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75–217 PDF 2012

S. Hrg. 112–661 

SAVING TAXPAYER DOLLARS BY CURBING WASTE 

AND FRAUD IN MEDICAID 

HEARING 

BEFORE THE

FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

JUNE 14, 2012 

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

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 

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(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

MARK BEGICH, Alaska 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JERRY MORAN, Kansas 

MICHAEL L. ALEXANDER, Staff Director 

NICHOLAS A. ROSSI, Minority Staff Director 

TRINA DRIESSNACK TYRER, Chief Clerk 

JOYCE WARD, Publications Clerk and GPO Detailee 

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT 

INFORMATION, FEDERAL SERVICES, AND INTERNATIONAL SECURITY 

THOMAS R. CARPER, Delaware, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

MARK L. PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

MARK BEGICH, Alaska 

SCOTT P. BROWN, Massachusetts 

TOM COBURN, Oklahoma 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

JOHN KILVINGTON, Staff Director 

WILLIAM WRIGHT, Minority Staff Director 

DEIRDRE G. ARMSTRONG, Chief Clerk 

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(III) 

C O N T E N T S 

Opening statements: Page 

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

Senator Brown .................................................................................................. 5 

Prepared statements: 

Senator Carper ................................................................................................. 39 

Senator Brown .................................................................................................. 43 

WITNESSES 

THURSDAY, JUNE 14, 2012 

Peter Budetti, M.D., J.D., Deputy Administrator and Director for Program 

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

Douglas Porter, Director, Washington State Health Care Authority .................. 11 

Douglas Wilson, Inspector General, Health and Human Services Commission, 

State of Texas ....................................................................................................... 12 

Carolyn Yocom, Director, Health Care, U.S. Government Accountability Office ......................................................................................................................... 14 

Ann Maxwell, Regional Inspector General for Evaluation and Inspections, 

Office of the Inspector General, U.S. Department of Health and Human 

Services ................................................................................................................. 15 

ALPHABETICAL LIST OF WITNESSES

Budetti, Peter, M.D., J.D.: 

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

Prepared statement .......................................................................................... 45 

Maxwell, Ann: 

Testimony .......................................................................................................... 15 

Prepared statement .......................................................................................... 74 

Porter, Douglas: 

Testimony .......................................................................................................... 11 

Wilson, Douglas: 

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

Prepared statement .......................................................................................... 58 

Yocom, Carolyn: 

Testimony .......................................................................................................... 14 

Prepared statement .......................................................................................... 68 

APPENDIX 

Chart referenced by Senator Carper ...................................................................... 85 

Chart referenced by Senator Carper ...................................................................... 86 

Chart referenced by Senator Carper ...................................................................... 87 

Chart referenced by Dr. Budetti ............................................................................. 86 

Questions and responses for the Record from: 

Dr. Budetti ........................................................................................................ 89 

Mr. Wilson ......................................................................................................... 102 

Ms. Yocom ......................................................................................................... 103 

Ms. Maxwell ...................................................................................................... 105 

CMS Settlement Issues ........................................................................................... 106 

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(1) 

SAVING TAXPAYER DOLLARS BY CURBING 

WASTE AND FRAUD IN MEDICAID 

THURSDAY, JUNE 14, 2012 

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

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:04 a.m., in 

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

Carper, Chairman of the Subcommittee, presiding. 

Present: Senators Carper, Brown, and Coburn. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. Good morning, everyone. The hearing will come 

to order. Actually, the hearing is in order. This is the quietest 

group I have seen or heard in quite a while. In fact, I hear nothing 

out there. If I closed my eyes, I would think I was here by myself. 

But we are glad you are all here; especially I want to welcome our 

witnesses. 

As you know, today’s hearing will focus on one of our Nation’s 

critical safety net programs, and that is Medicaid—the partnership 

between our States and the Federal Government—and the steps 

that must be taken to help further reduce waste and fraud and improve efficiency and effectiveness as well. 

A combination of Federal and State funding, as we all know, 

pays for Medicaid, though States take the lead in administering 

the program. Over the last year, State governments paid approximately $404 billion to care for some 70 million beneficiaries. These 

numbers are expected to grow in the coming years as the Affordable Care Act expands access to Medicaid for millions of additional 

Americans. And as we all know, both the Federal and State governments have struggled with record budget deficits in recent years. 

Today our national debt stands at just a bit over $15 trillion, well 

over double what it was just a decade ago. 

The last time that our Nation’s debt was this high, I think, as 

a percentage of the gross domestic product (GDP) was at the end 

of World War II. That level of debt was not sustainable then, and 

we all know that it is not sustainable today. 

In order to address the burden this debt places on our country, 

we need to look, as my colleagues have heard me say again and 

again, in every nook and cranny of the Federal Government, all 

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2 

1The chart referenced by Senator Carper appears in the appendix on page 85. 

programs of Federal spending, large and small, and make certain 

the resources that we are investing are being spent efficiently and 

effectively. We need to demand results and focus the scarce resources that taxpayers entrust us with on what works. We need to 

find out what works and do more of that. And across the Federal 

Government, program managers need to sharpen their pencils, and 

stop making the kinds of expensive, avoidable mistakes that lead 

to improper payments. 

The bad news is that the Government Accountability Office (GAO) tells us that last year improper payments were $115 billion. 

That is the bad news. The good news is that a year earlier it was 

$119 billion, and even with more programs covered, by the estimate it is coming down, so that is positive. But it is still way too 

high. With Medicaid, a significant amount of taxpayer dollars are 

unfortunately lost to waste and to fraud. Those resources could and 

should instead be used to help States provide quality health care 

to some of the most vulnerable citizens among us. According to GAO, Medicaid made an estimated $21.9 billion in 

improper payments in 2011. I think we have a chart1 over here. 

What does it say? It is hard to read over here. No, it is easy to 

read: $21.9 billion. I think if you add that to Medicare improper 

payments of about $40 billion, and that is with the Medicare prescription drug program added in for the first time—and the Medicare number is actually coming down a little bit despite the addition of the Part D. But that is still way too much. We can do better 

than that, and we have to do better than that. 

I think the Administration has indicated that their goal in, I 

know, Medicare—not in Medicaid as well, but their goal in Medicare is to bring almost down by half I think by the end of next year 

the improper payments in Medicare. We need to make great 

progress as well in Medicaid. And to the extent that we do in reducing improper payments in Medicaid, we help not just the Federal Government and the Federal deficit but we, frankly, help the 

States as well, because almost half the money that is involved 

there is theirs. 

Medicaid continues to be on GAO’s list of Government programs 

at a high risk for waste, fraud, and abuse, as it has been for many 

years. Now more than ever, it is urgent for us to step up our efforts 

to eliminate the problems that lead to waste and fraud across the 

government. Success in doing so will help us as we work to curb 

our debt, and in the case of Medicaid, as I said earlier, to help 

States, one of which I used to be Governor. But ultimately all of 

us—Congress, the Administration, and the States—want to improve program integrity in Medicaid to ensure that the program 

has the resources that are necessary to provide critical services to 

those in need, to the least among us. 

That is why I was encouraged to learn that in 2011 we saw a 

decline in the level of improper payments in Medicaid compared to 

more than $22 billion estimated that we saw there in 2010. So you 

may recall Dr. Coburn, Senator Coburn and I authored legislation 

signed by President Obama in 2010 that said, Federal agencies, not 

only do you have to figure out what your improper payments are, 

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3 

you have to stop making them, you have to go out and recover 

them, and we are going to evaluate supervisors within the Federal 

agencies in part on how well they comply with that law. And the 

next year, 2011, we saw some drop in the overall improper payments from $119 billion to $115 billion, and even in Medicaid, this 

number has dropped from a little over $22 billion to $21.9 billion. 

Is that enough? No. Can we do better? Sure. But it is progress, and 

for that we are grateful. 

But the Centers for Medicare & Medicaid Services (CMS) and 

State governments are clearly beginning to make some progress. 

However, as I said, more work remains in our efforts to curb improper payments and reduce the amount of taxpayer dollars lost to 

errors, waste, and fraud. I want to encourage CMS to continue to 

partner closely with the States to take advantage of every opportunity to prevent, identify, and recover improper payments. We 

cannot afford not to. 

Fortunately, Congress and the Administration have made reducing Medicaid waste and fraud a high priority and are taking important steps to improve its management of this critical program. And 

the Affordable Care Act, enacted in 2010, includes a number of provisions, as some of us know, aimed at enhancing our efforts to fight 

waste, fraud, and abuse in Medicaid and Medicare. These provisions aim to eliminate avoidable mistakes and crack down on criminals. They are critical to our broader efforts of achieving better 

healthcare results and improving access to affordable, quality 

healthcare. We are also looking at additional steps that the Federal 

Government should take. 

Senator Coburn—and there is his name again—Dr. Coburn, who 

is not only a doctor and Senator, but he is also, it turns out, an 

accountant. What do they say in baseball, that you are a five-tool 

player? He is at least a three-tool player here in the U.S. Senate. 

But Dr. Coburn and I along with dozens of our Senate and House 

colleagues, including the fellow to my right here, have put forward 

legislation to fight fraud, waste, and abuse in Medicare and Medicaid programs a couple of times, but most recently in something 

called the Medicare and Medicaid Fighting Fraud and Abuse to 

Save Taxpayer Dollars Act (FAST). That is what we call it, but it 

is Medicare and Medicaid Fighting Fraud and Abuse to Save Taxpayer Dollars Act. I do not know how you get FAST out of that, 

but someone has figured it out. 

It takes some of what we already know works to decrease waste 

and fraud in the private sector or what we have seen beginning to 

work elsewhere in government. We apply those lessons and those 

ideas to Medicare and Medicaid. Our bill includes a wide range of 

initiatives. Among other things, the legislation would increase antifraud coordination between Federal and State government. That is 

good. It would increase criminal penalties for fraud. That is good. 

It encourages seniors to report possible fraud and abuse in Medicare through the Senior Medicare Patrol. That is good. We have 

also changed the language, the way the messaging goes to seniors, 

and they want to actually see copies of the bills that are being paid 

for them for Medicare services. Actually, it is now being written in 

ways they can actually read and understand so they can actually 

be a better partner with the Senior Medicare Patrol. That is good. 

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4 

1The chart referenced by Senator Carper appears in the appendix on page 86. 

2The chart referenced by Senator Carper appears in the appendix on page 87. 

And deploy cutting-edge data analysis and technology, some of 

which we are actually borrowing from the credit card industry 

where they do a better job of combating fraud than we do in Medicare and Medicaid. 

Our legislation addresses loopholes in fraud prevention efforts 

that have been exploited to an alarming degree over the years. For 

example, there are the glaring problems of dead doctors who still 

manage to charge us for care they provide to patients live and 

dead—obviously a form of fraud. This is disturbing; it is also unacceptable. And our bill would require that the Federal Government 

and law enforcement take steps to curb the theft of physician identities. 

I often say there is no silver bullet for fighting waste and fraud, 

but this bipartisan bill provides—I think we have over 35 cosponsors. That is good, too. I would like to have a few more. But this 

bipartisan bill provides a lot of smaller proven, common sense solutions, and it builds on recommendations by the Office of the Inspector General (OIG), by GAO, and other smart people to improve on 

our current work, Program Integrity at CMS, which, as I have 

mentioned, already has made some important progress in reducing 

waste and fraud in these programs. 

All right. I am almost done. One more chart.1 Even as we look 

ahead to implementing additional tools to help improve efficiencies 

and effectiveness in Medicare and Medicaid, we also need to evaluate the effectiveness of the current tools at our disposal and identify what is working and where we need to improve our efforts. 

Today our witnesses from GAO and the Office of Inspector General will help us in that effort by describing weaknesses in the two 

primary Medicaid anti-waste and fraud systems now utilized by the 

Federal Government. According to GAO, one program that relies on 

Medicaid integrity contractors only identified about $20 million in 

overpayments since 2008. Yet we spent $102 million to operate the 

program during the same period. 

I actually read that twice to make sure I had that right, and I 

am going to read that again. It says: According to GAO, one program that relies on Medicaid integrity contractors only identified 

about $20 million in overpayments since 2008. Yet we spent $102 

million to operate the program during that same period of time. 

We clearly need to identify ways to improve our return on investment here. And what do they say? A picture is worth a thousand 

words. There is a picture: cost, $102 million; return, about $20 million. So instead of saving money for the taxpayers, it looks like we 

lost about $80 million, and that is not good. 

Finally, there are similar problems with the second Federal antiwaste and fraud programs. It is called Medicare-Medicaid Data 

Match Program, where Medicare and Medicaid data are compared 

with each other to spot duplication and other problems. Over a 2- 

year period of time, the program received some $60 million in funding but only prevented or recouped about $58 million in improper 

payments. That is better than what we see in this chart2 to my 

left, we lost money there as well rather than reducing costs. 

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5 

But there have also been some successes, to be fair, and earlier 

this year, the Administration announced another record-breaking 

year in joint Federal and State efforts to identify and prosecute 

health care fraud, with more than $4 billion in recoveries from 

Medicare, Medicaid, and other Federal health care programs. I 

think that might be a record. I think it was maybe a record 2 years 

in a row, and we applaud that there is still a lot of fraud out there, 

so we need to continue those efforts and strengthen them. 

In addition, stronger steps have been taken to screen physicians 

and other providers in order to avoid physician identity theft and 

other fraudulent activities that can lead to drug diversion and 

fraud. In fact, CMS announced last week this new automated 

screening process has already purged the provider database of 

more than 20,000 providers that were ineligible to participate in 

Medicare and Medicaid due to death, licensing, and other problems. 

That is an important step forward, and we applaud that. 

I look forward today, we look forward today to hearing from Dr. 

Budetti, head of CMS’ program integrity efforts in both Medicaid 

and Medicare, about how he and his team intend to build on what 

has worked so far and improve the performance of those initiatives 

that have not worked as well as any of us would like. And I also 

look forward to hearing from the State agency representatives we 

have with us today about their experiences in curbing Medicaid 

waste and fraud. And we are here in large part today because we 

have a moral imperative to ensure that both present and future 

Medicaid beneficiaries continue to have access to quality care. At 

the same time, we must also ensure that scarce taxpayer resources 

we invest in the program are being spent as effectively as possible. 

Now I would like to turn to Senator Brown, welcome him here, 

to make any comments that he would care to make. Senator 

Brown, good to see you. 

OPENING STATEMENT OF SENATOR BROWN 

Senator BROWN. Good to see you, too, Mr. Chairman. Thank you. 

I am not sure about you, but I am tired of seeing these numbers. 

Every time we come to one of these hearings, we see more numbers. I would note that it cost $6 billion to extend the student loan 

interest rate at the level that we have it, yet according to the chart 

you just had, I thought it was—I do not want to misspeak, but I 

thought it said $21.9 billion in improper payments were made in 

the fiscal year. I have a bill, as you know, Mr. Chairman, that will 

take some of those savings to pay for that interest staying the 

same and using that money that is already within the system instead of taxing our Subchapter S job creators, not only in Massachusetts, but throughout the country. 

As we all know, the Supreme Court will decide the fate of the 

Patient Protection and Affordable Care Act (PPACA), and it is expected any day now, as we know and you referenced. I think it is 

more important now than at any time since I have been here, certainly, to start to find a bipartisan solution to address our Nation’s 

most pressing problems like health care. I believe a crucial step in 

maintaining the viability of health care programs like Medicaid 

and Medicare is to ensure that these programs are not weakened 

by the waste, fraud, and abuse. As you referenced, there is going 

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6 

to be a lot more folks coming onto the system, and as a result of 

that, there is even more of an opportunity for that fraud, waste, 

and abuse that we have already seen. 

As our Nation ages, and the economic stagnation continues, these 

health care programs continue to put pressure on our Nation’s 

tough fiscal situation. We are not going to be able to tax our way 

out of this mess into prosperity. That is why this morning’s hearing 

on curbing the billions of dollars, potentially, of waste, I just find 

mind-boggling, and we cannot afford this business as usual approach. 

I have been honored to be on this Subcommittee this past year, 

and I know we are getting toward the end of the legislative session. 

However, the things we have done and brought to the attention of 

folks who are basically driving the trains I think has been a good 

thing. We brought this up. Some of them have tried to do yeoman’s 

work to fix it. However, I do not think others give much credence 

to what we have said and how they are addressing these problems. 

We are going to turn our attention to the Medicaid program, 

which is timely, as you know, because the PPACA will expand potentially Medicaid coverage by an estimated 16 million people by 

2019. That is a 32-percent increase. The cost of the expansion is 

going to exceed $430 billion over the next 10 years, and the government is responsible for paying over 90 percent of these increased 

costs. I do not know where the money is coming from, but this is 

on top of the $404 billion in Medicaid costs for Fiscal Year (FY) 

2010, of which the government’s share was $271 billion. 

So we will explore what the Center for Medicare & Medicaid 

Services is doing to confront the menace of fraud in Medicaid. 

Measuring, obviously, fraud in Medicaid is difficult, but CMS estimates, as we referenced, almost $22 billion in improper payments 

in Medicaid in Fiscal Year 2011. Once again, I believe the Congress 

has been complicit for far too long in this business as usual. This 

kind of go-along/get-along mentality where it really does not matter, a billion here, a billion there. It is mind-boggling, as I have 

said. 

I look forward to continuing to play a role in finding ways to improve the coordination between the Federal Government and the 

States and improve coordination across States. I believe we need to 

do a better job in leveraging the IT to prevent the fraud. It seems 

to be, once again, a no-brainer. We need to know if a doctor is dead 

and you should report if a doctor is dead. There should be a central 

database, and immediately tied into a lot of the prescription pharmacy outlets, and it should be a red flag. It should be immediately 

stopped. The person should be arrested for perpetrating a crime, 

and we need to really do it better. 

