/Federal responsibility, and I feel strongly that states and the Federal Government 

share the goal that the Medicaid program be as secure as possible 

to ensure beneficiaries are protected, and the right payments are 

being made. Second, we have made important progress in addressing beneficiary eligibility and provider enrollment issues through 

advanced data systems and improved collaboration. And third, it is 

clear that more work remains, that we can build on our accomplishments with improved guidance, building more capabilities, and 

enhanced oversight. 

States and the Federal Government share mutual obligations 

and accountability for the integrity of the Medicaid program, and 

the development, application, and improvement of program safeguards necessary to ensure proper and appropriate use of both Federal and state dollars. This Federal/state partnership is central to 

the success of the Medicaid program, and it depends on clear lines 

of responsibility and shared goals. Although the Federal Government establishes general guidelines for the program, states design, 

implement, and administer their own Medicaid programs. Medicaid 

is currently undergoing significant changes as CMS and states implement reforms to modernize and strengthen the program and its 

services. 

While focused on implementation of the Affordable Care Act, 

CMS has been working closely with states to implement new, more 

modern delivery system and payment reforms. In the last few years 

CMS and states have made important progress in improving the 

systems and processes that determine a beneficiary’s eligibility for 

Medicaid, and that ensure only legitimate providers enroll in and 

build a program. We have made great strides. The error rate in 

beneficiary eligibility, for example, has been cut in half since 2011. 

We recognize, however, that more remains to be done, and continue 

to work collaboratively with states to further improve Medicaid 

program integrity. 

A critical component to preventing waste, abuse, and fraud is ensuring that only legitimate providers have the ability to bill Medicaid in the first place. While states bear the primary responsibility 

for provider screening and enrollment for Medicaid, CMS is engaging in new efforts to work with states to make sure that only legitimate providers are enrolling in the Medicaid program. The ACA required CMS to implement risk-based screening of providers and 

suppliers who want to participate in Medicaid. This enhanced 

24 

screening requires certain categories of providers and suppliers 

that have historically posed a higher risk of fraud to undergo greater scrutiny prior to their enrollment or re-validation in Medicare, 

Medicaid, or CHIP. 

To enroll providers more efficiently, CMS has provided states 

with direct access to Medicare’s enrollment database, the Provider 

Enrollment Chain and Ownership System, or PECOS, and in response to input from states, began providing access to monthly 

PECOS data extracts that states could use to systematically compare state enrollment records against available PECOS information. 

CMS also provides guidance, education through the Medicaid Integrity Institute, which has reached over 4,200 state employees on 

enrollment and other topics, and oversight through state program 

integrity reviews. Additionally, the ACA, and accompanying Federal regulations, have enhanced beneficiary eligibility safeguards 

by establishing a modernized, data-driven approach to verification 

of financial and non-financial information needed to determine 

Medicaid eligibility. States now rely on available electronic data 

sources, including the Federal data hub and PARIS system, to confirm information included on the application and promote program 

integrity, while minimizing the amount of paper documentation 

that consumers need to provide. 

CMS has also developed its most recent comprehensive Medicaid 

integrity plan, in collaboration with our partners, including the National Association of Medicaid Directors, and is working to implement this plan. This work includes providing Medicare data to 

states for program integrity purposes, expanding support and 

training of state program integrity staff in vulnerable areas, such 

as program integrity oversight of managed care and evolving integrated care models, and facilitating development of state capacity 

and access to cost-effective analytics technology. 

The past several years have brought numerous gains in combating fraud, waste, and abuse in the Medicaid program, but more 

work clearly remains. Today the eligibility determination process 

for beneficiaries and provider screening efforts are significantly 

more modern and digital than ever before. We thank the GAO for 

highlighting critical issues in the Medicaid program, and look forward to continuing to work with states and other stakeholders to 

establish new initiatives and expand upon our existing programs to 

fight fraud, reduce improper payments, and improve oversight. 

Thank you, and I am happy to answer any questions. 

[The prepared statement of Dr. Agrawal follows:] 

25 


97382.013
26 


97382.014
27 


97382.015
28 


97382.016
29 


97382.017
30 


97382.018
31 


97382.019
32 


97382.020
33 


97382.021
34 


97382.022
35 


97382.023
36 


97382.024
37 


97382.025
38 


97382.026
39 


97382.027
40 

Mr. MURPHY. Thank you very much. Let me recognize myself for 

5 minutes and keep this moving. We appreciate your input on this, 

and some ideas here. 

Dr. Agrawal, the improper payment rate for Medicaid program 

was 6.7 percent in fiscal year 2014. That was an increase over fiscal year 2013, where it was just 5.8 percent. Now, CMS set the target rate for Medicaid payments at 5.6 percent, so CMS failed to 

meet the target rate for 2014, is that correct? 

Dr. AGRAWAL. That is correct. 

Mr. MURPHY. So why was the target rate not met? 

Dr. AGRAWAL. Yes, there are three major components of the 

PERM rate of the Medicaid improper payment rate. There is a feefor-service component, a Medicaid managed care component, and 

then a beneficiary eligibility component, and what I think you see 

in the error rate is a bit of a mixed picture. So on one hand, the 

beneficiary eligibility rate, which was a central topic in the GAO 

report, did actually decrease, from 3.3 percent to 3.1. Where we 

saw the biggest rise was in the provider screening and enrollment 

standards in the fee-for-service component. What I think the increase shows is that states are in various places of implementing 

those screening standards, which has led to an increase in the 

error rate in that part of PERM. 

Mr. MURPHY. But for 2015 they have set this improper payment 

rate target at 6.7 percent, and that is the same rate it was in 2014. 

It is actually higher than the improper payment rate for 2013 and 

2014. So why is CMS actually raising that improper payment rate, 

that error rate, for Medicaid instead of lowering it, and setting a 

target for reduction of errors? 

Dr. AGRAWAL. Well, I think, you know, we clearly want to make 

progress on the improper payment rate and Medicaid. The biggest 

driver right now are those provider enrollments and screening 

standards. You know, obviously we want to continue to make 

progress on the beneficiary eligibility requirements as well. You 

know, what we find is that states are in various different places 

of implementing their screening and enrollment for providers. It is 

a major driver. 

I think there are a lot of tools that we have to help states make 

progress, including oversight, education, guidance, giving access to 

more data systems. But I think we want to set realistic targets 

and, you know, work on that to make sure states can meet them. 

Mr. MURPHY. And we want to help you with this. We just want 

to make sure that the information that this Subcommittee gets, 

this Committee gets, can help facilitate that process. But if we 

raise our tolerance level for errors, and then we say, well, it is all 

within what we accept, that’s not acceptable, so I really want to 

caution you on that. What I am hoping, that we can not have that 

goal, but really work towards of a goal of how to lower it, and then 

identify those outliers. And, I mean, you heard the opening statements. This subcommittee is with you on trying to identify mechanisms for this. 

Now, the Office of Management and Budget has designated Medicaid as one of 13 programs as higher, with Medicaid ranking third, 

with $17.5 billion in improper payment amounts. So does CMS 

41 

know why Medicaid has been designated by OMB as a high error 

agency, Dr. Agrawal? 

Dr. AGRAWAL. Yes. There are clearly important factors in the size 

and scope of the program. The fact that the program is administered in numerous, different state Medicaid agencies, and require 

a great deal of collaboration. I am sure it does also reflect our historical error rate. So I think the designation of it being a high risk 

program certainly makes sense. 

I would also add, Chairman, to your last question that part of, 

what we see as the dynamic in program integrity, which is, I think, 

important to think about, is that as requirements increase, as the 

stringency of the program increases, oftentimes we also see an increase in the error rate as a result, because providers, or other 

stakeholders, such as states, need time to catch up to requirements. I think that is a common underlying element to many factors in the error rate, but specifically the provider enrollment 

standards that the ACA created. 

Mr. MURPHY. Well, let me move on to something else here. Director Bagdoyan, the GAO has also designated Medicaid as a high risk 

program since 2003. 

Mr. BAGDOYAN. Right. 

Mr. MURPHY. What are the criteria that land the Federal program into that kind of category, and it has been that way for a long 

time? 

Mr. BAGDOYAN. Yes. For Medicaid, Mr. Chairman, the specific 

factor that we cited in our report is the fact that its fiscal oversight 

over the years has been not where it should be, and within that, 

the—— 

Mr. MURPHY. Fiscal oversight at the Federal level, or state, or 

both? 

Mr. BAGDOYAN. That would be at both levels, since it is—— 

Mr. MURPHY. OK. 

Mr. BAGDOYAN [continuing]. A joint program. And then, further 

within that context, of course, the risk of improper payments and/ 

or fraudulent activity contributes to that designation. 

Mr. MURPHY. And part of this too is—we see that you are collecting data. You couldn’t even get data from some of the states because it just isn’t there. Is there things we need to do or things 

that you can recommend as well—what we need to make sure that 

states have been presenting data so we can analyze it and identify 

the problem, either one of you? 

Mr. BAGDOYAN. I would go first. Obviously data analytics is the 

growing field, and it would be incumbent upon both the Federal 

Government and the states to really pay attention to the quality 

of their data, the collection, the analysis, the reliability to make 

cross-comparisons and other analyses. 

Mr. MURPHY. And what we usually have as our tools in Congress 

is a carrot or a stick to enhance that, I am out of time here, but 

I would be looking forward to your comments of what we could do, 

because without the data, you can’t provide an accurate recommendation to us. Ms. DeGette, 5 minutes. 

Ms. DEGETTE. Thank you. Dr. Agrawal, in March 2011 CMS put 

into place new requirements for enrolling and re-validating Medicaid providers and suppliers, is that correct? 

42 

Dr. AGRAWAL. Yes, that is correct. 

Ms. DEGETTE. And the new process separates providers and suppliers into categories of risk, either high, moderate or limited risk 

for additional screening before enrollment or re-validation in the 

Medicaid program, is that correct? 

Dr. AGRAWAL. That is correct. 

Ms. DEGETTE. And, briefly, how does CMS determine which risk 

category an individual provider or supplier will be put into? 

Dr. AGRAWAL. Sure. So these risk categories are done at the provider sort of group level, or provider type level. So it isn’t an individual provider that we would be placing in these various categories, it would be a whole class, such as—newly enrolling home 

health agencies are considered high risk. 

Ms. DEGETTE. I see. 

Dr. AGRAWAL. And we designated these risk levels based on 

input from multiple sources, including the HHS OIG, based on historical levels of fraud or—— 

Ms. DEGETTE. Fraud. 

