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WASTE, FRAUD AND ABUSE: A CONTINUING 

THREAT TO MEDICARE AND MEDICAID 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MARCH 2, 2011 

Serial No. 112–13 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

CLIFF STEARNS, Florida 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

Vice Chair 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

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 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

CLIFF STEARNS, Florida 

Chairman 

LEE TERRY, Nebraska 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

SUE WILKINS MYRICK, North Carolina 

BRIAN P. BILBRAY, California 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

CORY GARDNER, Colorado 

H. MORGAN GRIFFITH, Virginia 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

DIANA DEGETTE, Colorado 

Ranking Member 

JANICE D. SCHAKOWSKY, Illinois 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

EDWARD J. MARKEY, Massachusetts 

GENE GREEN, Texas 

CHARLES A. GONZALEZ, Texas 

JOHN D. DINGELL, Michigan 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Cliff Stearns, a Representative in Congress from the State of Florida, 

opening statement ................................................................................................ 1 

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

Hon. Joe Barton, a Representative in Congress from the State of Texas, 

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

Prepared statement .......................................................................................... 4 

Hon. Diana DeGette, a Representative in Congress from the State of Colorado, opening statement ...................................................................................... 5 

Prepared statement .......................................................................................... 6 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 10 

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

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

prepared statement .............................................................................................. 148 

Hon. Cory Gardner, a Representative in Congress from the State of Colorado, 

prepared statement .............................................................................................. 150 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, prepared statement ...................................................................................... 152 

WITNESSES

Kathleen King, Director, Health Care Division, Government Accountability 

Office ..................................................................................................................... 13 

Prepared statement .......................................................................................... 15 

Gerald T. Roy, Deputy Inspector General for Investigations, Office of the 

Inspector General, Department of Health and Human Services ..................... 29 

Prepared statement .......................................................................................... 31 

Omar Perez, Assistant Special Agent in Charge, Office of the Inspector General, Department of Health and Human Services ............................................. 41 

Prepared statement .......................................................................................... 43 

John Spiegel, Director, Medicare Progam Integrity Group, Center for Program 

Integrity, Centers for Medicare and Medicaid Services, Department of 

Health and Human Services ............................................................................... 50 

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

Answers to submitted questions ...................................................................... 153 

R. Alexander Acosta, Dean, Florida International University College of Law ... 98 

Prepared statement .......................................................................................... 101 

Craig H. Smith, Partner, Hogan Lovells U.S., LLP .............................................. 111 

Prepared statement .......................................................................................... 113 

Sara Rosenbaum, Hirsh Professor and Chair, Department of Health Policy, 

George Washington University School of Public Health and Health Services ......................................................................................................................... 124 

Prepared statement .......................................................................................... 126 

SUBMITTED MATERIAL

Subcommittee exhibit binder .................................................................................. 162 

(1) 

WASTE, FRAUD AND ABUSE: A CONTINUING 

THREAT TO MEDICARE AND MEDICAID 

WEDNESDAY, MARCH 2, 2011 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 10:02 a.m., in room 

2322 of the Rayburn House Office Building, Hon. Cliff Stearns 

(chairman of the subcommittee) presiding. 

Members present: Representatives Stearns, Terry, Myrick, Murphy, Burgess, Bilbray, Gingrey, Scalise, Gardner, Griffith, Barton, 

DeGette, Schakowsky, Gonzalez, Dingell and Waxman (ex officio). 

Staff present: Stacy Cline, Counsel, Oversight/Investigations; 

Todd Harrison, Chief Counsel, Oversight/Investigations; Sean 

Hayes, Counsel, Oversight/Investigations; Debbee Keller, Press 

Secretary; Peter Kielty, Senior Legislative Analyst; Carly 

McWilliams, Legislative Clerk; Andrew Powaleny, Press Assistant; 

Krista Rosenthall, Counsel to Chairman Emeritus; Ruth Saunders, 

Detailee, ICE; Alan Slobodin, Chief Investigative Counsel, Oversight; Sam Spector, Counsel, Oversight/Investigations; John Stone, 

Associate Counsel, Oversight/Investigations; Kristin Amerling, 

Democratic Chief Counsel and Oversight Staff Director; Phil 

Barnett, Democratic Staff Director; Brian Cohen, Democratic Investigations Staff Director and Senior Policy Advisor; Karen Lightfoot, 

Democratic Communications Director and Senior Policy Advisor; 

Ali Neubauer, Democratic Investigator; and Anne Tindall, Democratic Counsel. 

Mr. STEARNS. Good morning, everybody, and let me welcome everybody to the Subcommittee on Oversight and Investigations of 

Energy and Commerce. 

OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA 

Mr. STEARNS. We convene this hearing of the Subcommittee on 

Oversight and Investigations today to examine the efforts of the 

Department of Health and Human Services and the Centers for 

Medicare and Medicaid Services to address fraud, waste and abuse 

in the Medicare and Medicaid programs. 

This issue is of great importance to us. During this Congress and 

the last, I introduced the Medicare Fraud Prevention Act, which 

would increase the criminal penalties for those convicted of defrauding the Medicare program. As a Member of Congress from 

Florida, I have personally seen how this issue can greatly impact 

2 

my State and its citizens. During my town hall meetings last week, 

many of my constituents shared their concerns with stories about 

waste, fraud and abuse in Medicare. 

Recently, the Government Accountability Office listed the Medicare and Medicaid programs as ‘‘high risk.’’ High-risk programs are 

identified as having greater vulnerability to fraud, waste and abuse 

and mismanagement. As much as $60 billion is lost to Medicare 

fraud every year. This is an estimate because the exact number is 

unknown. When my staff asked the folks from CMS how much 

fraud was being carried out, they had no idea. 

So it is hardly news that the Medicare and Medicaid programs 

are at high risk. GAO has listed Medicare as high risk since 1990 

and Medicaid as high risk since 2003. Over the years, this committee has had countless hearings on this subject and yet nothing 

seems to change. The volume of Medicare fraud and the corresponding cost to the taxpayer continues to go up and up. 

Meanwhile, the stories we hear from States like Florida continue 

to horrify taxpayers. News reports have indicated that Medicare 

fraud is rapidly eclipsing the drug trade as Florida’s most profitable and efficient criminal enterprise. With Medicare fraud, the 

penalties are lower and the threat of violence is nonexistent. Meanwhile, seniors who notice that their Medicare number is being used 

for fraudulent schemes often find themselves begging the government to do anything about it, often with no results. 

The types of fraud we are seeing run the gamut from fraudulent 

billing schemes to the actual creation of fake storefronts to sell durable medical equipment and then bill it to Medicare. Once the 

criminals get their money from Medicare, they close up shop and 

open a new storefront in a new location and start the scam all over 

again. 

The Administration says that additional measures are being put 

in place to screen Medicare providers and suppliers, and halt payments when there are credible allegations of fraud. These are good 

and these are necessary steps to take, but only if they work, and 

GAO has said that there is much more work to be done. 

In 2014, the Administration’s health care bill will implement 

massive changes. Medicare will be cut and Medicaid will expand. 

According to the Chief Actuary of Medicare and Medicaid, 20 million people will be dumped onto the Medicaid rolls and $575 billion 

will be cut from Medicare. While we are all committed to repealing 

this onerous law on this side, we also must do our best to end fraud 

before 2014. If we can’t stop fraud now, how are we going to do so 

while simultaneously adding 20 million people to Medicaid? 

We have to make sure that the focus remains on preventing 

fraud and abuse. Unfortunately, CMS uses a pay first, check later 

system. That must change. We need to check first, and pay later 

before taxpayers’ funds are wasted. CMS needs to fix its 

verification system to prevent these kinds of crimes or we will 

never get a handle on this problem. 

Every dollar that is lost to fraud is one that is not spent on medical care for those in need. Fraud raises the costs of health care for 

all Americans. Since Obamacare will raise those costs even further, 

it is absolutely necessary that we get a handle on Medicare and 

Medicaid fraud. 

3 

So I look forward to hearing what the Federal Government is 

doing to get Medicare and Medicaid fraud and abuse under control. 

[The prepared statement of Mr. Stearns follows:] 

PREPARED STATEMENT OF HON. CLIFF STEARNS

We convene this hearing of the Subcommittee on Oversight and Investigations 

today to examine the efforts of the Department of Health and Human Services and 

the Centers for Medicare and Medicaid to address fraud, waste, and abuse in the 

Medicare and Medicaid programs. 

This issue is of great importance to me-during this Congress and the last I introduced the ‘‘Medicare Fraud Prevention Act’’, which would increase the criminal penalties for those convicted of defrauding the Medicare program. As a Representative 

from Florida, I have personally seen how this issue can greatly impact my State and 

its citizens. 

Recently the Government Accountability Office (GAO) listed the Medicare and 

Medicaid programs in its ‘‘High Risk’’ report. High risk programs are identified as 

such due to their ‘‘greater vulnerability to fraud, waste, abuse, and mismanagement.’’ Indeed, as much as $60 billion is lost to Medicare fraud every year. This is 

a massive amount of fraud, although apparently the exact number is not even 

known. Recently, when my staff asked the folks from the Center for Medicare and 

Medicaid Services how much fraud was being carried out, CMS had no idea. 

It is hardly news that the Medicare and Medicaid programs are at high risk for 

fraud, waste, abuse, and mismanagement. GAO has listed these programs as high 

risk for over 20 years, beginning in 1990. Congress’ interest in Medicare fraud and 

abuse isn’t new either. Over the years, this Committee has had countless hearings 

on the subject. And yet, nothing seems to change. The volume of Medicare fraud, 

and the corresponding cost to the taxpayers, continues to go up and up and up. 

President Obama has repeatedly promised that he would somehow SAVE taxpayer 

money and fund health care reform by eliminating Medicare fraud, but in the last 

two years, under his watch, Medicare has remained on the GAO’s list as a ‘‘high 

risk’’ program for fraud. Estimates of fraud remain in the $60 billion a year range, 

despite President Obama’s commitment to fight Medicare fraud. 

Meanwhile, the stories we hear from States like Florida continue to horrify honest 

taxpayers. News reports have indicated that Medicare fraud is rapidly eclipsing the 

drug trade as Florida’s most profitable and efficient criminal enterprise. The penalties are lower and the threat of violence is nonexistent. Meanwhile, honest seniors 

who notice that their Medicare number is being used for fraudulent schemes often 

find themselves begging the government to do anything about it, often with no results. 

The types of fraud we are seeing run the gamut from fraudulent billing schemes 

to the actual creation of fake store-fronts to allegedly sell durable medical equipment and bill it to Medicare. Once the criminals get their money from Medicare, 

they close up shop and open a new store-front in a new location, and start the scam 

all over again. 

Now the Administration says that additional measures are being put in place to 

screen Medicare providers and suppliers, and halt payments when there are credible 

allegations of fraud. I agree that these are good—and necessary—steps to take, assuming that they work. 

Yet, GAO found that there is still much more that can be done in both Medicare 

and Medicaid. Considering that Obamacare puts the federal government on the 

hook for 90 percent of these increased costs to Medicaid alone, I sincerely hope we 

move to do more to combat fraud sooner rather than later. 

In 2014 massive changes will take place because of Obamacare. Medicare will face 

drastic cuts and Medicaid will drastically expand. According to the Chief Actuary 

of Medicare and Medicaid, 20 million people will be dumped onto Medicaid rolls 

while $575 billion will be cut from Medicare. While we are committed to repealing 

this onerous law, we also must do our best to end fraud before 2014. 

If we can’t stop fraud now, how are we going to do so while simultaneously adding 

20 million people to Medicaid? 

I hope the witnesses at today’s hearing will help us understand the challenges 

CMS will face as it prepares for the full implementation of health care reform, and 

how it plans to combat fraud and waste in the system. 

We have to make sure that the focus remains on preventing fraud and abuse before it takes place. If CMS is not setting up the right systems and checks to prevent 

these kinds of crimes, we are never going to get a handle on this problem. 

4 

Every dollar that is lost to fraud is one that is not spent on medical care for those 

who need it. Fraud raises the costs of health care in America, and since I believe 

that Obamacare will raise those costs even further, it is absolutely necessary that 

we put and end to Medicare and Medicaid fraud. 

I look forward to the testimony of the witnesses today and learning what the federal government is thinking of doing to get Medicare and Medicaid fraud and abuse 

under control. 

Mr. STEARNS. My remaining 1 minute I will give to the gentleman from Texas, Mr. Barton. 

Mr. BARTON. Thank you, Mr. Chairman. 

OPENING STATEMENT OF HON. JOE BARTON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BARTON. The easiest thing in Washington to do is talk about 

waste, fraud and abuse and the hardest thing in Washington to do 

is to actually do something about it. As Chairman Stearns just 

said, on both sides of the aisle we have had numerous hearings 

about waste, fraud and abuse in Medicare and Medicaid and yet 

the problem still obviously persists. We can’t even get a direct answer as to what the scope of the problem is. It is an $800 billion 

combined program. Is it 10 percent? Ten percent would be $80 billion a year. Is it 5 percent? That would be $40 billion. Is it 1 percent? That would be $8 billion. Nobody knows. 

Mr. Chairman, I hope on a bipartisan basis this subcommittee 

and the full committee under your leadership and under the leadership of Ranking Member Waxman and Chairman Upton in this 

Congress actually do something about it. With a $1.5 trillion budget deficit annually, there is no question that money spent here will 

be money that we get a huge return on investment. 

I look forward to hearing from our witnesses and I hope that 

they have some solutions in addition to helping us define the scope 

of the problem. 

With that, Mr. Chairman, I yield back. 

[The prepared statement of Mr. Barton follows:] 

PREPARED STATEMENT OF HON. JOE BARTON

Thank you Mr. Chairman for holding this hearing in an attempt to discuss, expose, and potentially prevent wide-spread waste, fraud, and abuse in the Medicare 

and Medicaid systems. 

I welcome all of our witnesses and I hope they can answer the hard questions this 

Committee has for them. In particular, I want to know why the Centers for Medicare and Medicaid Services (CMS), a federal agency that has a budget of almost 

$800 billion a year and a Center dedicated to Program Integrity can not give us an 

estimate on how much money is lost to fraud each year. 

It is frustrating that we all agree fraud is a problem, we all want to solve the 

problem, and yet, we still don’t even know the scope of the problem. Now why is 

that important? I believe that if you don’t know what the problem is, you can’t set 

goals on how to solve it. So let’s say it’s a 10 percent problem which would be $80 

billion. Maybe a reasonable goal then would be to cut that by 25 percent in a given 

year, which would be $20 billion. Maybe it’s only a 40 billion problem a year. But 

if you guys can’t help us determine what the problem is, it is hard for us to decide 

how to set goals to solve it. 

This inability is deeply disappointing considering in less than three years, under 

the Affordable Care Act, this agency will take over much of the healthcare system 

and President Obama has repeatedly stated that one of the ways he plans to fund 

Obamacare is by saving billions of dollars by identifying and preventing this fraud. 

Mr. Chairman, the hearing today highlights just one of the many flaws of expanding huge entitlement programs that are currently unmanageable, unsustainable, 

and highly susceptible to waste, fraud, and abuse. 

5 

Mr. STEARNS. I thank the gentleman, and I recognize the ranking 

member from Colorado, Ms. DeGette. 

Ms. DEGETTE. Thank you very much, Mr. Chairman. 

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

Ms. DEGETTE. Mr. Chairman, Medicare and Medicaid fraud have 

been persistent problems that have plagued both Democratic and 

Republican Administrations, as you have said, and it costs Americans billions of dollars every year. It affects health care providers 

at every level in the programs themselves and also in the private 

sector. 

Today’s hearing will focus on a very worthy target of oversight: 

waste, fraud and abuse in these two systems. Medicare and Medicaid provide millions of people with access to medical services and 

so it is a vital concern to this committee that we maintain their integrity. 

Fortunately, as you said, it is important to try to get a handle 

on Medicare and Medicaid fraud, and that is also a high priority 

for President Obama. Beginning in 2009, the Obama Administration made fighting fraud a priority. These efforts expanded even 

more after passage of the Affordable Care Act, which contains dozens of provisions designed to help fight Medicare and Medicaid 

fraud. 

The Administration asked for and received additional funding to 

fight health care fraud in both 2009 and 2010. They have reorganized within HHS and they have started several new collaborations 

with law enforcement authorities to uncover and prevent health 

care fraud. 

In May of 2009, HHS and DOJ announced the creation of the 

Health Care Fraud Prevention and Enforcement Team, or HEAT, 

designed to coordinate Cabinet-level agency activities to reduce 

fraud. Under the HEAT program, HHS and DOJ have expanded 

the use of dedicated strike force teams, placing law enforcement 

personnel in locations that are identified as health care fraud 

hotspots. These teams carried out the largest health care fraud 

takedown in U.S. history last month, netting over 100 arrests in 

just one day. The work undertaken by the strike force teams has 

led to criminal charges against 829 defendants for defrauding 

Medicare of almost $2 billion. There is an answer to your question 

about the extent of this. 

The Administration’s efforts have been a huge success for taxpayers, with a return on investment that would make most hedge 

fund managers jealous. And thanks to landmark health care reform 

law passed by Congress last year, HHS and law enforcement authorities now have a host of new tools and new funding to fight 

fraud. 

The Affordable Care Act contains dozens of new provisions to 

fight Medicare and Medicaid fraud. The most important changes 

allow CMS to apply a preventative model in its antifraud efforts. 

For years, CMS employed, as you said, a ‘‘pay and chase’’ model of 

enforcement, simply paying fraudsters’ claims, then attempting to 

6 

recover its losses. Now, CMS has new authority to keep fraudsters 

out of Medicare and Medicaid in the first place. 

The Affordable Care Act contains stiffer enrollment requirements 

for all providers, mandates enhanced background checks, adds new 

disclosure requirements, and calls for onsite visits to verify provider information. It requires that providers create internal compliance programs, and it contains several provisions aimed directly at 

fighting fraud in, as you mentioned, the high-risk durable medical 

equipment and home health programs. 

The government’s ability to act once it has uncovered fraud or 

the possibility of fraud is also enhanced by the Affordable Care Act. 

The Secretary now has authority to enact moratoria on enrolling 

new providers if she believes that such enrollments will increase 

fraud risks, and she can suspend payments to providers where 

there is a substantiated allegation of fraud. Once fraud has been 

proven, the Affordable Care Act provides stiffer monetary penalties 

and expands the HHS Inspector General’s authority to exclude violators from the Medicare and Medicaid programs. 

Data sharing and collection between CMS, States, and other federal health programs are modernized under the Affordable Care 

Act, and the Affordable Care Act provides an estimated $500 million in increased funding over the next 5 years to fight fraud, 

money that will return billions of dollars to the taxpayers. This expanded authority, combined with the coordinated and focused attention of the Obama Administration, has laid the groundwork for 

a new era in the Federal Government’s response to fraud. 

Mr. Chairman, as you said, the GAO first designated Medicare 

a high-risk program in 1990, and Medicaid joined the high-risk list 

in 2003. I look forward to hearing from the GAO about why this 

is the case and what can be done. I am hoping that these new commitments that I just talked about can really substantially reduce 

fraud and ultimately produce the result that all of us want. 

Mr. Chairman, if there is more than we can do to reduce waste, 

fraud and abuse on a bipartisan level, I would be eager to hear it 

and I would be happy to work with you and your colleagues on 

both sides of the aisle to make sure that we can do that because 

I think one thing we can agree on in a bipartisan way is, nobody 

wants to see money wasted and we certainly do not want to see 

fraud, waste and abuse in Medicare and Medicaid. 

And with that, I yield back. 

[The prepared statement of Ms. DeGette follows:] 

PREPARED STATEMENT OF HON. DIANA DEGETTE

Health care fraud costs Americans billions of dollars every year. Fraud affects 

health care providers at all levels, in Medicare and Medicaid, and in the private sector. 

Today’s hearing will focus on a worthy target of oversight: waste, fraud, and 

abuse in the Medicare and Medicaid programs. Medicare and Medicaid provide millions of people with access to essential medical services, and the integrity of these 

programs is a vital concern of this Committee. 

Fortunately, fighting waste, fraud, and abuse in Medicare and Medicaid is also 

a high priority for President Obama. Beginning in 2009, the Obama Administration 

made fighting fraud a priority. These efforts expanded even more after passage of 

the Affordable Care Act, which contained dozens of provisions designed to help fight 

Medicare and Medicaid fraud. 

7 

The Administration asked for and received additional funding to fight health care 

fraud in 2009 and 2010. They have reorganized within HHS and started several new 

collaborations with law enforcement authorities to uncover and prevent health care 

fraud. 

In May of 2009, HHS and DOJ announced the creation of the Health Care Fraud 

Prevention and Enforcement Team (or ‘‘HEAT’’), designed to coordinate Cabinetlevel agency activities to reduce fraud. Under the HEAT program, HHS and DOJ 

have expanded the use of dedicated strike force teams, placing law enforcement personnel in locations that are identified as health care fraud hotspots. These teams 

carried out the largest health care fraud takedown in U.S. history last month, netting over 100 arrests in a single day. The work undertaken by strike force teams 

has led to criminal charges against 829 defendants for defrauding Medicare of almost $2 billion. 