I came to Washington to work in a bipartisan manner as many 

of you know, and I am going to continue to do that, and I look forward to hearing the testimony. Thank you. 

Senator CARPER. Thank you, Senator Brown. 

Dr. Coburn, before you arrived, there was some mention of your 

name with respect to improper payments and the notion that we 

are actually making a little progress since our 2010 law was signed 

into law. I described you as a ‘‘three-tool player’’; in baseball parlance, you are a five-tool player. As you know, you are exceptional. 

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7 

I said, ‘‘He is not just a Senator, he is not just a physician, he 

is not just’’—‘‘Now I know he is an accountant, but he is also a husband, and this weekend I think a father on Father’s Day. So that 

is five tools. That is not bad. So thanks for all your work on this 

stuff, and you are recognized, please. 

Senator COBURN. I will pass on an opening statement so we can 

hear our witnesses. 

Senator CARPER. OK, fair enough. 

Some other breaking news. Dr. Budetti, I am told by Peter Tyler, 

who sits over my left shoulder, that in an interview last night, you 

indicated taking some strong, decisive measures to get the Medicaid Integrity Contractor (MIC) Program on a more positive track, 

and I do not want to steal your thunder, but I would characterize 

those moves as positive and an encouraging example of the Administration trying to ensure that curbing waste and fraud in Medicaid 

continues to be a priority, and we look forward to hearing more 

about that in the course of your testimony. Just very brief introductions. I am just going to make this real brief. 

Peter Budetti, M.D., J.D., Deputy Administrator and Director for 

Program Integrity, Center for Medicare & Medicaid Services, a visitor here and witness before us previously. We are delighted that 

you are back here today. 

One of two Douglases, the first is Douglas Porter, the State of 

Washington Health Care Authority. Who is your Governor now? Is 

Christine Gregoire still the Governor? 

Mr. PORTER. Yes, sir. 

Senator CARPER. For another 6 months or so? 

Mr. PORTER. She has another 6 months to sprint to the finish. 

Senator CARPER. All right. If you ever see her, give her my best. 

Our second witness is Douglas Porter, Director of the Health 

Care Authority for Washington State, which is their Medicaid 

agency. He spent almost 10 years working for the State of Washington as well as previous work with Medicaid agencies in California and Maine. We thank you for joining us today. 

The second Douglas here is Douglas Wilson, and Mr. Wilson is 

the Inspector General for Health and Human Services Commission 

in the State of Texas. Most of those jobs down there are elected. 

Are you elected? 

Mr. WILSON. No, sir, I am not. 

Senator CARPER. OK. All right. Mr. Wilson has over 25 years’ experience in State government with expertise in auditing, accounting, grants and contracting, investigations, licensing, compliance 

and enforcement. You are a five-tool player as well, I would say, 

with that introduction. Before his appointment, Mr. Wilson served 

as the Deputy Director of the Texas Attorney General’s Medicaid 

Fraud Control Unit (MFCU). We want to thank you for being with 

us today all the way from Texas. 

Next, Carolyn Yocom, Director of the Health Care team for GAO. 

Ms. Yocom has worked on a variety of issues related to health care, 

particularly Medicaid and State Children’s Health Insurance Program (SCHIP). She has been at GAO for 20 years and has testified 

numerous times before Congress. We thank you for testifying here 

today and for the good work that you and your colleagues at GAO 

do. 

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8 

1The prepared statement of Mr. Budetti appears in the appendix on page 45. 

And, finally, last but not least, Ann Maxwell, who is the Regional 

Inspector General with the Office of Evaluation and Inspections at 

the Department of Health and Human Services. Ms. Maxwell has 

worked for 15 years for the Inspector General. She has directed national studies in Medicare and Medicaid and public health and in 

child welfare. We thank you for your work. Thank you for being 

with us today. 

Dr. Budetti, you are recognized. Everyone, your whole statements will be made part of the record, so if you want to summarize, you are welcome to do that. Try to stay as close to 5 minutes 

if you can. If you get way beyond that, we will have to rein you 

in. Thank you so much. Dr. Budetti, you are recognized. Welcome. 

TESTIMONY OF PETER BUDETTI,1 M.D., J.D., DEPUTY ADMINISTRATOR AND DIRECTOR FOR PROGRAM INTEGRITY, CENTERS FOR MEDICARE & MEDICAID SERVICES 

Dr. BUDETTI. Thank you, Chairman Carper, Ranking Member 

Brown, Dr. Coburn. Thank you for this opportunity to discuss the 

Centers for Medicare & Medicaid Services’ program integrity efforts for the Medicaid program. 

As you know, the Administration has made important strides in 

reducing fraud, waste, and improper payments across the government. We have implemented powerful new anti-fraud tools provided by Congress that are enabling us to move beyond ‘‘pay and 

chase’’ to preventing fraud. Simultaneously, we are building on the 

many accomplishments of the Medicaid Integrity Program by making substantial improvements to certain parts of the program, in 

particular the National Medicaid Audit Program (NMAP). 

Just a little background on the Medicaid Integrity Program. It 

was established under the Deficit Reduction Act (DRA) of 2005, 

and it is the first comprehensive Federal strategy to prevent and 

reduce provider fraud, waste, and abuse in the Medicaid program. 

Our Center for Program Integrity (CPI) in the Centers for Medicare & Medicaid Services became responsible for the operation of 

the Medicaid Integrity Program in April 2010. 

CMS has two broad statutory responsibilities under the Medicaid 

Integrity Program. The first is the one that is the main topic of our 

discussion today, the National Medicaid Audit Program, in which 

the CMS contracts with private sector entities to review Medicaid 

provider activities, audit claims, identify overpayments, and educate providers and others on Medicaid program integrity issues. 

The second statutory responsibility is providing technical assistance and support to the States in their efforts to combat Medicaid 

provider fraud and abuse. I think you are well aware—and it is in 

detail in my written testimony—that the Medicaid Integrity Program has had a number of clear successes. I think you are very familiar with the Medicaid Integrity Institute (MII) that now has had 

over 3,000 students from State government pass through and has 

repeatedly been praised as making a substantial contribution to 

State efforts to combat fraud and improper payments. 

We have also provided boots on the ground for specific projects 

in a number of States to carry out targeted anti-fraud action. 

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9 

We have special contractors who are engaged in educating providers and beneficiaries on program integrity efforts. We also conduct triennial comprehensive reviews of each State’s program integrity activities and disseminate best practices across the States. 

Further, we conduct annual State program integrity assessments to 

collect standardized national data on the State Medicaid program 

integrity activities. So all of these are very strong accomplishments 

of the Medicaid Integrity Program. 

One major area has not been as successful as anticipated, and 

that is the National Medicaid Audit Program. CMS has identified 

redundant, ineffective, and inefficient practices in the existing program. As a result, over the course of the past 2 years, we have 

made changes in the National Medicaid Audit Program and initiated a redesign of the program that involves developing new approaches with States to provide for more effective and less burdensome audits of Medicaid providers, including expanding collaborative audits, and also at the same time we are working on modifying the Medi-Medi program, better identifying audit targets, and 

overhauling our contracting structure. 

The original approach implemented shortly after the start of the 

Medicaid Integrity Program in 2007 created two types of Medicaid 

integrity contractors for the National Medicaid Audit Program: review contractors analyzed Medicaid data to assist with the identification of audit targets, and audit contractors went out and conducted audits of the providers. During the test phase, the review 

contractors relied on data from the States’ full Medicaid Management Information Systems (MMIS), and that led to positive findings. With full implementation, however, the review contractors 

conducted their analyses based on a more limited data source because it was the only nationwide Medicaid claims and beneficiary 

information source reported to the Federal Government. 

The first audits were assigned in September 2008 based on these 

analyses. By mid-2010, the full impact of the limitations of the 

data available for selecting audit targets became available. At that 

time CMS began to explore options to a different approach to auditing providers and began a State collaborative audit concept with a 

small number of States beginning in January 2010. As of February 

2011, CMS discontinued assigning new targets through the traditional audit process based solely on reviews of the national data set 

and focused the audit processes instead on expanding additional 

collaborative audits with States and other direct interaction with 

the States. So the first audit targets went out in 2008, in September, and as of February 2011, we discontinued that specific 

model and moved toward a more collaborative model and much 

greater interaction with the States. 

We are fundamentally changing the design and operation of the 

program to improve its overall effectiveness. We are incorporating 

lessons that we have learned from our early implementation efforts 

and from our initial success with collaborative audits. We are paying close attention to recommendations such as the ones you will 

hear today from the Office of Inspector General, the Government 

Accountability Office, and also from the National Association of 

Medicaid Directors (NAMD) and the Medicaid and CHIP Payment 

and Access Commission (MACPAC). And we are pleased to see that 

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10 

many of these recommendations complement the efforts we already 

have underway. 

There are two main prongs of our new approach: working with 

States on expanding collaborative audits and developing more viable options for sharing data at the State and Federal level. Since 

the first collaborative audits were begun in 2010, we have worked 

with States to—we now have 137 collaborative audits in 15 States 

representing approximately 53 percent of all Medicaid expenditures. CMS is currently in discussion with 15 additional States to 

expand the use of collaborative audits. 

As we change our approach, we are also determining options for 

the existing Medicaid program integrity contractors going forward. 

And as you noted, Mr. Chairman, we have had five active task orders for reviewing Medicaid providers for anomalies for billing. We 

intend now not to exercise the renewal option on three of those five 

task orders because the original focus of the work is no longer consistent with our redesign efforts. We are currently reassessing our 

approach, and we have redesigned the review contractors’ work 

away from the focus of identifying audit targets based solely on the 

national data set. 

In addition to building the collaborative audit program, we are 

also committed to pursuing alternative sources for audit quality 

data. We are working very closely with States to identify the data 

elements that would be satisfactory for multiple Federal purposes. 

A pilot of the new data reporting system began in May 2011, and 

since then, test data has been received, and the proof of concept is 

targeted for completion this summer. 

I will summarize very quickly by identifying our plan of action 

in engaging the States to work with us, that even as we reconfigure 

the National Medicaid Audit Program in a State and Federal partnership and enhanced Medi-Medi, we will also expand our efforts 

to work with States in other areas that are of importance to the 

States and also to expand the Medicaid Integrity Institute. 

I would like to let you know that we have identified five action 

items. 

One is discontinuing the assignment of new audit space solely on 

the earlier data set and analysis. As I said, that began in February 

2011. We have been realigning the tasks of the contractors, and we 

have now chosen not to exercise the option years on three of the 

five review contractors’ task orders. 

The second point is to develop and expand our collaborative audits to go beyond the 137 we have now. We are looking to expand 

to an additional 15 States by the end of 2013 and continue the expansion in particular with high Medicaid expenditure States by the 

end of 2013. 

No. 3, to develop and implement enhanced data reporting by the 

States to fill gaps in the data set that had been reported to the 

Federal Government, and we intend to continue that through 2012 

and finish that initial stage this year. 

No. 4, we are reconfiguring the Medi-Medi program that will 

serve as a complement to the collaborative audit program. 

And, finally, we will continue to monitor the return on investment of both the old and the new approach to the National Medicaid Audit Program. 

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11 

I appreciate the opportunity and your indulgence in going a little 

over my time limits, Mr. Chairman, to describe the major changes 

that we are undertaking, and I will be happy to answer any questions. Thank you. 

Senator CARPER. Well, you have a lot to say, and we are pleased 

that you have had the chance to say that, and we look forward to 

asking some questions. 

Mr. Porter, welcome. Thanks for joining us. 

TESTIMONY OF DOUGLAS PORTER,1 DIRECTOR, WASHINGTON 

STATE HEALTH CARE AUTHORITY 

Mr. PORTER. Thank you, Mr. Chairman, members of the Committee, for this opportunity to testify. For the record, my name is 

Doug Porter, director of the Washington State Health Care Authority, and I am here to discuss the State and Federal efforts to reduce fraud, waste, and abuse in the Medicaid program, and specifically I will speak to the State’s perspective on what is working, 

what is not working, and where we see room for improvement. 

What is working? I am happy to report that the partnership between the State and Federal officials in program integrity is a good 

one. Our interests and incentives to be good stewards of the taxpayers’ money are closely aligned. I will cite just a few examples 

of this solid working partnership. 

I have been associated with the Medicaid program for about 20 

years or so and served on various technical advisory groups. In my 

opinion, the Fraud and Abuse Detection Technical Advisory Group 

is one of the most productive and the best functioning TAGs in recent memory and a solid collaboration between State and Federal 

officials. 

As Dr. Budetti just mentioned, the Medicaid Integrity Institute 

is a huge new asset for State program integrity staff to develop 

skills and share best practices, and we welcome the openness on 

the part of CMS to make available Medicare data to States. We 

think this is a big opportunity not only for program integrity enhancements, but also to improve care coordination for those clients 

who are eligible for both Medicare and Medicaid. 

What is not working? Three major challenges on that front: The 

erosion recently of State resources, the layers of outmoded or ineffective programs that we have had to contend with, and bad data. 

On the erosion of State resources, I will give you my own personal story. Over the last 4 years, since 2008, I have lost 20 percent of my workforce due to budget cuts. Our State legislature 

much prefers to eliminate administrative costs rather than program costs. I now have only 40 staff assigned to program integrity 

efforts to oversee over $5 billion a year of health care expenditures, 

and that is just not enough of a resource to do the job right. 

On the continuance of ineffective programs, I would list, as you 

have already heard, the Medicaid integrity contractors, and the 

Medicaid Eligibility Quality Control (MEQC), the Payment Error 

Rate Measurement Program (PERM), and the Medicare-Medicaid 

Data Match Project. These programs all draw resources away from 

activities that in our State would yield a better return on investment and detract from our ability to generate even more savings 

than we have to date. 

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1The prepared statement of Mr. Wilson appears in the appendix on page 58. 

On the data front, there is a lot of data, very little good information, as Dr. Budetti just indicated. Poorly collected and organized 

data is what is giving us a problem. The Medicaid Statistical Information System is not uniformly reported on by all States, making 

apples-to-apples comparisons very difficult. And the Medicare data 

that we are getting access to date has been difficult as it comes— 

Medicare Part A, B, and C comes in six different file formats for 

both ongoing and historical data and makes it very difficult if not 

impossible to merge with our existing Medicaid database. 

Opportunities for improvement, let us build on what works. I 

would like to suggest that State efforts be supported and reform 

that a 75–25 matching fund be available to State program integrity 

staff such as is currently available to Medicaid fraud control units 

around the country. 

Also, if we could do one thing I think would take a big burden 

off States, it is to create a national level provider enrollment capacity that would screen out bad providers on the front end. In the 

process of getting a national provider identification number, that 

would be the start and then have them re-enroll every 3 years. 

That way a central observation could be made on the databases 

that currently exist as to who the bad actors are out there. 

I think the Medicare database, as I said, could be improved by 

having a single documented file format and one single set of confidentiality and privacy requirements. And we should use a return 

on investment analysis to evaluate the effectiveness of programs 

and fund them accordingly. 

I would make a pitch finally to further enhance the Medicaid Integrity Institute by using distance education and involving 

Webinars to reach more State staff around the country. And I 

would suggest the establishment of a national certification process 

to credential State program integrity staff. 

That concludes my prepared remarks, and I thank you very 

much for the opportunity to be here today, and I would be glad to 

answer any of your questions. 

Senator CARPER. Good. That is a real interesting to-do list. 

Thank you. 

Mr. Wilson, welcome. Please proceed. 

TESTIMONY OF DOUGLAS WILSON,1 INSPECTOR GENERAL, 

HEALTH AND HUMAN SERVICES COMMISSION, STATE 

OF TEXAS 

Mr. WILSON. Good morning, Chairman Carper, Ranking Member 

Brown, and Dr. Coburn. For the record, my name is Douglas Wilson, and I serve as the Inspector General for the Texas Health and 

Human Services Commission. I appreciate the opportunity to be 

with you today to offer testimony from the Texas perspective regarding program integrity challenges, opportunities, and successes. 

Over the past year, we have worked in Texas to reform and 

refocus the Office of Inspector General. We have shifted resources 

internally to target our efforts to the cases with the greatest potential for recovery, increased the number of case investigations, 

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13 

shortened our investigative timeframes, and we are on track to increase the identification of potentially recoupable dollars. 

We recognize the importance of positive relationships between 

the States and CMS, and our experience with CMS has been positive. We primarily work with the Medicaid Integrity Group, and we 

have experienced cooperation at all levels. Through our attendance 

at the Medicaid Integrity Institute, we have greatly benefited from 

the ability to work through current and emerging issues and to discuss challenges and opportunities faced by other States with similar responsibilities. 

The ability to share information and knowledge at the Federal, 

State, and local level is very important to our collective success. In 

our experience, more data is better. Whether the data comes from 

Medicaid, Medicare, the Supplemental Nutrition Assistance Program (SNAP), the Women, Infants and Children’s Program (WIC), 

the Temporary Assistance for Needy Families (TANF), Craig’s List, 

county property lists, or nearly any other source, all of this data 

can help us to identify patterns of behavior and billings which may 

lead to the faster identification of intentional or inadvertent overbilling and overpayments. Usable access to the Medicare claims 

and payment data would be greatly beneficial to us. 

Texas OIG has spent a lot of time meeting with companies to discuss information technology solutions designed to improve the 

probability of detecting schemes and patterns sooner. We believe 

we have identified pattern recognition technology that identifies 

patterns and connections between seemingly unrelated events and 

individuals. Thus, data queries that might normally take hours or 

even days to run can be completed in minutes or even seconds. The 

ability to partner with the Federal Government to assist with the 

cost of this type of software is important to our anticipated success. 