Dr. AGRAWAL [continuing]. Issues with those specific provider 

types. 

Ms. DEGETTE. OK. And do the states also have to implement 

screening requirements before they enroll a provider in the Medicaid program? 

Dr. AGRAWAL. They do. Those requirements are largely identical 

to Medicare’s. 

Ms. DEGETTE. And those go into effect March 2016, 5 years after 

the regulation first went into effect, is that right? 

Dr. AGRAWAL. Many of the requirements have had to be implemented by now already. 

Ms. DEGETTE. OK. 

Dr. AGRAWAL. There were already deadlines. I think what you 

are referencing is a re-validation deadline—— 

Ms. DEGETTE. Right. 

Dr. AGRAWAL [continuing]. Yes, March of 2016. 

Ms. DEGETTE. OK. And then, after everything is either validated 

or re-validated, it has to be re-validated again every 5 years, is that 

right? 

Dr. AGRAWAL. That is correct. 

Ms. DEGETTE. Now, is CMS working with the states to implement these new requirements? 

Dr. AGRAWAL. We are, across the board. So, we have largely the 

same requirements in Medicare and, therefore, are undertaking the 

same work in the Medicaid program. Where possible, we have 

made data assets available to states so that they can utilize the results of our screening. For example, I referenced PECOS, where we 

have done a site visit, or fingerprint-based background check. 

States have access to that data so that they don’t have to duplicate 

those—— 

Ms. DEGETTE. OK. 

Dr. AGRAWAL [continuing]. Initiatives. 

Ms. DEGETTE. And are the states generally on track with their 

implementation? 

Dr. AGRAWAL. You know, states are in really different places, 

what we—— 

43 

Ms. DEGETTE. OK. 

Dr. AGRAWAL [continuing]. Find. So, when we do the PERM rate 

measurement every year, or do state program integrity reviews, 

there are certain states that are well advanced in their implementation of these requirements, and other states that are lagging 

quite far behind. 

Ms. DEGETTE. And so I assume those are the states you are focusing on, trying to get them—— 

Dr. AGRAWAL. Correct. We can increase the amount of oversight, 

we can offer more technical assistance, education efforts, things 

like that. 

Ms. DEGETTE. Now, these efforts were not included in the data 

of the GAO report, which went for 2011 data, is that right? 

Dr. AGRAWAL. That is right. 

Ms. DEGETTE. Yes or no will work. 

Dr. AGRAWAL. Yes. 

Ms. DEGETTE. Thank you. Now, Mr. Bagdoyan, in your written 

testimony, which you confirmed in your testimony today in the 

Committee, you said CMS has taken steps since 2011 to make the 

Medicaid enrollment verification process more data-driven. I am assuming you are talking about some of these implementations 

that—— 

Mr. BAGDOYAN. Right. 

Ms. DEGETTE [continuing]. Dr. Agrawal is—— 

Mr. BAGDOYAN. Yes. 

Ms. DEGETTE [continuing]. Talking about. 

Mr. BAGDOYAN. That is correct. 

Ms. DEGETTE. Do you think that these steps will help close some 

of the gaps GAO identified in the report with regard to potentially 

improper fraudulent payments? 

Mr. BAGDOYAN. Sure. As I mentioned in my closing, those steps 

will definitely add to the toolbox that CMS and the states have, 

and narrow the opportunities for potential improper payments and 

fraudulent activity. They will probably play out over time. As Dr. 

Agrawal said, some states are in different places than others, 

so—— 

Ms. DEGETTE. And we have to focus on the ones who are—— 

Mr. BAGDOYAN. That is correct. 

Ms. DEGETTE. Yes. 

Mr. BAGDOYAN. Long term implementation success and sustainability will be key in these areas. 

Ms. DEGETTE. Now, since 2011, do you agree that CMS has 

taken measures to address some of these real concerns that you 

raise in your report, like the deceased providers billing Medicaid, 

providers with suspended or revoked licenses, and people inappropriately using virtual addresses? Are they working on that now? 

Mr. BAGDOYAN. I think they are taking steps. They are in the 

right direction, we believe, but execution and sustainability will be, 

again, key for both—— 

Ms. DEGETTE. I agree. 

Mr. BAGDOYAN [continuing]. Federal Government and the states. 

Ms. DEGETTE. Yes. I appreciate GAO’s sustained work on this 

issue. Excuse me, that is my child. She programmed my phone to 

bark when—— 

44 

Mr. BAGDOYAN. Distinct voice that your child has. 

Ms. DEGETTE. Yes. That is my other one. But I am glad that you 

both agree that the Affordable Care Act has changed the way we 

prevent and address Medicaid fraud, and I look forward to it. As 

we said, Mr. Chairman, we are going to be back here in a couple 

of years, making sure that these ACA requirements have been implemented. Thank you. 

Mr. MURPHY. Thank you. I now recognize Mr. McKinley for 5 

minutes. 

Mr. MCKINLEY. Two quick questions. One, the CMS has raised 

its proper payment rate target from fiscal year 2015 to 6.7 percent, 

from the 5.6 target rate in 2014. Is that a good internal control 

practice, to raise the target rate? 

Dr. AGRAWAL. Sir, are you asking me? 

Mr. MCKINLEY. Yes. 

Dr. AGRAWAL. No. I do appreciate the question, and, again, I 

think it is important to set realistic targets and goals that do push 

us to improvement, but at the same time recognize that Medicaid 

is a state and Federal program that states are in various places of 

implementing things like the provider enrollment standards, which 

are the major driver of the improper payment rate at this point. 

Mr. MCKINLEY. OK. Let me get to the question I had from West 

Virginia, and it is more of a question, I think, of—perhaps abuse 

and errors. Let me frame the argument. In West Virginia, 1⁄3 of the 

hospitals we have in West Virginia are critical access hospitals. We 

are a very rural state. And for nearly 30 years, since the early ’80s, 

West Virginia’s critical access hospitals have been using a provider 

tax to supplement and provide resources for them. 

In 2012 CMS hired a different auditor from all of these past 30 

years, and this new auditor stepped in and said that process isn’t 

approved anymore, and we are going to go back and—we are auditing you back until 2009, and—trying to recover the money that you 

previously were working under the idea that this was the appropriate way to go about getting the provider tax revenue coming in. 

This is going to be an incredible hindrance for these hospitals to 

provide medical care in rural areas of West Virginia, when we go 

backwards on them after they were working under the idea that 

they thought they were working properly. 

So we have talked about—can we go forward from here, not go 

back and try to penalize them for following someone else’s advice, 

that was also with CMS? Now we go forward. We have written letters. We have had conversations with CMS—until recently, but 

CMS really was disengaged with us. Now these hospitals are all 

getting invoices 3 years after 2012, when they were told, we are not 

going to allow that anymore, now in 2015 they are getting invoices 

that they say they have to pay them within 15 days, or they are 

going to have the funds withheld. 

First, I don’t know of any private sector—coming from the private sector—I have got 50 years in the private sector. I have never 

heard of someone saying, if you don’t pay within 15 days, we are 

taking it out of your hide. That just doesn’t work. There are no details on these invoices. And when they have asked, can we get the 

details of what this invoice includes, and they say that they can’t 

have it. They are being denied access to what the invoice reflects. 

45 

I hope you understand, this kind of smacks of bullying on the 

part of CMS to rural hospitals. Especially given the fact that they 

were told to use this, this was OK. And now a new auditor has a 

different opinion. So do you think CMS is handling this crisis in 

West Virginia, and probably in other rural areas of this country? 

Do you think CMS is handling this sensitively and appropriately? 

Dr. AGRAWAL. Congressman, I appreciate the question. I can tell 

you that CMS has definitely been focused on critical access hospitals and rural hospitals, and the various policies we promulgate, 

including payments and other policies. I will tell you, I am not 

aware of the specifics of this particular situation. I understand 

some of the details now from what you have explained. However, 

I think I would have to connect you to the other folks in the agency 

that are directly working on this issue, but I would be happy to 

take it back. 

Mr. MCKINLEY. If you would, please. We have been given the 

runaround. I have never seen so many fingers pointing in different 

directions. It is not my problem, it is someone else, and we have 

been trying to pursue that. So if you can help us on that, we will 

put you on record. OK. You are under oath that you said you were 

going to help, so—— 

Dr. AGRAWAL. Thank you, Congressman, I appreciate that. I 

will—— 

Mr. MCKINLEY. I will remind you—— 

Dr. AGRAWAL. I will think of that. 

Mr. MCKINLEY [continuing]. Of that in the future. But thank 

you, because we need to get this resolved. Remember, a third of the 

hospitals could very well go under if they have to make these payments. Thank you. 

Dr. AGRAWAL. Thank you. 

Mr. MCKINLEY. Yield back. 

Mr. MURPHY. Gentleman yields back. Now recognize the Ranking 

Member, Mr. Pallone, for 5 minutes. 

Mr. PALLONE. Thank you. GAO reports that CMS has made several changes since 2011 to help limit improper payments, and these 

steps may address many of the potential improper payments GAO 

found in their analysis of 2011 claims. In addition, to noting in 

their progress already made, GAO made two recommendations to 

further improve efforts to limit improper payments by increasing 

information and data sharing efforts between the Federal Government and the state Medicaid programs, and GAO first recommended that CMS help states better identify deceased beneficiaries. 

I want to ask a question of each of you, but I have got three sets 

here, so we have got to go fairly quickly. Mr. Bagdoyan, can you 

comment on GAO’s findings that led to this recommendation? 

Mr. BAGDOYAN. Well, we did matching of deceased roles from the 

death master file. That is the complete file that has about 98 million records, and we matched those against claims data, and we 

discovered those beneficiaries who had been deceased before their 

services were billed for, so—— 

Mr. PALLONE. OK. And, Dr. Agrawal, what steps is CMS taking 

to implement this recommendation? 

46 

Dr. AGRAWAL. Yes. We take the recommendations very seriously, 

and, as I mentioned, we do appreciate the report. Specifically for 

the dead beneficiaries issue, there are clearly things that we have 

done, like implement the Federal data hub that allows states to 

check for death and other issues on the front end. We are also looking to work with our technical advisory groups with the states and 

recommend more guidelines for the states to both access the right 

data, and then access it frequently enough. 

Mr. PALLONE. OK. The GAO next recommended that CMS apply 

more complete data for screening Medicaid providers by providing 

states with full access to the Provider Enrollment Chain and Ownership System, or PECOS, database. So, again, Mr. Bagdoyan, can 

you describe the PECOS system? Can you comment on how states 

are using PECOS, and why GAO issued a recommendation for 

CMS to provide additional guidance to states? 