The Administration’s efforts have been a huge success for taxpayers, with a return-on-investment that would make most hedge fund managers jealous. And 

thanks to the landmark health care reform law passed by Congress last year, HHS 

and law enforcement authorities now have a host of new tools and new funding to 

fight fraud. 

The Affordable Care Act contains dozens of new provisions to fight Medicare and 

Medicaid fraud. 

The most important changes allow CMS to apply a preventive model in its antifraud efforts. For years, CMS employed a ‘‘pay and chase’’ model of enforcement, 

simply paying fraudsters’ claims, then attempting to recoup its losses. Now, CMS 

has new authority to keep fraudsters out of Medicare and Medicaid in the first 

place. 

The Affordable Care Act contains stiffer enrollment requirements for all providers, 

mandates enhanced background checks, adds new disclosure requirements, and calls 

for on-site visits to verify provider information. It requires that providers create internal compliance programs. And it contains several provisions aimed directly at 

fighting fraud in the high-risk durable medical equipment and home health programs. 

The government’s ability to act once it has uncovered fraud or the possibility of 

fraud is also enhanced by the Affordable Care Act. The Secretary now has authority 

to enact moratoria on enrolling new providers if she believes that such enrollments 

will increase fraud risks, and she can suspend payments to providers where there 

is a substantiated allegation of fraud. Once fraud has been proven, the Affordable 

Care Act provides stiffer civil monetary penalties and expands the HHS Inspector 

General’s authority to exclude violators from the Medicare and Medicaid programs. 

Data sharing and collection between CMS, States, and other federal health programs are modernized under the Affordable Care Act. And the Affordable Care Act provides an estimated $500 million in increased 

funding over the next five years to fight fraud—money that will return billions of 

dollars to the taxpayer. 

This expanded authority, combined with the coordinated and focused attention of 

the Obama Administration, has laid the groundwork for a new era in the federal 

government’s response to health care fraud. 

The Government Accountability Office first designated Medicare a ‘‘high-risk’’ program in 1990, and Medicaid joined the ‘‘high-risk’’ list in 2003. For two decades, the 

programs have been on GAO’s high priority list. We will hear today from GAO about 

why this is the case, and what can be done. I am hopeful that the Obama Administration’s commitment to reducing fraud, and the substantial anti-fraud boost provided by the Affordable Care Act will ultimately produce the result that preceding 

Republican and Democratic Administrations have been unable to achieve: removal 

of Medicare and Medicaid from the GAO high-risk list. 

Waste, fraud, and abuse in Medicare and Medicaid are bi-partisan problems, and 

I believe there is bi-partisan commitment to combating them. I hope there is also 

bi-partisan recognition of the commendable anti-fraud efforts undertaken by the 

Obama Administration and the vital anti-fraud authority granted by the Affordable 

Care Act. 5 

I thank the witnesses for joining us here today and look forward to hearing their 

testimony on this important topic. 

Mr. STEARNS. The gentleman from Texas, Mr. Burgess, is recognized for 3 minutes. 

Mr. BURGESS. I thank the chairman and I thank our witnesses 

for being here today. I know several of you we have seen before and 

several of you we have seen several times before, which just underVerDate Nov 24 2008 13:00 Aug 11, 2011 Jkt 037690 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 F:\112-013 MEDICARE WASTE-PDF MADE\112-13 PDF MADE WAYNE
8 

scores the problem that at the federal level we have really not done 

enough to address the issue of fraud, and as the reports that we 

have in front of us indicate that our Nation’s government-run 

health care system needlessly does waste billions of dollars each 

year through programs that are ineffective and unfocused. 

Fraud analysts and law enforcement officials estimate, and we 

have heard the figures already, 10 percent, as Mr. Barton did the 

math for us on an $800 billion public program. That is a substantial sum of money every year, and over a 10-year budget window, 

it is really astounding. But 10 percent of total health care expenditures are lost to fraud on an annual basis. 

The point has been raised by others, I have raised it numerous 

times before, how much fraud is enough for us to take notice? The 

answer that we all expect to see in the amount of fraud is none, 

zero, zero tolerance, but in reality, sometimes it is even as simple 

as just the lack of a prosecutorial force with the background in 

prosecuting health care laws cripples our ability to go after the people that need to be gone after, and certainly that has been true in 

my communities in north Texas where repeated violations by some 

of the same people who have multiple provider numbers but a single post office box, you can bust someone in the morning but we 

are sending out payments to the same post office box under a different provider number that afternoon. Clearly, that has to stop. 

Now, the Government Accountability Office has been able to 

identify areas where they may have made recommendations to the 

Centers for Medicare and Medicaid Services to prevent improper 

payments, some really dating back almost a decade, and they failed 

to fully implement them and that in fact has caused fraud to rise. 

If we are serious about bringing down the cost of health care and 

protecting the patient not just reducing but eliminating fraud, that 

needs to be the goal for which we strive. 

Medicaid expansion under the landmark health care legislation 

passed last year that has already been referenced but Medicaid expansion under the Affordable Care Act is estimated to exceed $430 

billion over the next 10 years. Under current standards, taxpayers 

would be losing over $40 billion a year to fraud. 

Now, we also talk about the medical loss ratio and how we are 

going to control costs in the private sector but I would just simply 

ask, what is a more cogent indicator of medical loss ratio than dollars that are lost to fraud? Maybe we ought to include that in our 

calculation. 

I realize the clock is misbehaving. Let me yield back to the chairman because I think he has others he wants to recognize. 

Mr. STEARNS. Thank you, Mr. Burgess. 

Mr. Bilbray of California is recognized for 1 minute and then Mr. 

Gingrey. 

Mr. BILBRAY. Thank you, Mr. Chairman. 

Mr. Chairman, I think there are many ways of addressing the 

potential or the existence of the fraud issue. I think that one of the 

concerns that a lot of people had when we were talking about expanding health care coverage last year was the President stood on 

the podium and said I assure you that those who are illegally in 

this country will not have access to this system, though when the 

bill was passed there was no requirement for verification, the same 

9 

verification required almost of every other federal program wasn’t 

included in that expansion of health care service. I would like to 

make sure that we all address the fact that if you do not verify, 

if you do not use the check system, you cannot straight face in the 

American people and tell us that people who are not qualified are 

going to be kept out of this system. Just by saying they are not allowed to participate in the system is as logical as saying that providers will not create a fraud because we have said that they 

shouldn’t do it. There has got to be some checks and balances here. 

And just as much as need to make sure that we are on top and 

checking the providers of the services, we also have a responsibility, especially after the President promised the American people 

that they would not participate is to make sure that we check and 

have a verification system for those who are providing the services 

and those who are being provided to those services, and I think not 

until we are willing to do that across the board with all of our 

health care system can we truly have our President stand up and 

assure the American people with a straight face that no, we are 

doing everything possible to make sure we fighting fraud in this 

country and we make sure that every dollar spent on health care 

in this country is going only to those who qualify and only being 

provided under a legal system. 

I yield back. 

Mr. STEARNS. The gentleman yields back. 

The gentleman from Georgia, Mr. Gingrey, is recognized for 1 

minute. 

Mr. GINGREY. Mr. Chairman, thank you. I am very pleased to 

welcome the witnesses on both the first and second panel. I look 

forward to hearing their testimony. 

I practiced medicine for 31 years, 26 of those years in the specialty of obstetrics and gynecology, so this issue of waste, fraud and 

abuse, particular in our Medicare and Medicaid systems, is something that really, really gets to me, and some of the comments that 

I have heard already this morning, particular from the other side, 

you would almost think that one of the reasons for adopting 

Obamacare or the Affordable Care Act was so that we could succeed in combating waste, fraud and abuse. I certainly don’t agree 

with that, and if it is true, then it will be more successful than the 

bill has been in lowering the cost of health care to individuals who 

are now uninsured. It will do more than it has done in regard to 

medical liability reform that was promised. It will do much more 

than providing a sustainable rate of reimbursement to our hardworking health care providers that was promised. So it kind of remains to be seen what is in this bill that is going to make us more 

successful in combating waste, fraud and abuse. 

But in any regard, I look forward to hearing from the witnesses 

and we do need to get a handle on this problem, and I yield back. 

Mr. STEARNS. I thank the gentleman, and Mr. Waxman, the 

ranking member of the full committee, is recognized for 5 minutes. 

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

10 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Well, this hearing is a very useful one already because we have the opportunity to educate two of our Republican 

members about the accuracy of the legislation that we just adopted. 

One of the reasons I am so proud of the Affordable Care Act, the 

historic health care reform law signed by President Obama last 

year, is that it contains dozens of antifraud provisions. This legislation has the most important reforms to prevent Medicare and Medicaid fraud in a generation. According to the Congressional Budget 

Office, these new fraud provisions will save over $7 billion for taxpayers. 

The health care reform law shifts the prevailing fraud prevention 

philosophy from pay and chase where law enforcement authorities 

only identify fraud after it happens to inspect and prevent. It allows CMS to impose moratoria on enrolling new providers if the 

Secretary believes that such enrollments will increase fraud risk. 

It allows the HHS Secretary to close the barn door before the 

horses have left. 

The new law also contains new penalties for fraudulent providers 

and new data-sharing provisions to catch criminals, and it provides 

hundreds of millions of dollars in new funding to help CMS, the Inspector General and the Department of Justice fight Medicare and 

Medicaid fraud, and we will hear today about how the CMS and 

Inspector General have already put these funds to work. I am 

proud of these efforts to reduce fraud. 

The second thing I want to point out is that the legislation does 

not allow undocumented aliens to access Medicare or Medicaid or 

the exchanges, and it is not just on their self-affirmation that they 

are not here illegally, it is based on an inspection that is required 

under the law. That can be done in two ways. They can either 

check with Social Security, get all the information to be sure that 

the claimant is accurately stating his or her status, or they can require the birth certificates and passports and other information to 

be produced to show that they are not taking advantage. So these 

oversight hearings have a real opportunity to educate people. 

I can’t tell you how much I think this is an important reason for 

our hearing. When we have health care fraud, it robs the taxpayers 

of funds, affects the quality of care provided to program enrollees 

and saps public confidence in the Medicare and Medicaid programs. 

And that is why I see fighting Medicare and Medicaid fraud as a 

critical need and an issue where we should be able to achieve bipartisan consensus. 

But I am wary of those who use the existence of fraud in these 

programs for the express purpose of undermining support for them. 

I do not believe we should attempt to exaggerate the scope of the 

problem just to foster ideological efforts to cut or eliminate them. 

When I hear estimates of the amount of Medicare and Medicaid 

fraud that have no basis in fact, or when members confuse Medicare and Medicaid improper payment rates that consists mostly of 

simple paperwork or clerical errors with the rate of intentional 

fraud against the programs, then I become concerned that memVerDate Nov 24 2008 13:00 Aug 11, 2011 Jkt 037690 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 F:\112-013 MEDICARE WASTE-PDF MADE\112-13 PDF MADE WAYNE
11 

bers are just using fraud as an excuse to bash these programs, not 

to improve them. 

The vast majority of Medicare and Medicaid providers are compassionate and honest. The vast majority of beneficiaries of these 

programs desperately need the care that is provided. We need to 

be tough on fraud and tough on criminals who take advantage of 

these programs and their beneficiaries, but we cannot and should 

not blame the victim. 

In January, every single Republican Member of Congress voted 

to repeal the entire Affordable Care Act, including essential antifraud provisions. In February, as part of the Continuing Resolution, every single Republican voted to ban the use of funds to implement the Affordable Care Act, including the funds needed to implement the antifraud provisions. That vote was penny-wise and 

pound-foolish. 

We are going to hear from CMS, from the HHS Inspector General and from GAO about the new authority and new funding they 

have to eliminate Medicare and Medicaid fraud, thanks to the Affordable Care Act, and I hope this testimony will make some members reconsider their views. If we truly care about protecting the 

taxpayer, we should support, not defund, the Administration’s initiatives to reduce Medicare and Medicaid fraud. 

I yield back the balance of my time. 

[The prepared statement of Mr. Waxman follows:] 

PREPARED STATEMENT OF HON. HENRY A. WAXMAN

Mr. Chairman, I want to thank you for holding this hearing today, and for focusing on the important topic of Medicare and Medicaid fraud. 

I have dedicated much of my career in Congress to improving the Medicare and 

Medicaid programs and the quality of care they provide and pursing waste, fraud, 

and abuse in government spending. This hearing combines both subjects. 

Health care fraud robs taxpayers of funds, affects the quality of care provided to 

program enrollees, and saps public confidence in the Medicare and Medicaid programs. That’s why I see fighting Medicare and Medicaid fraud as a critical need— 

and an issue where we should be able so achieve bipartisan consensus. 

But I am wary of those who use the existence of fraud in these programs for the 

express purpose of undermining support for them. I do not believe we should attempt to exaggerate the scope of the problem just to foster ideological efforts to cut 

or eliminate them. 

When I hear estimates of the amount of Medicare and Medicaid fraud that have 

no basis in fact . or when members confuse a Medicare and Medicaid ‘‘improper payments’’ rate that consists mostly of simple paperwork or clerical errors with the rate 

of intentional fraud against the programs . then I become concerned that members 

are just using fraud as an excuse to bash these programs, not to improve them. 

The vast majority of Medicare and Medicaid providers are compassionate and honest. The vast majority of beneficiaries of these programs desperately need the care 

they provide. We need to be tough on fraud and tough on criminals who take advantage of these programs and their beneficiaries—but we can and should not blame 

the victim. 

One of the reasons I am so proud of the Affordable Care Act, the historic health 

care reform law signed into law by President Obama last year, is that it contains 

dozens of anti-fraud provisions. The legislation has the most important reforms to 

prevent Medicare and Medicaid fraud in a generation. According to the Congressional Budget Office, these new fraud provisions will save over $7 billions for taxpayers. 

The health care reform law shifts the prevailing fraud prevention philosophy from 

‘‘pay and chase’’—where law enforcement authorities only identify fraud after it 

happens—to ‘‘inspect and prevent.’’ 

12 

It allows CMS to impose moratoria on enrolling new providers if the Secretary 

believes that such enrollments will increase fraud risks. This allows the HHS Secretary close the barn door before the horses have left. 

The new law also contains new penalties for fraudulent providers and new data 

sharing provisions to catch criminals. 

And it provides hundreds of millions of dollars in new funding to help CMS, the 

Inspector General, and the DOJ fight Medicare and Medicaid fraud. We will hear 

today about how the CMS and the Inspector General have already put these funds 

to work. 

I am proud of these efforts to reduce fraud. 

In January, every single Republican member of Congress voted to repeal the entire Affordable Care Act, including these essential anti-fraud provisions. In February, as part of the Continuing Resolution, every single Republican voted to ban 

the use of funds to implement the Affordable Care Act, including the funds needed 

to implement the anti-fraud provisions. That vote was penny-wise, pound-foolish. 

We will hear today from CMS, from the HHS Inspector General, and from GAO 

about the new authority and new funding they have to eliminate Medicare and Medicaid fraud, thanks to the Affordable Care Act. I hope this testimony will make some 

members reconsider. 

If we truly care about protecting the taxpayer, we should support—not defund— 

the Administration’s initiatives to reduce Medicare and Medicaid fraud. 

Mr. STEARNS. I thank the gentleman. 

At this point we will go to our witnesses, and we have our witnesses at the table. The first is Kathleen King, Director of Health 

Care Division, Government Accountability Office. She is the director of this health care team at the U.S. Government Accountability 

Office, which is responsible for leading various studies of the health 

care system, specializing in Medicare management and prescription 

drug coverage. She has more than 25 years’ experience in health 

policy and administration. She received her M.A. in government 

and politics from the University of Maryland. 

We have John Spiegel, who is Director of Medicare Program Integrity, Centers for Medicare and Medicaid Services. He has 

worked in various components of the Centers for Medicare and 

Medicaid Services. After several years working outside the public 

sector, he returned to federal service in 2010 as the Director of the 

Medicare Program Integrity Group. 

Then we have Gerald Roy, who is Deputy Inspector General for 

Investigations, Department of Health and Human Services. He has 

served in OIG since 1995. He was also instrumental in increasing 

OIG’s civil and criminal conviction record and a 25 percent increase 

in OIG’s monetary recoveries from $3 billion in 2008 to over $4 billion in 2009. 

And then we have Omar Perez, Assistant Special Agent in 

Charge, Health and Human Service Office of the Inspector General, 

Miami Regional Office. He joined the department in July 1998 and 

he has been promoted to special agent in January 1999. He has led 

a number of successful criminal and civil investigations and orchestrated Project Ghost Rider to address fraudulent ambulance companies, Bad Medicine to address Puerto Rico’s Medicaid equivalent, 

and the First Child Support Round in the U.S. Virgin Islands. 

So I welcome our witnesses, and let me swear you in first of all. 

[Witnesses sworn.] 

Mr. STEARNS. Ms. King. 

13 

STATEMENTS OF KATHLEEN KING, DIRECTOR, HEALTH CARE 

DIVISION, GOVERNMENT ACCOUNTABILITY OFFICE; GERALD T. ROY, DEPUTY INSPECTOR GENERAL FOR INVESTIGATIONS, OFFICE OF THE INSPECTOR GENERAL, DEPARTMENT 

OF HEALTH AND HUMAN SERVICES; OMAR PEREZ, ASSISTANT SPECIAL AGENT IN CHARGE, OFFICE OF INSPECTOR 

GENERAL, DEPARTMENT OF HEALTH AND HUMAN SERVICES; AND JOHN SPIEGEL, DIRECTOR OF MEDICARE PROGRAM INTEGRITY, CENTERS FOR MEDICARE AND MEDICAID 

SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES 

STATEMENT OF KATHLEEN KING 

Ms. KING. Mr. Chairman, members of the subcommittee, thank 

you for inviting me today to speak about our recent high-risk report, specifically about Medicare. We have continued to designate 

Medicare as a high-risk program because of its complexity and susceptibility to improper payment added to its size. This has led to 

serious management challenges. 

In 2010, Medicare covered 47 million elderly and disabled bene- ficiaries and had estimated outlays of $509 billion, making it the 

third largest federal programs in terms of spending. 

Currently, Medicare remains on a path that is fiscally 

unsustainable in the long term. This heightens the urgency for the 

Centers for Medicare and Medicaid Services to address our recommendations, effectively implement new laws and guidance and 

improve its management in four areas. Broadly, these areas include reforming and refining payments, improving program management, enhancing program integrity and overseeing patient care 

and safety. Today I am going to focus my oral comments on payments and program integrity. 

With regard to reforming and refining payments, CMS has implemented payment reforms such as for Medicare Advantage, inpatient hospital and home health services. It has also begun to provide feedback to physicians on their resource use, which is positive 

but which could benefit from additional refinement, and is developing a new payment system that accounts for the cost and quality 

of care. But more could be done. For example, we have recommended to CMS that they consider implementing more front-end 

approaches to controlling the growth of imaging services. In addition, we recently found that although payments for home oxygen 

have been reduced or limited several times in recent years, further 

savings are possible. 

In regard to program integrity, Congress recently passed laws including the Improper Payments Elimination and Recovery Act, the 

Patient Protection and Affordable Care Act and the Small Business 

Job Act that provide authority and resources and impose new requirements designed to help CMS reduce improper payments. 

The Administration has also issued executive memoranda including one that requires agencies to check certain databases known as 

the Do Not Pay List before making payments to ensure that payments are not made to individuals who are dead or entities that 

have been excluded from federal programs. CMS is taking steps to 

implement these laws and memoranda through regulations and 

14 

other agency actions. In 2010, it created a new Center for Medicare 

and Medicaid Program Integrity to better coordinate efforts to prevent improper payments. CMS has been tracking its improper payment rates in Medicare fee for service and Medicare Part C and 

has established performance goals for reducing those rates in the 

future. However, the agency has not reported a single error rate for 

Part D and has not been able to demonstrate sustained progress 

in lowering its improper payment rates. So continued oversight is 

warranted. 

Having a corrective action process in place to address 

vulnerabilities that lead to improper payments is also important to 

managing them effectively. Our work on recovery auditing, which 

reimburses contracts on a contingency basis to uncover payments 

that should not have been made found that CMS had not developed 

an adequate process to address the vulnerabilities that had been 

identified by the contractors. Since it is important to address these 

issues going forward, we recommended that CMS develop a robust 

corrective action process. 

Further, we issued a report in February 2009 that indicated that 

Medicare continued to pay some home health agencies for services 

that were not medically necessary or were not rendered. To address 

this, we made several recommendations including that CMS direct 

its contractors to conduct post-payment reviews on home health 

agencies with high rates of improper payments. CMS has not implemented this and several other recommendations to improve its 

program safeguards. 

In conclusion, although CMS has taken many actions to improve 

the integrity of the Medicare program, further action is needed to 

ensure that payments are proper and vulnerabilities to improper 

payments are addressed. We are beginning new work to address 

some of these issues to determine if additional agency or Congressional action might be helpful. 

Mr. Chairman, this concludes my statement. I would be happy 

to answer any questions. 

[The prepared statement of Ms. King follows:] 

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Mr. STEARNS. Thank you. 

Mr. Roy. 