Today, interdiction and recoupment efforts are a two-edged 

sword. States work to identify potential overpayments, and after 

due process steps we have to worry about potentially having to 

repay CMS more than we can ever hope to collect. 

Unfortunately, this process builds in disincentives to the States 

to be active in identifying and publicizing anti-fraud, anti-overpayment activities. In Texas, we are currently in the midst of investigating a small number of orthodontists who collectively have 

overbilled the State potentially hundreds of millions of dollars over 

the past 5 years. We find ourselves making tough decisions regarding aggressively pursuing overpayments while at the same time 

working with the Medicaid program to ensure we do not create access to care issues and leave Texas children at risk. 

In summary, we believe there is a solid foundation for the CMSState relationship but also that the environment in which that relationship exists needs to change to improve. An attitude of cooperation and assistance is already evident but needs to extend further, to data access and resource development. 

I appreciate the efforts of CMS, and in particular I am grateful 

for the efforts this Subcommittee and the efforts that you continue 

to make. The Texas OIG looks forward to partnering with CMS and 

other Federal, State, and local agencies involved in the fight to rid 

our programs of fraud, waste, and abuse. 

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14 

1The prepared statement of Ms. Yocom appears in the appendix on page 68. 

I am happy to answer any questions you may have. Thank you 

for inviting me. 

Senator CARPER. Thanks so much. Thanks for joining us from 

Texas and for your testimony. 

Now we will turn to Ms. Yocom. Ms. Yocom, welcome. Good to 

see you. 

TESTIMONY OF CAROLYN L. YOCOM,1 DIRECTOR, HEALTH 

CARE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Ms. YOCOM. Chairman Carper, Ranking Member Brown, and 

Members of the Subcommittee, I am pleased to be here to discuss 

the National Medicaid Audit Program. My statement will highlight 

key findings from a report prepared at your request which focuses 

on the effectiveness of the MIG’s implementation and subsequent 

redesign of the National Medicaid Audit Program. 

In brief, our work found that the majority of the audits that the 

MIG conducted were less effective than its initial test audits and 

the more recent collaborative audits, primarily because they use 

Medicaid Statistical Information System (MSIS) data. MSIS data 

are an extract of States’ claims data, and they are missing key elements such as provider identifiers that are important for identifying appropriate targets. 

Since Fiscal Year 2008, just 59 of the 1,550 MSIS audits identified $7.4 million in potential overpayment. Of the remaining MSIS 

audits, over two-thirds did not identify overpayments, and the remaining audits, 27 percent, were ongoing. In contrast, the 26 test 

audits and the 6 collaborative audits which used States’ more robust claims data and allowed States to select audit targets together 

identified more than $12 million in potential overpayments. Moreover, the typical amount of the potential overpayments for MSIS 

audits was smaller than the amounts identified through other 

audit approaches. Our review found that MSIS audits averaged 

$16,000 in potential overpayments compared with $140,000 for test 

audits and $600,000 for collaborative audits. 

The MIG has reported it is redesigning the National Medicaid 

Audit Program, but it has not provided the Congress with key details about the changes that it is making. In particular, CMS has 

not provided details or information on why it changed to collaborative audits, the new analytical roles for the contractors, and 

plans for monitoring and evaluating the performance of this redesign. 

In looking at CMS’ redesign, our work suggests that collaborative 

audits are more likely to result in increased findings and will allow 

States to leverage the MIG’s resources to augment their own program integrity capacity. It is less clear, however, whether the new 

analytical role for its contractors, some of which are just underway, 

will ultimately improve the selection of audit targets. 

Finally, the lack of a published plan detailing how the MIG will 

monitor and evaluate the National Medicaid Audit Program is a 

concern. Without appropriate tools in place to evaluate progress 

and assess adjustments that need to be made, CMS risks wasting 

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15 

1The prepared statement of Ms. Maxwell appears in the appendix on page 74. 

Federal dollars and missing potential findings of improper payments. 

Given that the National Medicaid Audit Program has accounted 

for more than 40 percent of MIG expenditures, transparent communications and a strategy to monitor and continuously improve the 

program are essential components of any plan seeking to demonstrate the MIG’s effective stewardship of the resources provided 

by the Congress. As a result, we are recommending that the Acting 

Administrator of CMS ensure: First, that the MIG’s planned update of its comprehensive plan provide key details about its redesign of the National Medicaid Audit Program; second, that the 

MIG’s future annual reports to Congress clearly address the 

strengths and weaknesses of the audit program and its effectiveness; and, third, that the MIG’s use of program contractors supports and expands States’ own program integrity efforts through 

collaborative audits. 

In conclusion, we look forward to working with the committees, 

with CMS, and with others to continue to improve efforts to ensure 

program integrity in Medicaid. 

This concludes my prepared remarks. I would be happy to answer any questions you may have. 

Senator CARPER. Good. Thanks, Ms. Yocom. 

Ms. Maxwell, please proceed. 

TESTIMONY OF ANN MAXWELL,1 REGIONAL INSPECTOR GENERAL FOR EVALUATION AND INSPECTIONS, OFFICE OF THE 

INSPECTOR GENERAL, U.S. DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Ms. MAXWELL. Good morning, Chairman Carper, Dr. Coburn. 

Thank you for the opportunity to discuss the Office of Inspector 

General’s recent evaluations of two national program integrity efforts: The National Medicaid Audit Program and the MedicareMedicaid Data Match Program. 

Our evaluations reveal that these national integrity efforts in 

many ways resemble a funnel: Significant Federal and State resources are being poured in, but only limited results are trickling 

out. 

Both national efforts are required to identify improper Medicaid 

payments for recovery. The National Medicaid Audit Program 

strives to do this within States and across States. The MedicareMedicaid Data Match Program attempts to detect overpayments in 

Medicaid and in Medicare by matching data across these programs 

to identify suspicious billing patterns. Both programs had limited 

success in achieving the goal of identifying Medicaid overpayments. 

As a result, both programs yielded a negative return on investment. 

In 2010, the National Medicaid Audit Program paid contractors 

approximately $32 million to identify Medicaid overpayments of 

just half that amount. In fact, we discovered that 81 percent of the 

audits assigned in the first half of that year did not or are unlikely 

to discover any overpayments at all. 

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16 

The Medicare-Medicaid Data Match Program also had a negative 

return on investment. This program, as you know, was appropriated $60 million over a 2-year period, during which time it 

saved $58 million. Of that amount, only one-quarter, $11 million, 

was saved on behalf of five States. 

There are a variety of challenges that limited the potential of 

these programs to detect Medicaid overpayments. The most fundamental of these is the data. National Medicaid data are not current, they are not complete, and they are not accurate. In fact, the 

National Medicaid—— 

Senator CARPER. Would you just repeat that last sentence again, 

please? 

Ms. MAXWELL. The National Medicaid data are not current, they 

are not complete, and they are not accurate. In fact, the National 

Medicaid data does not capture all the elements necessary for the 

detection of fraud, waste, and abuse. Missing data include elements 

as basic as beneficiary name and address and as technical as very 

specific billing information. 

Now, more current and accurate Medicaid data does exist, but it 

is captured in systems maintained by the States, and these systems are not standardized across States. For example, data elements that might be captured by one State might not even exist 

in another State’s data system. 

Due to these data problems, the National Medicaid Audit Program wasted resources, auditing potential overpayments that were 

not real. They were simply mirages created by the data. Due to 

these data problems, the Medicare-Medicaid Data Match Program 

does not provide electronic access to matched Medicare and Medicaid data. 

For these programs to be successful, they need better access to 

better data. In the short term, we recommend that they rely on the 

more timely and accurate State-specific Medicaid data, but it is not 

enough to stop there. We believe more must be done to overcome 

the significant shortcomings in the National Medicaid data. A recently launched pilot project to improve this data certainly holds 

promise, but it will require sustained focus and resources at the 

Federal and State level to deliver on that promise. Past initiatives 

to improve National Medicaid data have not delivered. 

We recommend that the Centers for Medicare & Medicaid Services devote the resources necessary to transform the National Medicaid data into a resource that helps protect the Medicaid program. 

In conclusion, without timely, complete, accurate, and standardized Medicaid data, it is impossible to effectively detect systemic 

vulnerabilities that cross State lines and cross Federal health care 

programs. 

We appreciate and share your interest in protecting the Medicaid 

program. I am happy to be of assistance if you have any questions. 

Thank you. 

Senator CARPER. Dr. Coburn, do you want to go first? 

Senator COBURN. No. I will wait. 

Senator CARPER. OK. There is some good news here, and there 

is some really troubling news here. What I would like to do with 

a hearing of this nature is to look for consensus to figure out how 

we can do a better job. I want to commend the efforts that are unH605-41331-79W7 with DISTILLER

17 

derway, that have been underway that are producing some results. 

But as I said, everything we do, I know we can do better. We have 

to do better here. The amount of money that is being misspent is 

still way too much. 

Ms. Maxwell, if you were ever here and you were wearing Dr. 

Budetti’s hat—not that he would ever give it up or that you would 

want it, but if you were wearing his hat, what would you do? What 

would you do about this stuff? 

And the second question is: If you were wearing the hat of Dr. 

Coburn, Senator Brown, or myself, what would you do if you were 

sitting in our seats? What would you do about this to make it better? 

Ms. MAXWELL. Our findings that indicate negative return on investment necessitate a serious reassessment of these programs, 

and that is precisely what we recommend in these reports. We recommend that CMS take stock of both these programs to determine 

what elements, if any, of these programs should be part of a national strategy to protect the Medicaid program. 

I think the goal that they embody, the goal of having a national 

presence in Medicaid program integrity is a goal that is important, 

and it is important to get right. 

So as I said in my oral statement, I would focus in the short term 

on using the data that is available which is more accurate at the 

State level, but I would not stop there. I would continue to push 

for more timely, accurate, and complete Medicaid data at the national level to support a national strategy. 

Senator CARPER. Dr. Budetti, would you react to that? And I 

want Ms. Yocom to react to that as well, please. 

Dr. BUDETTI. I think if you are looking for a consensus, Mr. 

Chairman, I think you are going to find quite a bit on this side of 

the table this morning. We have recognized the problems with 

these programs, and we are looking to solutions. 

As far as the availability of data, we absolutely agree. There are 

two ways to go about doing these—carrying out the Federal responsibility for oversight. One is for Federal entities to do the audits. 

The other is for Federal entities to work very closely with the 

States in doing the audits. The second is our current mode of emphasis. We are working toward a collaborative approach in which 

we are all satisfied about what the audited targets are and what 

the data are for doing that and how to go about conducting the audits and using Federal resources to assist the States in that way. 

We still have a ways to go before we have a full menu of all of the 

collaborative audits that we hope to have in place across the 

States. 

The other approach of the Federal entities doing audits and other 

kinds of oversight based upon adequate data is also a goal, and 

that involves also working very closely with the States so that we 

can identify precisely what the useful data elements would be and 

how the States would go about reporting them. That is the core emphasis of our current pilots, to work with the States, to identify 

that, to see what elements they can report and what elements they 

would need to create the capacity to report and to have a uniform 

set of data that would then be available for us to see the spectrum 

of activities at the right level of detail. 

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18 

So I agree with what Inspector General Maxwell just mentioned, 

and I think that those are the directions that we are moving in. 

Senator CARPER. Ms. Yocom, I would like to hear your reaction 

as well, please. 

Ms. YOCOM. I do agree there is a lot of agreement. Focusing on 

the collaborative audits—— 

Senator CARPER. A lot of agreement and some progress, but not 

nearly enough. 

Ms. YOCOM. That is right. There is more to be done, and the collaborative audits are promising, but I believe that one of the key 

things that needs to happen is more effective and frequent communications. 

Senator CARPER. Among whom? 

Ms. YOCOM. Among CMS in terms of reporting findings and what 

is going on in the program. Dr. Budetti mentioned that the MSIS 

audits were discontinued in February 2011. It is June 2012, and 

we are just now finding information and data about those results. 

So communicating specifically what is happening and what needs 

to be different I think is very important. 

Holding hearings I think is one way of getting to this information. Reporting out in its annual reporting requirements are another. 

Senator CARPER. All right. Thank you. 

When I was Governor of our State and involved in the National 

Governors Association (NGA), we always used to say States are 

laboratories of democracy, let us use them in that capacity. And 

this is a great opportunity because of the unique partnership in 

Medicaid between State and Federal Government. What can we 

learn from our States? You have already spoken to this in part, but 

I want you to reiterate some of what you think the most important 

points are in terms of what can we learn from our 50 laboratories 

of democracy. And I asked my staff, I said, ‘‘Why do we have the 

folks here from Washington State and the State of Texas?’’ And 

they tell me because you guys are good at this and that is why you 

are here. So let us hear your thoughts further. Go ahead. 

Mr. PORTER. We are very encouraged by the direction Dr. Budetti 

is talking about with these collaborative audits. We in the State of 

Washington are looking forward to the first time being able to 

audit hospitals once every 3 years. We have not been able to do 

that to date. That is where a lot of the expenditures sit. And this 

capacity—— 

Senator CARPER. Why haven’t you been able to audit hospitals? 

Mr. PORTER. Lack of resources, Senator. As I said earlier, whenever we have a budget problem at the State level, law makers are 

loath to go in and deprive vulnerable citizens of services or programs or benefits and are more likely to take a harsher budget ax 

to State employees. 

Senator CARPER. OK. 

Mr. PORTER. And that hurts. 

Senator CARPER. All right. Proceed. I interrupted your thought. 

Mr. PORTER. That is quite all right. I was talking to our staff 

about how the Medicaid Integrity Institute could be improved, and 

as you heard in my remarks, they were suggesting that you make 

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19 

1The chart referenced by Dr. Budetti appears in the appendix on page 86. 

that resource available—that CMS make that resource available to 

more State staff. 

I come from the State of California, where they had 800 auditors 

and investigators in their shop for the Medi-Cal program. It would 

be virtually impossible for them all to get to South Carolina to go 

through the excellent course work that is being offered there. The 

extent to which distance education could be made available, I think 

it would be very helpful. I cannot underscore enough that if I have 

somebody who is funded 75 percent by the Federal Government, as 

the Medicaid fraud control units do, I am much less likely to put 

their positions on the table because the State legislature is only interested in saving State general funds, and by cutting one FTE 

that if funded at 75–25, you only save 25 cents on the State dollar. 

It is a means of protecting a valuable asset. 

Senator CARPER. My time has expired, and, Mr. Wilson, I am 

going to come back to you with the same question when we go for 

a second round. But let me yield to Senator Brown. Thanks. 

Senator BROWN. Thank you, Mr. Chairman. I am bouncing back 

and forth between meetings, and I did catch it on TV. 

Dr. Budetti, you see the chart1 over there. It costs $102 million 

to get back a little under $20 million, so we lost $82.1 million. I 

understand you fired the contractors. I would think you would do 

so based on that type of performance. Did you fire them as a result 

of the hearing today? I mean, weren’t they just fired like yesterday 

or something? 

Dr. BUDETTI. Senator, I do not want to necessarily impugn the 

contractors. I think it is the data that we asked the contractors to 

analyze that was the cause of the problem. They were analyzing 

data that were absolutely not appropriate for the task. They produced some leads that looked extremely promising, but in the 

course of actually going out and conducting the audits by the other 

contractors, they proved to be not nearly as promising—in fact, in 

many cases zero. 

So we just simply do not need those contractors doing that work 

anymore because we are shifting to a new approach, and we have 

spent a number of months working on the redesign of our program. 

I think it is clear—— 

Senator BROWN. So when did you fire them? When did you let 

them go? 

Dr. BUDETTI. We are in the process of doing that. Under Federal 

acquisition rules and regulations, we have certain procedures that 

we have to go through. We have to figure out what the best way 

to go about this is so that we do not lose more money in terminating a contract than we otherwise—— 

Senator BROWN. Did you actually spend $82.1 million? Is that 

what the taxpayer money was actually spent to collect that? 

Dr. BUDETTI. I have no reason to doubt that those are the correct 

numbers. But I would point out, Senator, that, as I said in my 

statement, the first audits went out—were assigned in 2008, in 

September, and by February 2011, we recognized the problem and 

we shifted. 

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20 

Senator BROWN. OK. So 2008, 2009, 2010, 2011, you basically— 

at some point, I would think you would say, oh, my goodness, we 

are not getting a good value for our dollar, not getting a good return—— 

Dr. BUDETTI. Absolutely, and that—— 

Senator BROWN [continuing]. And it has taken like 4 years, 5 

years. 

Dr. BUDETTI. Well, it took from September 2008 until—— 

Senator BROWN. Well, those numbers are from June 2007 to February 2012, those numbers right now. 

Dr. BUDETTI. Right, overall. 

Senator BROWN. You just said in your earlier testimony that 

those were accurate. So I am just presuming—— 

Dr. BUDETTI. Right. I believe they are. 

Senator BROWN [continuing]. That the GAO is accurate. 

Dr. BUDETTI. I am not challenging those numbers at all, and I 

am saying that we did—— 

Senator BROWN. Well, I am challenging them because it just 

makes no sense. I am challenging the whole concept that we spent 

$82 million to get back 20. Only in the U.S. Government do we do 

that. 

Dr. BUDETTI. Sir, I am not disagreeing—— 

Senator BROWN. I mean, it is $102 million. 

Dr. BUDETTI. I am not disagreeing with you. That is why we 

are—— 

Senator BROWN. It is 102. 

Dr. BUDETTI. That is exactly—— 

Senator BROWN. We lost $82 million. 

Dr. BUDETTI. That is exactly why we are changing direction. 