Mr. BAGDOYAN. Sure. Thank you for your question. With PECOS 

it is a situation where states would need access to the system electronically so they can be able to run batch searches, if you will. I 

know it is a little technical term, but right now they have to do a 

manual search on a case by case basis each name, each time in 

order to get a result, whether there is an issue or not. So that is 

the essence of our recommendation, is to get them the automated 

access that would allow them to do bigger and wider searches at 

once. 

Mr. PALLONE. Thanks. Dr. Agrawal, what training and guidance 

has been provided to states on using the PECOS system, and what 

additional efforts will you be undertaking? 

Dr. AGRAWAL. Sure. So we have two different kinds of access to 

PECOS, one that is the sort of provider-by-provider real time access to the system, but since this analysis was done, we have also 

been making data extracts available to states so that they can use 

those extracts and compare them against their entire enrollment 

file. We have already made changes to those extracts based on 

state input, and are looking to expand them as we go on. 

With respect to guidance, we do offer education in using CMS 

data assets to states through things like the Medicaid Integrity Institute. We also offer other technical guidance, and sort of case-bycase help as needed, and states can contact us for that. 

Mr. PALLONE. All right. Let me see if I get my third question in. 

Given that Medicaid is a joint state/Federal program, states have 

a very important role to play in preventing improper payments. It 

sounds like there is a fair amount of Federal information available 

to states, but that not all states are taking full advantage of what 

is available. So I will start with Dr. Agrawal. How can states be 

encouraged to use the data available to them? 

Dr. AGRAWAL. Yes, I think that is a great question. So, there are 

data assets like PECOS and PARIS, where we know that all states 

have access. And I think part of getting them to use it offering the 

guidance, offering the technical input to make sure that they are 

using the data in the right way, and using it as frequently as they 

can. With something like PARIS, for example, we were able to release guidance, and ask all states to not only input their data every 

quarter, but also to use that data in their enrollment efforts every 

quarter. 

47 

Mr. PALLONE. OK. And, Mr. Bagdoyan, based on GAO’s findings, 

how can the states more effectively use the data available to them? 

Mr. BAGDOYAN. I think I would echo Dr. Agrawal’s comments. I 

think, if they are available, once they are available, they would be 

encouraged through guidance, they would be held to account to 

make sure that this works as intended. I mean, again, it is a partnership. It is a common model, if you will, to make this work. 

Mr. PALLONE. All right. Just want to thank both of you. In addition to the important tools already added by the Affordable Care 

Act, I am encouraged that CMS implementation of GAO’s recommendations will further help state Medicaid programs in their 

efforts to address this persistent issue. So thanks again. Thanks, 

Mr. Chairman. 

Mr. MURPHY. Thank you. Now recognize Dr. Burgess for 5 minutes. 

Mr. BURGESS. Thank you, Mr. Chairman. One of the hazards of 

having been on this committee for a number of years is you see 

themes repeating themselves. And, Chairman Murphy, I remember 

very well a morning in late September 2008, when we held a 

Health Subcommittee hearing downstairs, and we had some, I 

don’t know, 8, 10, 12 witnesses. It was a pretty varied panel. Karen 

Davis from Commonwealth, Steve Parenti from the McCain campaign, the late Elizabeth Edwards was one of the panel members, 

and it was all a panel to discuss what is it going to cost to provide 

health care to everyone who lacks health insurance in this country. 

And the estimates were quite varied, and they ran from $60 billion 

a year to $800 billion a year. 

Chairman Murphy, I remember you asking the question, how 

could there be so much variation? And Steve Parenti, on the panel, 

was the only one willing to take it on, and said, well, if you provide 

Medicaid to everyone, and that is how you expand your coverage, 

that is the lower number. If you provide Federal employee health 

benefit plan to everyone, which was being talked about by some of 

the candidates at the time, that is the higher number. 

So I guess my point is, everyone knew going into everything that 

became the Affordable Care Act that the way to expand coverage 

without blowing up the cost was Medicaid expansion. Why wouldn’t 

you fix some of these problems before you undertook to expand a 

program that, if I understand correctly, Mr. Bagdoyan, it was already on a watch list in 2008, and certainly on a watch list in 2009, 

when the law was written in 2010, when the law was signed. But 

really, why not put the effort on the front end? The way we are 

going to expand coverage is through Medicaid, maybe we could deal 

with some of these problems. What about the fact we have got dead 

people that we are paying money for? What about the fact we have 

got people who are receiving benefits in two states simultaneously? 

That is not supposed to happen, is it, Dr. Agrawal? 

Dr. AGRAWAL. That is correct. 

Mr. BURGESS. Then the whole issue—GAO in 2005 or 2006 put 

out a report about the third party liability—Medicaid will pay a 

claim when a person has private health insurance. And, really, 

Medicaid is supposed to be the payer of last resort, not the payer 

of first resort. And we have never really satisfactorily dealt with 

that problem, have we? 

48 

Mr. BAGDOYAN. I am not familiar with the report. 

Mr. BURGESS. Well, I will tell you, no, we have not. So here we 

have it here, three very basic steps, don’t pay the dead people, 

don’t pay people twice, and, hey, if Aetna, United, Cigna is supposed to be paying the bill, you get them to pay first, before the 

state reimburses on their Medicaid system. Relatively simple steps 

that could have been done before expanding a program massively. 

And now we are in a situation where not every state has expanded 

their Medicaid. 

And Dr. Agrawal, let me just ask you, when states come in with 

their proposals, if a state is considering expanding Medicaid in 

their state, and some states are, whether I think that is correct or 

not, some states are, when they come in with those proposals, are 

you talking to them about the fact that there are some inherent 

problems in the Medicaid system, and we would like to see those 

fixed before you double your number? 

Dr. AGRAWAL. Yes, thank you for the question, Dr. Burgess. So 

I think our relationship with the states is such that we are talking 

to them regardless of whether or not they are seeking to expand 

their Medicaid programs. There are current program integrity challenges and vulnerabilities, as the GAO has pointed out. They exist 

in the current Medicaid program. Our state oversight efforts, 

whether it is the PERM rate, or state program integrity reviews, 

include all states, not just those that are expanding. 

I think, to your larger point, what we are trying to do is balance 

real program integrity interests and needs against the needs of 

socioeconomically disadvantage population that needs access to 

health care and health—— 

Mr. BURGESS. Let me stop you there, because time is going to become critical. In my opening statement I referenced a problem that 

was related to dental care in the State of Texas. You have got a 

real problem. People who should be barred from ever participating 

in the program again simply dissolve into bankruptcy, and reemerge someplace else. What are you doing to keep that from happening? 

Dr. AGRAWAL. There are clearly efforts that we—we do conduct 

collaborative audits and investigations with states and, where appropriate, encourage states to take termination actions in their programs. I think you referenced the exclusion authority by the HHS 

OIG. We obviously agree that that is a very powerful authority. We 

encourage OIG to implement it where appropriate. And where they 

do, we can take revocation action quickly behind it. 

Mr. BURGESS. Let me just, before time expires, Dallas Morning 

News over the weekend, an article that I think is part of a series 

of articles about how private nursing homes are drawing down dollars by combining with a public entity, and some of these are fairly 

low ratings on the star rating on the nursing homes. Are you working with the states to address this problem? 

Dr. AGRAWAL. Yes. I am not aware of the specific nursing homes, 

but we do have survey and certification, and other rating functions 

CMS uses to work with states on these issues. 

Mr. BURGESS. Well, $69 million just to these nursing homes identified last year, so it is a place where we need to put some effort. 

Thank you, Mr. Chairman, I will yield back. 

49 

Mr. MURPHY. Gentleman yields back. Now recognize Mr. Kennedy for 5 minutes. 

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

to our witnesses for coming today, and for your testimony at an important hearing. I want to touch base a little bit on the improper 

payment rate, and put that in context. Medicaid program provides 

about 70 million low income and disabled Americans with vital 

health care services, and we must do everything we can to 

strengthen it and protect it. As you have heard from my colleagues 

here this morning, no one, Democrat or Republican, is in favor of 

fraud. We clearly want to make sure this program is as lean as it 

possibly can be, and that the people that need help and need the 

services are getting them. 

So, to that end, Mr. Bagdoyan, I would like to begin with you. 

Since its peak of 9.4 percent in 2010, the improper payments rate 

for the Medicaid program has steadily decreased, reaching a low of 

5.8 percent in 2013, or $14.4 billion. That number rose to 6.7 percent in 2014, or $17.5 billion. Is that right? 

Mr. BAGDOYAN. That is correct, sir. 

Mr. KENNEDY. So I want to dig into that number a little bit deeper and see if I can better understand the dynamics that are, in fact, 

driving that improper payment rate. The ACA provided CMS with 

a number of new tools to strengthen program integrity in the Medicaid program. In 2011 CMS established a new risk-based screening procedure for Medicare, Medicaid, and CHIP providers. CMS 

also promulgated new regulations, requiring the states to use electronic data maintained by the Federal Government to verity and 

revalidate beneficiary eligibility through the data services hub. 

So, Dr. Agrawal, let us break down that payment rate into its 

relevant components. I know you touched on this a little bit earlier. 

If I understand this correctly, Payment Rate Measurement Program, or PRM, measures error rates both overall for the Medicaid 

program, as well as for certain subcategories, fee-for-service, managed care, and beneficiary eligibility. Is that right? 

Dr. AGRAWAL. That is correct. 

Mr. KENNEDY. So what has happened to that beneficiary eligibility error rate since 2011? 

Dr. AGRAWAL. I think that is an important point, and it does 

highlight some of the intricacy in the rate. The beneficiary eligibility error rate has actually been cut in half since 2011. 

Mr. KENNEDY. So the error rate for—beneficiary eligibility rate 

cut in half, declined by three percent. Is that a substantial improvement, major improvement, small improvement? How do you 

characterize it? 

Dr. AGRAWAL. I think, given the issues that GAO has highlighted, that is obviously a substantial improvement. More work remains to be done, which we are focusing on, but it does indicate 

good progress. 

Mr. KENNEDY. And so what is driving that improvement, then? 

Is it the result of, in your opinion, the work CMS has been doing 

to implement the new program integrity tools in the ACA? Is it 

something else? What is behind the success? 

Dr. AGRAWAL. I think it is work being done at both the Federal 

and state levels between increased collaboration, more education 

50 

and technical guidance going to states, better data assets that have 

been highlighted by Mr. Bagdoyan. 