STATEMENT OF GERALD ROY 

Mr. ROY. Good morning, Chairman Stearns, Ranking Member 

DeGette and distinguished members of the subcommittee. I am 

Gerald Roy, Deputy Inspector General for Investigations at the 

U.S. Department of Health and Human Services, Office of Inspector General. Today I am privileged to have with me OIG Assistant 

Special Agent in Charge Omar Perez of our Miami Regional Office. 

OIG is an independent nonpartisan agency committed to protecting the integrity of more than 300 programs administered by 

HHS. The Office of Investigations employs over 450 highly skilled 

special agents who utilize state-of-the-art investigative technologies 

and a wide range of law enforcement actions including the execution of search and arrest warrants. We are the Nation’s premier 

health care fraud law enforcement agency. Our constituents are the 

American people, and we work hard to ensure their money is not 

stolen or misspent. Over the past fiscal year, OIG investigations 

have resulted in over 900 criminal convictions and civil actions and 

over $3.7 billion in recoveries. 

Today I will discuss three critical aspects of OIG’s work: the 

Medicare fraud strike force model, corporate fraud investigations 

and tools employed by OIG. The Medicare fraud strike force model 

is a critical component of one of the Administration’s signature initiatives known as HEAT. This is a joint effort by HHS and DOJ 

to leverage resources and expertise to prevent fraud and abuse. 

Strike forces concentrate antifraud efforts in geographic areas at 

high risk for fraud. Strike force teams consisting of OIG agents and 

our law enforcement partners are assigned to dedicated prosecutors. Strike force cases are data driven, which allows us to catch 

criminals in the act. We operate in nine locations and we plan to 

expand to other high-fraud areas. Last month, HEAT strike forces 

engaged in the largest federal health care fraud takedown in our 

history, arresting over 100 defendants in nine cities associated with 

more than $225 million in fraud. More than 300 OIG special agents 

led this operation. The photos you see here today show our special 

agents engaged in search and arrest activities. 

We are also aggressively pursuing major corporations and institutions that commit health care fraud on a grand scale. Corporate 

fraud often involves complex kickbacks, accounting and illegal marketing schemes. Some of these companies play such a critical role 

in the health care delivery system that they may believe that the 

OIG would never exclude them. Some executives consider civil penalties and criminal fines just the cost of doing business. As long as 

the profit from fraud outweighs the cost, abusive corporate behavior will continue. OIG plans to alter this cost-benefit calculus of executives by more broadly employing one of the most powerful tools 

in our arsenal: the authority to exclude individuals and entities 

from participating in federal health care programs. When there is 

evidence that an executive knew or should have known of the underlying criminal misconduct of the organization, OIG plans to exclude that executive from our programs. 

30 

Recently, we assigned a special agent to the International Criminal Police Organization, INTERPOL. INTERPOL facilitates international investigative cooperation between 188 member countries 

and more than 18,000 law enforcement agencies in the United 

States. HHS OIG is the first in the Inspector General community 

to have a special agent assigned to INTERPOL. We have over 170 

fugitives running from health care fraud charges. We will leverage 

the resources of INTERPOL’s worldwide partners to bring them to 

justice. 

In February, OIG launched our most-wanted fugitive Web site. 

The individuals you see on our top 10 fugitive poster allegedly defrauded taxpayers of more than $136 million. We have partnered 

with America’s Most Wanted and INTERPOL to feature our Web 

site and actively spread the word. We are asking the public to help 

us bring these fugitives to justice. 

The bottom line: We are sending a clear message that fraud will 

not be tolerated and our success represents a prudent investment 

of taxpayer dollars. For every $1 spent on our health care fraud 

programs, we return over $6 to the Medicare trust fund. 

Thank you for the opportunity to discuss our law enforcement efforts and strategies. We are committed to serving and protecting 

the Nation’s most vulnerable citizens and the federal health care 

programs on which they rely. 

[The prepared statement of Mr. Roy follows:] 

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Mr. STEARNS. Thank you. 

Mr. Perez, welcome. 

STATEMENT OF OMAR PEREZ 

Mr. PEREZ. Good morning, Chairman Stearns, Ranking Member 

DeGette and distinguished members of the subcommittee. I am 

Omar Perez, Assistant Special Agent in Charge with Human and 

Health Services Office of Inspector General. I am stationed in 

Miami and currently supervise agents assigned to the Medicare 

strike force, and prior to assuming my position, I was a member 

of one of the strike force teams. I am honored for the invitation and 

opportunity to discuss our efforts in combating health care fraud. 

This morning, I am here to tell you what our agents and I experience as criminal investigators on the front line in this fight against 

health care fraud. Although the vast majority of Medicare providers are honest, my job and our job is to focus on those intent 

on stealing from the program. My squad is actively engaged in 

criminal investigations, testifying before grand juries, executing 

search and arrest warrants and seizing bank accounts. 

Medicare fraud is discussed openly on the streets of south Florida because it is accepted as a safe and even way to get rich quick. 

Now, the money involved in staggering. We see high school dropouts making anywhere from $100,000 to millions a year. Typically, 

we see business owners, health care providers, doctors and Medicare patients participate in the fraud but now we see drug dealers 

and organized criminal enterprises joining in. 

Today I will describe the typical fraud scheme, highlight Miami’s 

investigative model, share success stories, and finally discuss the 

evolution of fraud in south Florida. 

Now, prior to the state of the strike force, Miami was riddled 

with sham DME companies whose owners had one idea in mind: 

steal from the program. In order to perpetrate the fraud, nominee 

owners were recruited to place their names on corporate documents, lease agreements and corporate bank accounts, and in exchange were paid between $10,000 to $20,000. Stolen patient information was obtained from corrupt employees at hospitals, clinics 

and doctors’ offices. They also obtained lists of stolen physician 

identifiers, and with these two key pieces of information submitted 

fraudulent claims to Medicare for equipment that was never provided. Once the money was deposited into the account, it was withdrawn within days. The idea was to deplete the account so that by 

the time Medicare even realized that there was a fraud, there was 

no money left to recover. 

These schemes are executed within a matter of months so we developed a streamlined investigative approach to HEAT investigations. The model includes the following steps to help identify our 

targets: quickly obtain and analyze Medicare claims, identify and 

obtain banking information, obtain the corporate documents, and 

identify the medical billing agent. 

Now, the following examples highlight the successes of our 

model. Two months ago, one of our agents received information 

from a confidential source that a DME company was submitting 

fraudulent claims. Through data analysis, we saw that $1.5 million 

was billed in just 3 weeks after a corporate change of ownership. 

42 

Further data analysis showed that this company and another that 

we had under investigation was billing for about the same 100 patients, so within 30 days the agents corroborated that fraud was 

taking place and we were able to arrest the target. Using this 

model, he got zero money. When we arrested him, we found a fake 

driver’s license and learned that he was about to purchase yet another company under this assumed identity. 

In another example, a source alleged a corporation owning several community mental health centers was paying patients to allow 

them to bill for services they were not receiving. Data analysis and 

other investigative techniques led to five individuals being indicted 

and arrested and seven search warrants being executed simultaneously. Now, 2 weeks ago, we indicted and arrested another 20 individuals associated with this corrupt corporation and those arrested included center directors, physicians, therapists, patient recruiters and money launderers. The photographs you see are of the 

lavish estate of a patient recruiter who also laundered money for 

the corrupt corporation. We are finding that criminals have migrated to other services within the Medicare program including 

home health, community mental health centers, physical and occupational therapy. Historically, Medicare patients and doctors were 

not involved but now we are finding that in many cases both are 

getting paid to participate in the fraud. 

Additionally, not only are we seeing criminals migrate to other 

parts of the State but we know that they have migrated to States 

adjacent to Florida and other parts of the country like Georgia, 

North Carolina, Tennessee, West Virginia and Michigan. 

Thank you very much for the opportunity to discuss strike force 

operations in the south Florida and the investigative model that we 

utilize to protect the taxpayers interest, and I certainly welcome 

the opportunity to address any questions the panel has. 

[The prepared statement of Mr. Perez follows:] 

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Mr. STEARNS. Thank you, Mr. Perez. 

Mr. Spiegel. 

STATEMENT OF JOHN SPIEGEL 

Mr. SPIEGEL. Thank you. Chairman Stearns, Ranking Member 

DeGette and members of the subcommittee, thank you very much 

for the invitation to discuss the Centers for Medicare and Medicaid 

Services’ efforts to reduce fraud, waste and abuse in the Medicare, 

Medicaid and Children’s Health Insurance programs and the new 

tools and authorities provided in the Affordable Care Act. I am 

happy to be here today appearing on behalf of Peter Buddetti, who 

is the Director of the Center for Program Integrity where I work 

as the Director of the Medicare Program Integrity Group. 

Dr. Buddetti said from the beginning of the time on his job that 

people are asking two questions repeatedly: why do you let the 

perps into Medicare and Medicaid and why do you continue to pay 

fraudulent claims? Well, I can tell you that with the new authorities provided in the recent laws and the commitment of the Administration in fighting fraud, we are making progress on both fronts. 

Our approach will be keeping people who don’t belong in the programs out and we will be kicking out fraudulent claims before they 

are paid. We now have the flexibility to tailor resources to address 

the most serious problems and quickly initiate activities in a transformative way. 

Under the leadership of Secretary Sebelius, CMS has taken a 

number of administrative steps to better meet emerging needs and 

challenging in fighting fraud and abuse. For example, CMS consolidated the Medicare and Medicaid Program Integrity Groups under 

a unified Center for Program Integrity to pursue a more strategic 

and coordinated set of program integrity policies and activities 

across both programs. This change in structure and focus served 

our program integrity well and has facilitated collaboration on antifraud initiatives with our law enforcement partners in the HHS Office of Inspector General and in the Department of Justice and 

State Medicaid fraud control units as well. And just last week we 

restructured the center to provide some additional concentrated 

focus on the new initiatives that I will be talking about in a little 

bit, some examples being increased focus on data development and 

uses of analytics that will help bolster our work. 

The Affordable Care Act enhanced this organizational change by 

providing an opportunity to develop policies across all of our programs jointly. The act’s division such as enhanced screening requirements for new providers and suppliers apply across all the 

programs, not just for Medicare and not just for Medicaid. They are 

uniform across the board. This ensures consistency obviously as 

one of the goals that we try to pursue in our fraud and abuse activities. 

So many might argue that just rearranging the boxes doesn’t 

have much of a value but we think that having created a Center 

for Program Integrity, it is on a par with other major operating 

components within CMS. It sends a powerful message that the Administration is seriously committed to fighting fraud and it puts 

the bad actors on notice, and because most success in anything 

comes from clarity of purpose, we have made certain that our 

51 

sights are firmly fixed on the goal of ensuring correct payments are 

made to legitimate providers for covered, reasonable and appropriate services for eligible beneficiaries. 

I would like to take a little time today to explain how we have 

been transforming our fraud detection and prevention work 

through the new approach on the poster over there. So first, central 

to our goal is the shift away from identifying fraud before it happens. We want to prevent things from taking shape. We want to 

move away from ‘‘pay and chase’’ that we have relied on so heavily 

in the past. Second, we don’t want to be limited to a monolithic approach to fighting fraud. Instead, we want to focus our efforts on 

the bad actors who pose elevated risk. Third, we are taking advantage of innovation and technology as we move quickly to take action focused on prevention when possible. And fourth, consistent 

with the Administration’s commitment to being transparent, we 

are developing performance measures that will specify our targets 

for improvement. We are actively engaging public and private partners from across the spectrum because there is obviously much to 

learn from others who engaged in the same endeavor of fighting 

fraud. We know the private sector is victimized by the same 

schemes we see in public programs in collaboration and communication among all parties. And finally, we are committed to coordination and integration of our activities across all the programs in 

CMS based on best practices and lessons learned. 

So as we move away from the old ways to more modern and sophisticated successful approaches, we are continuing to concentrate 

our actions—— 

Mr. STEARNS. Just if you can, sum up. Your time is over. 

Mr. SPIEGEL. OK. Sorry. 

Mr. STEARNS. Thank you. 

Mr. SPIEGEL. Let me just get through this one particular part 

and I will be finished. 

Mr. STEARNS. Can you just summarize? 

Mr. SPIEGEL. Sure. We want to do a better job of keeping people 

out before they get in. We want to move quickly when we see those 

who have gotten in that are potentially improper bills and take 

steps to reduce claims payment error by 50 percent and get people 

out who don’t belong. 

[The prepared statement of Mr. Spiegel follows:] 

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Mr. STEARNS. Thank you. With that, I will open up with questions. Let me start with you, Mr. Spiegel. When I looked at your 

re ́sume ́, it looks like you have been on the job less than a year. You 

started June 2010. So you have really been the man who is Director of Medicare Program Integrity for less than one year. Is that 

correct? 

Mr. SPIEGEL. That is correct. 

Mr. STEARNS. And you came from the private sector? 

Mr. SPIEGEL. Most immediately. 

Mr. STEARNS. OK. You might not have a handle on this, but how 

much money, in your opinion, is lost to fraud each year in the 

Medicare program precisely? 

Mr. SPIEGEL. Well—— 

Mr. STEARNS. Just precisely. 

Mr. SPIEGEL. I would have to answer that question and say that 

there is no actual one number—— 

Mr. STEARNS. So you don’t know? Is that fair enough? 

Mr. SPIEGEL. That is correct. 

Mr. STEARNS. Now, 60 Minutes in September had an expose ́ on 

Medicare, and they indicated it was $60 billion, and they had one 

witness who indicated it would be $90 billion. Do you think it is 

fair to say that it is anywhere from $60 billion to $90 billion based 

on what 60 Minutes said? 

Mr. SPIEGEL. Like all of us, I have heard the estimates that have 

come from private groups as well as government—— 

Mr. STEARNS. Why is it so difficult to understand what the figure 

is? If 60 Minutes has come up with it and witnesses have come up 

with it, we had the Justice Department give an estimate, why is 

it that you are the man in charge of Medicare Program Integrity, 

why can’t you give us an estimate of what it is, approximately? 

Mr. SPIEGEL. Well, because a lot of the estimates that you cite 

and others cite contain information that deals with things that 

aren’t necessarily fraud. Some of them turn out to be improper payments, things we want to know about but they are really not fraud 

and it is not necessarily—— 

Mr. STEARNS. All right. Mr. Waxman indicated in his opening 

statement that these new requirements that are in the Obamacare 

prevention will save us $7 billion. Do you think that is an accurate 

statement? 

Mr. SPIEGEL. I believe Mr. Waxman cited CBO estimates. 

Mr. STEARNS. OK. Now, the problem is, it is a $650 billion program and they are saving $7 billion. That is probably about less 

than 1 percent. How can you effectuate eliminating waste, fraud 

and abuse when you cut the program $550 billion like Obamacare 

does? So it is a question for Ms. King. If you are actually cutting 

Medicare program, wouldn’t that make it difficult to prevent waste, 

fraud and abuse just by axiomatic? Wouldn’t it be self evident that 

you can’t cut a program that amount of money and still reduce 

waste, fraud and abuse? 

Ms. KING. Mr. Chairman, I think that the reductions in Medicare 

spending are reductions off the rate of growth and not overall reductions in the size of the—— 

Mr. STEARNS. Well, that is not how we understand it. But Mr. 

Spiegel, let us go to Medicaid. How much is lost to Medicaid, not 

72 

Medicare, because you say you don’t know. What about Medicaid? 

What is the loss to fraud? 

Mr. SPIEGEL. Well, it is the same issues that surround trying to 

come up with a number for fraud in Medicare. 

Mr. STEARNS. So you have no idea, not even approximate? OK. 

Now, Ms. King, they are expanding Medicaid by another 20 million people they are going to add, and so if you are going to expand 

and increase it, and Medicaid has a lot of fraud, wouldn’t that indicate that you are going to have increased fraud? 

Ms. KING. I think it depends on what happens with the new authorities that CMS was given in the Affordable Care Act and how 

they are implemented. 

Mr. STEARNS. Let me say, the Republicans on this side would be 

very glad to vote for any legislative measure to prevent fraud. Any 

fraud measures, we would be glad to implement. It is just we are 

worried about some of the things I mentioned about. 

So Mr. Spiegel, my concern is, before we expand Medicare and 

Medicaid, we still don’t know how much we lost to fraud and you 

are the man in charge less than a year, so you are saying at this 

point we just have no idea how much it is, how much fraud, waste 

and abuse. So it seems to me that if you don’t even have a handle 

on what the amount is, it is going to be very difficult to penetrate 

it down. 

Let me ask a question to Mr. Roy and Mr. Perez. I appreciate, 

Mr. Perez, I said in my opening statement, I just said that Medicare fraud is rapidly eclipsing the drug trade as far as most profitable and efficient criminal enterprise system. This was comments 

based on the 60 Minutes expose ́. Do you think that is true? 

Mr. PEREZ. Well, we certainly have seen some of our investigations that individuals that used to participate in the drug trade are 

now certainly involved in health care fraud. 

Mr. STEARNS. Have you seen a lot of organized crime involved in 

Medicare and Medicaid fraud, Mr. Roy? 

Mr. ROY. Yes, sir. We are seeing—— 

Mr. STEARNS. Just bring the mic just a little closer to you, if you 

don’t mind. 

Mr. ROY. My apologies. We are seeing an uptick in organized 

crime elements engaging in health care fraud, whether it is in 

structured organizations like Eurasian organized crime that we see 

out in Los Angeles to more loose—knit organizations that we see 

in Texas and the Miami, Florida, area. 

Mr. STEARNS. Mr. Roy, this is probably putting you on the spot 

but do you or Mr. Perez and your colleagues, have you come up 

with what is a figure of how much fraud? Would you venture a 

guess? 

Mr. ROY. No, sir, I cannot. 

Mr. STEARNS. Would you venture a guess it is more than $7 billion a year? 

Mr. ROY. Yes, sir, I would. 

Mr. STEARNS. And Mr. Perez, would you venture a guess that the 

fraud in Medicare is more than $7 billion a year? 

Mr. PEREZ. I know we recovered $3.7 billion, so certainly I 

think—— 

73 

Mr. STEARNS. So what I am trying to say, Mr. Spiegel, is here 

you have no idea what the fraud figure is and the people to your 

right, one has indicated that he has found just in Florida $3.5 billion, so you have—it is just incomprehensible to me how you can 

come here this morning and say you have no idea how much the 

fraud when the man to your right has indicated that he can track 

$3.5 billion himself and so I think when Mr. Waxman mentioned 

$7 billion, that is just the tip of the bucket. That is just the tip, 

and there is so much more there and I think Mr. Roy and Mr. 

Perez have confirmed that. 

My time is expired. I will turn to the ranking member, Ms. 

DeGette. 

Ms. DEGETTE. Thank you so much, Mr. Chairman. 

Let me follow up on that, Mr. Spiegel, with you. I believe the 

CBO estimated that the provisions of the Affordable Care Act will 

save the taxpayers $7 billion over the next 10 years. Is that correct? 

Mr. SPIEGEL. I believe that is what it says. 

Ms. DEGETTE. Is that the only money that the Administration intends to save on fraud in Medicare and Medicaid? 

Mr. SPIEGEL. No. 

Ms. DEGETTE. Could you explain, please, why that is not the— 

I don’t want this to be misinterpreted that the Administration, that 

these are the only efforts that are going to be made. What other 

efforts are being undertaken to eliminate fraud, waste and abuse, 

briefly? 

Mr. SPIEGEL. First of all, however much the number is for fraud 

that is going on is too much. 

Ms. DEGETTE. Right. What other efforts are being undertaken to 

avoid fraud, waste and abuse, briefly? 

Mr. SPIEGEL. So we are implementing the new provisions of the 

Affordable Care Act that allow us to do a better job—— 

Ms. DEGETTE. OK. What other—Mr. Perez, do you have an answer? Oh, you are just trying to move the mic. 

Mr. SPIEGEL. I mean—— 

Ms. DEGETTE. What I am saying is, the provisions of the Affordable Care Act are not the only provisions of law that help—— 

Mr. SPIEGEL. Right. That is true. 

Ms. DEGETTE [continuing]. Us to avoid waste, fraud and abuse. 

What other provisions in law that may be separate and apart from 

the $7 billion are going to help us avoid fraud, waste and abuse? 

Mr. SPIEGEL. OK. So in addition to the things that I was talking 

about with regard to provider screening, we have a whole range of 

activities that we do now and that we are going to do to oversee 

proper payments—— 

Ms. DEGETTE. OK. If you can supplement your answer in writing, that would be helpful. 

Mr. SPIEGEL. I would be happy to do so. 

Ms. DEGETTE. But in essence, what you are saying is, the $7 billion is in addition to efforts that are being currently made? 

Mr. SPIEGEL. That is right. 

Ms. DEGETTE. Now, Mr. Perez, the efforts that you are undertaking, those are being undertaken under current law, right? BeVerDate Nov 24 2008 13:00 Aug 11, 2011 Jkt 037690 PO 00000 Frm 00077 Fmt 6633 Sfmt 6633 F:\112-013 MEDICARE WASTE-PDF MADE\112-13 PDF MADE WAYNE
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cause the Affordable Care Act hadn’t been implemented yet, correct? 