Senator BROWN. It only took, what, 3 or 4 years. It is unbelievable. And that being said, as we are approaching the 50th anniversary of Medicare and Medicaid with both programs on GAO’s highrisk list as a result of some of the things we are hearing and the 

fraud, waste, and abuse, we are also facing PPACA expansion in 

Medicaid, as I said in my earlier opening statement, in 2014, a 32- 

percent increase over the current enrollment. Based on CMS’ prior 

success in eradicating waste, fraud, and abuse, or lack thereof, how 

can you assure the American people that CMS will be ready for the 

expansion in Medicaid? 

Dr. BUDETTI. I believe that we are ready for that—— 

Senator BROWN. Based on what? 

Dr. BUDETTI. Based on the program integrity arena, based upon 

our assessments, our open and candid assessments of the lack of 

results from our oversight—from this particular program. 

Senator BROWN. See, I look at that and I say, well, we are down 

$82 million right now, so we are already in the hole $82 million. 

So you basically—in my mind, we have to find $82 million and then 

find some more. 

Dr. BUDETTI. Senator, if I could just say something about the 

broader Medicaid integrity program, you have heard very positive 

comments, for example, about the Medicaid Integrity Institute. We 

do not measure the financial impact. We do not measure the return 

on investment in dollars of all of the work that—— 

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21 

Senator BROWN. Because it is not your money. It is not your 

money. It is the taxpayers’ money. 

Dr. BUDETTI. Yes, sir. 

Senator BROWN. We need people to actually measure those. It is all about dollars and cents. When we are talking about $6 billion 

to pay for keeping student loan interest rates low we could use that 

money. We could use that $82.1 million. We could use other—it is 

all about the money. That is all we are talking about up here, is 

money, money, money. How are we going to pay for A, B, C, and 

D? Dr. Coburn is legendary in identifying a lot of these things, and 

I commend him for that. 

Let me just shift gears. What are your savings goals for this year 

and next so we can ultimately track your progress? And would we 

have statements or some type of way to measure that success or 

lack thereof? 

Dr. BUDETTI. I believe you heard from both the GAO and the IG 

about our need to specify what our targets are, what our goals are, 

but also to report on our progress. Our goals are, of course, always 

to have a positive return on investment of the taxpayers’ dollars. 

We believe that there is a sufficient problem in fraud and overpayments, that is the least that we can expect. We believe we are moving in that direction certainly with the Medi-Medi program and 

also with the redesign of the Medicaid Audit Program to the collaborative models that we have talked about. So we do believe that 

we have every reason to expect a positive return on investment. 

Senator BROWN. And, Mr. Porter, you actually withdrew from the 

Medi-Medi program. Why was that? 

Mr. PORTER. We had some frustration with the contractor that 

was assigned to our State. We felt that they did not understand 

Medicaid data, although they were pretty—they were very conversant with Medicare data and were trying to treat our Medicaid 

data the same way. They also took very much a criminal justice approach and a fraud-oriented approach to the program where we 

saw much more opportunity in the waste and abuse portions of our 

expenditures. 

The bottom line, with the 40 staff that I have and the other opportunities we saw to save our program money at the local level, 

we opted to withdraw from the program and redirect our resources 

in a more productive venue. 

Senator BROWN. So how helpful would it be for you to have access to real-time provider screening data from the Medicare provider screening contractors? Would it also be helpful to expand access to Medicare data for your State’s program integrity efforts? 

Mr. PORTER. We think Medicare data could be extraordinarily 

valuable. As I said in my earlier remarks, our problem is the format in which the data is made available. It is very difficult to manage the merging of that with our Medicaid data, and also there appear to be a number of barriers on the confidentiality and privacy 

front that restrict how we can use it and with whom we can share 

that data. We would very much like to work with CMS to reduce 

some of those barriers. 

Senator BROWN. Yes, we would like to know what those are so 

we can provide guidance and effectuate that streamlining. 

Thank you, Mr. Chairman. 

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Senator CARPER. You bet. Dr. Coburn. 

Senator COBURN. The one question I have for Dr. Budetti is not 

about that you let that contractor go. Did you let the person or people who made the decision to contract that go? In other words, 

what we are seeing is the Pentagon all over again. One system 

does not talk to another system. There is no communication. We 

have had testimony, we have six different sources of information, 

and each one in a different format, and you have to go buy somebody to program it to where you can be able to utilize the information. Correct? And each one of those are six different types of data. 

So the right hand is not talking to the left hand. 

We also had testimony on MSIS audits that they do not include 

provider identification. These audits are worthless if you cannot 

source data to the provider, because that is where it starts. That 

is where the fraud or the overpayment or the abuse, or whatever 

it is, starts. 

So what I see is the same thing. If you go back, the Deficit Reduction Act passed in 2005, 2006 to 2008 to get the audit started, 

2008 to 2010 to see there was a problem, and from 2010 to now 

to redesign the program. So we are 6 years out, and we really have 

not accomplished anything in terms of savings. And that is the 

problem. I have a lot of questions that I think I will submit for the 

record because they are pretty detailed. 

I think what Senator Brown touched on is important, if Texas 

and Washington could get easily accessible data without all the 

rules and regulations that mean nothing in terms of true results— 

in other words, clean it up to where you have limited common 

sense regulations controlling the security of the data. If you could 

get that data and merge it, is there any question in your mind that 

you could do a much better job in terms of overpayments, fraud, 

and abuse on Medicaid payments? Whether it is provider data or 

trend data or whatever it is, is there any doubt in your mind that 

you could save a lot of money for Texas and Washington State? 

Mr. WILSON. From the Texas perspective, there is no doubt at all 

that we could do a much better job at identifying fraud, waste, and 

abuse. I think Senator Brown was very much on point in terms of 

saying it is all about the money. In Texas, we have been very clear 

about suggesting that or saying that right to our staff. It is all 

about the money. In these times, when Medicaid in our State is 

about a third of the State budget and estimates are, arguably, that 

as high as 10 percent or so of that or more is potentially fraud, 

waste, and abuse, it is all about the money. We are working diligently to stem the tide. Obviously, the great challenge is getting access to the data. But when you get the data, having the tools that 

can quickly look through that data and identify the patterns and 

trends that you want to target to go after. Today I said in my written testimony I visited with a number of companies that say they 

can help us. The challenge that we find is these companies have 

yet to do business with anybody in a large number in any other 

States. The hesitance is this: Every State knows we need help, but 

the cost to secure that type of software is there. If you make the 

wrong decision and do not get the right company and get the results that you need, then you are criticized. In our State, I am suggesting that we cannot sit paralyzed for fear of being successful. 

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23 

We have to identify the software that we think can help us and let 

us move toward it in that direction. And it is not extremely costly, 

but someone has to take the big plunge, and let us start identifying 

it sooner than later. 

I mean, as I have talked about in our State, we have a number 

of issues right now that we are facing, and the dollars at risk are 

huge. It is most unfortunate. We are being aggressive in trying to 

collect those dollars. But when you are—it has been my experience 

in this business that when you see people that are taking money 

they are not entitled to, they are not taking it to save it or hold 

on to it. So when I identify it and I say that I want to get that 

money back, it is a process. It takes time for me to work through 

that. 

Senator COBURN. Does Texas have a predictive analytics program? 

Mr. WILSON. Texas has a system that is known as Medicaid 

Fraud and Abuse Detection System (MFADS), which is sort of more 

known for models and targeted queries that we can build and run 

that allows us to identify outliers, people that have maybe aberrant 

billing patterns or behaviors that suggest we should take a look at 

them. 

What Texas does not have is a system that can look within the 

data itself and on its own identify things that are questionable, like 

five providers in your database of 50,000 or more providers have 

the same exact address or the address is within a mile of each 

other and they are making referrals and billings all the time and 

it is accounting for X percent of dollars. Those are things that take 

human intelligence today to get to. 

In our visits with the various companies, we are learning that 

there is software that does that type of analysis, that can identify 

unknown trends or behaviors and patterns that we otherwise 

would not see, and that allows us to then say let us take a look 

at what that is and let us go identify it sooner than later. 

In many cases, by the time we notice the aberrant billing pattern, it has been a little time that it has been going on. 

Senator COBURN. The money is out the door. This is not reinventing the wheel. 

Mr. WILSON. No, sir. 

Senator COBURN. The private insurance industry has all this predictive analytics. They are using it. We contracted at the Federal 

Government to create a new program, which I was very much 

against reinventing the wheel. I saw a demonstration of the Fraud 

Prevention System (FPS)—and, Dr. Budetti, I thank you for giving 

us the time to do that. But we do not need to reinvent the wheel. 

It is out there. And I just think our whole approach—I mean, 6 

years to get to somewhere where we are not there yet, and I will 

go back. Dr. Budetti, the people who made the decisions on this to 

go this direction, are they still with you? 

Dr. BUDETTI. Senator, those decisions were made some years ago, 

and I am not sure whether—— 

Senator COBURN. I do not care which Administration. I am talking about the individual that was responsible for making those decisions, are they still with you? 

H605-41331-79W7 with DISTILLER

24 

Dr. BUDETTI. I would have to go back and check and see whether 

they are still with us. We have completely reorganized a number 

of times since then, as you know, sir. 

Senator COBURN. Well, I think that tells us one problem: No accountability, no responsibility, no consequence for failure. That is 

a principle that this Government cannot live with anymore. And it 

is fine to get rid of something that is not working, but the question 

ought to be: Who made the deductive reasoning that said this was 

the way to go? And why did they do it? It is not about secondguessing. It is about holding people responsible. 

Ms. Yocom, CPI or CMS utilized its moratorium authority at all 

in areas where there are known rates of high fraud and significant 

market saturation of providers or suppliers? 

Ms. YOCOM. I cannot answer that. I am sorry, sir. I do not know. 

Senator COBURN. Does anybody know the answer to that question? 

Dr. BUDETTI. Yes, sir, I do. We are very much interested in using 

that authority. We believe that we should combine the use of the 

moratorium authority with all the other appropriate tools that we 

have. A moratorium is just that. It just tells people they cannot get 

into the program. It does not do anything about the bad guys who 

are already in there. We have been undergoing extensive analysis 

to pinpoint the ways in which that moratorium authority is most 

appropriate for us to use it, and we will be using that tool when 

we believe that it is appropriate. 

Senator COBURN. And how long has CMS had that authority? 

Dr. BUDETTI. Since the implementation of the Affordable Care 

Act. 

Senator COBURN. OK. And so you have Miami-Dade County, 

which we know is a big hotbed of fraud. 

Dr. BUDETTI. Yes, sir. 

Senator COBURN. And yet we still do not have a moratorium. 

Dr. BUDETTI. We do not have a moratorium. We have lots of 

other activities that are going on, for example, revoking building 

privileges, getting people out of the program, stopping payments. 

We do want to use the moratorium authority when we believe that 

stopping new providers and suppliers from getting into the program is an effective part of our overall strategy. Yes, sir. 

Senator COBURN. I want to ask the two State directors. You have 

difficulty getting access to a list of bad players on the Federal level. 

Is that correct? In other words, Medicare knows these are bad players, but that is not accessible to you. Is that correct? 

Mr. WILSON. Senator, partially, yes. I think in the Medi-Medi 

program, in some cases we are made aware when there is a bad 

player in the Medicaid side. For us, in some cases that just means 

a crossover claim is being paid. 

Senator COBURN. Yes. 

Mr. WILSON. So, in other words, it may be 20 percent of that 

claim. On the Medicare side, it could be a lot of dollars at risk. For 

our State, it may or may not be a number of dollars at risk. 

Senator COBURN. But, specifically, can you go to CMS and say 

we want to know the names of everybody that is on your watch list, 

your fraud list—in other words, all these provider numbers, can 

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25 

you go and say we want to know who to look at harder in Texas 

based on what CMS has discovered? 

Mr. WILSON. Not to my knowledge, sir. 

Senator COBURN. OK. Well, there is a big problem, and the question is: Why not? I mean, we are going to spend all this money at 

the Federal level to identify these bad actors, and we are spending 

a ton of money, and you do not have access to it, and what portion—60 percent of the portion on Medicaid in the State of Texas 

is funded with Federal dollars? 

Mr. WILSON. Yes, sir. 

Senator COBURN. Why don’t they have access to everything CMS 

has access to in terms of providers? And if the rules are too hard, 

why don’t we change the rules? And if there is a Federal law that 

limits the ability to have common sense rules, why don’t we change 

those laws? 

The point is that we are running around in a circle and the problem is getting bigger rather than smaller. And so I guess the question for Dr. Budetti or for General Maxwell is: What is the problem? Format aside, why can’t the States have access to the information of the bad players in their State that Medicare has already 

identified? 

Ms. MAXWELL. I know the Office of the Inspector General has 

been on the record in support of transparency to the extent that 

the policymakers and lawyers provide, and we consider it to be a 

healthy development to have more transparency in the data. 

Senator COBURN. But it is still not there. I have been in the Senate almost 8 years. I was in the House 6 years. These are the same 

problems we were talking about 16 years ago. I mean, I can recall 

hearings in the Commerce Committee where we were raising this 

same question with CMS. There is no answer, or the answer is incompetence. 

I will submit the rest of my questions for the record, Mr. Chairman. Thank you for holding this hearing. This is a big issue. 

I would make one last comment. If we were to block grant Medicaid to the States, making them fully responsible—not taking 

away any of their dollars, making them fully responsible, take the 

Federal laws, let them do it, what we will see is some States very 

successful and some States not. And one of the things that can 

happen, I guarantee you, if Texas—I know Texas because they are 

my neighbor. We have great admiration for the things that happen 

in Texas in terms of their government. I guarantee you, they would 

save a whole lot more money. They will be a whole lot more efficient with the Federal dollars that we send because they are spending so much of their own. 

I appreciate your time. 

Senator CARPER. And we appreciate your dogged persistence on 

this issue. 

I just want to say on a brighter note—you said we have been 

working on this forever and not making a lot of progress. One of 

the things that Senator Roth when he was in the Senate and when 

I was in the House, I think in my last year, we worked on legislation with a number of our colleagues to require that every Federal 

agency of any consequence have a Chief Financial Officer and also 

that they develop auditable finances. And it has taken a long time 

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26 

to get there, but everybody is basically doing that now, except the 

Department of Defense (DOD). And Leon Panetta has assured us 

that they will be auditable prior to their deadline of 2017, so that 

is good. 

Ten, 15 years ago, nobody was thinking about improper payments, no discussion really of improper payments that I ever heard 

of. And today there is a whole lot of discussion on improper payments. We have a good law in effect thanks to your efforts, and we 

are making progress. 

Senator COBURN. And let me differentiate between improper payments and fraud. They are cumulative. They are not the same. 

Senator CARPER. So the glass is not entirely empty, at least halffull, and we have just to fill the rest of it up here. Fortunately, we 

have some water here so we can do that. 

I want to go back to Mr. Wilson, and I said the reason why we 

asked you and the other Douglas, Douglas Porter, to come is because you guys do a good job at this. And my question was: What 

can the other States learn from you down in Texas and maybe 

what can we learn here from what you all are doing? 

Mr. WILSON. In our State, we have become a lot more aggressive 

in working these cases. I think the challenge that I walked into 

when I assumed the responsibility of Inspector General was initially some hesitance on our part to pursue cases where it was a 

question of medical necessity. 

On the program integrity side of the house, that is a big part of 

what we do, determining whether or not the client recipient actually needed the service or not. There are definitely challenges because we are dealing with medicine, a discipline where there is 

built-in expectations and respect for the people that we are in 

many cases challenging and pursuing to get dollars back from. 

Our approach since I have hired my new deputy, Jake Stick, 

Deputy of Enforcement, has been we have a number of medical 

consultants on our staff now that we have contracted with to—once 

we see behaviors that we believe do not fit, that are not right, that 

look suspicious—— 

Senator CARPER. They are not employees that you consult with, 

you contract with them? 

Mr. WILSON. We would love to have employees, but as my counterpart here, Douglas Porter, has indicated, there are always challenges with the budget. It is better for me at this point to contract 

with them to give us some of their time on a case-by-case basis, 

once we go pull the records and we suspect we have seen fraud, 

waste, or abuse, to have them come in and take a look to verify 

what my guys think they know. We have had great success with 

that, especially in the area of orthodontia for the cases—— 

Senator CARPER. Especially where? 

Mr. WILSON. Orthodontia. The orthodontist problem we have in 

Texas. Great success with it. Extremely high error rates from what 

we are seeing from our specialists, as high as 90, 95 percent in 

many cases of what has been billed to our program. 

The challenge—because, as you know, there is a due process 

right there—is once we say, ‘‘You owe us money,’’ they are going 

to say, ‘‘No, we do not.’’ And then we are having to contend with 

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27 

torneys saying, ‘‘You are guilty,’’ their attorneys saying, ‘‘They are 

not.’’ And in many cases, if we have identified a number that we 

believe is due back to the State, we may get some, or even all of 

it, but then our ability to collect once a favorable decision is rendered then becomes the next challenge, because, as I said before, 

no one is taking the money to hold on to it and save it. They are 

actually spending it. So our ability to negotiate as we deem appropriate, that is in the best interest most definitely of our State, but 

also the Federal Government, is tantamount to our success, to sit 

down with them and say—because it leaves me with a couple of 

choices. I can put you out of business if you cannot repay me, 

which means I get nothing, but it helps me because I do not have 

to pay anything back to CMS. Or if you can remain viable—and in 

some cases, we have some cases where the dentist or the perpetrator who was actually committing the fraud, waste, and abuse is 

no longer with the company because we are looking at a time certain, and there is no ownership, let us say, and they have made 

improvements, but it is still under the same name. We are pursuing them saying, ‘‘You owe us money back.’’ ‘‘Well, a lot of dollars 

we are talking about. We cannot pay it all, but here is what we 

think we can pay.’’ And negotiating those kinds of settlements 

when I identify an overpayment, as the system works today, I am 

on the hook for about 50 percent of what is identified, not what is 

collected. 