Mr. KENNEDY. Given that large drop in the error rate for beneficiary eligibility, what factors are driving the increase in the overall PERM rate? And I realize you touched on this a little while ago, 

but if you could flesh that out a little bit for me? 

Dr. AGRAWAL. Sure, no problem. The biggest driver of the increase in the rate are provider enrollment and screening standards. 

And, again, as with other PI aspects of program integrity, whenever there is a new requirement, certain stakeholders, in this case 

states can experience some difficulty in keeping up. So what we 

have found, that, while some states are quite far along, other states 

are lagging behind, and generally that is causing the error rate to 

rise. 

Mr. KENNEDY. And how do we get those other states to pick up 

the pace? 

Dr. AGRAWAL. Well, we exercise oversight in a variety of ways, 

so I think it is both what can we offer them in terms of collaboration that will help, like technical assistance, data assets like 

PECOS, and then where can we exercise real oversight? We do that 

through the PERM rate. We require states to submit corrective actions to improve the error rate going forward, and also conduct 

state program integrity reviews, with associated corrective action 

plans where states fail to meet requirements. So I think it is a mix 

of both of those things. 

I think the error rate increase in that particular aspect is the reflection of more stringent policy, which in and of itself is a good 

thing. We need that policy. 

Mr. KENNEDY. What, if anything, can this committee do to help 

you with that? 

Dr. AGRAWAL. I appreciate the question. I think holding our feet 

to the fire is appropriate. 

Mr. KENNEDY. You are welcome. 

Dr. AGRAWAL. Thank you very much. I also think encouraging 

states to stay on the right path, take advantage of the various resources that we offer, identify improvements that we need to make 

so that they can make progress, would be extremely helpful. 

Mr. KENNEDY. And, again, just putting this in context, if I understand Mr. Bagdoyan, the GAO report, it was four states, yes? 

Mr. BAGDOYAN. Yes. 

Mr. KENNEDY. And it covered 9.2 million Medicaid beneficiaries, 

right? 

Mr. BAGDOYAN. That is correct. 

Mr. KENNEDY. And I know we talked a little bit about the 200 

or so deceased beneficiaries that received payment. If we were to 

put that—just so I understand it, that is 200 out of 9.2 million, 

right? 

Mr. BAGDOYAN. My math is not that good. 

Mr. KENNEDY. Right. If we wanted to put that in that percentage, though, if you take my word for it that my iPhone calculator 

ain’t so bad, that is .00002, four zeros and then a two—as far as 

error rates go, nothing is acceptable, but we are doing OK if it is 

200 out of 9.2 million, right? You guys are doing your jobs? 

51 

Mr. BAGDOYAN. Well, that is we found is 200 out of the 9.2 million. That is all I am prepared to say. 

Mr. KENNEDY. Well, thank you for your work on this. Thank you 

for your research, and being here today, and highlighting an important issue for the hearing. 

Mr. BAGDOYAN. Thank you. 

Mr. MURPHY. I guess this can go in the category of lies, damn 

lies, and statistics. We appreciate it no matter what it is, and we 

are all in agreement that we want to make sure we rid that—Dr. 

Bucshon, you are next for 5 minutes. 

Mr. BUCSHON. Thank you, Mr. Chairman. First of all, I was a 

practicing physician for 15 years, as I had mentioned to our witnesses beforehand. I have taken care of all patients, regardless of 

their ability to pay, which is what we do in health care. But I just 

want to highlight that all is not rosy with Medicaid. And I know 

this hearing is about waste, and fraud, and abuse, but I am from 

Indiana, and our medical practice routinely wrote off hundreds of 

thousands of dollars from a neighboring state’s Medicaid program 

in billings every year because they ran out of money before the end 

of the year, and this pre-dates the ACA. 

The other thing is that the program within our own state has 

been financially challenged historically with a significant Medicare 

provider cut within the last 10 years just to stay afloat. That said, 

Medicaid is a critical program that we have to have for our citizens. What can we do? Well, Indiana has expanded our Medicaid 

program using an innovate plan called Healthy Indiana Plan 2.0, 

and I am hopeful that this state-based plan, as well as state-based 

plans around the country, can be used as a proving ground how to 

move forward on our Medicaid program. 

Some facts about the Medicaid expansion that are not surprising 

to me, but seem to be surprising to those who wanted to expand 

traditional Medicaid, is that ER visits are up, in some cases dramatically up, in multiple studies across the country. And the hospitals are very happy, but we have made no progress because this 

is the highest cost form of medical care available in the country. 

And so, having a card in your pocket, but having no access to primary care physicians or others outside of the emergency room is 

not progress. And the encouragement to seek preventative care, as 

was mentioned earlier, may be technically true, but functionally 

not accurate because you can’t get preventative care if no one takes 

your coverage. 

States that have expanded Medicaid are already starting to look 

for ways to pay for the program once the Federal money for the expansion goes down to 90 percent, and my concern is reimbursement 

cuts will be the way that will happen. And what does that do? Further limits access to the citizens in their states. And if anyone 

doesn’t think that sometime in the future that the Federal Government will look for a way to pay for other things by further cutting 

that expansion money to the states on their Medicaid program, 

then you are not following the government very well. 

That said, I do have a couple of questions. And, again this is a 

very important hearing. I saw that we limited the study, Mr. 

Bagdoyan, to the four states. Why did we pick these states, and did 

the GAO try to include other states in your study? 

52 

Mr. BAGDOYAN. Thank you for your question, Dr. Bucshon. The 

way we picked our states is we began with the universe of beneficiaries per state, and then we also looked at data reliability, as 

well as geographic dispersion. So those were the three key factors 

that we used to pick these states. Now, data reliability being a very 

important factor, we don’t have reliable data, we can’t do our analysis. 

Mr. BUCSHON. And that segues into Dr. Agrawal. The data we 

were just talking about, not accurate from states, how do you envision the progress we are making in information sharing on Medicaid between the states and the Federal Government? How can we 

improve on that situation so if, in the future, we want to study this 

situation, we can pick any one of the 50 states? How are we doing? 

Dr. AGRAWAL. Yes, thank you. I think that is a really important 

question. Data is really central to program integrity work. What we 

have found is access to the right data set can really increase the 

sensitivity and specificity of our leads. The agency has made some 

of the biggest investments we have ever made in improving Medicaid data assets in programs like T–MSIS, which is seeking to dramatically increase the amount of data and the kind of breadth of 

that data that we get from state programs. 

In addition, Congress has funded previous programs like the 

Medi-Medi, which encourages Medicare and Medicaid data sharing 

and integration specifically for program integrity purposes, and we 

have been engaged in that process for years now. 

Mr. BUCSHON. Is proprietariness among different systems a problem? What are the barriers to, it seems like it would be simple, 

right, but there are barriers. 

Dr. AGRAWAL. There are, and I am not a technologist, but there 

are clearly differences between systems, and getting data integration to occur, that is not a trivial task at all, especially, you know, 

amongst 50 different states. So, yes, there are some real technical 

barriers to getting the right data formatted in the right way so that 

it is readily accessible. 

Mr. BUCSHON. But some of it is not just about money, right, 

where the systems don’t want to communicate because of proprietary control over data? 

Dr. AGRAWAL. I am not sure how much proprietary issues stand 

in the way. I think it is more technical implementation. And then, 

yes, resourcing is important to make sure that we can adequately 

make this all work together. 

Mr. BUCSHON. Thank you. Mr. Chairman, I yield back. 

Mr. MURPHY. Ms. Clarke, you are recognized for 5 minutes. 

Ms. CLARKE. Thank you, Mr. Chairman, and I thank the Ranking Member, thank our witnesses for their testimony here today. 

I am glad we have had the opportunity today to talk about the 

Medicaid program, and how many people it helps across the country. As of February 2015, over 70 million people were enrolled in 

Medicaid. The number of enrollees will continue to rise, as 30 

states have expanded Medicaid, and even more states are considering doing so. We know that fraud and improper payments have 

long been a reality of the Medicaid system, but with the passage 

of the Affordable Care Act in 2010, we have made significant steps 

53 

to strengthen the Medicare, Medicaid, and CHIP programs by reducing waste, fraud, and abuse. 

Dr. Agrawal, I would like to ask you about the Affordable Care 

Act anti-fraud measures, and how they have strengthened the Medicaid program. In your testimony you noted that the Secretary of 

HHS can temporarily pause enrollment for new Medicaid providers 

and suppliers if she determines certain geographic areas face a 

high risk of fraud. Dr. Agrawal, how does the Secretary make that 

determination? 

Dr. AGRAWAL. Yes, thank you. So, you are right, the moratorium 

authority is one of many tools granted to CMS for its program integrity efforts. We currently have moratoriums in place in seven 

different metropolitan areas in two main service categories, ambulance services and home health agencies. And, we arrived at those 

areas, both the service types and the geographies, by doing data 

analysis to look at where there were clear areas of market saturation of these provider types, and in all of these metropolitan areas 

we see somewhere between three to five times higher the number 

of providers of these categories than, you know, comparative metropolitan areas. 

We also conferred with our law enforcement colleagues in DOJ 

and OIG to assess where hot spots really are, and where billing is 

really concerning for fraud, and it was really a multitude of things 

that led us ultimately to implement these moratoria. 

Ms. CLARKE. How have they been effective in preventing and reducing fraud in those affected areas? 

Dr. AGRAWAL. So, what the moratoria really do is, essentially, 

pause enrollment. It stops new providers from coming into those 

areas in these specific provider categories. That affords both us and 

law enforcement the opportunity to step up our activities in those 

areas and remove bad actors that are already in those areas prior 

to lowering the moratorium, and allowing new providers to enroll 

again. 

Ms. CLARKE. And has that been effective, in your estimation? 

Dr. AGRAWAL. I think we are still doing data analysis to look at 

how effective the moratorium as a singular tool is, but what we are 

finding is that, in those area, which clearly are hotspot areas anyway, we have been able to effectuate literally hundreds of revocations of both home health agencies and ambulance companies. So, 

we continue to assess the moratorium. We are obviously very concerned about access to care, want to make sure that the moratoria 

don’t interfere with access. And, so, there are a lot of analytics that 

go on, as well as collaborating with the states. 

Ms. CLARKE. And how does the affected states, during the moratorium period, how does CMS work with them? 

Dr. AGRAWAL. So, just as we do more broadly, we engage in data 

exchanges, we work with them on collaborative audits and investigations, and then we do those access to care analyses to make 

sure that the moratorium is not having an adverse consequence. 