Mr. PEREZ. Yes, ma’am. 

Ms. DEGETTE. OK. Now, Mr. Spiegel, perhaps you can talk about 

the enrollment screening requirements in the Affordable Care Act. 

Will they work to prevent enrollment by fraudulent providers? 

Mr. SPIEGEL. Yes. 

Ms. DEGETTE. And how are they different than previous requirements? 

Mr. SPIEGEL. Well, the new enrollment screening provisions 

allow us to focus on providers based on the risk that they pose, the 

risk of fraud that they pose. We have new and enhanced screening 

that we would be applying to those that pose the greatest risk like 

criminal background checks, database checks, fingerprinting for 

those that are posing the greatest risk. We have new approaches 

to consolidating our data and sharing data across Medicare and 

Medicaid so that both programs have access to information about, 

for example, providers that have been terminated from Medicaid 

that may be terminated from Medicare as well and vice versa. The 

particular provision that—one of the particular provisions in the 

provider screening rule we just published that may have the most 

effect is the Secretary’s authority to impose temporary enrollment 

moratoria when she determines that there is a need to do that to 

combat fraud, waste and abuse. 

Ms. DEGETTE. Ms. King, do you believe that some of these new 

provisions that we have talked about today will add to our arsenal 

in being able to target waste, fraud and abuse and to eliminate it? 

Ms. KING. Yes, we do. We have previously identified several 

areas where increased enforcement and action would be helpful. 

One of those is enrollment. One is them is in prepayment edits. 

One is in postpayment edits, contractor oversight, and the other is, 

the last is a robust process for corrective action, and the Affordable 

Care Act has provisions in several of these areas designed to enhance CMS’s ability, and some of the key ones I think are on the 

enrollment side because preventing fraud is a lot better and easier 

than chasing after it when it has been committed so—— 

Ms. DEGETTE. Correct, and these are new tools. 

Ms. KING. Yes, they are. 

Ms. DEGETTE. But would you agree that some of the existing 

tools that CMS has could also be used in a robust way? 

Ms. KING. Yes. Congress starting in 1997 in HIPAA created a 

program, a Medicare integrity program that was designed to focus 

on reducing improper payments and fraud and abuse, and that is 

what some of these activities that have been discussed today are 

funded from—— 

Ms. DEGETTE. Thank you. 

Ms. KING [continuing]. Before the Affordable Care Act. 

Ms. DEGETTE. I yield back. 

Mr. STEARNS. The gentlelady’s time is expired. The gentleman 

from Texas, Mr. Barton, is recognized for 5 minutes. 

Mr. BARTON. Well, thank you, Mr. Chairman. 

Let us start off by saying that everybody on the dais here is anti 

fraud and abuse. John Dingell is anti fraud and abuse. Jan 

Schakowsky is anti fraud and abuse. Diana DeGette is anti fraud 

75 

and abuse. The chairman is anti fraud and abuse. All of our freshmen down here in the front row are anti fraud and abuse on the 

Republican side. Dr. Murphy is anti fraud and abuse. I mean, we 

are all anti fraud and abuse, so this is not a partisan issue. But 

we are very frustrated. I have chaired hearings on this, John Dingell has chaired hearings on this, Diana DeGette has chaired hearings on this, Waxman has chaired hearings on this. I mean, it is 

so frustrating that we all agree it is a problem, we all want to solve 

the problem, and yet we still don’t even know the scope of the problem. 

Now, why is that important? I believe that if you don’t know 

what the problem is, you can’t set goals on how to solve it. So let 

us say it is a 10 percent problem, which would be $80 billion. 

Maybe a reasonable goal then would be to cut that by 25 percent 

in a given year, which would be $16 billion or $20 billion. Maybe 

it is only a $40 billion a year. But if you guys can’t help us determine what the problem is, it is hard for us to decide how to set 

goals to solve it. 

So I am going to go through a series of questions here and they 

are kind of sophomore 101 questions, and hopefully you have got 

great answers to every one of them. My first question is—and I am 

going to ask Mr. Perez because you seem to be the guy at the table 

that actually can do something about it, not just study it or whatever but you can actually make things happen. Do you have the 

ability to seize assets of folks that you arrest and accuse of Medicare and Medicaid fraud? 

Mr. PEREZ. Well, first, Congressman, thank you very much for 

the vote of confidence. I certainly appreciate that. And the department does not have, or OIG does not have seizure authority but we 

do work in tandem with the Federal Bureau of Investigation or 

other entities that do you have the seizure authority. 

Mr. BARTON. Does anybody within HHS have the ability to go out 

and actually seize physical assets, seize cash, seize equipment, or 

do you have to go to the FBI to do that? 

Mr. PEREZ. Currently, we have to use the FBI unless it is a civil 

proceeding. 

Mr. BARTON. Would you like to have the authority, if Congress 

gave you the authority to seize assets? 

Mr. ROY. Sir, if I could respond to that? We would be more than 

happy to have that authority, but you have to understand that the 

size of our organization, taking on full seizure authority entails 

taking on a tremendous amount of additional assets to be able to 

seize that and care for that property and then liquidate that property. It is a tremendous undertaking that is probably—— 

Mr. BARTON. Right now I just want to know if you want to have 

the authority. Mr. Perez seems to think he would like it. You seem 

to think it is more trouble than it is worth. 

Mr. ROY. Well, Mr. Perez is in lockstep here. We will take any 

additional authority that comes our way and utilize—— 

Mr. BARTON. I only have another minute and 25 seconds. Are 

there currently under existing programs taxpayer hotlines where 

people can phone in or mail in or Internet in tips on people they 

think are defrauding the government on billing claims? Do you 

have that? 

76 

Mr. ROY. Yes, sir. OIG has 1–800–HHS–TIPS as our hotline. 

Mr. BARTON. What about my friend here, Mr. Spiegel? Do you 

have those hotlines? 

Mr. SPIEGEL. We do. We have 1–800–Medicare. We have special 

hotlines in south Florida. 

Mr. BARTON. Do you pay bonuses or some sort of a cash payment 

if the tip is followed up and actually proves to be correct? 

Mr. SPIEGEL. We have a set of rules around that, and yes, we 

have. 

Mr. BARTON. How often is that used? 

Mr. SPIEGEL. It depends. Well, there is a number of criteria that 

define it. It hasn’t been used all that often but it has been just recently actually. 

Mr. BARTON. Do you have within your agency the ability to check 

internally for people that are employees that are part of scams in 

terms of credentialing people that shouldn’t be or checking for folks 

that are paying bills that they shouldn’t pay? Is there an internal 

ability to check within the system? 

Mr. SPIEGEL. There are. There is a number of contracting requirements in place to make sure that the people who actually 

make decisions on our behalf are following the rules. 

Mr. BARTON. My last question. If it is not proprietary, how often 

does that type of investigation actually produce fraudulent activity 

within the system? In other words, 10 percent of the time that you 

check? 

Mr. SPIEGEL. I don’t know the exact number. I would be glad to 

get back to you with that, though. 

Mr. BARTON. OK. Thank you, Mr. Chairman. And I will have 

some questions for the record. 

Mr. STEARNS. Thank you, and recognize the chairman emeritus, 

Mr. Dingell from Michigan, for 5 minutes. 

Mr. DINGELL. Mr. Chairman, I thank you and commend for this 

hearing. It is a very important matter, and I would note, I was one 

of the people who went with our very fine investigators when they 

were conducting the nine community raids on these malefactors 

that we are discussing today, and I want to commend you down 

there for the work that you are doing on this matter. I also want 

to commend the people from the Inspector General’s Office, from 

the GAO and our friend, Dr. Spiegel. 

I would like to observe one thing very quickly. No environmental 

impact statements are filed by these criminals and they don’t file 

any 10Ks or 10Qs so we can know what they are up to, and I want 

to say, Mr. Chairman, I commend you for having this hearing because moving this process forward is extremely important and 

there is a lot of money in the recent health care reform legislation 

which will make available to us the ability to make significant savings. I am not about to criticize our witnesses today or anybody 

else for not having the cost of these things. These criminals don’t 

operate by the clear light of day. 

These questions are to Dr. Spiegel and to Ms. King. Dr. Spiegel 

and Ms. King, do you believe that the new tools included in the Affordable Care Act will help CMS to meet its goal? Yes or no. 

Ms. KING. Yes, if they are implemented properly. 

Mr. SPIEGEL. Yes. 

77 

Mr. DINGELL. Again, if you please, funding for the health care 

fraud and abuse control program includes mandatory and discretionary funding. It is divided by CMS’s integrity programs and law 

enforcement programs at the Office of the Inspector General and 

DOJ. The President’s 2012 discretionary request is $581 million. If 

this funding is not provided, will CMS be able to hire the personnel 

necessary to implement the antifraud provisions included in the Affordable Care Act? Yes or no. 

Mr. SPIEGEL. Until we find out exactly how much would in fact 

be appropriated, we won’t know exactly what we would be able to 

do but we know that are limited in our ability to plan right now. 

Mr. DINGELL. If you don’t get the money, you can’t plan and you 

can’t hire—— 

Mr. SPIEGEL. And we wouldn’t be able to—— 

Mr. DINGELL [continuing]. People to support the program work? 

Mr. SPIEGEL. We would have to ratchet back. 

Mr. DINGELL. All right. Now, the Affordable Care Act requires 

high-risk providers and suppliers who want to enroll in Medicare, 

Medicaid CHIP to undergo a higher level of screening. This increases scrutiny will be critical in rooting out fraud, waste and 

abuse in susceptible programs. If the requested discretionary funding is not provided, will CMS be able to fully implement and utilize 

enhanced screening? Yes or no. 

Mr. SPIEGEL. Again, it would depend on the levels of funding 

that ended up—— 

Mr. DINGELL. The simple fact of the matter is, if you don’t get 

that, you aren’t going to be able to move forward. You aren’t going 

to be able to move forward until you know that you are going to 

get it, and until you get it, you aren’t going to be able to do the 

hiring and the other things that are necessary to bring your enforcement program up to date. Isn’t that right? 

Mr. SPIEGEL. It would have a severe effect on that, yes. 

Mr. DINGELL. Very good. Now, again, Dr. Spiegel, the Affordable 

Care Act requires data sharing among federal agencies to monitor 

and assess risk levels in program areas that improve identification 

of fraud. If the requested discretionary funding is not provided, will 

CMS be able to implement full data-sharing technology needed to 

coordinate monitoring and identifying sources of fraud across the 

federal agencies? Yes or no. 

Mr. SPIEGEL. No. 

Mr. DINGELL. Now, again, Doctor, the goal of the antifraud provisions in the Affordable Care Act is to move CMS away from that 

wonderful practice of ‘‘pay and chase’’ and preventing improper 

payments from happening in the beginning. While some improper 

payments may be due to honest mistakes, many, many criminals 

have made Medicare and Medicaid their targets and also the other 

programs of this character. CMS has already begun testing riskscoring technology to predict and prevent fraud. If the requested 

discretionary funding is not provided, will CMS be able to fully test 

and pursue the technology? Yes or no. 

Mr. SPIEGEL. No. 

Mr. DINGELL. This to Deputy Inspector General Roy. This last 

summer, as I had mentioned, I was fortunate enough to attend a 

ride-along with the Detroit Medicare’s fraud strike force. That is 

78 

nine communities. And I saw some of the most extraordinary practices by the criminals in making money at the expense of Medicare 

that you could ever believe possible. And so as the first Member to 

ever join Medicare strike force on a ride-along, I have enormous respect for the fine work that the strike forces are doing. They have 

the difficult task of not only rooting out fraud in our health system 

but protecting our neediest populations, the poor, the elderly and 

the sick, from the criminals seeking to make money from the most 

vulnerable. Do you believe that the Medicare strike forces have the 

staffing resources they need to be effective? Yes or no. 

Mr. ROY. Yes, I do. 

Mr. DINGELL. You believe they do now? 

Mr. ROY. Sir, right now in the cities we are operating, yes. If we 

want to expand, I will need additional funding. 

Mr. DINGELL. So your answer is that they don’t have the resources and you are hoping to get them. Is that right? 

Mr. ROY. Absolutely. 

Mr. DINGELL. Now, do you agree on that, Ms. King? 

Ms. KING. I don’t have the basis of evidence to answer that question. 

Mr. DINGELL. Any other witness like to make a comment on 

that? Very well. 

This goes to you again, Inspector General Roy. If the requested 

discretionary funding for the health care fraud and abuse control 

program is not provided, will the health care fraud prevention and 

enforcement action team be able to expand the Medicare strike 

force? Yes or no. 

Mr. ROY. No, sir. 

Mr. DINGELL. All right. Now, I guess that completes my time and 

I thank you for your kindness and generosity, Mr. Chairman. 

Mr. STEARNS. I thank the gentleman. 

Mr. Burgess, the gentleman from Texas, is recognized for 5 minutes. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Mr. Spiegel, so I don’t get lost in all the numbers that we are 

hearing this morning, let me walk through some things and you 

tell me if the thinking is generally correct. Now, if I understand 

correctly, the Congressional Budget Office score for the entirety of 

the Patient Protection and Affordable Care Act that the provisions 

in that act would save about $8 billion over the 10-year budgetary 

cycle. Is that correct? 

Mr. SPIEGEL. That is my understanding. 

Mr. BURGESS. And the HHS estimate of the error rate in the payments, the payment error rate, is just under 10 percent at 9.4 percent a year. Is that correct? 

Mr. SPIEGEL. Yes. 

Mr. BURGESS. Now, Medicaid expenditures are going to increase 

of necessity under the Patient Protection and Affordable Care Act. 

The number I calculate for that is about $430 billion over 10 years. 

Does that sound about right? 

Mr. SPIEGEL. I am not an expert on that Medicaid budget. 

Mr. BURGESS. Does GAO have an opinion on the amount that we 

are going to spend additionally in Medicaid over the life cycle of the 

10-year budgetary window? 

79 

Ms. KING. I actually don’t have that number off the top, either. 

Mr. BURGESS. Well, it is—— 

Ms. KING. But it certainly—— 

Mr. BURGESS [continuing]. A part of the GAO report that we 

have that the cost of Medicaid expansion is estimated to exceed 

$430 billion over the next 10 years. So I am going to assume the 

answer from GAO is yes. 

So just in Medicaid, just in the expansion of the Medicaid system that we are doing, we have an error rate that will lose $43 billion 

over the 10-year budgetary cycle but we have safeguards in the act 

that are going to save us $8 billion, so we are not netting out very 

much in that exchange, are we? And that is your division of CMS, 

right? I mean, that is what you are going to fix, right? 

Mr. SPIEGEL. I am in the Medicare Program Integrity Group, and 

yes, we are focused keenly on preventing fraud, waste and abuse 

in our program. 

Mr. BURGESS. But in fact, the numbers just don’t add up. I mean, 

this is going to cost us a tremendous—I am all for the antifraud 

provisions that are in the Patient Protection and Affordable Care 

Act but there is no way in the world they are going to pay for the 

expansion that is occurring even just in the Medicaid part of this, 

let alone other areas. 

In my area in Dallas-Fort Worth, we have got a very aggressive—Mr. Roy and Mr. Perez, I am basically directing this question 

to you. We have got a very aggressive investigative reporter. She 

is very, very good. Becky Oliver is her name, and you just never 

know when she is going to walk up behind you and put a microphone 2 centimeters away from your face and ask a very, very 

tough question, and most of those tough questions have to do with 

Medicare and Medicaid fraud, and I referenced some of that in my 

opening statement. It almost seems as if organized crime and organizations from outside the continental United States, offshore organizations, are getting involved. This business is so lucrative and so 

easy and the risks are so slight that they are really going after this 

money aggressively. And she was the one that pointed out to me 

that there was a Nigerian national who had several home health 

agencies opened under various provider numbers and a single post 

office box. I guess she wants to be cost-effective so she wasn’t 

spending much on overhead, a single post office box, and yet after 

one of our provider numbers was busted, CMS keeps sending payments to the same post office box. I mean, you say you are doing 

stuff with the electronics and getting better at this, but oh, my 

God, that is the sort of stuff, the American people look at and they 

just don’t understand. Is there a way to get at that? 

Mr. ROY. Well, first and foremost, that is the scheme, to have 

multiple provider numbers and set those up. 

Mr. BURGESS. So you know that, right? 

Mr. ROY. Yes, sir. We are addressing it. In your city of Dallas, 

that is our brand-new strike force city and we are bringing the resources to there to adopt that model to address this issue. 

Mr. BURGESS. I am going to run out of time. I referenced in my 

opening statement about the prosecutorial force. You guys are 

doing the job we asked you to do and we are grateful for that, but 

when you bring these folks to light, are we able to actually get jusVerDate Nov 24 2008 13:00 Aug 11, 2011 Jkt 037690 PO 00000 Frm 00083 Fmt 6633 Sfmt 6633 F:\112-013 MEDICARE WASTE-PDF MADE\112-13 PDF MADE WAYNE
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tice on these criminals or do they end up back out on the street 

to sin again? 

Mr. ROY. Now more than ever, I am seeing sentences and people 

go to jail that is more than I have seen before in the past. People 

are being prosecuted. They are going to federal prison for stealing 

from Medicare. 

Mr. BURGESS. How comfortable are you with the prosecutorial 

manpower, the strength of the prosecutorial force that is available 

to prosecute this? 

Mr. ROY. Getting better all of the time. In your particular city, 

the resources coming from the Department of Justice are some of 

the best health care fraud prosecutors in our country. 

Mr. BURGESS. Well, I appreciate that, and of course, I have had 

several meetings with HHS and the Department of Justice on this 

issue after being asked the tough questions by Becky Oliver, so I 

credit her with having put some pressure on that, but I have to tell 

you, we have got to do a lot more in this. It is going to overwhelm 

the system. 

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

Mr. STEARNS. I thank the gentleman. 

Ms. Schakowsky from Illinois is recognized for 5 minutes. 

Ms. SCHAKOWSKY. Thank you. 

Do you have a strike force in Chicago, Mr. Roy? 

Mr. ROY. Yes, ma’am, we do. 

Ms. SCHAKOWSKY. Can I go on a ride-along? 

Mr. ROY. Yes, ma’am, you can. 

Ms. SCHAKOWSKY. Thank you. The Affordable Care Act increased 

mandatory funding for the health care fraud and abuse control 

fund by about $350 million, and indexed funding for the health 

care fraud and abuse control fund and the Medicare and Medicaid 

integrity programs to make sure that funds keep up with inflammation. Overall funding to fight fraud will increase by about $500 

million over the next 5 years. The House Republicans voted to repeal the health care reform bill, and that would cut off the funds 

the law provided for antifraud activities, so I do want to ask you, 

Mr. Roy, could you describe the impact of cutting off this funding 

and what it would do to antifraud initiatives that the Administration is implementing under the Affordable Care Act? 

Mr. ROY. Well, right now, as I stated, from the perspective of 

strike force, we were in nine cities. I would ultimately like to expand that using data to justify and find our hotspots. I will say 

without additional funding at this point in time, I don’t think I am 

going to be in a position to open up additional strike force locations. I need the resources. I need the additional bodies to put in 

fraud hotspots across the country. 

Ms. SCHAKOWSKY. Thank you. 

Mr. Spiegel, would you want to answer that? 

Mr. SPIEGEL. Sure. I mean, we had planned to expand the strike 

force locations from where they were to a total of 20 because they 

are so effective in what they do, and we are obviously not going to 

be able to go there with the adequate resources to do that. 

Ms. SCHAKOWSKY. Thank you. 

Ms. King, the Affordable Care Act includes provisions to provide 

more transparency in nursing home ownership and operating strucVerDate Nov 24 2008 13:00 Aug 11, 2011 Jkt 037690 PO 00000 Frm 00084 Fmt 6633 Sfmt 6633 F:\112-013 MEDICARE WASTE-PDF MADE\112-13 PDF MADE WAYNE
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tures and to require training, compliance and ethics. Ensuring that 

we have complete and accurate information on ownership allows 

not just more transparency but provides tools to allow regulators 

to hold any wrongdoers accountable. How important is it to have 

this data, in your view, or in GAO’s view? 

Ms. KING. I think that we believe it is always important to have 

good data about the people who are participating in the program 

so that you can track what is going on. 

Ms. SCHAKOWSKY. Mr. Roy, you had mentioned the importance in 

your written testimony, I didn’t hear it orally necessarily but of 

whistleblowers in identifying possible wrongdoing. Last month, a 

Florida long-term-care ombudsman asked for information on nursing home structure, the same information that will be required in 

the Affordable Care Act, and was subsequently fired by Governor 

Scott. Without getting into the specifics of the case, do we need to 

provide whistleblower protections for long-term-care ombudsmen 

and others who seek information about fraud and abuse? And in 

the nursing home area, do we need to look at special protections 

for long-term-care ombudsmen? 

Mr. ROY. I am certainly in favor of some type of protection for 

all our whistleblowers. I am not familiar too in-depth with the matter you are speaking about. 

Ms. SCHAKOWSKY. Mr. Perez, are you, being in Florida now? 

Mr. PEREZ. No, ma’am. 

Ms. SCHAKOWSKY. And so the protection for whistleblowers, is 

that an important source for you? 