It is a huge challenge for us. It forces us to make tough decisions. 

We are very appreciative of the changes that were made in the 

timeline from 60 days to 1 year. I cannot speak for other States, 

but in the State of Texas, there was much rejoicing around that additional time that was provided. I think the more time that is provided, that gives us the flexibility to work out repayment agreements that are viable for the States and for the Federal Government to see some return of those dollars that we are talking about 

on that board over there is absolutely essential. 

Senator CARPER. Yes, interestingly enough, I think the idea for 

providing the 1-year extension that you just alluded to actually 

came out of a hearing right here where Ms. Yocom is sitting. I 

think it was the Medicaid Director from the State of New York who 

suggested that, and we folded that into our law. 

Mr. WILSON. Awesome change. Thank you. 

Senator CARPER. Good. Thank you. I will mention that to another 

Peter back here who worked on that for us. 

Did you have something else, Mr. Porter? 

Mr. PORTER. Yes, I would say, Senator, we have done three 

things in our State that have amped up our performance considerably. The leadership issue would be the first one. The second one 

would be a focus on improving our own data. And the third would 

be investing in the tools that help us do a better job. 

When I got to the State of Washington, the culture, the organizational culture, was such that there was a reluctance to antagonize 

the provider community. There was a premium placed on access, 

and there was a fear that if you made payment review too burdensome, you would push people out of the program. So it was the Secretary of Health and Human Services, Dennis Braddock, who really 

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tegrity and take on some of the tough constituents at the State 

House level, a very unpopular move with doctors and hospitals and 

nursing homes, but there was the political will to move forward, 

and that was very important. 

On the data piece, we had all different silos of data, bad data, 

conflicting data that prevented us from moving forward and getting 

folks around the table to really define what you are going to use 

the data for, so how should you better collect and organize that 

data and have that drive your decisions was a key factor in success. 

And then, finally, investing about 5 years ago in a new Medicaid 

Management Information System that had a more robust capacity 

for edits and audits on the front end so that you were not paying 

money out to fraudulent or abusive providers in the first place and 

then having to chase it afterwards. 

The combination of those three aspects I think have made our 

program as successful as it is today. 

Senator CARPER. OK, great. Thank you for those. 

I have a couple of questions my staff has been good enough to 

help prepare, and I am going to go ahead, and before we close out, 

give you at least one of those. But while I do that—and one of the 

questions is for Dr. Budetti. A guy I sometimes like to quote is another doctor, Dr. Alan Blinder. He has a Ph.D. in economics. He 

teaches at Princeton. He used to be Vice Chairman of the Federal 

Reserve, and he testified before the Finance Committee last year 

that in terms of reining in the growth of health care costs and trying to make sure it did not eat us alive in States’ Medicaid and 

Federal Government Medicare and really companies trying to compete with other companies around the world whose health care 

costs were a lot less. And he said that what we should do in order 

to rein in the growth of health care costs is find out what works, 

do more of that. And I said to him, ‘‘Do you mean find out what 

does not work and do less of that?’’ And he said, ‘‘Yes.’’ 

So before we leave, that is going to be my last question, name 

one thing that is working that we ought to do more of and one 

thing that is not working that we ought to do less of. So while all 

of you are thinking about that, I will pick on Dr. Budetti for a 

minute. I want to ask you a question about recovery audit contracting, one of our favorite subjects. As you know, recovery audit 

contracting is a form of post-payment auditing in which private 

companies are employed to review payments, supporting documents, and other information in an effort to try to identify overpayments and underpayments. We used them in the State of Delaware 

Division of Revenue to recover monies, tax revenues that we were 

not recovering, and to compensate the folks who did the actually 

recovering, they would retain a percentage of what they collected. 

But recovery audit contracting has been used by CMS to review 

Medicare payments since, I think, 2005. They recouped, I am told, 

a little more than $2 billion during the last couple of years. In the 

Affordable Care Act, we expanded the use of recovery audit contractors to all of Medicare and to Medicaid as well. And I understand that as of April of this year, 26 States had operational programs. We are at about the halfway point, and that is good. 

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First, let me say that we are pleased to see the program up and 

running, and, Dr. Budetti, when do you think we will see all 50 

States participating? And when will we begin to see the numbers 

on the success of the program showing the amount of dollars recovered? 

Dr. BUDETTI. Yes, sir. The Recovery Audit Contractor Program, 

as you know, expanded under the Affordable Care Act to Medicaid 

and also to Parts C and D of Medicare. All 50 States have submitted State plan amendments laying out their intention to proceed with putting recovery audit contractors in place. I believe the 

last numbers I have are that more than 30 of them now actually 

have signed contracts with recovery audit contractors, and they are 

gearing up. 

Just as we did with the Medicare program under Parts A and B, 

we expect to see returns even in the first year of operation. So as 

those recovery audit contractors become operational in the States, 

we would expect to see some recoveries beginning this year. 

Senator CARPER. Good. Thank you. 

Dr. BUDETTI. Mr. Carper, I would also like to add one thing, 

which is that our discussion about the movement to collaborative 

audits really has a side benefit, which is that we believe that the 

collaborative audit approach with the States is also going to be a 

very effective tool for coordinating the audits that will be done 

under the Recovery Audit Contractor Program with the audits that 

would be done under the Medicaid Integrity Program so that they 

will not overlap and duplicate each other to any great extent, because if we are working with the States to select the audit targets 

and they are also working with their recovery audit contractors to 

identify the audit targets, we ought to be able to keep duplication 

to an absolute minimum. 

Senator CARPER. That is a good point. And you may have just 

said this in a different way, but one of the things we have learned 

in Medicare where the recovery audit contractors have been working is that they are helpful in helping us move away from ‘‘pay and 

chase’’ where we pay the bills in Medicare and then have to chase 

the money, because we learned through the recovery audit contractors, they are like a passthrough. They come back and say to the 

Federal Government these are the places where we are seeing 

fraud occur, so rather than continue to make those mistakes, let us 

fix them in the front end. So there is a double benefit there. But, 

anyway, that is good. We have 30. That is good. We have 20 more 

to go, and we will not be home free, but we will be on our way. 

This is a question, if I can, for Mr. Wilson and Mr. Porter dealing 

with the Public Assistance Reporting Information System (PARIS) 

and cross-State checks for beneficiaries. I would like to ask the 

panel about a specific challenge for Medicaid, and under Medicaid 

rules, a beneficiary can only be enrolled in one State’s Medicaid 

program. Is that correct? I think that is correct. 

Mr. WILSON. Yes, it is, sir. 

Senator CARPER. OK. If a beneficiary is enrolled with the Delaware Medicaid program, that beneficiary cannot be enrolled in 

Maryland, our neighbor to the west, or Pennsylvania, our neighbor 

to the north, or New Jersey, our neighbor to the east. However, I 

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30 

ing between States to try to identify duplicate enrollees. This 

seems to us to be a significant problem to address waste and fraud. 

In March, our Subcommittee held a hearing on improper payments, and we heard about a system called the Public Assistance 

Reporting Information System, which, of course, has the acronym 

PARIS, as in France. But it is the Public Assistance Reporting Information System. It is run by the Department of Health and 

Human Services. The system has the ability for States to do such 

cross-State beneficiary checks of individual enrollees. However, we 

learned that Medicaid State agencies are not fully utilizing the system, nor does CMS perform these cross-checks. 

I would just ask our friends from Washington and from Texas, 

could you comment on this specific challenge and how Congress 

and the States and maybe CMS can work together to ensure that 

beneficiary enrollments are not duplicated in other States? 

Mr. WILSON. Sure. For Texas, we have actually found benefit in 

using—— 

Senator CARPER. Is there a Paris, Texas? 

Mr. WILSON. There is a Paris, Texas. Yes, there is a Paris, Texas. 

It is not much to see, Senator, but there is a Paris, Texas. 

Senator CARPER. The other one is worth seeing, the big one. 

Mr. WILSON. Yes, sir, it is. 

We have gotten benefit from the PARIS system. Texas has been 

part of that system for a while, and through that process we do 

identify recipients attempting to get access to Medicaid services in 

our State that may be receiving them in another State. We have 

recently been using it to identify recipients that are on the Medicaid rolls in our State but are also expending the benefits in another State, almost any of the other 49 States, to be quite candid 

with you. 

In some respects, we have learned in working with the Federal 

Government that people travel, they go out of town, things happen, 

so we have been trying to sort of tighten down that window in 

Texas. If you are on the Medicaid program in Texas but you have 

expended your benefits on your SNAP card in Oklahoma or Maine 

somewhere for 6 months, that may be an indication that you have 

actually physically moved and you are no longer a resident of our 

State. 

There has been hesitance to allow us to make those changes because ultimately it is a Federal program. They are eligible in 

Texas. They will probably be eligible in whatever State they are actually in. From our perspective, though, they are on our rolls. It 

looks like that person is receiving or needs Medicaid benefits in our 

State when they actually do not. 

But those are the kinds of things that we are working through. 

We think that PARIS absolutely does have utility. We have had to 

my knowledge no issues getting that data and trying to use it in 

helping us work recipient cases. 

Senator CARPER. All right. Thank you. Mr. Porter. 

Mr. PORTER. We have had great success using the PARIS system 

in the State of Washington, but primarily for identifying those individuals who are on the Medicaid program who are actually entitled 

to veterans benefits and hooking them up with another payer, if 

you will, for things like longterm care and other health benefits 

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31 

that the VA offers. And that helps get people off of our rolls or at 

least not put as much demand on our Medicaid program when they 

are entitled to other benefits. So it has been quite helpful there. 

We have used it to monitor what you are talking about, dual enrollment, but we have not—we actually have a specific focus on our 

sister State to the south, the State of Oregon. They do not have a 

sales tax where the State of Washington does. Washington does not 

have an income tax like the State of Oregon does. So we are always 

mindful that people might be crossing the border to try and game 

those two systems. And we did some driver’s license checks in addition to the PARIS checks, but we find that is at least not a very 

big problem at all in our State, having people travel to a border 

State. 

Senator CARPER. OK, good. Thanks. 

A question for Dr. Budetti, and then I will go back to the question inspired by Dr. Alan Blinder. Last year, at about this time, our 

Subcommittee held a hearing that discussed the Integrated Data 

Repository (IDR). I have another Subcommittee I chair. We have 

been exploring repositories for spent nuclear fuel, so I am really focused on repositories this year. But the Integrated Data Repository 

refers to an existing database of all Medicare claims, including prescription drug claims, and providing access to State Medicaid agencies for program integrity purposes was one of the original ideas, 

I believe, for the Integrated Data Repository. I am told that no 

States, though, have been granted access, and I would just ask, Dr. 

Budetti, when do you think the States will have gained access? Are 

there any challenges that you can describe which prevent sharing 

this data with States? 

Dr. BUDETTI. Senator, I think, as you know, the Integrated Data 

Repository is far advanced from what it was when we discussed it 

last year. It has a lot more data and also now has some pre-pay 

data in it, as we had intended all along. One of the big gaps still 

is getting the Medicaid data in there, and that is something we are 

working on. 

But as far as State access to data, I think you are aware that 

last week CMS announced a new initiative to make data sharing 

a major activity of the Centers for Medicare & Medicaid Services, 

and we are currently looking at all of the—States can get quite a 

bit of the data right now, but as you have heard before, there are 

restrictions in the way that they can use it, and some constraints 

and inefficiencies in the ways that they get access to it. All of those 

are things that are currently under very intense discussion, and we 

anticipate having some major steps forward on that front very soon 

in terms of making the data available to the States, the appropriate data available to the States, while we continue to protect, of 

course, legitimate privacy and confidentiality interests. So that is 

something that we look forward to having major progress in the 

near future on. 

Senator CARPER. Good. Well, we will keep following up with you. 

Thank you. 

Ms. Maxwell, you get to be the lead-off hitter on our last question. Again, the idea is to find out what is working in the realm 

of issues we are discussing here today and what should we be 

doing more of and maybe give us one good idea. Then we will come 

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back to you to ask for an example of something that is not working 

and we ought to do less of that. Please proceed. 

Ms. MAXWELL. Based on our evaluations, we found that the partnerships with the States really were more successful than the 

MSIS audits. We found that—— 

Senator CARPER. Say that again. The partnership with the 

States—— 

Ms. MAXWELL. The collaborative audits that the—— 

Senator CARPER. Were more successful than? 

Ms. MAXWELL. Were more successful. Ninety percent of the identified overpayments came from seven collaborative audits. An additional 35 regular audits only uncovered $700,000 in identified overpayments. 

Senator CARPER. That is interesting. Why do you suppose that 

is? 

Ms. MAXWELL. We believe that is because they were able to partner with the States from the very beginning through the whole 

process, so that allowed them to access State knowledge based on 

States’ understanding of where the fraud might be most problematic. It also allowed them access State knowledge in our program 

policies so they can interpret the data. And, most importantly, it 

allowed them to access that more accurate and more timely Statespecific Medicaid data. 

Senator CARPER. OK. Well, good. Thank you. 

Ms. Yocom? And it is OK to say the same thing that someone 

else has said. Repetition is not bad. 

Ms. YOCOM. That is good to know because I was going to. 

[Laughter.] 

Senator CARPER. Good. And in NASCAR, they call this ‘‘drafting’’ 

the car in front of you. 

Ms. YOCOM. We had slightly different time periods, but our results were the same. The collaborative audits looked to be very 

promising, and as Dr. Budetti said, the cooperation and the coordination that happens with the States I think is a very effective outcome as well. 

One thing that I would do more of is about transparency. The 

more transparent CMS is, the more transparent the States are 

about the issues they are facing and ways to combat them, the 

more we have a feedback loop in the process and we can make 

progress more quickly. 

Senator CARPER. OK, thanks. Mr. Wilson. 

Mr. WILSON. I would echo what the previous two have just said. 

I think that collaboration is key. It has been said that if you have 

seen one State Medicaid program, you have just seen one State 

Medicaid program. I think the collaboration works because each 

State knows its program best, and we can help you understand 

what our policies and rules mean and pursue the money much 

more aggressively. 

I also believe that aggressively pursuing these cases from my 

agency, changing our mind-set about how we approach the case, 

was—— 

Senator CARPER. Sorry. Changing your mind-set about? 

Mr. WILSON. How we approached our cases, giving my staff the 

courage to say, ‘‘I know you are the doctor, but we think you did 

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something wrong. Let us go after him.’’ Having clean data that we 

could utilize and then having good investigations being conducted, 

and then having other professionals, medical professionals, come in 

and verify what we think we know to be accurate for us has been 

very successful. 

I think—and I circled what Carolyn said. I had on there for what 

could be improved is definitely the transparency. Texas wants to be 

transparent. I want to show what I think I know and what I do 

know, but I want to do that without fear of reprisal. I do not want 

to have negative consequences to my State for being aggressive and 

doing the right thing we believe was best for not only Texas but 

also for the Federal Government, who we partner with in these 

programs. We understand that. We are committed to that. They 

have commercials there that say, ‘‘Do not mess with Texas.’’ We are 

serious about that when it comes to our Medicaid money. So we absolutely do want to work with everyone here. 

I think the other thing that is working good now is absolutely 

the ability to dialog with others, both at the State and Federal 

level. I am listening to Mr. Porter next to me, and I am almost 

thinking he has moved to Texas and just has not told me. Some 

of the things he is talking about I echo almost verbatim. It is sort 

of the same experience. And I think we would find that nationally, 

that everybody is fighting the same types of battles and we are 

looking for the same kinds of solutions, and collective knowledge is 

priceless. 

Senator CARPER. All right. Thanks so much. 

Mr. Porter, are you thinking of moving to Texas? Is there anything to that? 

Mr. PORTER. I have been to Maine, California, Washington. 

Texas could be next on my itinerary. 

Senator CARPER. A great place. 

Mr. PORTER. What works in medicine is prevention, and I am 

going to take this opportunity to make another pitch for a national 

enrollment, Level one enrollment where 50 States do not have to 

comb through the Federal databases, that we would oblige our providers to get enrolled in Medicaid via a centralized national screening process. States would be free to add additional criteria before 

they would admit providers to their Medicaid programs, but at 

least there would be one place where an entity could see across 

State lines, see where people had been, and if they were excluded 

in one State, they would know not to allow them to enroll in another State, and then re-enroll them every 3 years. 

Senator CARPER. Could you just stop right there? Would others 

in the panel just briefly comment on that, about his point? Ms. 

Maxwell, do you have any thoughts on what he just said? 

Ms. MAXWELL. That is not an issue I am particularly informed 

about. I could certainly have our office get back to you. 

Senator CARPER. That is OK. 

Ms. Yocom, any thoughts on what Mr. Porter just said? 

Ms. YOCOM. We have not studied it either, but I would say that 

in concept it makes a lot of sense. We may have 56 programs reinventing the wheel to investigate providers. 

Senator CARPER. Mr. Wilson, would you comment on that? 

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Mr. WILSON. I believe in my written testimony we make comments regarding provider enrollment, and I would echo what he is 

saying exactly. We are enrolling a number of providers in our 

States, and the Affordable Care Act requires us to go out here recently and conduct actually onsite visits of all those providers, in 

the first year just for one provider type, which I have met up with 

6,000 visits we have to conduct, many of whom are also in the 

Medicare program. So I think the ability to leverage that common 

information, that common knowledge, and share it freely helps everybody. So I totally support what Mr. Porter is saying. 

Senator CARPER. Dr. Budetti, would you react to that? 