Ms. CLARKE. Yes, and on that point, how do you make sure that 

Medicaid beneficiaries are continuing to receive the services they 

need? 

Dr. AGRAWAL. Right, that is of primary importance. Again, these 

areas in service categories were chosen in the first place because 

54 

of really significant market saturation, making access not such a 

huge problem right at the outset. But, as the moratoria have gone 

on, we have worked, through our regional offices at CMS, with the 

relevant states. We have stayed in contact with them, exchanged 

data to make sure that that picture has not changed, and thus far 

it hasn’t. Access to care continues not to be a major issue. 

Ms. CLARKE. And then, finally, ACA significantly increased funding to fight Medicare and Medicaid fraud. How will additional 

funding help CMS address program integrity vulnerabilities? 

Dr. AGRAWAL. Yes. We do appreciate the work of Congress, and 

the leadership of this Committee, in providing more resources for 

us. Those additional resources will allow us to continue to invest 

in existing programs, to encourage, again, more data collaboration 

with Medicaid agencies, provide more technical guidance and education. And then, where necessary, especially to respond to recommendations like this, we will be implementing new initiatives 

and programs to continue the Medicaid and Medicare programs. 

Ms. CLARKE. Very well. And just out of curiosity, the implementation of the data hub, have you used that collaboratively in those 

high concentrated metropolitan areas as you also employ the moratoria? 

Dr. AGRAWAL. Well, the data hub is really more of a general Federal asset for states to utilize at the time of beneficiary enrollment 

and eligibility determinations. It is not really specifically focused 

on moratoria area. Rather, we see it as a tool that should be utilized across the Medicaid program, to ensure eligibility is done correctly the first time. 

Ms. CLARKE. Very well. I yield back. Thank you, Mr. Chairman. 

Mr. MURPHY. Now recognize Mr. Brooks for 5 minutes. 

Mrs. BROOKS. Thank you, Mr. Chairman, and thanks to our witnesses for being here. I am a former United States Attorney, and 

so have worked with Medicaid fraud control units run by our 

states’ Attorney General, and also with HHS OIG agents, and my 

question is really to both of you about the staffing, and the number 

of people that we dedicate—so while you are very focused on prevention, I understand, but deterrence is also a wonderful tool, and 

I am curious about the effectiveness of our deterrence. Because if 

we don’t prosecute those, and—while certainly I know U.S. Attorneys’ offices and Attorney Generals are prosecuting all across the 

country, I don’t believe they have the resources that they need. 

These are very complex investigations. The last thing they want to 

do is prosecute someone wrongfully, and these are very complicated 

cases. 

So my question is to both of you about whether it is our health 

care providers, or the beneficiaries who are receiving improper payments, what is your thoughts on how we are doing with respect to 

prosecutions? 

Dr. AGRAWAL. So I appreciate the question. Prosecution is obviously an important aspect of health care fraud control generally. 

What we have been doing over the last 5 years, since the creation 

of the Center for Program Integrity, is really investing resources in 

preventing these issues from arising in the first place. That includes, you know, payment edits, audits, investigations, and ultiVerDate Nov 24 2008 11:49 Dec 01, 2015 Jkt 037690 PO 00000 Frm 00058 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-48 CHRIS
55 

mately removing a provider from the program, if necessary, to stop 

inappropriate billing. 

As part of that work, we are also collaborating closely with OIG 

and DOJ, making sure that they have data that is adequate for 

their cases, providing them whatever additional services or resources they need, even using administrative authorities that CMS 

has, as long as, you know, we are obviously following those authorities and implementing them in the proper way. So I think it is a 

balance. I think deterrence is obviously very important, and we 

continue to collaborate with law enforcement as needed. 

Mrs. BROOKS. Mr. Bagdoyan? 

Mr. BAGDOYAN. Yes, thank you, Ms. Brooks. The issue of prosecution was not within the scope of our audit, certainly, but I 

would see it certainly as part of the toolbox that I alluded to in my 

opening remarks. So, in its totality, it would have to have preventative controls, and the ability to investigate, and, if appropriate, 

prosecute. 

Mrs. BROOKS. Let me dig a bit further on the investigation, 

though, and I have seen the reports done by those units, and the 

analysis they do, and it is very complex. And I know that in your 

written testimony you talked about the Medicaid Integrity Institute, Dr. Agrawal. How many employees do you know across the 

country deal with Medicaid, state and Federal? Any idea? Because 

I saw in a Reuters report that more than 4,200 employees have 

been trained, but there are thousands more, I would suspect, but 

I have no idea. 

Dr. AGRAWAL. Right. So I am not sure exactly what the total 

number of Medicaid employees is. I think the 4,200 number, what 

that really sort of refers to are state employees that we have been 

able to bring over to the Medicaid Integrity Institute to engage in 

an educational experience on some aspect of program integrity, 

whether it is working with law enforcement, or provider enrollment 

in screening standards, beneficiary eligibility, whatever the case 

may be. 

I think there are definitely more than 4,200 out there. Right 

now, our only constraint is the resourcing and the time to get as 

many employees in as possible. But the program is a strong one, 

I think, because it really allows us to spend Federal resources. 

States have to pay very little to nothing for an individual employee 

to be educated and have access to those courses. 

Mrs. BROOKS. And are all the courses required to be done in person, or could you move to an online training program to help states 

who have constrained budgets have more of their Medicaid employees trained? 

Dr. AGRAWAL. Yes, that is a—— 

Mrs. BROOKS. I think that is a challenge for a lot of states. 

Dr. AGRAWAL. Agreed, that is a great question. We have, up until 

now, done the vast majority of this educational work in person because there is a value to that in-person education, being able to 

conduct seminars, real sort of small group trainings. However, I 

think your point is a good one, and we are currently looking at 

ways of using more virtual training, as well as potentially putting 

MII on the road, so that states that can’t travel, or for their own 

policies or whatever, still have access to the education. 

56 

Mrs. BROOKS. Do you have any sense as to the success of this institute? I mean, how many folks have gone back and have actually 

prevented fraud? 

Dr. AGRAWAL. Yes. So, measuring the impact of education, as you 

are probably aware, is really challenging to connect it to specific 

dollars and cents that are saved. What we find, in certainly postcourse assessments, is a very high rating by state officials that indicate that they really did value the education that was given. We 

do also ask them to self-report where they feel the education contributed to recoveries or savings. We can give that number to you. 

But, again, I think it is hard to connect education to a specific dollar that is saved. I think it is often important to do these activities 

merely because that greater awareness at the state level is valuable onto itself. 

Mrs. BROOKS. Thank you. I yield back. 

Mr. MURPHY. The gentlelady yields back. Now recognize Ms. Castor for 5 minutes. 

Ms. CASTOR. Well, thank you, Mr. Chairman, for calling this 

hearing, and thank you to the witnesses. Thank you for your attention to program integrity, and rooting out fraud in Medicaid. In 

Medicaid, every dollar counts, because these are dollars that go, in 

large part, to children and their health care needs, and our older 

neighbors in nursing homes, and other hard working Americans. 

Now, CMS has issued several new regulations and guidance just 

in the past month, and I would like to ask you about them today. 

Dr. Agrawal, as I understand it, under the proposed regulation for 

Medicaid managed care organizations, managed care providers 

would be subject to the same screening requirements as providers 

for the fee-for-service program, is that correct? 

Dr. AGRAWAL. That is correct. 

Ms. CASTOR. And that is especially important because many 

states are moving their Medicaid programs to managed care models, is that right? 

Dr. AGRAWAL. That is correct. 

Ms. CASTOR. In fact, do you know how many states have already 

shifted, and have instituted Medicaid managed care? 

Dr. AGRAWAL. I think the majority have. They are at various levels. States like Arizona, where it is essentially all managed care at 

this point, and other states that have a hybrid population between 

fee-for-service and managed care. But, that kind of enrollment requirement is a vulnerability or an issue that has been flagged by 

both OIG and GAO—— 

Ms. CASTOR. Yes. 

Dr. AGRAWAL [continuing]. And so we are happy to get into a proposed rule. 

Ms. CASTOR. OK. Elaborate on that. Why did CMS make that decision? 

Dr. AGRAWAL. Yes. So, as you mentioned the rise of managed 

care is definitely occurring in all states, with some at various levels 

of integrating managed care. Previous OIG and GAO reports have 

highlighted that as an issue because, up until now, providers that 

provide services in managed care programs, through MCOs, aren’t 

necessarily known to the states. They don’t necessarily have to go 

57 

through the same enrollment standards. Some states require that. 

Most don’t. 

We felt that this was an important vulnerability or an issue to 

address. Hence, that was one piece of the program integrity provisions in that NPRM, and we think that requiring the same screening standards will ensure beneficiary safety, regardless of whether 

they choose to stay in fee-for-service or managed care. 

Ms. CASTOR. Good. And, Mr. Bagdoyan, is this a policy change 

that the GAO supports? 

Mr. BAGDOYAN. I am aware of the rule coming out, but I am not 

familiar with its details. I would go back to my original point that 

steps like this one would, over time, if executed and sustained, help 

narrow that window of opportunity for fraud and improper payments. So that would be my assessment at this point. 

Ms. CASTOR. OK. Dr. Agrawal, my understanding is that the proposed rule also imposes new internal compliance and program integrity requirements on Medicaid and CHIP managed care plans. 

Can you walk us through those requirements? 

Dr. AGRAWAL. Sure. There are other requirements of managed 

care plans that include elevating issues, or informing the state 

about audit issues, other vulnerabilities that they have identified. 

It is making sure that they have compliance programs in place to 

ensure the integrity of payments, program integrity generally. 

Those are all new elements that the majority of states don’t have. 

In addition, there is a data sharing element, which requires language in managed care contracts to ensure states can still get access to managed care data as needed for obviously, we are in sort 

of the rulemaking process. But, if finalized in its current form, 

would make really important progress in program integrity. 

Ms. CASTOR. And your goal is to complement what is already in 

place at some states? Some don’t have similar safeguards, is that 

right? 

Dr. AGRAWAL. Correct. You can think of this as trying to build 

the safeguards in place that have been started in fee-for-service. 

So, the same screening and enrollment standards, the same kind 

of access to data, and making sure that those go through to managed care plans. So, again, beneficiaries have the choice for which 

to engage in in states that have both, or states can make the transition to managed care without necessarily feeling that they have 

to give up program integrity along the way. 