Mr. ROY. It is, specifically with corporate fraud. Whistleblowers 

often file what we refer to as qui tam lawsuits, which are lawsuits 

on behalf of the Federal Government. They are usually corporate 

insiders with in-depth knowledge of corporate fraud. From a corporate standpoint, they are essential to our work. 

Ms. SCHAKOWSKY. And do we have those protections in the new 

act? Are we going to do better to make sure we protect those people? 

Mr. ROY. In the new act, I do not—I am not familiar with anything that would point toward whistleblower protection but I am 

certainly not an expert on everything in that Affordable Care Act. 

Ms. SCHAKOWSKY. OK. Thank you very much. I yield back. 

Mr. STEARNS. The gentleman from Nebraska, Mr. Terry, is recognized for 5 minutes. 

Mr. TERRY. Thank you, Mr. Chairman. 

I like the strike force, or HEAT. It seems to be a common theme 

on both sides of the aisle probably because it is positive news of 

success. I am trying to get my arms around what resources CMS 

has right now to fight fraud and abuse. Under the PPACA, I understand there will be an additional $35 million per year, as Dr. Burgess said, that won’t even come close to what will fight fraud and 

abuse from the expansion of Medicare, but that is the CBO number. I don’t know what the base is right now. What does CMS set 

aside per year for investigating and prosecuting fraud and abuse? 

Do you know that number? 

Mr. SPIEGEL. I don’t know right offhand but the investigating 

and the prosecuting takes place to my right. 

Mr. TERRY. All right. 

82 

Mr. SPIEGEL. But the identification and the looking for in dealing 

with the improper payments and fraud at the front end would be 

us, and it is—— 

Mr. TERRY. Will you please provide that number to the committee, please? 

Mr. SPIEGEL. Yes. 

Mr. TERRY. And why I wanted that is so I can get a picture of 

what percentage of your budget is being used for policing purposes, 

and then I would like the opportunity to compare that to private 

sector health insurance who seems to be able to do a lot better job 

in weeding out and finding insurance fraud and abuse and what 

they spend in policing. I think that is a good opportunity to figure 

out if you have enough resources or not. Obviously I would say you 

don’t have enough resources. 

Mr. SPIEGEL. Well, one of the things about the way the private 

sector does things versus the way we do it is, they have different—— 

Mr. TERRY. I didn’t ask that, and I only have 2 minutes. 

Mr. SPIEGEL. Sorry. 

Mr. TERRY. But I am curious about it. 

Let me talk to Mr. Roy. With your strike forces and the work 

with Justice in being able to prosecute these, if you had the perfect 

world and Congress came to you and CMS came to you and said 

what do you need to get $50 billion a year recovered, what would 

you need? 

Mr. ROY. It would have to be a joint effort between us and Department of Justice. I can hire as many agents as possible to address the fraud but I also need prosecutors to prosecute that case. 

The perfect world is that we utilize the models we are using now, 

looking at data to find these hotspots and then have the ability to 

put agents in those particular hotspots and the prosecutors to prosecute the cases as well. 

Mr. TERRY. Would you be able to provide us information if we set 

a goal of $50 billion per year? And by the way, I think it was the 

testimony, I don’t know if it was you or Mr. Perez said you already 

have 300 agents working in HEAT and these strike forces. 

Mr. ROY. That was just the agents—I do not have 300 agents assigned to strike force locations. When we did that operation 2 

weeks ago, I took 300 out of my 420-plus agents and detailed them 

if they weren’t already on the ground to the cities where we had 

strike force operations take place. 

Mr. TERRY. Can I assume that not all 420 of your agents are 

dedicated to fighting CMS fraud and abuse? 

Mr. ROY. That is correct, sir. Eighty percent of our time is spent 

in the realm of health care fraud but we over see the 300-plus programs of the department, and I am certainly engaged in oversight 

activities, criminal activities in those other departments as well. 

Mr. TERRY. Mr. Perez, being on the streets and getting information, it sounds like fighting drug distribution on the streets. What 

do we need in communities and on the streets to be able to obtain 

this? The gentlelady from Illinois mentioned whistleblowers. I 

think that is probably an important part of this. How much of it, 

and how much of it comes from just hearing on the street? 

83 

Mr. PEREZ. I unable to quantify exactly how much we get from 

the street but I think one of the things, to underline your question 

or at least answer it, is one of the things that I think we would 

like to see in the field, at least as agents, are two things, one, an 

ability to access the claims data directly, in other words, be able 

to have—sit outside of a business who we believe fits all the mold 

of a fraudulently run company and actually open up a laptop, log 

on and actually to be able to see whether or not a claim is being 

submitted by that company now, whether or not there are any payments that are on the payment floor, if they have already submitted claims, and we can make phone calls and actually start 

doing the investigation from right outside of the parking lot. That 

would be helpful. 

Mr. TERRY. And that is not available to you today? 

Mr. PEREZ. Not today. 

Mr. TERRY. Thank you. 

Mr. STEARNS. The gentleman from Texas, Mr. Gonzalez, is recognized for 5 minutes. 

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

My question will be to Mr. Spiegel and Mr. Roy. I am trying to 

get at percentages of fraud. I know GAO did a study on Medicare 

and CMS estimated that it could be as much as $48 billion in improper payments. What I don’t follow here is equating fraud, waste 

and abuse with improper payment. 

Mr. STEARNS. Does the gentleman have your speaker on? 

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

I do not want to equate fraud, waste and abuse to improper payment, which may be a billing error or a good-faith mistake. So can 

you—taking that into consideration, and I think that Dr. Burgess 

asked if it was an accurate—I think he quoted a percentage of 10 

percent of payments on Medicaid can be attributed to fraud, but 

that wouldn’t be accurate. Is that correct? I think it was Mr. Roy 

or Mr. Spiegel may have responded to Dr. Burgess’s question. 

Mr. SPIEGEL. That is—what you said is accurate. It is not fraud, 

it is improper payments, and it is important to make that distinction as we try and calculate what the elusive number is that everybody is going after. Some of the numbers tend to have a lot of improper payments or just billing errors or things that aren’t anything more than a mistake included in them. They are not fraudulent. And so we are reluctant to say things like that but the Medicaid number is improper payments. 

Mr. GONZALEZ. Mr. Roy, obviously you are not going to go and 

prosecute and seek some sort of legal action against someone who 

made a good-faith mistake, yet that number is going to be taken 

into consideration when we are trying to look at payments, overpayments and so on. What I am saying is, it is not all criminal activity so that when you take Jan out there in your car and you are 

making all the big busts, you are not going to be going to providers 

that have simply made a good-faith mistake on a billing statement? 

Mr. ROY. That is correct, sir. In the strike force model for the 

most part, these providers that we are going after are involved in 

almost 100 if not 100 percent fraud. 

Mr. GONZALEZ. But you have limited resources, and I understand 

that, and you are going after the true wrongdoers and such, beVerDate Nov 24 2008 13:00 Aug 11, 2011 Jkt 037690 PO 00000 Frm 00087 Fmt 6633 Sfmt 6633 F:\112-013 MEDICARE WASTE-PDF MADE\112-13 PDF MADE WAYNE
84 

cause I think there are some participants out there that make 

good-faith mistakes. I don’t want to make excuses for anybody out 

there that is billing the government again fraudulently and so on 

and no one is for that, and my colleague from Texas, Mr. Barton, 

pointed that out. 

What about the private sector? Let me ask Mr. Roy and even Ms. 

King, has there ever been a comparison—or Mr. Spiegel—as far as 

what is happening when it comes to fraud, waste and abuse with 

the private sector? What is the percentage there that is being suffered as a result of the same actors or similar actions by individuals that are defrauding obviously the private sector? Do we have 

numbers there? Is there a percentage that we can estimate, guesstimate as to how much is the private sector suffering as a result 

of fraud or criminal activity? 

Ms. KING. To my knowledge, there is not a number out there 

about that and one of the difficulties I think on fraud is that you 

don’t know what you don’t know, and part of the reason I think 

that Medicare doesn’t know the number about fraud or we don’t 

know about that, if someone does something fraudulently, for example, they submit a claim on behalf of a beneficiary who is deceased or they buy a beneficiary’s number and they submit a clean 

claim, that claim is paid and that is not going to show up as fraud 

or improper payments because it slipped through the system, so 

that is part of the difficulty about estimating a number on fraud. 

Mr. GONZALEZ. And I appreciate that. Whether it is in the private sector or public sector, you are still faced with the same dilemma, and I think that is important to point out rather than saying that this is something distinct and unique to Medicaid or to 

Medicare. 

Mr. Roy, I am just curious, and I have got about 32 seconds but 

quickly, what is the State’s obligation when it comes to Medicaid 

fraud? Because we had an incident in Texas—I don’t know if you 

are familiar—that the governor did relieve the doctor that basically 

was managing or the head of looking at the Medicaid contracts 

with providers as well as the attorney that was charged with prosecuting. Are you familiar with that case? 

Mr. ROY. No, sir. I believe this might be a question that is probably better posed to Mr. Spiegel than myself. 

Mr. GONZALEZ. Mr. Spiegel, what is the role of the State government? 

Mr. SPIEGEL. Well, the State government has a responsibility to 

have fraud control, a Medicaid fraud control unit, and they do and 

they look at instances where they can take action to both identify 

and prevent fraud. There is data systems in place in most—and 

again, I am not an expert on this but there are data systems in 

place in most all State Medicaid programs that allow a fairly robust analysis of things that appear to be aberrant or improper. 

They have—— 

Mr. GONZALEZ. You can complete your answer, Mr. Spiegel. 

Mr. SPIEGEL. Sorry. That are similar to the way we do things in 

Medicare where they make sure that they are paying for people 

who are properly enrolled in Medicaid in a proper amount for a 

provider that is eligible to provide the service. 

85 

Mr. GONZALEZ. Thank you, Mr. Spiegel. So that is a shared responsibility then? 

Mr. SPIEGEL. Yes. 

Mr. GONZALEZ. Thank you. 

Mr. Chairman, thank you for your indulgence. 

Mr. STEARNS. Thank you. 

Mr. Gingrey from Georgia is recognized for 5 minutes. 

Mr. GINGREY. Mr. Chairman, thank you. 

I want to go back to Ms. King in a follow-up on the question that 

Mr. Gonzalez from Texas just asked you, because I think it is a 

real important, pertinent question. Ms. King, you are director of 

the Health Care Division of GAO and if you don’t have this information here today, you ought to be able to get it for the committee, 

and the question that he asked in regard to comparing the amount 

of waste, fraud and abuse in the private sector versus the government sector, and primarily we are discussing Medicare and Medicaid, I think is of paramount importance and I want, Mr. Chairman, to ask Ms. King, maybe she can answer that right now and 

I will gladly give you the opportunity to do so. 

Ms. KING. You know, we would be happy to look into it and see 

if we could get an answer to it, but as a practical matter, we don’t 

have a right of information from the private sector so we would 

have to ask them to provide that information to us as opposed to 

on the government side where we have a right to information. 

Mr. GINGREY. Well, yes, and I appreciate that and certainly I 

think that you ought to use every tool that you do have available 

to get that information because quite honestly, a lot of us feel that 

the big government and the bigger it gets, the more expansive it 

gets, and 15 million additional people on the Medicaid program and 

we have got 47 million now on the Medicare program of aged and 

disabled, and that number is just going to grow as all the Baby 

Boomers are maturing, and, you know, you expand this Obamacare 

program, another entitlement program, in fact. 

Let me ask you a specific question about that. On July 30, 2009, 

President Obama stated that his health plan—that is why I refer 

to it as Obamacare—was funded by eliminating the waste that is 

being paid out of the Medicare trust fund, and then on September 

10, 2009, Speaker Pelosi said that Congress will pay for half of 

Obamacare, $500 billion, by squeezing Medicare and Medicaid to 

wring out the waste, fraud and abuse, and I will ask you, Mr. Spiegel, as well, was cutting $137 billion out of the Medicare Advantage 

program in any way, shape or form cutting out waste, fraud or 

abuse? 

Ms. KING. I don’t have the exact numbers off the top of my head 

but we in MedPAC have done work that has shown that payments 

to Medicare Advantage plans are higher than those that are made 

in fee for service. 

Mr. GINGREY. Well, Ms. King we know that. We understand that. 

It is 112 percent. That is not an arguable—the point is, you overpaid them. That is not waste, fraud and abuse. It may be waste 

but it is certainly not fraud and abuse. 

Ms. KING. It is not fraud and abuse but it could be considered 

waste by some. 

Mr. GINGREY. Mr. Spiegel, any comment on that? 

86 

Mr. SPIEGEL. I am just trying to identify and prevent fraud in 

my job. You know, to respond to the questions about—— 

Mr. GINGREY. You are going too slow for me. I am going to give 

you a pass. 

Let me go to Mr. Perez and Mr. Roy. Can you tell us what you 

are seeing in terms of organized crime involvement in Medicare 

and Medicaid fraud? That poster over there, I keep looking at it. 

It looks like Murderers Row. But you know, what is going on in 

Miami and is organized crime involved heavily in Medicare and 

Medicaid fraud and abuse, and why? 

Mr. ROY. I will answer the first portion of that question about 

the overall scope of organized crime because it is geographical in 

nature. For instance, in the Los Angeles area you are seeing very 

organized criminal structures, in essence Eurasian organized crime 

entities heavily involved in Medicare fraud. They are involved in 

many street-level crimes as well. They are also involved in things 

such as credit card fraud and identity theft but what we are seeing 

is that in order to get to the upper echelons of these organized 

criminal elements, you have to go through health care fraud. That 

is where they make their money and that is different from what 

we would in Texas and in Miami, and with respect to what we see 

in Miami, I will turn that over to ASAC Perez and he will give you 

an idea of what is going on there. 

Mr. GINGREY. Mr. Perez, thank you. 

Mr. PEREZ. Thank you for the question. A lot of the things that 

we are seeing are a group or groups of individual that have tiers 

underneath them and for all intents and purposes there is even another subset of cells that work underneath that second tier and one 

cell won’t necessarily know what the other cell is doing but they 

all kind of report to the same few folks in the top. 

Mr. GINGREY. I see my time has expired, Mr. Chairman, and 

thank you, panelists, for your response, and I yield back. 

Mr. STEARNS. I thank the gentleman. 

Mr. Scalise, the gentleman is recognized for 5 minutes. 

Mr. SCALISE. Thank you, Mr. Chairman. I appreciate the panelists for coming. 

We are talking about waste, fraud and abuse. I want to first go 

back to something I saw in our State and ask you to comment on 

some of the things that we saw and how it is being dealt with at 

the federal level. In 1996 when I started in our State legislature, 

our governor appointed a 24-year-old to run our health department. 

At the time it was the largest department in State government, 

and there was a lot of waste, fraud and abuse and the governor 

made it a priority. And we talk about zero tolerance against waste, 

fraud and abuse, it is an attitude. It can’t just be rhetoric. It has 

got to be followed by real action. And so the governor set out on 

a mission to root out that waste, fraud and abuse. He appointed, 

as I said, back in 1996 a 24-year-old to run that department and 

to go and seek it out, and in fact, that new head of our department 

was very aggressive. People went to jail. They shut down programs. 

There were Medicare mills, a lot of things that were going on that 

got rooted out. We cut out almost a billion dollars in waste, fraud 

and abuse in our department. I say that to make a point, that person that 24 years old at the time is now called the Governor Bobby 

87 

Jindal. He is now the governor of our State, but he was very aggressive then as the head of our Department of Health and Hospitals in rooting out that waste, fraud and abuse and he is still aggressive today. 

I want to know, what coordination do you all have with our governors who are aggressive in rooting out whether you find Medicare fraud or Medicaid fraud, if you are finding Medicare care by 

a provider that is maybe doing business in other States and Medicaid, how do you coordinate those things with the States who are 

specifically dealing with Medicaid because they do have real jurisdiction there? I will you all kind of down the list. Ms. King. 

Ms. KING. There is one provision in the Affordable Care Act that 

gives CMS the authority to revoke Medicare enrollment if Medicaid 

enrollment has been revoked in a State, so if someone is a bad 

actor in Medicaid and they are excluded from Medicaid, Medicare 

can follow the lead on that, and that is a new authority. 

Mr. SPIEGEL. And that is addressed in our most recently published final rule with the new screening authorities. 

Mr. SCALISE. Do you coordinate with the governors when you do 

find—let’s say you find Medicare fraud or even, you are working on 

Medicaid fraud, are you all coordinating with those governors in 

those States who maybe have some enforcement that they are trying to do as well? 

Mr. ROY. Sir, from a law enforcement perspective, we are working very closely with our Medicaid fraud control units, which obviously the governor, that would be their representative from a fraud 

level. We are doing great work there. Over the last 3 years we have 

probably increased our joint cases with the Medicaid fraud control 

units by upwards of 25 percent. 

Mr. SCALISE. Thanks. And I need to move because we are limited 

on time. I apologize. 

One of the components we really haven’t talked about a lot is the 

waste component of waste, fraud and abuse, and you know, when 

you talk to doctors, and I have talked to a lot of doctors, especially 

over the last few years since I have been in Congress and we have 

been working on ways to actually reform health care as opposed to 

what I think President Obama did, doctors will tell you the biggest 

area of, you can call it waste—I would—the biggest area of work 

that they do that doesn’t really relate to improving patients’ health 

but it is defensive medicine. They run tests that everybody knows 

they don’t have to run but they do it because they are afraid of frivolous lawsuits. In many cases they have had to fight frivolous lawsuits but it costs them a lot of money so it is just something that 

every doctor will tell you they do. Do you all consider—first of all, 

do you all consider defensive medicine to be part of waste in the 

definition that we are discussing today, Ms. King? Yes or no. 

Ms. KING. I don’t know. I don’t honestly know the answer. 

Mr. SCALISE. Have you done any kind of research to know how 

much this does cost? 

Ms. KING. Defensive medicine? We have not done any direct 

work on that. 

Mr. SCALISE. Mr. Roy or Mr. Perez? 

88 

Mr. ROY. I don’t have a direct comment to that but I want to say 

that we are putting people in jail that are committing fraud, not 

necessarily involved in—— 

Mr. SCALISE. Mr. Spiegel? 

Mr. SPIEGEL. I don’t know the answer to that. 

Mr. SCALISE. I can’t believe that, you know, especially Mr. Spiegel and Ms. King, would say that you don’t know the answer to 

what doctors will tell you is the biggest area of unnecessary spending but something they have to do because they will get sued if 

they don’t run the test but they will tell you probably a third of 

those tests are done not because they think it is in the best decision for care of the patient but because they are afraid of getting 

frivolous lawsuits, and in fact, the President’s bill does absolutely 

nothing to address that problem, and doctors will tell you that people in the medical profession across the board will tell you that 

topic was completely ignored, the topic that doctors will tell you is 

probably the biggest cause of waste in health care. And so when 

we talk about adding another 20 million onto the Medicaid rolls, 

at least, I would hope you all would go back and look at just how 

much more we are going to waste in making these doctors run 

these tests, because in our bill, in our real reform bill after we have 

done repeal, we are including medical liability reform where you 

get dramatic savings in waste in health care. But I would ask if 

both Ms. King and Mr. Spiegel would go back and include defensive 

medicine and come back to us with some real costs. Will you get 

the committee that information on what you estimate are the costs 

that it adds to the system to have these defensive medicine practices that weren’t addressed in the President’s bill? 

Ms. KING. We can certainly look into it. I think it is a difficult 

question because what someone considers defensive medicine may 

be, you know, an unnecessary test on someone’s part—— 

Mr. SCALISE. But you can estimate the cost of that? 

Ms. KING. Well, there is a lot of variability in how physicians 

practice medicine. 

Mr. SCALISE. As there is with anything that you give estimates 

on. 

Mr. Spiegel? 

Mr. SPIEGEL. I mean, I would say the same thing Ms. King said. 

We could look into it but the definitions of what falls into the category that you are trying to get a handle on vary, depending upon 

to whom you are speaking. 

Mr. SCALISE. Thank you. I yield back. 

Mr. STEARNS. The gentleman’s time has expired. 

Mr. Griffith from Virginia is recognized for 5 minutes. 

Mr. GRIFFITH. Mr. Spiegel, how many claims does CMS get a 

day? Do you know? 

Mr. SPIEGEL. I don’t. 

Mr. GRIFFITH. But it would be millions, would it not? 

Mr. SPIEGEL. It would. 

Mr. GRIFFITH. And do you have any idea what percentage of 

them you are able to review before payment is made? 

Mr. SPIEGEL. Well, we do a substantial amount of review on virtually all of them before they get paid. 

89 

Mr. GRIFFITH. And I saw somewhere, I know that there was 

some testimony earlier that there was some indication that we 

didn’t really know what the private sector’s rate was but I had seen 

somewhere or have information that their rate is about 1–1/2 percent lost to fraud, and I am just wondering if you have seen that, 

A, and B, if you have studied what the private sector is doing to 

eliminate fraud so you could see maybe if there are better ways for 

eliminating or preventing Medicare fraud. 