Dr. BUDETTI. Thank you for asking that question, Senator Carper. Yes, we are, in fact, right now talking to States about applying 

the automated provide screening system that we have put into 

place for the Medicare enrollment of providers and suppliers and 

applying that to the Medicaid provider and supplier community. As 

you know, there is a great deal of overlap—not 100 percent overlap—between providers and suppliers in the Medicaid program. 

There are some that are unique to Medicaid, and the States will 

have to apply the screening for that separately, or we can work 

with them to figure out ways to use our technology. But in terms 

of using what we are doing for Medicare, since the States can accept the same screening for enrollment in Medicaid, we are currently developing pilots with States to do exactly that so that we 

could implement one-stop shopping for provider screening. 

Senator CARPER. OK. Thanks very much. 

See what you started here, Mr. Porter? 

Mr. PORTER. I am keeping my hopes up. 

Senator CARPER. Good. OK. Did you have any other point? 

Mr. PORTER. On what is not working—— 

Senator CARPER. Hold that one and we will come back to you. 

Dr. Budetti, give us one good example of what is working and we 

need to do more of. 

Dr. BUDETTI. Well, I think you have heard very extensive comments that were very supportive for the Medicaid Integrity Institute and all of the incredible work which I wish we could quantify 

the results of, and we are looking for ways to quantify the results 

of, but at least we are gratified that the qualitative results and the 

testimony we get from people who have used the system and their 

supervisors is all very positive. We are indeed working to expand 

the use of it through—we are looking at ways to do remote learning, distance learning, and other approaches to expand the use of 

it. 

I think the other thing that is—— 

Senator CARPER. In fact, could I interrupt for just a second? 

Dr. BUDETTI. Sure. 

Senator CARPER. There is a fair amount of focus on distance 

learning with respect to VA benefits and with respect to Department of Defense benefits, and there are concerns that in some 

cases some of the folks in proprietary colleges and universities are 

doing distance learning with folks in the VA program, the GI bill 

program, and tuition assistance. Some of them do a great job, a terrific job. Some of them do not. And we are trying to put a lot of 

pressure on those who are not doing a very good job and are taking 

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advantage of the veterans and the taxpayers, and the quality of 

their program or lack of quality in their program, we are trying to 

ferret those out and get them to change their ways. 

In terms of being able to take a program that—it sounds like 

people go to South Carolina to the institute to actually participate 

in it, but to be able to do that from their home States is—you may 

want to think about some of the distance learning colleges and universities, if you will, training under these, they are doing a really 

good job, and see if there might be some way to do a competition 

with them to help them come in and do the same kind of thing 

with the institute. 

Dr. BUDETTI. Thank you for that. Yes, sir, I have been engaged 

in quite a bit of distance education in my time, and I agree that 

there are good ways to do it and not so good ways to do it, and we 

do not want to ruin something that is very good. We will continue 

the onsite education because the networking, the interaction, the 

ability to share best practices, all of that is a whole level—— 

Senator CARPER. I am sure it is. 

Dr. BUDETTI [continuing]. That you will not get through the distance learning. 

Senator CARPER. I am sure it is. OK. 

Dr. BUDETTI. Do you want something else that is working? 

Senator CARPER. Please. 

Dr. BUDETTI. One of the things that is working, I think, I would 

like to mention, which does address one of Dr. Coburn’s questions, 

which is that the technology that we have built in the fraud prevention system on the Medicare side that you are familiar with, we 

are required under the Small Business Jobs Act to apply that to 

Medicaid. And so we are very much interested in doing the kinds 

of things that you heard from our colleagues in both State programs about using the technology that we already have at the Federal level, that is expanding, and that is being enhanced all the 

time, applying that to the Medicaid program. So I think the fact 

that we have a collaborative relationship and we are developing pilots to do exactly that, I think that is something that is—it is a 

work in progress, but I believe it is working. 

Senator CARPER. OK. Good things. 

All right, Ms. Maxwell, back to you. Something that is not working that we need to do less of? 

Ms. MAXWELL. I would say what is not working is—— 

Senator CARPER. Are you going to say these hearings? [Laughter.] 

Ms. MAXWELL. No; that is very effective. I would say what is not 

working is an underinvestment in creating a National Medicaid 

data set. With a National Medicaid data set, we would be able to 

detect billing patterns that cross State lines, that cross Federal 

health care programs, and we would be able to do that more quickly, and we would not leave the States in the position of trying to 

chase dollars that are difficult to collect. 

Senator CARPER. All right. Thank you. 

Ms. Yocom, something that is not working that we need to do 

less of? 

Ms. YOCOM. To go back to transparency again, the more transparency, the less duplication. We have some duplication in our sysH605-41331-79W7 with DISTILLER

36 

tem right now that is not serving us well, and we need to do less 

of it. 

Senator CARPER. Any particulars you want to mention with respect to duplication? 

Ms. YOCOM. Some of the algorithms run at the Federal level have 

been the exact same ones that the States have run. At times, 

States have had to take time to train the Federal Government 

about their systems rather than collaborating with the someone 

who already knows their own systems. Those are two examples. 

Senator CARPER. Thanks. Mr. Wilson 

Mr. WILSON. I would say what is not working is the current process for repayment where a State may be at risk for repaying dollars that there is no chance they could possibly collect. I find that 

to be a disincentive at this point for my State. 

Senator CARPER. OK. Thank you. Mr. Porter. 

Mr. PORTER. I think what has not worked in our State is adopting vendor-driven solutions to things that are kind of prepackaged. 

Senator CARPER. Explain what that means in English. 

Mr. PORTER. Well, I will speak to what has been mentioned earlier on predictive modeling. When we were pursuing better care coordination for chronic illnesses, we had a lot of national vendors 

come forward talking about their predictive modeling capacity, and 

when we looked under the hood, we did not see a whole lot there. 

A lot of marketing, not a lot of product. And we are very closely 

watching what is going on with the Medicare efforts under predictive modeling and trying to resist the many vendors coming into 

our State saying to the legislature, ‘‘You should adopt this proven 

technology.’’ And we are there saying, ‘‘It is not proven yet.’’ And 

we would like to see the results. We would like to not be in a position where I am defending how much money I spent on something 

that has no track record and has no evaluation and no proven results or return on investment before I buy into it. 

Senator CARPER. Good. Thank you. 

Dr. Budetti, the last word, or the next to the last word. 

Dr. BUDETTI. I think the one thing that we all agree has not been 

working is the way that we have gone about the National Medicaid 

Audit Program with reliance on an inadequate database and with 

contractors who were not working in an interactive and collaborative way with the States. And so I am very pleased to say that 

we are moving away from something that is not working. 

Senator CARPER. OK. Thank you. 

I think that is probably it for today. I think we are making some 

progress here, and I think you are helping us to make some more, 

not just for the Federal Government but for all of our States. 

Coincidentally, the next Chairman of the National Governors Association is a fellow named Jack Markell, who is the Governor of 

Delaware, and he will become Chairman of the National Governors 

Association I think sometime this summer, and I think he will be 

a very good one because he is a very good Governor. 

I was once, a dozen or so years ago, privileged to hold that position when I was Governor of Delaware, and I think for the year 

that he is Chairman, there may be an even better opportunity to 

partner in some of these areas and to get better results for less 

money. And we will look forward to trying to use our personal relaH605-41331-79W7 with DISTILLER

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tionship and friendship and close working relationship in Delaware 

on all things Delaware and to be able to see if we cannot use that 

as a springboard to greater results on some of the issues we are 

talking about here today. 

I want to thank you all for coming. Some of our colleagues who 

did not come missed a good hearing. A lot of them, I am sure, were 

glued to their televisions so they could watch it on TV, and certainly their staffs were. Some may have some questions, and what 

do they have, Peter, a couple weeks? 

Mr. TYLER. Two weeks. 

Senator CARPER. They have 2 weeks to produce those questions 

and provide them to you. When you get them—and you will get 

some from us as well—I would just ask that you promptly respond 

to them. 

My guess is that somewhere down the line we will have another 

hearing. I do not know that we will trouble each of you to come, 

but we might, and this has been a very productive hearing, and we 

are grateful for your preparation and the great travel from as far 

away as Washington State and Texas. When I was a naval flight 

officer, I left Pensacola on my way to Southeast Asia, and I was 

stationed for a while in Corpus Christi Naval Air Station. I have 

just wonderful memories of being in Texas. 

I would ask again, Mr. Porter, that you give my best to Governor 

Gregoire as she winds up her service there. 

All right, everybody. That is it. With that, this hearing is adjourned. Thanks so much. 

[Whereupon, at 11:56 a.m., the Subcommittee was adjourned.] 

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A P P E N D I X 

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FOR RELEASE: June 14, 2012 

CONTACT: Emily Spllin (202) 224-2441 or emilLspllin@carper.scnate.gov 

U.S. SENATE COMMITTEE ON HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, 

GOVERNMENT IN1<'ORMATION, FEDERAL SERVICES, AND 

INTERNATIONAL SECURITY 

HEARING: "Saving Taxpayer Dollars by Curbing Waste and Fraud in Medicaid" 

Opening Statement of Senator Tom Carper, Chairman 

As prepared/or delivery 

Today's hearing will focus on one of our nation's critical safety net programs, Medicaid, 

and the steps that must be taken to help further reduce waste and fraud and improve 

efficiency and effectiveness there. 

A combination of federal and state funding pays for Medicaid, though states take the lead 

in administering the program. Over the last year, state governments paid approximately 

$404 billion to care for 70 million beneficiaries. These numbers are expected to grow in 

the coming years as the Affordable Care Act expands access to Medicaid for millions of 

Americans. 

As everyone in this room knows, both the federal and state governments have struggled 

with record budget deficits in recent years. Today our national debt stands at about $15.7 

trillion, well over double what it was just ten years ago. The last time our national debt 

was this high was at the end of World War II. That level of debt was not sustainable then, 

and it is not sustainable today. 

In order to address the burden this debt places on our country, we need to look in every 

nook and cranny of federal spending - in programs large and small - and make certain 

that the resources we're investing are being spent efficiently and effectively. We need to 

demand results and focus the scarce resources taxpayers entrust us with on what works. 

And across the federal government, program managers need to sharpen their pencils and 

stop making the kind of expensive, avoidable mistakes that lead to improper payments. 

With Medicaid, a significant amount of taxpayer dollars are unfortunately lost to waste 

and fraud. Those resources could, and should, instead be used to help states provide 

quality healthcare to some of our most vulnerable citizens. 
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According to the Government Accountability Office, Medicaid made an estimated $21.9 

billion in improper payments in 2011. And Medicaid continues to be on the Government 

Accountability Office's (GAO) list of government programs at "high risk" for waste, 

fraud and abuse - as it has been for m~y year~ . I 

Now more than ever, it's urgent that we step up our efforts to eliminate the problems that 

lead to waste and fraud across government. Success in doing so will help us as we work. 

to curb our federal debt and, in the case of Medicaid, it will help states as they grapple 

with their own budget problems. Ultimately all of us .- Congress, the Administration, 

and the states -- want to improve program integrity at Medicaid to ensure that the 

program has the resources necessary to provide critical services to those in need. 

That's why I was encouraged to learn that, in 20 II, we saw a decline in the level of 

improper payments in Medicaid compared to the more than $22 billion estimate we saw 

in 2010. The Centers for Medicare and Medicaid Services (CMS) and state governments 

are clearly beginning to make progress. However, more work remains in our efforts to 

curb improper payments and to reduce the amount of taxpayer dollars lost to errors, 

waste, and fraud. I want to encourage CMS to continue to partner closely with the states 

to take advantage of every opportun'ity to prevent, identify, and recover improper 

payments. We can't afford not to. 

Fortunately. Congress and the Administration have made reducing Medicaid waste and 

fraud a high priority and taken important steps to improve its management of this critical 

program. The Affordable Care Act, which was enacted in 2010, includes a number of 

provisions aimed at enhancing our efforts to fight waste, fraud, and abuse in Medicare 

and Medicaid. These provisions aim to eliminate avoidable mistakes and crack down on 

criminals. They are critical to our broader efforts of achieving better healthcare results 

and improving access to affordable, quality healthcare. 

We are also looking at additional steps that the federal government should take. Senator 

Coburn and I, along with dozens of our Senate and House colleagues, have put forward 

legislation to fight fraud, waste, and abuse in the Medicare and Medicaid programs-

"The Medicare and Medicare Fighting Fraud and Abuse to Save Taxpayers Dollars Act", 

or the FAST Act as we call the bill. It takes some of what we already know works to 

decrease waste and fraud in the private sector, or that we have already seen is beginning 

to work elsewhere in government, and applies these ideas to Medicare and Medicaid. 

Our bill includes a wide range of initiatives .. Among other things, the legislation would 

increase anti-fraud coordination between the federal and state governments, increase 

criminal penalties for fraud, encourage seniors to report possible fraud and abuse in 

Medicare through the Senior Medicare Patrol, and deploy cutting-edge data analysis 

technologies. Our legislation addresses loopholes in fraud-prevention efforts that have 

been exploited to an alarming degree over the years. For example, there's the glaring 

problem of dead doctors who still manage to charge us for care they provide their 

patients, obviously a form of fraud. This is both disturbing and unacceptable. Our bill 
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would require that the federal government and law enforcemcnt take steps to curb the 

theft of physician identities. 

I often say that there is no silver bullet to fighting waste and fraud. But this bipartisan 

bill provides a lot of smaller, proven, common-sense solutions. It builds on 

recommendations by the Office ofthc Inspector General, GAO, and other experts to 

improve upon the current work of the program integrity office at CMS, which, as I've 

mentioned, has already made important progress in reducing waste and fraud in these 

programs. 

Even as we look ahead to implementing additional tools to help improve efficiency and 

effectiveness in Medicare and Medicaid, we also need to evaluate the effectiveness of the 

current tools at our disposal and identify what's working and where we need to improve 

our efforts. Today, our witnesses from the GAO and the Office ofInspector General will 

help us in that effort by describing weaknesses in the two primary Medicaid anti-waste 

and fraud systems now utilized by the federal government. 

According to GAO, one program that relies on Medicaid Integrity Contractors only 

identified about $19.9 million in overpayments since 2008, yet we spent $102 million to 

operate the program during the same period. We clearly need to identify ways to 

improve our return on investment here. 

There are similar problems with the second federal anti-waste and fraud program, called 

the Medicare-Medicaid Data Match program, where Medicare and Medicaid data are 

compared with each other to spot duplication and other problems. Over a two year time 

period, the program received $60 million in funding, but only prevented or recouped 

$57.8 million in improper payments. 

But there have also been successes. Earlier this year, the Administration announced 

another record breaking year in joint federal and state efforts to identify and prosecute 

health care fraud, with more than $4 billion in recoveries from Medicare, Medicaid and 

other federal health care programs. 

In addition, strong new steps have been taken to screen physicians and other providers in 

order to avoid physician identity theft and other fraudulent activity that can lead to drug 

diversion and fraud. In fact, CMS announced last week that this new automated 

screening process has already purged the provider database of more than 20 thousand 

providers that were ineligible to participate in Medicare and Medicaid due to death, 

licensing and other problems. This is a very important step forward. 

I look forward to hearing today from Dr. Budetti, the head ofCMS's program integrity 

efforts in both Medicaid and Medicare, about how he intends to build on what has 
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worked so far and improve the performance of those initiatives that have not worked as 

well. I also look forward to hearing from the state agency representatives we have with us 

today about their experiences curbing Medicaid ~le and fraud, . ' 

We are here today in large part because we have a moral imperative to ensure that both 

present and future Medicaid beneficiaries continue to have access to quality care. At the 

same time, we must also ensure that the scarce taxpayer resources we invest in the 

program are being spent as effectively as possible. 

### 
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Opening Statement by Senator Scott P. Brown 

June 14th, 2012 

Subcommittee on Federal Financial Management, Government Information, Federal 

Services, and International Security 

U.S. Senate Homeland Security & Governmental Affairs Committee 

"Saving Taxpayer Dollars by Curbing Waste and Fraud in Medicaid" 

The Supreme Court's decision on the fate of the Patient Protection and 

Affordable Care Act (PPACA) is expected any day now, that's why I think it is more 

important than ever to come together in a bipartisan manner to address our nation's 

most pressing problems like healthcare. I believe a crucial step in maintaining the 

viability of healthcare programs like Medicaid and Medicare is ensuring that these 

programs aren't weakened by waste, fraud and abuse. As our nation ages and the 

economic stagnation continues these health care programs continue to put pressure on 

our nation's already dire fiscal condition. We cannot tax our way to prosperity that is 

why this morning's hearing on curbing waste, fraud and abuse is so important. We 

simply can no longer afford the business as usual approach to this problem that has 

permeated Washington for so long. The reason I came to Washington was to fix these 

problems and ensure the vitality of these programs that so many of our nations most 

vulnerable depend on for their health and well being. 

This morning we turn our attention to the Medicaid program, which is timely as 

PPACA expands Medicaid coverage by an estimated 16 million people by 2019 -- a 32 

percent increase over the current enrollment in the program. The cost of Medicaid 

expansion is estimated to exceed $430 billion over the next 10 years. The federal 
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government is responsible for paying over 90 percent of these increased costs. This is 

on top of the estimated $404.9 billion Medicaid cost in fiscal year 2010, of which the 

federal government's share was estimated to be at $271 billion. 

Today we will explore what the Center for Medical Services (CMS) is doing to 

confront the menace of fraud in the Medicaid program. Measuring fraud in Medicaid is 

difficult but CMS estimates that there were $21.9 billion in improper payments in 

Medicaid in fiscal year 2011. 