Ms. CASTOR. OK. I would also like to ask you about the guidance 

CMS issued earlier this week on criminal background checks and 

fingerprinting of certain providers in the Medicaid program. First 

of all, who will be subject to the full background check and 

fingerprinting requirement, and how will CMS and state agencies 

determine if a provider represents a high risk? 

Dr. AGRAWAL. Sure. So you are referring to fingerprint-based 

criminal background checks that were one of the ACA requirements in enrollment and screening for providers. Generally fingerprint checks are utilized for provider types that are designated 

high risk. That would be, for example, a newly enrolling home 

health agency or DME company where there has been a history of 

kind of endemic fraud issues. If you are newly enrolling in the 

state in one of those categories, you would be subject to a fingerVerDate Nov 24 2008 11:49 Dec 01, 2015 Jkt 037690 PO 00000 Frm 00061 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-48 CHRIS
58 

print-based criminal background check. If CMS has already done it, 

states can utilize our results as their own. 

The only other provider types are those that have already been 

issues in the program, and therefore are on an individual basis designated high risk if they try to re-enroll. 

Ms. CASTOR. Thank you very much. 

Mr. MURPHY. Mr. Mullin, you are recognized for 5 minutes. 

Mr. MULLIN. Thank you, Mr. Chairman. Doctor, can you walk me 

through the process of what happens when a state medical fraud 

unit identifies a provider that is committing fraud within the system? 

Dr. AGRAWAL. Broadly speaking I can. I will sort of tell you the 

steps that I know, but I will just make the point that MFCUs, or 

the Medicaid Fraud Control Units, actually respond to the Office 

of Inspector General, and they work with program integrity units 

at the state Medicaid agency. 

But I, surmising that the relationship is really similar to what 

we have with our Office of Inspector General, we will often initiate 

investigations based on data assets, beneficiary complaints, a host 

of other inputs. And then, if there is any indication of fraud, or patient safety issues, we will send that over to the OIG, and oftentimes state Medicaid agencies with similar policies, engaging their 

fraud control unit. 

Mr. MULLIN. Can the state Medicaid fraud units indict providers? 

Dr. AGRAWAL. I believe they can, working with regional DOJ offices. 

Mr. MULLIN. Communication with our Oklahoma fraud unit for 

Medicaid, they indicated that they couldn’t. They had to basically 

turn it over to you all. 

Dr. AGRAWAL. Again, they might be referring to Federal law enforcement, either, again, OIG or DOJ. As an administrative agency, 

we don’t indict providers. We have various administrative authorities and actions, but the most severe is kicking somebody out of the 

program. 

Mr. MULLIN. So they can go in and be fraudulent, billing Medicaid for millions of dollars, and the worst thing that happens to 

them, they get kicked out of the program? 

Dr. AGRAWAL. Well, again, we have the administrative authorities that we have. We are able to suspend payments, terminate the 

enrollment of providers. And then I think, to the point that was 

made earlier, we do work with law enforcement to bring other, 

more criminal justice activities. 

Mr. MULLIN. But we hear reports over and over again about providers that were kicked out of the program for having fraudulent 

claims, and then they turn back around, change their name, and 

are back in business the following week. 

Dr. AGRAWAL. So—— 

Mr. MULLIN. What is the indicator that you communicate with 

the Federal prosecutors and say, look, we want this guy to go to 

jail—— 

Dr. AGRAWAL. Right. 

59 

Mr. MULLIN [continuing]. Or do you guys just don’t do that? You 

say, well, whatever, she defrauded the taxpayers millions of dollars, but it is up to you? 

Dr. AGRAWAL. Well, specifically with working with law enforcement, we make referrals—I think hundreds, if not thousands of referrals, and we can actually get you some numbers for the last couple of years to show you how many, to law enforcement for those 

cases that are most concerning for fraud, and where we believe a 

law enforcement action would be appropriate, at least from our determination. 

But I think, to your larger question about providers reinventing 

themselves, we too have noted that as a vulnerability, and, in fact, 

have promulgated rules that have allowed us to close it by, for example, tracking administrative actions, and actually applying them 

to owners who would try to reinvent companies. 

Mr. MULLIN. Well, it seems like, to me, if more of them went to 

jail, that might prohibit them from going through. So do we know 

how many actually end up doing jail time? 

Dr. AGRAWAL. I think that is a question for at least the OIG, or 

the state law enforcement officials. 

Mr. MULLIN. Is that a number that you guys can provide? 

Dr. AGRAWAL. Remember, our authorities don’t involve—— 

Mr. MULLIN. So there is a breakdown in communication is what 

I am saying. 

Dr. AGRAWAL. No, I wouldn’t say that—— 

Mr. MULLIN. I am asking you, because you kick them out of the 

program, then turn it over, then no one pays attention to them 

anymore. And if the Federal prosecutors aren’t willing to prosecute, 

then they come right back into your system, no one is paying attention to them, and they end up doing the same thing over again. Because if the worst thing that happens to them is they get kicked 

out, then it is not there. 

It might be something that we might want to look at. Maybe we 

ought to let the states do this. If they have a unit that specifically 

identifies claims to Medicaid that the state is issuing, and they see 

fraudulent activities, and they turn it over to you, you all kick 

them out, you all turn it to the Federal prosecutors, if they end up 

getting lost in the chain, why don’t we simplify the process and just 

let the state prosecute them? 

Dr. AGRAWAL. Just to be clear, states don’t have to go through 

CMS in order to get to prosecutors or law enforcement. They do 

have Medicaid fraud control units that they can go to directly. 

Mr. MULLIN. But they—— 

Dr. AGRAWAL. They have other—— 

Mr. MULLIN [continuing]. Can’t prosecute them, though. 

Dr. AGRAWAL. Right. As administrative agencies, the state Medicaid agency, CMS, we don’t prosecute directly, but we don’t work 

with law enforcement to do that. I wouldn’t characterize it as a 

communication breakdown. I would characterize it as different 

lines of authority. We are happy to work with law enforcement. We 

provide law enforcement with data on a routine basis, work with 

them sometimes for years as they develop, investigate, and take action on cases. 

60 

Mr. MULLIN. So do you think there is a better way—quickly, because I am running out of time, is there a better way to handle 

this, then? 

Dr. AGRAWAL. I think it depends on what this is that you are trying to improve. 

Mr. MULLIN. Well, to prosecute the individuals, rather than just 

kicking them out of the program, and not actually sending them to 

prison. 

Dr. AGRAWAL. Yes. So it is really important, I think, to engage 

in prevention, because prosecution takes, understandably, time, 

and what we don’t want is folks billing programs that shouldn’t be 

billing programs. And, so it is useful to actually kick them out of 

the program and stop dollars from going out the door. At the same 

time, if we can work with our law enforcement colleagues to get the 

prosecution, we can have the deterrence effect, and other impact 

that we want. 

Mr. MULLIN. Appreciate it. Thank you. 

Mr. MURPHY. Thank you. Mr. Green, you are recognized for 5 

minutes. 

Mr. GREEN. Thank you, Mr. Chairman. Mr. Bagdoyan, Medicaid 

is a large program, as is Medicare. Would it be fair to say that as 

long as these programs existed, there have always been at least 

some improper payments, some people gaming the system? 

Mr. BAGDOYAN. That seems to be the historical record, sir, yes. 

Mr. GREEN. I know it wasn’t part of your audit specifically, but 

improper payments were not only associated with Medicare and 

Medicaid, but they are a challenge government-wide, I assume. 

Mr. BAGDOYAN. That is correct. OMB measures that. I think 

maybe the Chairman or the Ranking Member earlier referred to 

the higher error programs that OMB tracks, so yes. 

Mr. GREEN. OK. Clearly we want to lower the rate of improper 

payments in programs such as Medicare and Medicaid, but it is important to put it in context. This Committee examined this issue 

more than a decade ago. Then, as we are discussing today, there 

were improper payments associated with Medicaid and Medicare. 

But do we want to constantly try to eliminate improper payments—and we do want to try and eliminate improper payments 

and better controls. 

On page 14 of your report, your audit mentions that CMS, as 

part of the passage of the Affordable Care Act has put in place 

some new tools that may help bring down improper payments. I realize that gaps remain, but do you see this as an important step 

in the right direction? 

Mr. BAGDOYAN. I would say they are, and they add to their toolbox that I referred to in my opening statement. 

Mr. GREEN. OK. Do you see any new tools as a step in the right 

direction? If so, can you explain how you think they will help us 

reduce improper payments moving forward? 

Mr. BAGDOYAN. Well, the two recommendations we make available to states, where the action happens, so to speak, with the data 

they need to better screen both beneficiaries and providers. 

Mr. GREEN. OK. I understand more specifically that CMS regulations established a more rigorous approach to verifying financial 

and non-financial information that could help determine Medicaid 

61 

beneficiary eligibility. It has created a tool called the data services 

hub. I know that gaps will remain, and bad actors constantly try 

to find ways to game the system, however, does the implementation 

of this new tool, the data service hub, give you some encouragement that we can reduce the rate of improper payments? 

Mr. BAGDOYAN. Again, by all means it is a step in the right direction. Getting the data right and reliable is a key step there, as 

well as having states regular and electronic access would be also 

useful. 

Mr. GREEN. I am guessing some of these new tools are already 

having some positive effect. I understand the GAO’s audit has some 

limitation—mainly due to using data that is now almost 5 years 

old. While I applaud GAO’s efforts to help strengthen Medicaid 

through its work, it is unfortunate that we cannot see how these 

new and encouraging tools are working until we can examine more 

recent billing data. 

Mr. Chairman, I hope that we continue to work with GAO and 

CMS to see how these new tools CMS is working on can help us 

in taking out the fraud and abuse. Again, I want to thank GAO for 

the excellent work you are doing, and also CMS for responding to 

what we did in the Affordable Care Act to give you those tools. I 

yield back my time. 

Mr. MURPHY. Gentleman yields back. Now recognize Mr. Collins 

for 5 minutes. 

Mr. COLLINS. I come from the private sector. I am a Lean Six 

Sigma guy. I have brought Lean Six Sigma into a large municipal 

government. I think you both know where I am going. It is not a 

good place. This is the most disturbing hearing I have attended in 

2 1⁄2 years. I hear you saying that making 67,000 errors per million 

opportunities is worth a gold star. Six Sigma says you make 3.4 errors per million. 3.4, not 67,000. 

I will be using today’s hearing in my stump speeches, in my town 

halls for a very long time. It is everything wrong with government. 