Mr. SPIEGEL. Sure. I have seen some numbers for the private sector, and we did look into what it is about them that makes them 

different from us in the way they approach this. So in the private 

sector, they have a different approach to how they deal with approval of services that we don’t do in Medicare because we are designed as a program to get beneficiaries needed services and not to 

impose restrictions at the point of service. But private insurance 

can have prior authorization for a whole range of things that we 

don’t, and so they can eliminate things that may have an impact 

on someone’s need for services or at least impose a barrier there 

that we don’t operate that way. 

Mr. GRIFFITH. Since there appears to be some intent to pay for 

all of this new health care by getting rid of this fraud, have you 

all considered going to a preapproval process? 

Mr. SPIEGEL. Well, we have had discussions about that among 

ourselves but right now it is not consistent with I guess our statutory authorities to be doing that. 

Mr. GRIFFITH. And let me switch—— 

Ms. KING. Sir? 

Mr. GRIFFITH. I am sorry. 

Ms. KING. If I might point out something else that is a key difference between the private sector and Medicare is that Medicare 

is an ‘‘any willing provider’’ program so the private sector has 

much more ability to restrict the providers who are coming into the 

program than Medicare does. Now, with some of the new authorities in the ACA, CMS is going to have more authority to take a 

closer look at providers and keep out providers who are not good 

actors. 

Mr. GRIFFITH. Let me claim back my time. Let me ask, switching, something that is kind of interesting, it is my understanding 

that the Medicare number, and I don’t care whether it is Ms. King 

or Mr. Spiegel, but the Medicare number is the same as your Social 

Security number. Is that correct? 

Ms. KING. That is correct. 

Mr. GRIFFITH. And then if somebody steals your identity, you 

can’t just go out and change your Social Security number. Wouldn’t 

it be a better policy to have each patient have a separate Medicare 

number and then when somebody steals that number the patient 

can get a new number just like you do with your credit card if you 

lose it or it is stolen by somebody? 

Ms. KING. Certainly there have been proposals made to that effect. 

Mr. SPIEGEL. And we are doing a substantial amount of work 

right now to eliminate all the compromised numbers that we have 

identified through both providers and suppliers as well as beneficiaries. 

90 

Mr. GRIFFITH. Doesn’t that have the impact on the one hand of 

making it very difficult for the patient and then I guess I would 

ask, what is your opinion of that? You said it had been talked 

about but what do you think? Don’t you think that would be a better policy, Ms. King? 

Ms. KING. I think it probably would be. There would be a question, I think, in our minds about what it would cost to effect that 

transition and how long that would take and what would be involved with that because you have every living beneficiary and 

then new beneficiaries as they come on the rolls. 

Mr. SPIEGEL. And we agree with that. 

Mr. GRIFFITH. New ones would be a lot easier. That wouldn’t 

probably very much at all. 

Ms. KING. Yes, they would. 

Mr. GRIFFITH. But anyway. All right. I yield back my time, Mr. 

Chairman. 

Mr. STEARNS. The gentleman yields back his time. The 

gentlelady, Ms. Myrick, is recognized for 5 minutes. 

Mrs. MYRICK. Thank you, Mr. Chairman. Thanks to all of you for 

being here and thank you, you two who do the investigative work 

for what you are doing and the way you are going about it. 

My question I guess is to Mr. Spiegel. I am not real sure. On 

States, is there a requirement that States report fraud to you, to 

CMS? Because I understand that maybe half the States don’t even 

report data. 

Mr. SPIEGEL. I don’t know what the requirement is for—— 

Mrs. MYRICK. Would you mind finding out and getting back? Because I would like to know. 

Mr. SPIEGEL. Sure. 

Mrs. MYRICK. And then the next question is relative to States, 

do they have their counties report? Does it individually vary by 

State to State? In North Carolina, counties are responsible for reporting the fraud to the State. Is that something that happens 

across the country? You know, when you get right down to the local 

level where they have better control on it maybe than the whole 

State does. It is more efficient? 

Mr. SPIEGEL. I don’t know about the efficiencies, and it would 

really depend on how each State is set up its operational structure. 

Mrs. MYRICK. So each State is in control of how they report that? 

Mr. SPIEGEL. I would think so. 

Mrs. MYRICK. But why do some States not report? Do you know? 

Mr. SPIEGEL. I don’t know the extent to which they don’t. I mean, 

I know we have fraud investigation databases and we collect information from States, and I think we—what I was trying to say before is, I didn’t know what the requirement was. I know we get reporting from States about the fraud cases that they uncover and 

I am sure they coordinate closely with—— 

Mrs. MYRICK. I would be curious to know. 

And then the second part of that, are there any minimum standards that States have to meet relative to, you know, the waste, 

fraud and abuse, whatever you want to call it, to receive their 

FMAP? 

Mr. SPIEGEL. Well, again, I am not a Medicaid expert but there 

are requirements that States have to meet, you know, to have a 

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proper State plan in place, they have certain administrative requirements they have to meet. They have to have a single State 

agency with authority. They have to have Medicaid fraud control 

units and things. 

Mrs. MYRICK. And is there a follow-up on that to make sure that 

gets done? And I guess that goes back to my first question, do the 

States all report? Anyway, if you don’t know—— 

Mr. SPIEGEL. Well, I know there is follow-up on how the States 

organize themselves and there is constant interaction between the 

folks in CMS who oversee Medicaid around that. 

Mrs. MYRICK. But all of you pretty much agree that there needs 

to be more of an effort on this relative to dollars that come from 

what you said before to the different people and you have all responded that if there were more dollars into the program for what 

you are doing, you would have a better ability to do it, particularly 

with the two in the middle and what you do with the inspection 

work. 

Mr. SPIEGEL. We have found that for every dollar we are spending, we are getting a substantial return on investment, 6.8 percent, 

I believe. 

Mrs. MYRICK. But yet in the new health care bill, there is only, in my understanding, $350 million in there for any fraud activities, 

which, if that is divided up across all the agencies, you know, it is 

less than one-tenth of 1 percent of what we are spending on the 

health care bill. So it seems like it is a very small amount that is 

being dedicated to what really is getting at the crux of so much of 

the waste that everybody talks about is going to pay for all this. 

It just doesn’t seem to make sense. It seems like there should be 

more effort put into what you are doing from the standpoint that 

you are actually seeing results and you are getting to the bottom 

of the issue. 

Mr. SPIEGEL. I mean, I guess we would welcome the opportunity 

to have more resources to do more of the things that we have embarked on. 

Mrs. MYRICK. But I know Mr. Terry asked a question about actually if we could do this what would it take type thing, so you all 

are going to get back to him with that? 

Mr. SPIEGEL. Yes, ma’am. 

Mrs. MYRICK. I appreciate it. No more questions. 

Mr. STEARNS. The gentleman, Mr. Murphy from Pennsylvania, is 

recognized for 5 minutes. 

Mr. MURPHY. Thank you. 

I want to go over this list here and I wonder if you can tell me 

if you have any idea where these fugitives are. Carlos Benitez, do 

you know where he might be? Do we know what country he is in? 

Mr. ROY. Sir, I may indeed know the general whereabouts of 

some of these individuals but—— 

Mr. MURPHY. Cuba? 

Mr. ROY. Probably not, sir. 

Mr. MURPHY. Are any of these folks in Cuba? 

Mr. ROY. Probably not. 

Mr. MURPHY. I understand that some of them actually may be. 

Mr. ROY. Sir, I correct myself. There may be several of those that 

are in Cuba, yes. 

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Mr. MURPHY. Because my understanding is there may be as 

many as six, and the question is what the Cuban government is involved in here. According to some reports, ‘‘In a discussion with a 

high-level former intelligence official with the Cuban government 

who asked to remain unnamed,’’ and this is from University of 

Miami report. He states, ‘‘There are indeed strong indications that 

the Cuban government is directing some of these Medicare frauds 

as part of a desperate attempt to obtain hard currency.’’ The source 

notes that the Cuban government is also assisting and directing 

other instances of Medicare fraud providing perpetrators with information with which to commit fraud. They go on to say in the instance where the Cuban government is not directing or facilitating 

the fraud—— 

Ms. DEGETTE. Mr. Chairman? 

Mr. MURPHY [continuing]. It does provide Cuba as a place for fugitives to flee. This gives the Castro regime a convenient and carefree way to raise hard currency. Are we doing anything about that? 

Mr. ROY. I have actually inquired before about what are the ties 

to Cuba, and nothing has been brought to my attention that would 

substantiate what you are saying. I am more than happy to take 

a name and a number or if you can get me in touch with that individual to follow up on that. 

Mr. MURPHY. This was a report—— 

Ms. DEGETTE. Mr. Chairman, will the gentleman just yield briefly? 

Mr. MURPHY. Not on my time. 

Ms. DEGETTE. I would like to make—— 

Mr. MURPHY. I didn’t yield yet, because I really only have a couple of minutes—— 

Mr. STEARNS. Does the gentlelady request a personal privilege or 

a point of order? 

Ms. DEGETTE. I just want to make sure—— 

Mr. STEARNS. Is this a request for a point of order? 

Ms. DEGETTE. It is a request for a point of order. 

Mr. STEARNS. OK. The gentlelady is recognized. 

Ms. DEGETTE. I just want to make sure, and I know that you are 

not intending to ask Mr. Roy any information that would in any 

way undermine an ongoing investigation. 

Mr. MURPHY. Absolutely. 

Ms. DEGETTE. I just wanted to clarify that. Thank you. 

Mr. MURPHY. Absolutely. 

Ms. DEGETTE. He looked a little uncomfortable when you asked 

that question. 

Mr. MURPHY. I am just asking if—— 

Ms. DEGETTE. Thank you very much. 

Mr. MURPHY. Thank you. I appreciate that. 

This is a report from the University of Miami. I would be glad 

to let you read that. It is just something I wanted to bring attention because it does bring to light there has also been concerns 

about how things happen by other countries where they may be 

doing this as part of an organized-crime issue, recognizing the ability to have false claims with Medicare actually may be easier, less 

risk and lower penalties than it would be, for example, with cocaine trafficking where you have long mandatory sentences. And so 

93 

I am wondering along these lines if you are also looking to see-I 

mean, I appreciate the work you are doing. This is great. I am glad 

you are pursuing this. The American people appreciate that. As 

Mr. Barton talked before, we are all in favor of this. I just want 

to make sure we are also looking at this as a mechanism to see if 

you think we need more enforcement, do you need more funding, 

do you need more personnel, or do we need stiffer penalties, or all 

of the above? 

Mr. ROY. We need all of the above, sir. 

Mr. MURPHY. Do you think the level of penalties is a factor in 

terms of people are willing to risk the risk and consider jail time 

as the price of doing business? 

Mr. ROY. Well, I certainly felt that way probably 5 to 10 years 

ago but in the recent years I have seen across the board sentencing 

guidelines go up and I have seen perpetrators of health care fraud 

go to federal prison for longer periods of time. If I had my way, 

they would go there longer but that is not the perfect world but I 

see a movement toward the punishment fitting the crime, sir. 

Mr. MURPHY. Thank you. Anybody else want to comment on that, 

Mr. Perez or Mr. Spiegel? 

What additional tools then do you think that Congress can give 

all of you with regard to helping investigate Medicare and Medicaid fraud and abuse cases? Are there any other tools you want 

from us? 

Mr. ROY. First and foremost, the funding aspect of it. The funding has to be continuous. It has to be long term to ensure that I 

can keep bodies on the ground. It can’t be a one shot in the arm 

type of a situation. Our organization is human resource driven, and 

the more agents I have in the field and the more support staff I 

have, the better job I am going to be able to do. 

Mr. MURPHY. I appreciate that. Anyone want to comment? Yes, 

Mr. Perez. 

Mr. PEREZ. Just from an investigative standpoint, and I mentioned this earlier. I apologize if I am repeating myself at least to 

you. But we certainly would like to have real-time data access so 

that we can see the claims as they are hitting them. We currently 

don’t have that. And there is another system that is out there that 

we would also like access to that actually gives us the profile of the 

providers that are in so that we know once they are in, all of the 

makeup of that particular provider and then we can initiate investigations. 

Mr. MURPHY. Do you have that profile access now or that is 

something you are asking for in addition? 

Mr. PEREZ. We do not have it now. 

Mr. MURPHY. So to be able to get that profile information on the 

providers and the real-time data so you could I guess more or less 

profile as people are submitting claims that there are things that 

appear to not match standard billing procedures with durable medical equipment or services, that would show up and you could hit 

on that right away, would that help you? 

Mr. PEREZ. I think that certainly would help us, yes. 

Mr. MURPHY. Mr. Spiegel, do you have a comment on that? 

Mr. SPIEGEL. Sure. And what I would say is, the President’s 

budget has laid out a number of things that we would want to do 

94 

in 2012, and for now, we need to have a little bit of time to gauge 

the impact of all the things that we started doing in the last year 

to refocus our efforts on the front end and to take prompt action 

on the folks who need to have action taken against them. 

Mr. MURPHY. Thank you. I think if any of you had any other details of how that work would out to let the committee know. Thank 

you so much. 

Mr. STEARNS. The gentleman’s time has expired. The gentleman, 

Mr. Gardner, from Colorado is recognized for 5 minutes. 

Mr. GARDNER. Thank you, Mr. Chairman, and thank you to the 

witnesses for being here today. I appreciate your work on something that obviously everybody is concerned about. 

In Colorado, we were able to do a couple of things to detect 

fraud, to fight back against those who would abuse the system. We 

passed legislation that would freeze—you know, pair up benefits, 

the public pension fund. If it was a public employee that was involved, it allowed the board to freeze those assets. We also tried 

to pass legislation that said if you were a contractor, a provider 

that had been convicted of fraud elsewhere, that after a certain 

point you were barred from dealing with the State of Colorado and 

so I want to get into that a little bit for a couple of questions. 

Mr. Spiegel, I wanted to follow up on one of your responses to 

Mr. Griffith. I believe Medicare receives about 4.5 million claims a 

day, and you substantially review every single one of those claims? 

Mr. SPIEGEL. In some way. We verify that the person who sends 

in the bill, for example, is enrolled in Medicare and that the person 

who received the services is an eligible beneficiary. I mean, there 

are automated claims edits that are in place that look at that. 

Mr. GARDNER. How many would you say you substantially review 

that you are actually able to really look at? Because that is all 

automated. I mean, what percentage are you able to actually look 

at to detect—— 

Mr. SPIEGEL. If what you are talking about is do we take an opportunity to collect medical records and make a judgment about the 

clinical conditions that were present and things like that, I don’t 

know the exact percent. I could get back to you with that. 

Mr. GARDNER. That would be great if you would get back to me 

on that. Thank you. 

And then Mr. Spiegel, we have heard that in terms of both durable medical equipment and home health, both are highly susceptible to fraud. What other areas lose a substantial amount to 

fraud? 

Mr. SPIEGEL. Well, in our recent screening rule, the ones that we 

put in the high-level-risk category were newly enrolling suppliers 

and newly enrolling home health agencies and those individuals or 

entities that hit some of the triggers that we put in the rule. There 

are examples of other provider and supplier types that we have uncovered and that the Inspector General’s work has identified that 

maybe not as a class but as individuals have had some problems. 

Mr. GARDNER. And I see in your testimony where you talk about 

delivery system reform, you talk about inflated prices that could 

lead to increased fraud but you have only made reforms in, I believe it was nine areas. Why did you just add those reforms in nine 

95 

areas? If you are overpaying somebody, shouldn’t we reform them 

all? 

Mr. SPIEGEL. The nine areas were in statute. 

Mr. GARDNER. So if they are being overpaid and it is causing 

fraud, do you have an ability to add to those nine areas? 

Mr. SPIEGEL. I don’t know the answer to that. Over time we have 

an opportunity to add to that based on what we learn from our 

work. 

Mr. GARDNER. And the President’s budget 2012 said we are going to recover about $32 billion in fraud. Is that how much fraud there 

is? What percentage of fraud total are we recovering? 

Mr. SPIEGEL. Well, as I mentioned before, we don’t know the 

exact number because the estimates that we have all seen contain 

things that are in addition to fraud. They contain improper payments, they contain administrative errors, they contain both public 

and private sector estimates. Until we can get to one number that 

identifies fraud, which is in a sense a legal determination, we are 

not going to be able to—— 

Mr. GARDNER. At what point is a provider barred from doing 

business with a Medicare and Medicaid provider? 

Mr. SPIEGEL. Well, it would depend on the circumstances. 

Mr. GARDNER. After one time they have been found fraudulent? 

Mr. SPIEGEL. Well, it would depend on, you know—we don’t determine fraud at CMS. That is a law enforcement decision. And if 

somebody has been convicted of fraud, the Inspector General has 

the opportunity to exclude them from the program for a period of 

time. 

Mr. GARDNER. So if somebody is convicted of fraud, are they 

automatically barred? 

Mr. SPIEGEL. Sir, yes, they are. 

Mr. GARDNER. And then are States using that then to bar them 

from their Medicaid programs? 

Mr. SPIEGEL. We are working on that issue right now. I am not 

sure how in depth the State goes with respect to who they exclude 

from their programs. 

Mr. ROY. We have provisions in our recently published rule to 

implement that so that when someone is excluded from Medicare, 

States will be doing the same thing as well as States excluding 

from Medicaid entities or individuals that have been excluded by 

other State Medicaid programs. 

Mr. GARDNER. What happens to the money that you are recovering from fraud? Does that go back into fraud-fighting efforts? 

Mr. ROY. By law, the money that we recover goes right back in 

the Medicare trust fund. 

Mr. GARDNER. So it does not go into additional fraud prevention? 

Mr. ROY. No, sir. 

Mr. GARDNER. I yield back my time. 

Mr. STEARNS. I thank the gentleman, and I thank the first panel 

for their indulgence and forbearance here. 

Ms. DEGETTE. Mr. Chairman? 

Mr. STEARNS. Just let me finish and I will be glad to recognize 

you. 

There was a question, Mr. Spiegel, that was asked of you and 

you did not know the answer concerning the claims per day. I 

96 

thought I would put in the record that Health and Human Services’ 

Bill Corr testified in front of the Senate Finance Committee in October 2009 that CMS gets 4.4 million claims a day with a requirement to pay within 14 to 30 days and they are only able to review 

3 percent of the prepayment. 

The gentlelady from—— 

Ms. DEGETTE. I would just ask unanimous consent to follow up 

on one question. 

Mr. STEARNS. Sure. Go ahead. 

Ms. DEGETTE. Mr. Perez, someone asked you if you needed more 

powers and you said you would like to be able to access claims data 

directly when you are on these investigations. Do you need—is this 

a matter of more authority to be given to you by Congress or is it 

just the procedures that your office is using? 

Mr. PEREZ. I believe it may be an internal issue with the department working with CMS and allowing OIG then to have direct access to that. 

Ms. DEGETTE. If you need more powers, let us know because it 

would seem to us to be good information for you to be able to access. Thank you. 

Mr. STEARNS. I thank the gentlelady. We have another member 

who has joined us. The gentleman from California, Mr. Bilbray, is 

recognized for 5 minutes. 

Mr. BILBRAY. Thank you. 

Mr. Perez, we were talking about the ability to impound. IRS has 

been given that power to impound so why wouldn’t we—if we are 

as serious about making sure that taxpayer funds are going out inappropriately, wouldn’t we at least give you the authority that we 

give to the people who make sure that revenue comes in to the 

Federal Government appropriately? 

Mr. ROY. If I could, sir? 

Mr. BILBRAY. Go ahead. 

Mr. ROY. I am more than willing and happy to look at that particular issue in terms of the ability to impound. We do seize bank 

accounts. It is more in the matter of physical assets but I am more 

than willing to take any additional resources that come my way. 

Mr. BILBRAY. I am just concerned, because you see the disconnect 

that we take income of the revenue very seriously but traditionally 

we haven’t put as much weight on reviewing and oversight and recapturing of assets coming back. 

Ms. King, I appreciate your kind words about the wrongful payment bill. I was one of the authors of that bill, one of the few bipartisan bills that got passed last year, but I don’t think that weight 

has been traditionally applied and I would like to make sure that 

we do it. 

Speaking of the IRS, the fact is, a lot of these people are engaged 

in fraud and abuse. I have to believe as a former tax consultant 

that once they get in the habit of filling out applications for revenue from Medicare and Medicaid inappropriately, I have to believe 

there has got to be more opportunity in there to engage the IRS 

to be able to be involved with this. Remember, it wasn’t the FBI 

that got Al Capone, right? 

Mr. ROY. Sir, you are correct. We work joint cases with IRS/CID 

all the time just for that purpose. 

97 

Mr. BILBRAY. Mr. Spiegel, I have a concern with something you 

said. I know that this is waste, fraud and abuse in here but you 

appear to take wrongful payments as being sort of separate and 

apart from waste, fraud and abuse. 

Mr. SPIEGEL. Well, from fraud. 

Mr. BILBRAY. From fraud? OK. And that is why I want to clarify 

because you will admit the impact to the taxpayer and to the federal family is financially the same between wrongful payment and 

fraud. 

Mr. SPIEGEL. We are against all of us. We are against improper 

payments and fraud and waste and abuse. 

Mr. BILBRAY. OK. So the fact is, is that we need to fast-track 

those items and get it there. 