I believe Congress for too long has been complicit in the Washington's business 

as usual culture that tolerates the continuing waste and fraud in these healthcare 

programs. Congress has a duty to ask when the fraudulent payments will stop and 

what can be done for State and Federal governments to prevent fraud. I am taking a 

leadership role in ensuring that Congress upholds its oversight responsibilities to 

provide comprehensive program integrity to Medicaid. Simply put we need to improve 

coordination between the federal government and states and we need improve 

coordination across states. We also need to do a better job of leveraging information 

technology to prevent fraud and which would provide a meaningful deterrent to potential 

fraudsters. I know the President and the States share my conviction that we must work 

together to stamp out fraud in Medicaid - we are all on the same team in this regard. 

I came to Washington to work in bipartisan manner to solve the issues 

Americans care about, I believe members of Congress from both parties agree that the 

fraud, waste and abuse. in Medicare and Medicaid must end. So I extend an invitation 

to members of Congress from both parties, the Administration and the States to work 

with me and let's end fraud in Medicare and Medicaid. 
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STATEMENT OF 

PETER BUDETTI, M.D., J.D. 

DEPUTY ADMINISTRATOR AND DIRECTOR, 

CENTER~o,~:PRW~M INTEGRITY 

CENTERSiFo1i~rlic}~ &(M~D\tAID SERVICES ;'~, 

ON 

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U.S. Senate Committee on Homeland Security and Government Affairs 

Subcommittee on Federal Financial Management, Government Information, 

Federal Services, and International Security 

Hearing on "Saving Taxpayer Dollars by Curbing Waste and Fraud in Medicaid" 

June 14,2012 

Chainnan Carper, Ranking Member Brown, and Members of the Subcommittee, thank you for the 

invitation to discuss the Centers for Medicare & Medicaid Services' (CMS) program integrity 

efforts for the Medicaid program. 

The Administration has made important strides in reducing fraud, waste and improper payments 

across the government. Over the last two years, CMS has implemented powerful new anti-fraud 

tools provided by Congress and implemented large-scale, innovative improvements to our program 

integrity strategy to shift beyond a "pay and chase" approach by focusing new attention on 

preventing fraud. Simultaneously, CMS is using the same innovative tools to further enhance our 

collaboration with our State and law enforcement partners in detecting and preventing fraud. 

Preventing and Detecting Fraud in the Federal Health Care Programs 

CMS directly administers Medicare through contracts with private companies that process claims 

for Medicare benefits. Medicaid is administered by the States within the bounds of Federal law and 

regulations, and CMS partners with each State Medicaid program to support program integrity 

efforts. Tn April20IO, Secretary Sebelius announced the alignment of Medicare and Medicaid 

program integrity functions with the creation of the Center for Program Integrity (CPI) in CMS. 

This newly-established Center brought together the oversight of Medicare Program Integrity and 

Medicaid Program Integrity to coordinate resources and best practices for overall program 

improvement. The Affordable Care Act (P.L. 111-148 and P.L. 111-152) and the Small Business 

Jobs Act of2010 (P.L.l I 1-240) provided additional opportunities to strategically combat fraud, 

waste, and abuse with a coordinated approach in Medicare and Medicaid. 
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The New "Twin Pillar" Strategy 

eMS has implemented a twin pillar approach to fraud prevention in Medicare that builds upon 

program integrity efforts focused on detecting and prosecuting fraud. The first pillar is the new 

Fraud Prevention System (FPS), which applies predictive analytic technology on claims prior to 

payment to identifY aberrant and suspicious billing patterns. The second pillar is the Automated 

Provider Screening (APS) system, which identifies ineligible providers or suppliers prior to their 

enrollment or revalidation. Together, these innovative new systems, the FPS and APS, are growing 

in their capacity to protect patients and taxpayers from those intent on defrauding our programs. 

These pillars represent a comprehensive approach to program integrity - preventing fraud before 

payments are made, keeping bad providers and suppliers out of Medicare in the first place, and 

quickly removing wrongdoers from the program once they are detected. 

The Medicaid Program 

Medicaid is the primary source of medical assistance for 56 million low-income and disabled 

Americans. Although the Federal government establishes requirements for the program, States 

design, implement, administer, and oversee their own Medicaid programs. The Federal government 

and States share in the cost of the program. State governments have a great deal of programmatic 

flexibility within which to tailor their Medicaid programs to their unique political, budgetary, and 

economic environments. As a result, there is variation among the States in eligibility, services, 

reimbursement rates to providers and health plans, and approaches to program integrity. The 

Federal government reimburses a portion of State costs for medical services through a statutorily 

determined matching rate called the Federal Medical Assistance Percentage, or FMAP, which is 

based on each State's per capita income relative to the national average and normally ranges 

between 50 and 75 percent. The Federal government also reimburses the States a portion of their 

administrative costs through varying matching rates determined according to statute, ranging from 

50 percent to 90 percent. The total net Federal Medicaid outlays in fiscal year (FY) 2011 are 

approximately $275 billion. 

Preventing and Detecting Fraud in Medicaid 

States have primary responsibility for policing fraud, waste, and abuse in their Medicaid programs, 

and they have significant financial interest in doing so as they pay, on average, 43 percent of the 

cost of the program. eMS plays a significant role through the provision of technical assistance, 

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guidance, and oversight in the State-based efforts. Section 1936 of the Social Security Act ("the 

Act") provides CMS with the authorities to fight fraud and abuse by Medicaid providers by 

requiring CMS to contract with private sector entities to review provider claims data, audit 

providers, identify overpayments, and educate providers and other individuals about payment 

integrity and quality of care. CMS works with partner agencies at the Federal and State levels to 

enhance these efforts, including preventing the enrollment of individuals and organizations that 

would abuse or defraud the Medicaid program and removing fraudulent or abusive providers when 

detected. 

CMS is evaluating many of the tools used in Medicare for opportunities to transfer the knowledge 

and lessons learned to the Medicaid program. Specifically, CMS is evaluating the use of the twin 

pillars, FPS and APS, on State data. CMS is also actively pursuing ways to apply advanced data 

analytics technology, including predictive analytics, to the Medicaid program. CMS is required, 

under the Small Business Jobs Act of201 0, to complete an analysis of the cost-effectiveness and 

feasibility of expanding predictive analytics technology to Medicaid and the Children's Health 

Insurance Program (CHIP) after the third implementation year of the FPS. Based on this analysis, 

the law requires CMS to expand predictive analytics to Medicaid and CHIP by April I, 2015. 

CMS is currently working to identify specific FPS algorithms applicable to Medicaid and will be 

performing an analysis of one State's Medicaid claims data using the identified algorithms. Once 

the analysis is complete, we will share the results with the State. We anticipate the analysis being 

complete before the end of the year. As another example, CMS is engaged in an additional pilot to 

screen all of one State's Medicaid providers using the APS. Once the analysis is complete, we will 

provide the results to the State for their action as appropriate. The goal of this test project is to 

demonstrate the utility of using an automated screening application to screen Medicaid providers, 

and we expect results later this year. Once we test the effectiveness of these types of solutions in 

Medicaid, our goal is to expand these capabilities to more States. CMS is also supporting States' 

use of predictive analytics through technical assistance and education. 

CMS is collaborating with our State partners to ensure that those caught defrauding Medicare will 

not be able to defraud Medicaid, and those identified as fraudsters in one State will not be able to 

replicate their scams in another State's Medicaid program. Specifically, the Affordable Care Act 

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and CMS' implementing regulations require States to terminate from the Medicaid program those 

Medicare providers or suppliers whose billing privileges have been revoked, or terminated for cause 

by another State's Medicaid or CHIP program. Similarly, under current authority, the Medicare 

program may also revoke the billing privileges of its providers or suppliers terminated by State 

Medicaid or CHIP agencies. 

To support State efforts to share such information, CMS implemented a web-based application that 

allows States to share information regarding providers that have been terminated for cause and to 

view information on Medicare providers and suppliers that have had their billing privileges revoked 

for cause. We are confident this interactive tool for States is the beginning of a smarter, more 

efficient Federal-State partnership, integrating technology solutions to routinely share relevant 

program information in a collaborative effort. 

CMS Collaboration with States on Medicaid Program Integrity 

To address Medicaid's structure as a Federal-State partnership, CMS has developed initiatives 

specifically designed to assist States in strengthening their own efforts to combat fraud, waste, and 

abuse. The Medicaid Integrity Institute (MIl) is one ofCMS' most significant achievements in 

Medicaid program integrity. The MIl provides for the continuing education of State program 

integrity employees, including specific coursework focused on predictive analytics. At the MIl, 

CMS has a unique opportunity to offer substantive training, technical assistance, and support to 

States in a structured learning environment. From its inception in 2008 through May 2012, CMS 

has continually offered MIl courses and trained more than 3,000 State employees at no cost to the 

States. These State employees are able to learn and share information with program integrity staff 

from other States on topics such as emerging trends in Medicaid fraud, data collection, and fraud 

detection skills, along with other helpful topics. In 2012, CMS has already held several events at 

the MIl and plans to host a Data Expert Symposium this summer to bring together State Medicaid 

data experts to exchange ideas about predictive analytics, including algorithm development and 

trend analysis. 1 

1 Medicaid Integrity Institute FY-12 Training Calendar: http://www.justice.gov/usao/eousalole/miilmiLcourses.12.pdf 

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Additionally, to provide effective support and assistance to States to combat Medicaid fraud, waste, 

and abuse, and to gauge States' efforts in this regard, CMS conducts triennial comprehensive 

reviews of each State's program integrity activities. We use the State Program Integrity Reviews to 

identify and disseminate best practices. The review areas include provider enrollment, provider 

disclosures, program integrity, managed care operations, and the interaction between the State's 

Medicaid agency and its Medicaid Fraud Control Unit (MFCU). CMS also conducts follow-up 

reviews to evaluate the success of the State's corrective actions. 

Through its reviews, CMS has identified 52 unduplicated program integrity "best practices" that we 

have publicized to all States through annual summaries of our efforts. The guidance includes 

specific examples of how States have created well-functioning and committed partnerships between 

the State Medicaid agency and its MFCU. CMS, working with State Medicaid agencies and 

MFCUs, issued guidance in September 2008 entitled "Performance Standard for Referrals of 

Suspected Fraud from a Single State Agency to a Medicaid Fraud Control Unit." CMS, State 

Medicaid agencies, and MFCUs developed this performance standard to provide State program 

integrity units with a clear understanding of how to comply with requirements for making referrals 

of fraud to MFCUs. In concert with the release of the performance standard, MIG issued a second 

guidance document, "Best Practices for Medicaid Program Integrity Units' Interactions with 

Medicaid Fraud Control Units." This document advises State program integrity units of the 

circumstances under which they should refer cases to their MFCUs, and provides guidance for 

interactions between State program integrity units and their MFCUs, with specific examples of 

actions taken by States that have created well-functioning and committed partnerships between the 

two entities. 

CPI is taking steps to improve communication and coordination on cross-cutting issues, which will 

strengthen program integrity efforts in both Medicare and Medicaid while potentially saving both 

programs valuable resources. For example, many States require that Medicaid DME providers be 

enrolled in Medicare to participate in Medicaid. In these states, there are opportunities to leverage 

resources and share information regarding changes in enrollment status and the results of site visits 

and other investigations. Weare partnering with three States to test strategies and develop 

processes for improved information sharing between programs regarding DME provider enrollment 

activities. 

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Just recently, CMS announced another initiative to assist States in their program integrity efforts. 

On May 30th, we launched the "CMS Provider Screening Innovator Challenge," an innovation 

competition to develop a multi-State, multi-program provider screening software application 

which would be capable of risk scoring, credentialing validation, identity authentication, and 

sanction checks, while lowering burden on providers and reducing administrative and 

infrastructure expenses for States and Federal programs. This competition addresses our goals of 

improving our abilities to streamline operations, screen providers, and reduce fraud and abuse. It 

also complements CMS' current efforts in applying the APS to Medicaid screening. Further 

information about the Challenge is available at www.medicaid.gov. 

CMS also provides States assistance with "boots on the ground" for targeted special investigative 

activities. Since October 2007, CMS has participated in 12 projects in three States, with the 

majority occurring in Florida. CMS assisted States in the review of 654 providers, 43 home health 

agencies and DMEPOS suppliers, 52 group homes, and 192 assisted living facilities. During those 

reviews, CMS and States interviewed 1,150 beneficiaries, and States took more than 540 actions 

against non-compliant providers (including, but not limited to fines, suspensions, licensing referrals, 

and State MFCU referrals). States reported these reviews have resulted in $40 million in savings 

through cost avoidance. 

eMS Redesign olthe National MedicaidAudit Program 

CMS has learned important lessons during the initial years ofthe Medicaid Integrity Program. 

Beginning in early 2010, eMS determined through internal analysis, environmental assessments, 

parallel discussions with stakeholders, and reviews of contractor performance that the initial 

auditing model of the Medicaid Integrity Program required fundamental changes to effectively 

support States in their efforts to combat fraud, waste, and abuse in their Medicaid programs. In 

short, we recognized that audits based solely on a subset of post-payment data provided to the 

Federal government (the Medicaid Statistical Information System (MSIS» 2 and carried out with 

little input from States had mixed results, at best. The Department of Health and Human Services' 

Office of Inspector General (HHS-OIG) and the Government Accountability Office (GAO) have 

2 MSIS data is the primary data source for Medicaid statistical data, and is a subset of Medicaid eligibility and claims 

data from all 50 States and the District of Columbia. 

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reported findings consistent with those identified by our internal assessments. CMS' 2010 Annual 

Report to Congress 3 on the Medicaid Integrity Program contained a section entitled "Redesign of 

the National Audit Program" that described how CMS was approaching improvements to Medicaid 

program integrity. Since February 2011, CMS stopped initiating audits by our contractors based on 

the results of algorithms developed solely using MSIS data. CMS instead has focused on 

developing collaborative auditing projects with the States. 

The collaborative approach allows CMS to work alongside States in identifying areas that warrant 

further investigation and to develop the audit targets. Through this process CMS can more 

effectively support a State's program integrity efforts. In addition, the corresponding data for the 

collaborative audits is in many cases provided or supplemented by the States, making the data more 

complete and thus increasing the accuracy of any audit findings. The number of collaborative 

audits has progressively increased. 

Since the earliest collaborative audits were assigned to Medicaid Integrity Contractors (MICs) in 

January 20 I 0, CMS has worked with States to develop and assign 137 collaborative audits in 

15 States that collectively represent approximately 53 percent of all Medicaid expenditures in 

FY 2011. CMS is committed to expanding collaborative audit projects to a broader number of 

States, and is in discussions with 15 additional States that make up approximately 26 percent of 

FY 201 I Medicaid expenditures. 

CMS has continued to identify additional opportunities for program changes and improvement. 

eMS' redesign plan for the National Medicaid Audit Program recognizes the significant increase in 

Medicaid managed care penetration, anticipated growth in enrollment in the Medicaid program, the 

influence of new State Medicaid recovery audit contractors, as well as the need to eliminate certain 

redundant, ineffective, and inefficient practices. We are working within CMS and with our State 

partners to develop and test best practice approaches to managed care program integrity oversight 

that considers both the growth in enrollment and alternative funding arrangements. 

3 bttp:llwww.cms.gov/Regulalions-and-Guidance/Legislalion!DeficitReductionActlDo"nloads/fyIOrtc.pdf; page 24. 

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As noted earlier, others came to many of the same conclusions for the need for changes to 

strengthen Medicaid program integrity that resulted from our own internal analysis. Recently, the 

HHS OIG,4 the Medicaid and CHIP Payment and Access Commission (MACPAC),5 the National 

Association of Medicaid Directors (NAMD), 6 and GA07 have identified many of these same 

factors and have made recommendations for changes to the Medicaid Integrity Program that parallel 

CMS' plans for restructuring the program. We appreciate the work of our oversight partners and 

have taken their recommendations into consideration as we make ongoing changes to improve the 

program integrity efforts in the Medicaid program. 

Both the OIG and GAO reports primarily focused on early results of the National Medicaid Audit 

Program and noted CMS' efforts to improve its program and expand collaborative audits with 

States appear to enhance results. In CMS' review of the relevant reports, including those from 

MACPAC and NAMD, we note there were similar recommendations, and we are pleased to note 

the Medicaid Integrity Program improvements CMS has initiated address many recommendations in 

those reports. Beyond the expansion of collaborative audits, examples include improving alignment 

of State and Federal audit activities, expanding support and training of State program integrity staff 

in vulnerable areas such as program integrity oversight of managed care and evolving integrated 

care models, facilitating development of State capacity and access to cost effective analytics 

technology, and providing guidance for better quantifYing the effectiveness of program integrity 

activities to demonstrate impact of cost avoidance from prevention. 

CMS is implementing the program redesign in a phased approach which involves piloting new 

concepts and sharing best practices with States, as well as collaborating with States to use State data 

directly for the National Medicaid Audit Program. These improvements include expanding reviews 

to managed care entities, refining the identification of audit targets like high-risk providers serving 

4 HHS OIG, "Early Assessment of Audit Medicaid Integrity Contractors." March 2012. 

http://oig.hhs.gov/oei/reports/oei-05-10-0021 O.pdf 

'MACPAC, "Report to the Congress on Medicaid and CHIP." March 2012. 

http://www.macpac.gov/reportsl20l2-03-15 MACP AC Report.pdflattredirects=O&d= 1 

6NAMD, "Rethinking Medicaid Program Integrity: Eliminating Duplication and Investing in Effective, High-Value 

Tools." March 2012. 

http://medicaiddirectors.orglsites/medicaiddirectors.orglfiles/public/namd medicaid pi position paper final l20319.p 

df 

'GAO. "Medicare and Medicaid Fraud, Waste, and Abuse: Effective Implementation of Recent Laws and Agency 

Actions Could Health Reduce Improper Payments." March 2011. http·l/www.gao.gov/assets/J30/125646.pdf 

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both Medicare and Medicaid beneficiaries, examining areas where greater efficiency can be 

obtained, and enhancing support to States in their recovery of overpayments. 

eMS is constructing an analytical approach that will assist States with their assessment of managed 

care rate setting. In addition, we intend to assess industry practices, share State best practices, and 

exchange ideas through the educational courses eMS sponsors at the Medicaid Integrity Institute. 