That you are setting a standard of making 67,000 mistakes for 

every million times you try to do something, and you are going to 

reward and congratulate yourselves, this is disbelief, absolute, 

utter disbelief of what is wrong with government, to have you two 

individuals, with smiles on your face, and congratulating each 

other over trying to achieve 67,000 errors per million opportunities. 

My mind is blown. I know if 1,000 airplanes take off, and 67 of 

them crash, that is a 6.7 percent error rate. I don’t think we are 

going to be flying on our airplanes if 67 airplanes crash for every 

thousand that take off. 

In the manufacturing world today, whether it was Toyota many 

years ago, whether it was General Electric, or some things I have 

done, we set a goal of Six Sigma, 3.4 errors per million. It is 

achieved every single day in the private sector. And here we are 

in government, talking about 67,000 errors per million opportunities, and how this is progress? This is disgusting. It is a waste of 

taxpayer dollars. It is setting the bar so low that, yes, I guess, we 

had a goal of 5.6, we hit 6.7, so next year let us make it 6.7. Well, 

if it is 7.2, then the next year it is going to be 7.2, and we are going 

to have a hearing, and you guys are going to self-congratulate each 

62 

other on achieving something like that? I don’t even know that you 

can’t defend the indefensible. 

So, while I am carrying on here a little bit, I know you can’t defend the indefensible, but maybe I will let you try. And I will also 

say there is a sign in my office, in God we trust, all others bring 

data. I am a data guy, if you can’t already tell. That means you 

need good data. And now I am reading that the PERM program, 

the Payment Error Rate Measurement Program, at best, it is using 

a rolling sampling of 17 states, the data is not consistent, it is not 

gathered in a consistent way. I have one word for that data, and 

that is garbage. Garbage, complete garbage. 

So, I don’t know, Mr. Bagdoyan, do you have anything to say? 

Mr. BAGDOYAN. Well, Mr. Collins, I thank you for your comments. I think our audit was thorough, by our audit standards, and 

our findings speak for themselves. 

Mr. COLLINS. You are familiar with Six Sigma, right? 

Mr. BAGDOYAN. I am indeed, yes. 

Mr. COLLINS. All right. So, what would you think if you are in 

my world, and I am used to 3.4 errors per million, and you are at 

67,000? How long do you think you would work for me? 

Mr. BAGDOYAN. I take your point. 

Mr. COLLINS. Yes, not very long. And, Dr. Agrawal, again, you 

are—you seem OK with taking the 5.6 to 6.7. Can you defend that? 

I am going to stand up in front of my residents, and I am going 

to talk about this hearing, and they are going to be shaking their 

heads in total disbelief. You are going to be an example of everything wrong with government from this day forward in western 

New York when I tell them at 5.6 percent—you hit 6.7, so the next 

year you just changed it to 6.7. If that is not oh, my God, I am 

just—again, this is the most disturbing hearing I have ever taken 

place in. So what do you say to the third graders when I tell them 

that? 

Dr. AGRAWAL. I think I have made it pretty clear from my opening remarks, Congressman, that we do view these findings as important, and, while we have made progress, there is more progress 

to be made. I don’t view it as any other way. I don’t view it as just 

sort of being happy with the results and where we are. 

Mr. COLLINS. Well, my time has expired, but I would suggest you 

set different standards for yourselves, ones that respect the B in 

billions. We talk in government about dollars like billions don’t 

even matter anymore because we are trillions in debt, and I would 

suggest that, as somebody who has got something to do with this, 

next year, when they try to raise the error rate to 7.2 percent, you 

actually stand up and make a name for yourself and say, I am not 

going to stand by and let that happen. With that, I yield back. 

Mr. MURPHY. Gentleman yields back. Just to clarify, Dr. 

Agrawal, did you set the standard at 6.7 percent? 

Dr. AGRAWAL. No. That is a process that involves a different part 

of the, it is obviously kept separate from folks that are trying to 

make the interventions, right, so that there is some objectivity to 

it. 

Mr. MURPHY. And, Mr. Bagdoyan, you more or less audited this 

information and provided it for us, correct? 

63 

Mr. BAGDOYAN. Yes. We use it as a point of reference, sir. We 

don’t set the number. 

Mr. MURPHY. So the follow up to Mr. Collins’s question that is 

important for us to know, the process of how that is done? Because 

I think you heard unanimity of opinion, none of us want to tolerate 

that, but we need to know how that is happening so we can make 

changes on this very thing. But I thank you. I now recognize Mr. 

Yarmuth for 5 minutes. 

Mr. YARMUTH. Thank you, Mr. Chairman, and thanks to the witnesses. I want to get some clarification on this PERM rate, because 

I am not sure I understand it. If you characterize these as errors, 

are these errors that CMS made, or are they errors that—just some 

kind of incorrect payment was made? So you would have had, for 

instance, a bill come in that was coded incorrectly, wrong procedure, whatever it is, and—would that have been counted as an 

error? 

Dr. AGRAWAL. Yes, it would be. 

Mr. YARMUTH. So it wasn’t a mistake that you made, it was a 

mistake that somebody who was sending the bill in made, is that 

correct? 

Dr. AGRAWAL. Yes. I mean, I think it could be argued, and in 

fairness, that we need to have preventative programs in place to 

catch that. 

Mr. YARMUTH. I understand, but this is not necessarily an—— 

Dr. AGRAWAL. Correct. 

Mr. YARMUTH [continuing]. Indication of negligence on the part 

of CMS. 

Dr. AGRAWAL. Correct. 

Mr. YARMUTH. And I have got my problems, as everybody does, 

with CMS, but if somebody sent in a bill on a fee-for-service basis 

for $100, and they were actually only entitled to $90, that would 

be an error under this—— 

Dr. AGRAWAL. That would be—— 

Mr. YARMUTH [continuing]. Report? Now, would that total $100 

be counted in the 14 billion? My point being that—— 

Dr. AGRAWAL. Yes. 

Mr. YARMUTH [continuing]. I think there is the danger here—and 

I am a former journalist. There is a danger here that somebody 

would look at this report and say the mistakes cost taxpayers $14 

billion in 2013, when, in fact, they didn’t cost taxpayers $14 billion, 

they cost them some—could be a very small fraction of $14 billion. 

Am I analyzing that correctly? 

Dr. AGRAWAL. Right. I think what is really important is the 

measured tone that GAO and Mr. Bagdoyan have taken today, that 

these are all potentially improper payments, and not the data inconsistency alone doesn’t absolutely establish that. In many of the 

specific claims where these improper payments have been noted, 

states or CMS are able to actually recover those dollars, or Federal 

portions are withheld. So, yes, there is obviously complexity underlying this that you are correct to point out. 

Mr. YARMUTH. Right. I just want to make that clear, because, 

again, I think there is a danger in taking these numbers and blowing them out, at least not with a full understanding of what they 

represent. 

64 

And, Mr. Bagdoyan, looking at the numbers there, I did the same 

calculations that Mr. Kennedy did, and on the deceased question, 

looking at it another way, it was one out of every 46,000 beneficiaries. Just on the total beneficiary problems, it was one out of 

every 742, and on the provider problems it was one out of every 

2,753. Now, I think, again, there is a danger in looking at it and 

saying, 8,600 beneficiaries got benefits in two states, but—— 

Mr. BAGDOYAN. Yes. 

Mr. YARMUTH [continuing]. It is a relatively small number. I 

would be negligent if I didn’t spend time talking about the Kentucky experience, because I know my colleague from Indiana talked 

about how states are worried about paying for the Medicaid expansion. I think everybody has some concern over what the impact will 

be, but—in Kentucky—and I need to congratulate Governor 

Beshear and his team. Under the expansion of Medicaid, more than 

520,000 Kentuckians now have insurance who didn’t have it before. 

The ACA, the uninsured rate across the state has been reduced by 

almost half. In my district alone, the uninsured rate has been reduced by 81 percent, which is a phenomenal occurrence—I think a 

very humane one. 

But more importantly, the governor just had the Deloitte Firm, 

highly respected accounting and business consulting firm, do an 

analysis and a project as to what the ACA would mean to Kentucky over the next 6 years. And, again, most of this is because of 

Medicaid expansion, but the vast majority of the newly insured are 

part of the Medicaid expansion. The Deloitte Firm concluded that 

over the next 6 years the ACA, in Kentucky, would create 40,000 

new jobs, it would have a positive impact on the economy—additional impact on the economy positive of $30 billion, and would 

have a positive impact on Kentucky’s budget over the next 6 years 

of $819 million. 

So, I think that it is easy to sit here and say, gosh, what are 

states going to do when they have to pay 90 percent in 2021, or 

95 percent in 2017 or ’18? But, in fact, an analysis of our situation 

shows that it is going to have a positive impact well into the 2020s. 

So I wanted to get that on the record as part of this discussion, and 

with that, Mr. Chairman, I yield back. 

Mr. MURPHY. Gentleman yields back, and I will recognize Ms. 

Blackburn for 5 minutes. 

Ms. BLACKBURN. Thank you, Mr. Chairman, and I thank you all 

for being here. And, as Mr. Collins just said, this is really a frustrating hearing in so many ways for us. In 2003, shortly after, we 

did a field hearing in Tennessee, looking at the TennCare program, 

which was the test case for Hillary Clinton’s health care, and implemented in Tennessee, and a lot of Obamacare has been built on 

it. And one of the focuses of that hearing was the waste, fraud, and 

abuse, and the fact that CMS just couldn’t seem to get its act together when it came to dealing with waste, fraud, and abuse. 

And when you isolated our state and looked at it, the payment 

error rate, and the eligibility issues with verification of who was 

and was not eligible, and then the providers, so to see this continue 

on, and your willingness to accept a failing grade in addressing this 

is just beyond us. Because you are not getting better, you are getVerDate Nov 24 2008 11:49 Dec 01, 2015 Jkt 037690 PO 00000 Frm 00068 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-48 CHRIS
65 

ting worse, and then you change the grading system to accommodate that you are not improving. 

And, Dr. Agrawal, if I am understanding this right, you moved 

from 5.6 to 6.7 in that rate, and this was done by committee, so 

there is no one person in charge of this debacle, is that correct? 

Dr. AGRAWAL. I am sorry, ma’am, I don’t understand what you 

are asking about. 

Ms. BLACKBURN. You changed your grading rate. You went from 

a target for—5.6, a target rate, to 6.7 in your improper payment 

rate. And, if I am understanding your answer to Mr. Collins, there 

is no one person that decided that, it was a committee, or a group, 

that decided that. Is that correct? Who do we hold responsible for 

accepting a failing grade? 