One of the items that has been brought up is the fact of the use 

of false documentation, identify theft. Now, we usually talk about 

identify theft in different fields, and we have gone around with individual the use of identify fraud to falsify employment opportunities, illegal presence in the country and everything else. But the 

identity fraud issue that we have seen here with your enforcement 

of the ability of somebody to get a driver’s license, get a document 

and use it fraudulently, that has been documented in your enforcement as a vehicle that organized crime or these bad guys are using 

in implementing their fraud to the health care system. 

Mr. PEREZ. Certainly, and in Miami I know that in those instances where we are able to prove that beyond reasonable doubt, 

we certainly are including those in—— 

Mr. BILBRAY. Has Florida implemented the REAL ID bill yet? Do 

you know? 

Mr. PEREZ. That I do not know, sir. 

Mr. BILBRAY. Mr. Chairman, I just think we need to point out 

that that is one bill that we passed how long ago which was basically the number one request of the 9/11 Commission, but we still 

have States that are looking at dragging their feet about using biometrics, and biometrics is one way we could catch these guys. You 

have biometrics through a driver’s license under one name, you do 

the other. Anybody who watches NCIS knows that, you know, we 

have got that computer technology. We have had it in California 

since 1978. That they will get busted coming in, one guy coming 

in as Smith, another guy coming in as Martinez, and we cross-reference those biometrics. So I just want to point out that I think 

that the federal bureaucracy needs to be sensitive that the States 

are the people that provide the IDs in lieu of a federal ID, that 

REAL ID is a way we can secure the system without having to 

have a federal ID and make sure—you know, there is one reason 

why we have got to be serious as federal agents to push that the 

States have to do their part down the line. 

And maybe, Mr. Chairman, our committee can recommend to 

Homeland Security that before we send money to States for homeland security projects that we require that the first priority that if 

States haven’t implemented REAL ID and secured this identification issue that should be the first project used with federal funds 

on Homeland Security, and with that, I yield back, unless anybody 

has a comment on that. 

98 

Mr. STEARNS. All right. I thank the gentleman. That could be 

your piece of legislation. 

So I want to thank the first panel again. We will move to our 

second panel and ask the Hon. Alex Acosta to come up and Mr. 

Craig H. Smith and Ms. Sara Rosenbaum, and I invite all my 

members to stay for the second panel. 

The Hon. R. Alex Acosta is a native of Miami and the current 

Dean of the College of Law at Florida International University. He 

received his law degree from Harvard. He served as a law clerk to 

Justice Samuel Alito, then a judge on the U.S. Court of Appeals for 

the 3rd Circuit. He has been the longest serving U.S. attorney in 

south Florida since 1970, sitting as a Senate-confirmed United 

States Attorney for the Southern District of Florida. 

Our second panelist is Craig Smith. He is a partner of Hogan 

and Lovells. He rejoined the firm in 2008 after serving as General 

Counsel for the Florida Agency for Health Care Administration. 

While serving as the chief legal officer of one of the Nation’s largest 

Medicaid programs, he coordinated frequently with the federal officials at the Centers for Medicare and Medicaid Services and the 

Department of Justice. 

Our third panelist is Sara Rosenbaum, who received her J.D. 

from Boston University Law School. She has played a major role 

in design of national health policy in areas such as Medicare and 

Medicaid, private health insurance and employee health benefits, 

access to health care from medically underserved persons, maternal 

and child health, civil rights in health care and public health. She 

also worked for the White House Domestic Policy Council. 

So I thank all three of you, and we welcome the Hon. Mr. Acosta 

for your opening statement of 5 minutes. Thank you for staying 

with us. 

STATEMENT OF R. ALEX ACOSTA, DEAN, FLORIDA INTERNATIONAL UNIVERSITY COLLEGE OF LAW; CRAIG H. SMITH, 

PARTNER, HOGAN LOVELLS, LLP; AND SARA ROSENBAUM, 

HIRSH PROFESSOR AND CHAIR, DEPARTMENT OF HEALTH 

POLICY, SCHOOL OF PUBLIC HEALTH AND HEALTH SERVICES, THE GEORGE WASHINGTON UNIVERSITY MEDICAL 

CENTER 

STATEMENT OF R. ALEX ACOSTA 

Mr. ACOSTA. Thank you, Mr. Chairman, Ranking Member 

DeGette and distinguished members of the committee. I appreciate 

the opportunity to appear before you to discuss waste, fraud and 

abuse in Medicare and Medicaid. As the chairman mentioned—— 

Mr. STEARNS. Let me just swear you in. If you don’t mind, please 

stand and raise your right hand. 

[Witnesses sworn.] 

Mr. STEARNS. Sorry. Go ahead. 

Mr. ACOSTA. As the chairman mentioned, I served as the United 

States Attorney for the Southern District of Florida from 2005 to 

2009. 

Early in my term, I made the prosecution of health care fraud 

a top priority in my district. I organized in 2006 the South Florida 

Health Care Fraud Initiative. As a result, we became home to the 

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first Medicare fraud strike force in the Nation. The results were 

spectacular but they were also very sad. By 2008, we accounted for 

32 percent of the Nation’s health care fraud prosecutions. 

From fiscal year 2006 through May 2009, we charged more than 700 individuals responsible for more than $2 billion in fraud. That 

is actual fraud charged in criminal indictments. I have heard this 

morning that figure now stands at 3.5 billion. Put differently, those 

$2 billion, which is sometimes hard to imagine so I put it in perbeneficiary terms. That is $1,900-plus per beneficiary in south Florida. 

Numbers alone, though, don’t tell the story. I was very happy to 

hear that some Members are going to do ride-alongs. I wish more 

Members could visit the strike forces. If I was U.S. Attorney and 

if you visited south Florida, I would take you to our facility. There 

we have a wheelchair that we have shown to other interested individuals. That wheelchair was billed again and again and again, the 

same wheelchair not used by patients. We call it the million-dollar 

wheelchair because it was billed that many times. We have boxes 

after boxes of evidence. We have pictures of a pharmacy, and that 

pharmacy is billing thousands, perhaps millions of dollars in expensive brand-name inhalation products. In fact, the pharmacy was a 

broom closet and there was nothing there. 

That level of fraud should absolutely disgust each and every one 

of us. We enjoy one of the world’s best health care systems but we 

often hear of the skyrocketing costs of health care and we worry 

that one day we will not be able to afford quality care. Reducing 

fraud, as you have already mentioned, is, in public parlance, a nobrainer. It should be a bipartisan effort. 

Now, let me say I am proud of the work we did in south Florida 

prosecuting fraud but prosecution is not the solution. We need to 

prevent fraud from happening in the first place. Prosecutions have 

limited deterrence. The sentences, while increasing, are not sufficient. Prosecutions are resource-intensive. Prosecutions rarely recover taxpayer dollars wrongfully paid out in fraudsters. The 

fraudsters for the most part spend the money or send the money 

overseas. Prevention is the preferred approach. 

Think of this as perhaps, analogize fraud to a busy intersection. 

How do you prevent accidents at a busy intersection? Do you post 

a police officer at that intersection and ticket cars after they commit accidents or do you put a red light at that intersection and prevent accidents in the first place? In the same way, we need to prevent fraud in the first place. Prosecutions are not the solution. 

Now, effective prevention requires a lot more than front-end 

screening. Effective prevention requires continuous and proactive 

efforts to identify and stop fraud as it happens. The gentleman 

from Virginia, Mr. Griffith, mentioned the issue of unique IDs. 

Well, Mr. Chairman, Ranking Member DeGette, I assume both of 

you have credit cards. Imagine if you call—you use that credit card 

and you call American Express and you say I just lost my card and 

they say thank you very much, we can’t issue a new card with a 

new number; when you get fraudulent charges, let us know and 

continue to let us know in the future because we cannot cancel 

your card. How long would American Express stay in business? But 

that is the system that Medicare uses. Your Medicare number is 

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your Social Security number, a number that is easily found and a 

number that can then be used to bill in your name and that number cannot be changed. 

Effective predictive modeling is another tool that can assist with 

fraud prevention. An example of how effective this can be comes 

out of south Florida. South Florida in one year was responsible for 

$92 million in Budesonide billings. This is an expensive inhalation 

drug, and inhalation drugs are a large problem in south Florida. 

Well, the Office of Inspector General did a study to look at these 

billings. Seventy-four percent of the beneficiaries for this drug submitted claims that exceeded the 90-day coverage maximum. Any 

private insurance company would say if you exceed a coverage 

maximum, we are not going to pay. Sixty-two percent of those that 

allegedly submitted claims for these drugs in fact hadn’t seen a 

prescribing physician in 3 years. Ten doctors in south Florida were 

responsible for more prescriptions for this drug than all the doctors 

in Chicago combined. Chicago is the next highest billing city. 

These are the kinds of issues that predictive modeling can catch. 

These are the kinds of issues that should be caught. Experience 

shows that prepayment prevention computer models that identify 

billing patterns that stop payments when you see spikes like this 

are the preferable approach. Post-payment pay and chase does not 

work. 

Now, I have heard this morning that CMS is moving away from 

pay and chase, and I think that is a wonderful idea. It is an important issue because we need to catch this before it happens. After 

the fact my former colleagues and good friends at OIG can prosecute with DOJ but that is not going to solve the problem. Thank 

you. 

[The prepared statement of Mr. Acosta follows:] 

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Mr. STEARNS. I thank the gentleman. 

Mr. Smith, you are recognized for 5 minutes. 

STATEMENT OF CRAIG H. SMITH 

Mr. SMITH. Thank you, Chairman Stearns, Ranking Member 

DeGette and distinguished members of the committee. Thank you 

for inviting me to testify today. 

I do want to say at the outset that I am here in my personal capacity and that my views are not necessarily the views of my law 

firm, Hogan Lovells, or any of the firm’s clients. 

I was asked to appear today to share with you my views of ways 

we can detect and prevent Medicare and Medicaid fraud and abuse 

based principally on my time serving as General Counsel of Florida’s Medicaid program which as you have heard operates one of 

the Nation’s largest Medicaid programs in this country. 

Now, we have certainly heard this morning about the serious 

problems that have plagued the Medicare and Medicaid programs 

in terms of fraud, waste and abuse. The real concern is that the 

expenditures under both programs as shown by the chart that is 

on the screen before us today are set to significantly increase over 

the next 10 years, and this means that there is an even greater 

number of bad actors who will look for ways to defraud these programs. 

In the past 10 to 12 years, Florida officials realized that the rapidly rising costs of the Medicaid program were threatening the 

State’s long-term financial health, and they began focusing on prepayment fraud and abuse prevention. That is going to be a recurrent theme you are going to hear with me as you heard from Mr. 

Acosta and others today. 

Florida officials also began administering the Medicaid program 

more like a private health insurer would do. Medicare, in contrast, 

has for the most part continued along the ‘‘pay and chase’’ approach, as we have heard, and that made Medicare an especially 

easier target for fraudsters, especially in south Florida, as compared to Medicaid. 

The recent sting operation involving 700 federal and State law 

enforcement officials across the country to apprehend 111 suspected health care fraud criminals was impressive but it shows 

that at a rate of about seven law enforcement officials to every one 

person arrested, the postpayment is inefficient and highly expensive. 

In the written remarks I submitted to the subcommittee, I offered several recommendations for preventing fraud and abuse in 

these programs. For purposes of my testimony today, I would like 

to highlight three of those that have been very effective in Florida’s 

Medicaid program. Number one, the first recommendation is that 

the programs need to better control the provider enrollment process 

and provider network process. You heard Ms. King testify this 

morning from the GAO that the Medicare program is an ‘‘any willing provider’’ program. This is a problem because bad actors should 

not be able to gain access to the program. One of the most egregious stories involves a Miami man who served 14 years in prison 

for murder and then recently purchased a medical supply business 

for $18,000 and proceeded to bill the Medicare program for over 

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$500,000 in false claims. Now, he was eventually arrested but that 

was only after he was charged with murdering another person and 

dismembering that person. This is the type of person we should not 

have in any of these programs and a better provider screening and 

enrollment process would catch that. 

The other thing I want to highlight about the provider network 

process, going back to this ‘‘any willing provider’’ approach in Medicare is despite some misconceptions, there is no constitutional right 

for anyone to be a Medicare or Medicaid provider. There are entitlements for the beneficiaries but there is not a constitutional right 

to be a provider in these programs. Florida understands that in its 

Medicaid program and has added ‘‘without cause’’ termination provisions in its Medicaid provider agreements. These allow the program to very quickly get bad actors out of the program or people 

we don’t need in the program whereas the Medicare program has 

really struggled expelling bad actors. 

The second recommendation I have for the subcommittee is that 

the programs should consider shifting away from fee-for-service reimbursement methodologies that are ripe and very susceptible for 

fraud and abuse and move toward other payment systems including managed care. Risk-based managed care companies have a financial incentive to detect and prevent provider fraud and abuse 

in these programs. They could be a helpful partner to the government in stopping provider fraud and abuse and saving taxpayer 

dollars. 

My third recommendation is that the programs, as Mr. Acosta 

said, should use predictive modeling and other analytical technologies. Prepayment predictive modeling has been used to analyze 

health care claims for many years but in the past its effectiveness 

has been hampered by the inability to limit false positives and 

produce focused, actionable results. Well, those technologies have 

significantly improved and so today, just as the credit card industry is able to send its cardholders an instant text message or alert 

if there is a suspected fraud transaction, the Medicare and Medicaid program ought to be able to do that up front, and as Agent 

Perez testified this morning, it would be great if they could do that 

in real time as the claims are coming in. In 2008, Medicare paid 

home health agencies in south Florida over $550 million just to 

treat patients with diabetes, and that is more than was paid to 

every other locale in the entire country combined. Predictive modeling can stop that. 

So we have heard that the fraud, waste and abuse program is 

very real and I applaud the committee for having this hearing 

today. If we focus on prepayment for prevention, that is the way 

to best protect taxpayer dollars, and I welcome any questions you 

might have. Thank you. 

[The prepared statement of Mr. Smith follows:] 

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Mr. STEARNS. Thank you. 

Ms. Rosenbaum, you are welcome for 5 minutes your opening 

statement. 

STATEMENT OF SARA ROSENBAUM 

Ms. ROSENBAUM. Thank you, Mr. Chairman, Ranking Member 

DeGette, committee members. 

You have heard so much information this morning that what I 

would like to focus my comments on has to do with a question that 

arose during the question-and-answer period that I think merits a 

closer look, which is the extent to which fraud and abuse are issues 

in private insurance, not only in private insurance but actually 

fraudulent and abusive activities by private insurers. 

One of the great things, in my view, about the Medicare and 

Medicaid programs is that they are public programs and so we are 

able to know a lot as evidenced by the testimony this morning 

about the extent to which fraud, waste and abuse may be happening in the programs. They are extensively studied. There are 

many, many reports. You have made many incredibly important investments in curbing fraud, waste and abuse in Medicare and Medicaid and those investments have begun to yield real benefits. We 

know very little actually about fraud, waste and abuse in private 

insurance. We do know that since 1995, according to at least some 

studies, 90 percent of health insurers have begun to institute more 

significant antifraud efforts. Clearly, they have concluded that they 

are experiencing some of the very same problems in their payment 

systems that Medicare and Medicaid are experiencing in their payment systems. 

I would note that one factor about the Medicare and Medicaid 

programs that may make them slightly more susceptible to fraud 

and waste and something that I think would be very hard to remedy, even were the entire Medicare and Medicaid system changed, 

is the nature of the beneficiaries. A lot of studies show that fraud 

generally is more concentrated in communities and among populations who are extremely poor, extremely disadvantaged and much 

more vulnerable to fraud. Whether they were given public insurance or a voucher to buy private insurance, in communities with 

high concentrations of poor and vulnerable populations, this is an 

issue and the investment of federal resources and State resources 

in protecting them against fraud is enormous. 

I think there is something else that is worth mentioning, and 

that is when we see fraudulent behavior by the insurance industry 

itself, and there are actually three kinds of fraud behaviors that I 

think are worth thinking about as you contemplate further efforts 

to try and reduce and prevent fraud. The first of course is Medicare 

Advantage marketing abuses. They are extensively documented. A 

simple Google search of Medicare Advantage marketing abuses 

shows thousands of reports. One of the most interesting is a study 

in rural Georgia. A group of public health students, near and dear 

to my heart, since I am a professor of public health, took on as a 

summer project in an effort to try and uncover marketing abuses 

in rural Georgia by Medicare Advantage salesmen going door to 

door. I would note that one of the best Web sites on the problem 

and what can be done about it is found in the Texas Department 

125 

of Insurance, so this is something the State insurance departments 

are aware of. 

A second kind of abuse is an abuse in which a health insurer negotiates deep, deep, deep provider discounts, fails to disclose those 

discounts among its network providers to enrollees who then instead of paying what they think is a 20 percent coinsurance rate 

are paying coinsurance rates that are in some cases actually even 

more than the fee that was paid to the provider. And a third type 

of abuse, one that was disclosed by Attorney General Cuomo, is the 

abuse that we saw in the Ingenix cases in which out-of-networkprovider payment standards are manipulated, reduced and enrollees who thought they had out-of-network coverage are in fact 

gouged and made to pay very high balance bills. 

Now, these issues, I think, are important to focus on as we move 

into a time when tax subsidies are flowing into the purchase of private insurance products and health insurance exchanges and other 

locations, and so my strongest recommendation to the committee 

would be to consider further steps to empower investigation of insurer fraudulent and abusive behavior. Thank you. 

[The prepared statement of Ms. Rosenbaum follows:] 

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Mr. STEARNS. Thank you. 

Now I will start with questions. I just note, Ms. Rosenbaum, that 

you had indicated your strong support of the public sector but the 

public sector, Mr. Spiegel could not tell us at all how much fraud 

is in the Medicare system but I can assure you that in the private 

sector they would go out of business if they couldn’t answer that 

question on a continual basis. They would go out of business. 

Mr. Smith has outlined three ways he thinks he can prevent 

waste, fraud and abuse, and of course, the predictive modeling 

using computers was one that you mentioned, Mr. Acosta, too. Do 

you agree or would you add to the three that Mr. Smith mentioned 

I thought were pretty incisive? Are there any other ones you would 

suggest? 

Mr. ACOSTA. I would agree with that and I also would like to 

support a prior comment made about the importance of data access. One of the ways that we were able to bring as many cases 

as we did in south Florida is, we employed a nurse practitioner 

that had access to not real-time data because we couldn’t obtain 

that but fairly recent data to look for billing spikes, and we did 

that ourselves rather than have the HHS OIG agents defer to 

CMS. That kind of integrated data is very important and I would 

like to support Mr. Perez’s request. 

Mr. STEARNS. Mr. Acosta, Mr. Smith, do you think we should 

have Medicare issue something besides a Social Security number so 

that they could actually, when a person calls and said listen, there 

is fraud in my billing here, instead of saying well, just keep alerting us, do you think we should change that? Because that was not 

one that either one of you suggested and that has been mentioned. 

Mr. ACOSTA. Well, let me—you know, let me apologize because 

I thought I had referenced that. I think it is absolutely critical. As 

U.S. Attorney, we would get calls on a weekly basis from individuals saying we have two legs yet Medicare is paying for a prosthetic leg. Medicare says they can do nothing about it. 

Mr. STEARNS. In the 60 Minutes expose ́, there is a woman there 

who said for 6 years she called for artificial limbs, artificial legs, 

6 years and Medicare did nothing. 

Mr. ACOSTA. Mr. Chairman, how long would American Express 

be in business if—— 

Mr. STEARNS. That is what I mean. 

Mr. ACOSTA [continuing]. When you would call and say I lost my 

card, they say we can’t help you. 

Mr. STEARNS. Are either one of you concerned that here we are 

expanding the Medicaid program by 20 million people under 

Obamacare and federal spending on Medicare and Medicaid will 

rise from $900 billion in 2010 to almost $2 trillion in 2019? Are you 

concerned that, you know, unless we implement these things that 

obviously we are going to have more fraud? 

Mr. ACOSTA. From my perspective, I think, you know, it is critical that Medicare and Medicaid spend money to modernize their 

system. That involves unique IDs, not the Social Security number. 

That involves predictive modeling. Again, credit cards, if your 

spending patterns deviate at all, they call you up. Why can Medicare not do the same thing? 

139 

Mr. STEARNS. Are you familiar with what the Medicare prevention fraud in the ACA does? Are either one of you, Mr. Smith or 

Mr. Acosta? Do you think they would help pay for the cost of this 

Medicare expansion and Medicaid expansion just based upon what 

you see in the bill, or do you know what is in the bill? 

Mr. SMITH. I certainly am aware of some of the provisions in the 

bill. I think one of the big concerns is we heard testimony today 

from the OIG saying that the current problem, current Medicaid 

and Medicaid fraud problem with the current population of beneficiaries we have exceeds, in his estimate, $7 billion. So even if you 

took the CBO’s suggestions that the additional funding in the federal health reform legislation could help save $6 billion or $7 billion, that is barely enough to get close to the estimates of what the 

OIG says is the problem today. 

Mr. STEARNS. Excellent point. 

Mr. Acosta, anything you would like to add? 