Dr. AGRAWAL. Well, Congresswoman, clearly the target is set, but 

I think what is important is we actually measure our—— 

Ms. BLACKBURN. Who sets the target? Who set it? 

Dr. AGRAWAL. I don’t know. We would have to—— 

Ms. BLACKBURN. Who accepts this? 

Dr. AGRAWAL [continuing]. Go back and identify that person. 

Ms. BLACKBURN. Who accepts the wasting of taxpayer money? 

You have got an issue that gets worse every year. Let me ask you 

this, we are going to get in behind this. Was it 90 providers in one 

state that were found to be receiving erroneous payments? Did I 

understand that right, sir? 

Mr. BAGDOYAN. Sorry, it was 90 in the four states we looked at. 

Ms. BLACKBURN. Ninety in four states? 

Mr. BAGDOYAN. That is correct. 

Ms. BLACKBURN. OK. What would happen if we were to say there 

were a zero tolerance policy for improper payments, and for waste, 

fraud, and abuse that is taking place in CMS? What would happen? How would you all react? Because Federal agencies that deal 

with taxpayers, they pretty much have a zero tolerance policy. 

Or what if we did this, what if we were to look at these numbers—according to CMS, improper payments in the Medicaid program rose from 14.4 billion in 2013 to 17.5 in 2014. What if we 

were to say, CMS, we are going to charge you back with this $17.5 

billion until you can get your act together? And you have got to 

take that out of your budget, and you have got to find a way to 

deliver the services and avail yourselves of technology. 

Let me ask you a question too. When it comes to the data, and 

transferring that into information that can be used, have you 

looked? You say you offer guidance and support to the states. Have 

you told the states, we are going to hold you accountable for giving 

us data that can be turned into information, and we are going to 

cut your payments if you don’t give us the data that can be used? 

Garbage in, garbage out. It is not going to change. 

And the fact that you have a secure job, and a paycheck, and 

think you can’t be fired, and then you come in here, and what we 

hear is, going back to my first hearing on this in 2003, the problem 

gets worse, the problem doesn’t get better, and when it does get 

worse, you just change the metrics and say, well, that is OK, we 

are going to do better next year. No, it is not OK. The error rate 

is not OK. And it is something we are going to push forward, and 

66 

holding you all accountable, and look for new ways of doing that. 

And I yield back my time. 

Mr. MURPHY. Gentlelady yields back. I am going to let Ms. 

DeGette take 2 minutes, and Mr.—— 

Ms. DEGETTE. Yes. 

Mr. MURPHY [continuing]. Dr. Burgess, and we will proceed from 

there. Thank you. 

Ms. DEGETTE. Now, in fairness, Dr. Agrawal, were you in your 

job in 2003, in this job? 

Dr. AGRAWAL. No. 

Ms. DEGETTE. Mr. Bagdoyan, were you in this job in 2003? 

Mr. BAGDOYAN. I was not, ma’am. 

Ms. DEGETTE. I am going to ask you, because you are with the 

GAO, has the agency tried to institute new metrics to try to prevent fraud since 2003? 

Mr. BAGDOYAN. I think, as we reflect in our report, and in my 

statement, they have. Those will have to play out over the long 

term—— 

Ms. DEGETTE. Right, and as—— 

Mr. BAGDOYAN [continuing]. At all. 

Ms. DEGETTE. And as we discussed when I was asking questions, 

unfortunately, the data that you had for those four states was from 

2011, so it didn’t reflect some of the preventative efforts that have 

happened since—— 

Mr. BAGDOYAN. That is correct. That was part of the necessity 

of our methodology. 

Ms. DEGETTE. Right, exactly, because you just didn’t have the 

data, right? 

Mr. BAGDOYAN. That is correct. 

Ms. DEGETTE. And, Dr. Agrawal, do you think that it is a good 

idea to have fraud? Do you support that? Because I have been listening to these other questioners, they seem to somehow imply that 

either you personally, or the agency, think that it is acceptable to 

have fraud. 

Dr. AGRAWAL. Obviously, I do not. 

Ms. DEGETTE. Why? 

Dr. AGRAWAL. Well, I come at it from the perspective of an ER 

physician. I have taken care of Medicaid and Medicare beneficiaries, and other beneficiaries, the uninsured. I do this work so 

that we can preserve resources for the folks who need it. 

Ms. DEGETTE. Thank you. I yield back. 

Mr. MURPHY. Dr. Burgess? 

Mr. BURGESS. Thank you, Mr. Chairman. I do thank our panel 

for being here, and I know it has been a long morning. Let me just 

ask a question, because I am trying to get a better understanding 

of what is referred to as the PERM program. That is a 3 year rolling average of 17 states examined on a yearly basis, is that correct? 

Dr. AGRAWAL. That is correct. 

Mr. BURGESS. And, now, what kind of statistical modeling was 

involved in coming up with that formula? 

Dr. AGRAWAL. So there is a statistical sample done in each of 

these states along the three major categories of the PERM program. And, again, we conduct the cycle so that every state is measured at least once in the 3 year period. And there is statistical 

67 

analysis behind it to make sure that the results are generalizable, 

and can actually arrive at a national rate. 

Mr. BURGESS. How do you select the 17 states to be in the particular cohort? 

Dr. AGRAWAL. They are—— 

Mr. BURGESS [continuing]. Alphabetical, and then you cut it off 

at 17, and—— 

Dr. AGRAWAL. That is a good question. Actually, I am not sure. 

I don’t think it is alphabetical, but there are 17 in every cohort, 

and we make sure that every state is represented once in a 3 year 

period. 

Mr. BURGESS. So the four states that Mr.—— 

Mr. BAGDOYAN. Bagdoyan. 

Mr. BURGESS [continuing]. Bagdoyan was concerned about, are 

those four states all in one cohort, or are they evenly distributed 

between the three rolling averages? 

Dr. AGRAWAL. They are distributed between them. 

Mr. BURGESS. Well, I guess, it seems like that is a difficult one. 

I don’t understand why that model was selected. Is it just simply 

too difficult to assess every state on a yearly basis? 

Dr. AGRAWAL. I think it would be a real resource constraint to 

try to assess every single state every single year, and it does also 

pose burden issues for the states. 

Mr. BURGESS. Everybody knows HHS has the best computers in 

the world, right? So why can’t you? 

Dr. AGRAWAL. I can take that back as a specific question if we 

are going to alter the methodology, but I think the methodology 

itself has been—it is not the—sort of under—— 

Mr. BURGESS. Yes. 

Dr. AGRAWAL [continuing]. Your question here. It—— 

Mr. BURGESS. It just struck me as unusual to do it in this fashion. So, again, that is why I was wondering, is there a particular 

statistical methodology that has been followed, as far as the sampling, on a rotating basis, 17, 17, 17 year in and year out, and how 

long have you been doing it this way? 

Dr. AGRAWAL. Since the PERM program started. 

Mr. BURGESS. Which was? 

Dr. AGRAWAL. I believe we had the first rates in ’07, but I would 

have to get back to you about that. 

Mr. BURGESS. And do you see consistency in those numbers over 

those years that you go back and look at this? 

Dr. AGRAWAL. What we do is we report a national average rate 

every single year so you can actually follow the rates, as people 

have done in this hearing, sort of talk about the rates over time. 

What we don’t report are rates by state, because it is very difficult 

to compare two different Medicaid programs that might have two 

very different approaches to eligibility and other things. 

Mr. BURGESS. All right, thank you. Mr. Chairman, I am going to 

submit a question in writing about the Dallas Morning News article that I referenced earlier in the hearing, and I would appreciate 

a response on that. 

Dr. AGRAWAL. Sure. Thank you. 

Mr. BURGESS. Thank you. 

68 

Mr. MURPHY. Thank you. Let me just say this, first of all, we are 

grateful you came to us in a candid way. But I think you hear 

among us, we want to facilitate this. None of us are going to tolerate any kind of acceptance of this. And there was a concern about 

whoever made the decision to just raise the level, it is not really 

acceptable. What we want to know is the methodology, and work 

with you, and see what next steps we need to take to deal with 

fraud and abuse. 

Granted, this data is from 2011. Some changes, as Ms. DeGette 

pointed out, may have already been put in place, to whatever extent you can tell us about that. We want to move a trajectory towards this, because, goodness knows, federal dollars are limited, 

and anybody who is out there being a crook needs to be handled 

appropriately so the money can go to those who need it. That is 

where our compassion should be. It is sort of in the category of 

those who can, those who can’t, and those who won’t. And those 

who won’t play by the rules, they need to face the consequences. 

So we will be passing on other questions to you, and, to that extent, I want to thank the members for participating, and when the 

questions are submitted for the record, we would appreciate it if 

you could get back to us with prompt responses. So, to that extent, 

I now adjourn this hearing. Thank you. 

[Whereupon, at 12:11 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

It was 12 years ago that the Government Accountability Office first sounded the 

alarm that the Medicaid program was a high risk for fraud and abuse. The Office 

of Management and Budget has designated it as one of the federal government’s 

‘‘high-error’’ programs with $17.5 billion in improper payments-third on the OMB’s 

list. For decades, Members of both sides of the aisle have asked both Republican 

and Democratic administrations a very basic question: how are you going to stop 

the waste of billions of taxpayer dollars? Nevertheless, Medicaid continues to waste 

billions of taxpayer dollars, jeopardizing the care of the most vulnerable. 

Put simply: this is unacceptable. Medicaid is supposed to provide our most vulnerable with vital medical services, but continued waste and fraud undermines this important goal. 

For the past several years, tools have been developed, initiatives started, and regulations authored with the goal of reducing Medicaid fraud. And still, fraud in Medicaid continues to grow, not shrink. We owe it to folks in Michigan to do a better 

job and reverse that trend. 

I appreciate the work and testimony of our witnesses. I realize that with over 

$310 billion spent, some element of bad actors may be unavoidable as they normally 

follow the money. But we must do better to protect the integrity of this vital program and the care for our most vulnerable. The testimony today provides valuable 

insight as we continue to work toward a fraud-free Medicaid system. 

69 


97382.043
70 


97382.044
71 


97382.045
72 


97382.046
73 


97382.047
74 


97382.028
75 


97382.029
76 


97382.030
77 


97382.031
78 


97382.032
79 


97382.033
80 


97382.034
81 


97382.035
82 


97382.036
83 


97382.037
84 


97382.038
85 


97382.039
86 


97382.040
87 


97382.041
88 

Æ 


97382.042