Mr. ACOSTA. Yes. I would add to that that most of the—I assume 

you are referring to the ACA, most of the ACA focuses on screening 

measures, licensure checks, background checks, site visits, which 

are important. But, you know, it is not enough. You need to actually review claims as they come in using predictive modeling. You 

need to have prepayment screening of claims. 

Mr. SMITH. And Chairman, I would echo that and say that that 

is why I really think it is important as part of the Small Business 

Jobs Act, that is where the predictive modeling legislation was 

added. It is not part of the original federal health reform legislation 

and so I think that predictive modeling and analytical technology—— 

Mr. STEARNS. It is hard to believe. So the predictive modeling 

using computers is not part of the prevention program in 

Obamacare right now. Is that the way you understand it? 

Mr. SMITH. Well, I think that the federal health reform legislation does ask and does provide for additional technologies to be 

used but the predictive modeling piece and the key piece for prepayment—— 

Mr. STEARNS. Is not there. I am just going to close by asking you 

quickly, in your opinion, do you think organized-crime involvement 

in Medicare and Medicaid has been, you know, pretty prevalent in 

south Florida? Have you seen a lot of organized-crime figures engage in Medicare fraud? 

Mr. ACOSTA. I certainly have. If I could just clarify a small point. 

The Small Business Jobs Act of 2010 did have authorization for 

predictive modeling. HHS is looking at this. But the authorization 

was put in a separate provision. 

With respect to organized crime, I think it is a clear method by 

which organized crime makes money. It is highly profitable. We are 

talking not millions but billions of dollars, $2 billion in actual 

charged criminal indictments. That is not all of it that is on the 

street. That is simply what we proved in court in south Florida 

alone. One of the frustrations is when you take down an operation, 

when you do these national stings, you get the nominee owners, the 

individuals that are being paid a little bit of money so their name 

can be used but they are not really the brains behind the operation 

140 

and so you need to go up the chain just like you do in organized 

crime. 

Mr. STEARNS. All right. My time is expired. The gentlelady from 

Colorado. 

Ms. DEGETTE. Thank you so much, Mr. Chairman. 

So Mr. Acosta, what you are saying is, in fact Congress did pass 

the predictive modeling, the prepayment information, it was just 

not in the same bill as Affordable Care Act, correct? 

Mr. ACOSTA. Correct. If memory serves, I believe Senator—I don’t 

know in the House but the Senate side Senator LeMieux added 

it—— 

Ms. DEGETTE. So it is in the law now, we can do that, right? 

Mr. ACOSTA. HHS has the authorization if they choose to use it. 

Ms. DEGETTE. The authorization. Now, both of you, I really— 

well, actually I want to thank all three of you for your testimony 

because I thought it all gave good, different perspectives on how we 

can target waste, fraud and abuse, and as we said with the last 

panel, we are all interested in rooting out waste, fraud and abuse 

in every part of the system. One of the new tools that we talked 

about that is in the Affordable Care Act and that CMS and HHS 

are using is this preventative approach so that we are moving 

away from the ‘‘pay and chase’’ model to the model that emphasizes 

keeping criminals out of the system to begin with, and I would assume, Mr. Acosta, you would agree with that approach, correct? 

Mr. ACOSTA. I entirely agree that the ‘‘pay and chase’’ is a bad 

approach and that we need to move—— 

Ms. DEGETTE. Thank you. 

Mr. Smith, would you agree with that? 

Mr. SMITH. Absolutely agree that is not a good approach. 

Ms. DEGETTE. You don’t think that the preventative approach is 

a good approach, or you don’t think that ‘‘pay and chase’’ is a good 

approach? 

Mr. SMITH. ‘‘Pay and chase’’ is a terrible—— 

Ms. DEGETTE. Is a bad approach? 

Mr. SMITH. Yes. 

Ms. DEGETTE. And what about you, Ms. Rosenbaum? 

Ms. ROSENBAUM. I agree that prevention is the best approach. 

Ms. DEGETTE. OK. Now, Mr. Smith, you testified, this was really 

quite shocking to me. You said that there is ‘‘any willing provider’’ 

rule which would allow even people with murder convictions to become a provider. Here is my question. Is that under statute or is 

that just under practice? 

Mr. SMITH. Well, Ms. King testified this morning referring to the 

‘‘any willing provider’’ rule. 

Ms. DEGETTE. Yes. 

Mr. SMITH. Basically, CMS’s approach historically has been to let 

providers in unless they clearly had an issue in the screening process that CMS caught, and they weren’t very good historically at 

catching those problems. 

Ms. DEGETTE. OK. So do you think that there are some criteria 

that we could pass that would be absolute barriers, like, for example, a felony conviction where you would say, you know, you are 

just—because I know they use their discretion so they could reject 

somebody for having a felony conviction. Are you saying that it 

141 

would be a good idea for us to pass a bright line of certain criteria 

that they just couldn’t consider somebody if they met those criteria? 

Mr. SMITH. Certainly, and there are certain criteria in statute 

that are bright lines but I would say that it goes beyond just felony 

convictions. It also goes to operating your provider network like an 

insurance company would, which is, if we have too many home 

health agencies in Miami-Dade, regardless of whether we think a 

particular provider is fraudulent, we shouldn’t let more agencies in 

the program. 

Ms. DEGETTE. Yes, I agree with that, but that is not a bright 

line, that is sort of a discretionary criterion, and that is what I am 

asking you. So if any of you actually think that there are additional 

bright-line criteria we should put in statute, we would appreciate 

it if you would supplement your answers and provide that to us because I agree too, those kind of outrageous things should not happening and sometimes I do think they slip through the cracks. 

Now, Mr. Acosta, you testified that one thing that would be really helpful would be using these unique IDs, not using Social Security numbers, correct? 

Mr. ACOSTA. Correct. 

Ms. DEGETTE. Mr. Smith, do you agree with that, that that 

would be a good way to improve the system and to decrease fraud? 

Mr. SMITH. Yes. 

Ms. DEGETTE. And Ms. Rosenbaum, do you agree with that too? 

Ms. ROSENBAUM. I do. 

Ms. DEGETTE. I think that is a really great idea, and I appreciate 

you bringing that up. I guess that is all the questions I have. I 

yield back. 

Mr. STEARNS. I thank the gentlelady. 

Mr. Murphy from Pennsylvania is recognized for 5 minutes. 

Mr. MURPHY. Thank you, and thank you to the panel. This is 

very enlightening. 

Mr. Acosta, you were talking about—a couple of you, you and Mr. 

Smith were talking about issues involved with prevention versus 

chasing. Do we have any estimate of the costs involved with bringing a Medicare or Medicaid fraud case to justice, from bringing 

charges to jail time? 

Mr. ACOSTA. The costs, well, I can tell you that in my office, I 

received a line item of about $1 million that I supplemented with 

about $2.5 million of my own discretionary spending and so I spent 

about $3.5 million per year to prosecute cases. Now, that does not 

include the costs of the agents from HHS, OIG and FBI. 

Mr. MURPHY. Do you have any kind of ratio to make decisions 

with regard to whether or not to prosecute a case, if it is less than 

$1 million or so and it is going to cost you $3.5 million? 

Mr. ACOSTA. We have cutoffs all the time. We don’t like to discuss them publicly but obviously you have more cases than you can 

imaginably prosecute and so you go after the larger cases, and that 

is a problem and every now and then we prosecuted some smaller 

fraudsters because you don’t want to send the message that if you 

stay below a certain number you get away with it. 

Mr. MURPHY. What would the cost of prevention be? 

142 

Mr. ACOSTA. The costs of prevention at the end of the day I think 

are much lower and much more effective. Computer programs that 

screen, for example, inhalation drugs in south Florida. Budesonide 

that I mentioned is just one but there are a number of other inhalation drugs. In one year, Miami-Dade County received $93 million 

in billings. The next highest billing city was Cook County with $2.7 

million. That is a red flag if I have ever heard one. That is the kind 

of issue that should be caught by a computer program, and if you 

can prevent those $93 million and reduce it to the size of Chicago 

of $2.7 million, that is $90 million that you are preventing right 

there. 

Mr. MURPHY. Thank you. 

And Mr. Smith, on the ‘‘any willing provider’’ issue, how do you 

recommend we define providers? Obviously we don’t want to stop 

people who want to start a business who are legitimate about it but 

should it involve such things as the ranking member was talking 

about something alone the lines of a criminal background check requirement or would these be people who would be at a higher level 

of screening for their first year or two? Would they be specifically 

licensed on some other level to begin with, probationary? Do you 

have any recommendations for that? 

Mr. SMITH. There already exists in law provider screening requirements that would look at convictions, different things in the 

person’s past, and CMS did just recently come out with a final rule 

regarding provider screening enrollment and what they have done 

is try to tier the risk areas so a provider seeking or a person seeking to open up a new Medicare-certified durable medical equipment 

company, a home health agency or perhaps an infusion clinic would 

be tiered in a higher risk category and perhaps be screened closer 

than someone hoping to open up a new hospital, and I think that 

is a wise idea. 

Mr. MURPHY. Do you think with regard to these issues, and you 

are familiar with Florida. I don’t know if you heard my questions 

before regarding the questions of the Cuban government’s role in 

this. Would we have picked up on this? Is there any thought that 

we might pick up when another country is involved perhaps in organized crime? 

Mr. SMITH. I think from a Medicaid perspective, part of it goes 

to not only to making sure you screen for certain bad actions in 

their past but also making sure you collect enough data to get the 

people on the applications so that you know what the links are, 

and one of the things that is beneficial about the predictive modeling is not just the claims analysis but also it has the capability 

of doing what I call social network analytics so you can basically 

see which people who have had an experience with a fraudulent enterprise have links to other people that you might not be aware of, 

might not have their names in any applications but they are operating in clusters and they sort of swarm around like bees with patients and defraud the program. That type of technology has great 

opportunities for us to save money. 

Mr. MURPHY. Mr. Acosta? 

Mr. ACOSTA. Congressman Murphy, thank you. If I could, you 

asked earlier, you referenced the list of OIG’s most wanted, and 

based on public information, my understanding is that a majority 

143 

of these individuals are in fact in Cuba. One of the issues that we 

had early on was that defendants were being granted bond by federal judges on the theory that because they were Cuban nationals, 

they could not return to the island of Cuba, and in fact, they were 

then jumping bond and we had a law enforcement problem. Since 

then federal judges have actually stopped using the fact that someone may not flee to Cuba as a reason to grant bond because of reduced risk of flight because in fact the risk of flight to Cuba is high 

because Cuba welcomes the hard currency that they receive from 

these individuals. 

Mr. MURPHY. Thank you very much. 

Thank you, Mr. Chairman. 

Mr. STEARNS. The gentleman from Virginia is recognized, Mr. 

Griffith, for 5 minutes. 

Mr. GRIFFITH. Thank you, Mr. Chairman. I do think that is very 

interesting. So even if the Cuban government is not involved, they 

still welcome these folks in because they are bringing cash with 

them? 

Mr. ACOSTA. They certainly welcome them in. There is some evidence that shows that there is governmental involvement as well 

but that is based on University of Miami reports. 

Mr. GRIFFITH. Interesting. 

Professor Rosenbaum, I am just trying to do some things on 

background, and I would just ask you some questions, if I might. 

I see that you have listed some government contracts on your 

Truth in Testimony form, and I am just wondering if you could tell 

me what those contracts involve. 

Ms. ROSENBAUM. Sure. I am a law professor at George Washington University and I am the chair of the department of health 

policy in the medical center, and I am the principal investigator on 

a contract that provides analytical support to what is now I guess 

the center—as opposed to DCIIO, it’s CCIIO—to review and summarize the comments for the requests for comments and the notices 

of proposed rulemaking related to health insurance exchanges. 

Mr. GRIFFITH. OK. And so they don’t have somebody in-house 

that is doing that? 

Ms. ROSENBAUM. Oh, I am sure they must review as well but we 

do policy support work for the department and have under federal 

contracts for administrations since 1991. 

Mr. GRIFFITH. Yes, ma’am. And is there anything else you are 

working on with HHS or CMS in regard to the Affordable Care Act 

and the regulations? 

Ms. ROSENBAUM. I have no other contracts in which I am the investigator, no. 

Mr. GRIFFITH. All right. I appreciate that. Thank you, ma’am. 

Mr. Chairman, I yield back my time. 

Mr. STEARNS. The gentleman yields back his time. I think we are 

all through. I am getting ready to close. I did have one follow-up 

for Mr. Smith. I think you talked about, or maybe it was Mr. 

Acosta, about using a data access process to cut fraud. I wasn’t 

quite sure, because Inspector General and GAO can go in and look 

at these statistics to get—who were you talking about when you 

talked about data access? 

144 

Mr. ACOSTA. One of the issues that we had early on in south 

Florida for the health care fraud initiative that later became the 

strike force, we set up a separate location where we collocated the 

agents and the prosecutors to focus on this. At the time I had requested that everyone have access to the billing data so they could 

look for aberrant billing patterns. We were finally able to obtain access to some data and that was restricted in appropriate ways at 

the time. 

Mr. STEARNS. So you want law enforcement agents—— 

Mr. ACOSTA. Absolutely. 

Mr. STEARNS [continuing]. And the prosecutors to have access to 

this data prior to—while they are investigating a crime? 

Mr. ACOSTA. As the data comes in, give law enforcement access 

to the CMS systems, protect privacy but give us access to the billing patterns so we can catch the fraudsters in the act. 

Mr. STEARNS. Would you need to go to a judge to get access? Or 

you just want to be able to have access to it? 

Mr. ACOSTA. Correct. Yes. 

Mr. STEARNS. So you could call up the Health and Human Services and say we have this particular case, this particular modeling, 

we want you to give us access so we can look at the data? 

Mr. ACOSTA. Not call up HHS but actually put your investigators, have the—we have a facility in south Florida. We would like 

a computer terminal there where we can go and see billings for X 

drugs spiked by 300 percent in the past month for these five providers. Well, maybe that is a reason we should investigate those 

five providers. 

Ms. DEGETTE. Will the gentleman yield? 

Mr. STEARNS. Sure. I would be glad to yield. 

Ms. DEGETTE. Is that a legal barrier that you couldn’t get the 

data or is that an agency policy that prevented you from getting 

the data? 

Mr. ACOSTA. In all candor, I am uncertain whether it is legal or 

bureaucratic. I just know it is a barrier. 

Ms. DEGETTE. As I said to the previous panel, I think that is 

some data that would be really helpful in these investigations, so 

if you can try to figure that out and supplement your answer, then 

we can know what we need to do to help expedite that. 

Thank you, Mr. Chairman. 

Mr. STEARNS. Thank you. Let me conclude by—oh, good. We have 

another member came back. The gentleman from Texas, Dr. Burgess, is recognized. 

Mr. BURGESS. Thank you, Mr. Chairman. Actually, I have been 

watching off the floor. I have a couple of constituents that are here. 

They are both serving their country, so I am making some time for 

them while this hearing is going on. 

Let me just ask a question, Ms. Rosenbaum—well, actually I 

want to ask it of Mr. Smith, but Ms. Rosenbaum made an observation that we should empower more investigation of fraudulent insurance behavior but Mr. Smith, some of your testimony to me indicated that you didn’t feel that it was necessary to have the same 

focus. Would you care to expound upon that? 

Mr. SMITH. I think what I said came at maybe a slightly different 

angle. I said one of my recommendations was that the Medicare 

145 

and Medicaid programs continue to move away from a fee-for-service-based system and more toward other payment systems such as 

managed care and also to operate the programs more like a private 

insurer would. I guess it might be interesting historically to hear 

what percentage private insurers have suffered in fraud and abuse 

but that goes to their bottom line, it doesn’t go to taxpayer dollars. 

What the Medicare and Medicaid programs need to do is focus on 

protecting taxpayer dollars, and if you engage an outside managed 

care company and you pay them risk-adjusted rates, they have the 

financial incentive to stop provider fraud and abuse. If they don’t, 

it goes to their bottom line. It doesn’t hurt taxpayer dollars any 

further. 

Mr. BURGESS. Yes, and that is interesting that you say that. 

When was this? June of 2009, you may be familiar with an article 

published in the New Yorker by Atul Gawande, and it was important to me because he was talking about Texas. I should point out 

that Texas today is 175 years old. It was 175 years ago this morning that Texas declared its independence and became an independent country. But that is another story. 

Part of Dr. Gawande’s investigation in south Texas led him—I 

don’t know that he came right out and said it but he certainly implied that overutilization and overbilling of Medicare was rampant 

within the medical community in McAllen. So it bothered me. I 

know a lot of doctors, or I know some of the doctors who work 

there. We work together on border issues. So I took a trip down to 

McAllen to see for myself on the ground if I could what was going 

on, and just the point you make, Mr. Smith, was you don’t see the 

headlines in the paper that Aetna Life and Casualty has been defrauded of 15 wheelchairs. It just doesn’t happen. It is always 

Medicare, Medicaid and SCHIP. It is always the public side. 

Now, Ms. Rosenbaum has some issues with private insurers, and 

I get that, but here we are talking about the actual delivery of 

care, and appropriately, it never seems to happen on the private 

sector, or if it does, perhaps they just don’t talk about it the same 

way we do on the public side. But is that your observation as well? 

Mr. SMITH. It has certainly been a prevalent problem in both programs. There was a report recently that in 2009 the Medicare program paid for over 420 million claims for mental health in Florida 

alone, which was four times higher than the amount paid in Texas 

and 635 times higher than the amount paid in Michigan, and to 

paraphrase Carl Hiaasen, who is a funny novelist out of Florida, 

he said no matter what you think of Floridians, there is no way 

that we are four times crazier than Texans, respectfully, Congressman. 

Mr. BURGESS. Well, exception taken. Yes, I was going to suggest 

perhaps they need to move to Texas and that would solve our problem. 

Well, it is just—you know, it raises an important issue. What is 

happening on the private side that prevents the same problems 

that are happening on the public side. Now, we talked a little bit 

about the payment error rate, and Ms. Rosenbaum, some of that 

is truly just a coding error. Someone makes a mistake when someone comes in and they write the code down and that goes into the 

payment error rate, correct? 

146 

Ms. ROSENBAUM. Absolutely. 

Mr. BURGESS. But that error rate of 9.4 percent or whatever was 

quoted to us, that is not predominantly made up of honest mistakes made in tallying up the office visit. Is that correct? 

Ms. ROSENBAUM. I am not sure I understand the question. 

Mr. BURGESS. Well—— 

Ms. ROSENBAUM. You mean of the total amount? 

Mr. BURGESS. Yes. How much is just simple coding errors 

that—— 

Ms. ROSENBAUM. I couldn’t begin to answer the question. 

Mr. BURGESS. It wouldn’t these two guys that were on the panel 

earlier with their handcuffs and nightsticks? Just wouldn’t be involved, right? The amount of the error rate that is just attributable 

to simple coding errors is likely pretty small out of that 9.4 percent? 

Ms. ROSENBAUM. I truly don’t know. I have only seen the numbers aggregated. 

Mr. BURGESS. Well, let us even say this. Let us say it is that 

high for just simple coding errors. Doesn’t that tell us something 

about how we should be approaching this problem, that if nothing 

else, perhaps some education of doctors and nurses and clinics 

about how to code properly would be part of what should be happening at the level of CMS? 

Ms. ROSENBAUM. Yes. I think anything and everything that can 

be done to clarify how to bill, how to file appropriate claims—— 

Mr. BURGESS. I don’t have any data on it but I would suspect 

that number is very low, because as you recall in the late 1990s, 

there were all of these compliance audits, and I know because I 

was in practice at the time, and they were very, very severe, and 

yes, you could be put in jail, so I am just telling you I think that 

number of actual coding errors of that 9.4 percent is in fact very 

small because most physicians and nurses and nurse practitioners 

do not want to undergo that type of scrutiny because we all had 

to go through those compliance audits, we all had to put forward 

what we were doing in our offices to prevent that from happening. 

Mr. Chairman, I see I have gone over my time. Thank you for 

the indulgence. 

Mr. STEARNS. All right. I thank the gentleman. 

By unanimous consent, we would like to put the document binder 

into the record, and I will conclude by saying the purpose of Oversight and Investigations is to ferret out details. You have done an 

excellent job, the second panel here. We are going to recommend 

to the Health Subcommittee on Energy and Commerce a lot of the 

recommendations that have come out of this hearing and that is 

the purpose, and hopefully they will have a hearing and follow up 

with legislation. I know the Democrats think a lot of these suggestions you have made are part of Obamacare but I am not sure they 

all are, and obviously changing the Social Security number so a 

person can have a Medicare ID number that you seem to all agree 

upon is something that we should look at quickly. 

So with that, the—— 

Mr. BURGESS. Mr. Chairman, just a point of personal privilege, 

can I recognize two of my constituents? 

Mr. STEARNS. Sure. 

147 

Mr. BURGESS. Captain Dambravo and Captain Dambravo were 

visiting me today during the hearing, and I want to thank them 

for their service to their country. If I can further relate, my relationship with Captain Dambravo goes back some time. Without violating HIPAA, I delivered him 27 years ago. Thank you both for 

being here with us today. 

Mr. STEARNS. Thank you for being here. 

And with that, the subcommittee is adjourned. 

[Whereupon, at 1:02 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

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