Improving Data to Fight Fraud in Medicaid 

eMS has made significant improvements to our databases and analytical systems in recent years. 

However, we acknowledge that more can be done. CMS is committed to enhancing the quality and 

availability of our data to States. CMS is keenly aware that States' appropriate access to Medicare 

data and analytic tools could strengthen the State agency's ability to prevent and mitigate improper 

Medicaid payments. CMS is working toward solutions to provide States with sufficient access to 

CMS data for program integrity purposes. There are privacy, contractual, operational and potential 

regulatory constraints that need to be resolved in order to implement an efficient and effective 

process for sharing Medicare data with States for program integrity. However, the agency does 

release Medicare data to states for research purposes, which could include some data analysis for 

program integrity; we are looking into what f1exibilities may be within existing research protocols 

to allow States, for example, to use predictive analytic models to identifY fraudulent activity worth 

scrutiny. We anticipate solutions will need to be implemented in stages based on current constraints 

and technology. 

Additionally, CMS recently launched an initiative to transform the agency's approach to data and 

analytics. The Office ofInformation Products and Data Analysis (OIPDA) was established in May 

2012 to make development, management, use, and dissemination of data and information resources 

a core function ofCMS. 8 Over time, the initiative will modernize CMS' intricate data systems and 

policies, and help the agency to achieve the greatest improvements in health care delivery. 

http://www.cms.gov/apps/mediaipress/factsheet.asp?Counter=4371&intNumPerPage=IO&checkDate=&checkKey=&sr 

chType=1&numDays=3500& 

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Integrated Data Repository (lOR) 

CMS has made great progress in building the Integrated Data Repository (!DR) to provide a 

comprehensive view of Medicare and Medicaid data including claims, beneficiary data, and drug 

information, and continues to address the remaining issues. The IDR provides broader and easier 

access to data and enhanced data integration while strengthening and supporting CMS' analytical 

capabilities. The !DR is currently populated with seven years of historical Medicare Parts A, B, and 

D paid claims, and CMS has recently integrated Part B and DME pre-payment claims. Part A prepayment claims data will be integrated later this summer. 

The !DR continues to be an integral part ofCMS' data strategy. The !DR ensures a consistent, 

reliable, secure, enterprise-wide view of data supporting CMS and its partners in more effective 

delivery of quality health care at lower cost to CMS' beneficiaries through state-of-the-art health 

informatics. 

CMS is also working to incorporate State Medicaid data into the !DR, while also working with 

States to improve the quality and consistency of the data reported to the Federal government from 

each State. MSIS data has been the primary data source for Medicaid statistical data. It is a subset 

of Medicaid eligibility and claims data from all 50 States and the District of Columbia. To improve 

the quality of the MSIS data, and Medicaid data in general, CMS established the Medicaid and 

CHIP Business Information Solution (MACBIS) Council. This Council provides leadership and 

guidance in support of efforts to create a more robust and comprehensive information management 

strategy for Medicaid and CHIP. The Council's strategy includes: 

• Promoting consistent leadership on key challenges facing State health programs; 

• Improving the efficiency and effectiveness of the Federal-State partnership; 

• Making data on Medicaid, CHIP, and State health programs more widely available to 

stakeholders; and 

• Reducing duplicative efforts within CMS and minimizing the burden on States. 

The Council has initiated several efforts including the Transformed MSIS (T-MSIS) pilot project in 

II States, which together represent 40 percent of the nation's Medicaid expenditures. The heart of 

this pilot is to create a consolidated format from a variety of State information sources to satisfy 

multiple Medicaid and CHIP Federal information reporting requirements. CMS will use the results 

and lessons learned from these 11 States as the basis for national implementation by 2014. The 

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MACBIS projects will lead to the development and deployment ofimprovements in data quality 

and availability for Medicaid program administration, oversight, and program integrity. 

One Program Integrity (One PI) 

Improved data and analytical tools will allow CMS and its partners to analyze infonnation from 

throughout the claims process to identify previously undetected indicators of aberrant activity. 

Used with the !DR, CMS' One PI web-based portal, and analytic tools helps CMS share data with 

our integrity contractors and law enforcement and enhances their use of the data. CMS has been 

working closely with our law enforcement colleagues to provide One PI training and support. Since 

October of2010, CMS has provided training at CMS's Baltimore Training Facility to a total of622 

program integrity contractors and CMS staff, including 82 law enforcement personnel, on the portal 

and tools on One PI. 

The Medicare-Medicaid Data Match Program 

The Medicare-Medicaid Data Match Program (Medi-Medi) is another CMS initiative to improve 

the use and availability of better quality Medicaid data. The Medi-Medi program began as a pilot 

project with the State of California in 2001; nine other states joined the Medi-Medi program 

between 2003 and 2005, followed by further expansions. The Medi-Medi program enables 

participating State and Federal Government agencies to collaboratively analyze billing trends across the 

Medicare and Medicaid programs to identifY potential fraud, waste, and abuse. Currently, CMS is 

partnering with States that account for most of the expenditures in Medicaid; the 16 States that now 

participate in the Medi-Medi program account for more than half of total Medicaid expenditures. 

Participating States include: New York, New Jersey, Pennsylvania, North Carolina, Georgia, 

Florida, California, Texas, Colorado, Oklahoma, Utah, Iowa, Ohio, Mississippi, Missouri, and 

Arkansas. 

CMS is working to identify ways the Medi-Medi program can be improved and made more 

beneficial to States. We are also exploring additional opportunities to collaborate with States as 

well as working directly with States to match Medicare and Medicaid data for specific collaborative 

projects. The APS and FPS pilots with State Medicaid data will also provide more collaboration 

between Medicare and Medicaid. In addition, we will be providing more opportunities for sharing 

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lessons learned from States that have made successful referrals and recouped Medicaid 

expenditures. 

Looking Forward 

As these efforts mature, we expect to be able to more easily transfer the lessons learned from 

Medicare program integrity analytics and algorithms, including predictive analytics, to the Medicaid 

Integrity Program. As in Medicare, eMS' ultimate goal is to use predictive modeling and other 

sophisticated analytics to enhance our capabilities, as well as increase information-sharing and 

collaboration among State Medicaid agencies to detect and deter aberrant billing and servicing 

patterns at the State level and on a regional or national scale. 

Medicare and Medicaid fraud affects every American by draining critical resources from our health 

care system and contributing to the rising cost of health care for all. The Administration has made a 

firm commitment to rein in fraud, waste, and improper payments. Today, we have more tools than 

ever before to move beyond "pay and chase" and implement strategic changes in pursuing and 

detecting fraud, waste, and abuse. I look forward to continuing to work with you as we makc 

improvements in protecting the integrity of our health care programs and safeguarding taxpayer 

resources. 

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Testimony of Douglas Wilson 

Inspector General 

Texas Health and Human Services Commission 

before the 

Senate Committee on Homeland Security & Governmental Affairs 

Subcommittee on Federal Financial Management, Government Information, Federal Services, & 

International Security 

June 14,2012 

Good morning Chairman Carper, Ranking Member Brown, and distinguished members of the 

Committee. My name is Douglas Wilson and I serve as the Inspector General for the Texas 

Health and Human Services Commission. I appreciate the opportunity to be with you today to 

offer testimony from the Texas perspective regarding program integrity challenges, opportunities 

and successes. 

Over the past year since I assumed the position of Inspector General, Texas has reformed and 

reenergized its Medicaid program integrity efforts. Our Medicaid program has a budget of$19.6 

billion annually and my office has about 615 employees. Although completed case investigations 

are a long way from recouped dollars (and in fact the two are only marginally related), our 

reinvigorated Office of Inspector General has significantly increased the number of case 

investigations in the last fiscal year, and we are on track to increase the identification of 

potentially, recoupable dollars by more than eighteen times. However, much like high pressure 

water through a leaky hose, the efforts we have made have identified some holes in the system 

requiring attention. 
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State-CMS Coordination and Cooperation 

Although some bemoan the inflexibility offederal agencies that has not been our experience with 

CMS. Our relationships primarily are with the Medicaid Integrity Group, where we have 

experienced significant and meaningful cooperation at all levels. In particular, we have regular, 

positive and useful contact with Robb Miller, Director of the Division of Field Operations, Lyn 

Killman, the Deputy Director, and Angela Brice-Smith, Director of the Medicaid Integrity 

Group. They have repeatedly sought to assist and encourage us in our innovative efforts, and we 

view them as active, cooperative team members. Our joint challenge is to work through policies 

and regulations that were designed to create certainty in process but which actually have 

hampered our efforts. 

A specific· example of the assistance CMS recently provided to Texas in the area of program 

integrity is an innovative, but common sense effort we have launched to reduce fraud involving 

durable medical equipment. Our experience tells us DME vendors are more likely than other 

providers to overbill the Medicaid program. As difficult as it may be to believe, one relatively 

easy method to steal from Medicaid is to obtain a Medicare and Medicaid provider number and 

simply start billing for DME - no supplies delivered. Our solution to this problem is to sweep all 

the DME vendors in the State of Texas - nearly 6,000 of them - with onsite visits. Simply 

physically visiting each vendor to identify which of them do not have a physical location, or 

have a location that is inadequate for the volume they bill, will likely reduce the number ofDME 

vendors (and concomitantly, the fraud exposure those vendors create) by a third or more. Yet the 

Affordable Care Act requires each of these vendors receive two visits - once immediately before 
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re-enrollment, once after re-enrollment and Texas is not yet ready to begin the re-enrollment 

process. Obviously, traveling to and conducting site visits on all of these vendors will take tens 

of thousands of hours and will be a significant cost to the Office of Inspector General. So we 

called CMS, starting with Robb Miller. We explained what we wanted and he engaged Lyn 

Killman. Together they cleared obstacles for us and facilitated an arrangement that permits 

Texas to pilot this type of statewide fraud sweep while still permitting us a year's grace period to 

count the fraud site visits as re-enrollment site visits under the Affordable Care Act. Although it 

may sound simple, this type of cooperation is exactly what we need to combat fraud jointly. 

CMS will provide us with up to date Medicare site visit data, thereby reducing the overall 

number of vendors interviews we must conduct. In return, Texas will comply with the Medicare 

site visit requirements, including photographing or making a video record of the site visits. We 

will then provide the results of our visits to CMS for use in the Medicare program, thus 

eliminating the needs for Medicare's contractor to repeat our efforts. 

In addition, no comment on CMS assistance to the states would be complete without a reference 

to the Medicaid Integrity Institute in South Carolina. Texas has taken advantage of the support 

the Medicaid Integrity Group has provided to the Medicaid Integrity Institute and we regularly 

send the maximum number of students to the Medicaid Integrity Institute's training programs. 

My office's senior executive management takes advantage of every opportunity the Institute 

provides to meet with executive management from other states, and we have found nothing to 

compare to that experience for the knowledge, ideas and innovation that occurs simply by 

putting like-positioned people together to talk about ideas and experiences. 
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Data Access 

The Texas experience is that more data is better. Whether the data comes from Medicaid, 

Medicare, SNAP, WIC, TANF, Craig's List, county property lists, banking records, arrest 

records, employment records or nearly any other source you can imagine, all of this data can help 

to identify patterns of behavior and billing which lead to identifying intentional or inadvertent 

overbilling and the accompanying overpayment. Although I will discuss pattern recognition 

more later, the single largest source of non-Medicaid data and cooperation is Medicare. 

Unfortunately, our interaction with Medicare is limited to the unsuccessful Medi-Medi program. 

In Texas, as in most places, Medi-Medi is unsuccessful because of its focus on specific cases, 

invariably. Medicare, rather than upon the purpose of the program, which is enhanced 

cooperation between the two federally-supported health insurances. Thus, we receive few 

referrals and the ones we do receive are limited to small, dual-eligible overpayments. What we 

want and need is usable access to the Medicare claims and payment data. We know providers 

who defraud one program are overwhelmingly likely to defraud the other, or the Children's 

Health Insurance Program. Yet while we all know that, we still encounter federal institutional 

opposition to sharing Medicare data with us. The reality is that additional data would enable us 

to see and identify overpayments in a far broader context - overpayments which might otherwise 

fly below the radar and escape our notice. 

Pattern Recognition Technology 

Many argue that data analytics and approaches among the states and federal government on 

Medicaid expenditures should be standardized to facilitate the transfer and analysis of data. Yet 
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the old adage is that if you have seen one state's Medicaid program, you have seen one state's 

Medicaid program. Because each state assigns different levels of effort and funding to priorities 

within the Medicaid program, a universal approach to data analysis would likely prove 

counterproductive. Even if it were possible to run the same analytics on every state or territory's 

program, the results quickly would grow stagnant. Ranchers and farmers know the value of 

hybrid vigor - cross breeding different strains of livestock or crops - to enhance the strength and 

viability of the animal or plant. A similar concept applies in investigations. Too many people 

running the same queries or investigations stifle creativity, innovation and adaptability. We 

would end up with every investigator in the country aware of and investigating the same 

schemes, while those bent on stealing money from the Medicaid program would stay up late 

plotting ways to avoid detection. In our judgment, eMS should encourage each state to use 

whatever method of data analysis is effective for that state. To some degree, trial and error will 

help reveal the most effective methods of approaching large quantities of data and extracting 

useful information from it. Yet the more programs that are looking at data and trends from more 

perspectives, the greater the probability that schemes and patterns will become visible to 

everyone sooner. 

In Texas, we have identified pattern recognition technology that traverses gigantic quantities of 

data in remarkably short times to identify patterns and connections between seemingly unrelated 

events and individuals. Thus, data queries that might normally take hours or even days to run 

can be completed in minutes, seconds or even sub-seconds, and a physical graph of the results 

can be displayed on a desktop computer for an investigator to see. Recognizing that fraud is 

fundamentally a behavior rather than simply an act, we can begin to compile databases of 
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Medicaid transactional history, other social service program history and additional data from 

widespread other resources to track relationships between people and specific acts in time. In 

this way, we can see how events, times, locations and actions are related to each other. 

Importantly, we can begin to understand not only the actions individuals commit, but also the 

behavioral indicators and relationships that are suggestive of fraud The end result will be a 

remarkable abbreviation of the time it currently takes us to see aberrant billings or expenditures. 

Although much is said about pre-payment review of claims, the reality is that investigators still 

must know trends and patterns to know whether a creeping upward expenditure line is an 

aberration or expectation, and whether physicians referring to certain pharmacies or therapy 

clinics are doing so for professional or fraudulent reasons. 

This technology is not without cost, and states need federal assistance in obtaining it. Yet 

equally as important is access to federally-maintained data, such as that in the Medicare 

databases. There are organized groups of people in the United States today who are, this very 

moment, conspiring to defraud the government and our taxpayers. Until the states and the 

federal government reach the point where there is no "our data" and "your data," we will 

continue to play catch me if you can with criminals who skip from state to state and scheme to 

scheme as easily as other people change socks. 

Federal - State Recoupment Cooperation 

Currently, interdiction and recoupment efforts are a two-edged sword. States identify potential 

overpayments and, after the proper due process steps are observed, CMS is entitled to 50% of the 
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identified overpayment. States have 60 days to repay the overpayment to eMS in non-fraud 

cases, one year to do so in cases where the state has established fraud. 

Unfortunately, this process builds in disincentives to the states to be active in identifying and 

publicizing anti-fraud, anti-overpayment activities. In Texas we currently have a number of 

large cases where the potential overpayment could easily involve tens of millions of dollars. 

Historically, our options for cases where we identify a potential overpayment of that size are 

limited. Providers with large overpayments generally go out of business or bankrupt, either of 

which relieves them (and consequently the state) of the burden of repaying any portion of the 

overpayment they obtained. 

In Texas, we are currently in the midst of investigating a relatively small number of orthodontists 

who collectively have overbilled the State in the neighborhood of hundreds of millions of dollars 

over the past five years. Although the pattern recognition software I mentioned earlier would 

have identified the creeping upward trends and identified this problem much earlier, we are 

confronted with a situation now where a few providers are providing care to an enormous 

number of Medicaid recipients. One provider alone has roughly $27 million in orthodontic 

overpayments in addition to general dentistry overpayments that may far exceed that amount. 

The easiest thing for a provider in that situation to do is close, leaving the state scrambling to 

identify substitute providers for the patients affected. For larger providers, the number of 

affected children easily reaches the tens of thousands. Although Texas could absorb that type of 

disruption once or twice, perhaps even three or four times, we simply do not have enough 
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professionals to care for all the children who would be affected if their orthodontist went out of 

business. 

Thus, we are confronted with two dilemmas. First, we have providers overbilling the Medicaid 

program. At the same time, we need their services to complete the treatment they began or, in 

some cases, simply provide care in areas where there are no other providers. Second, we have 

little ability and few tools to recoup money from those individuals. Recognizing that over-billers 

rarely save their ill-gotten gains in liquid accounts, we see provides buying jets, expensive cars 

and building enormous houses. If we pursue them for repayment, we find few easily collectible 

assets. Worse, we can only pursue them once we have established a definite overpayment 

amount - which means the clock starts running for the state to repay eMS one half of the 

identified overpayment. In the case of my state, our program integrity efforts could perversely 

cost the state hundreds of millions of dollars in identified overpayment money eMS is obligated 

to claw back. 

However, given enough time and flexibility it is possible for us to recoup some lost money. 

Long tenn repayment arrangements and litigation to pursue assets are two readily identifiable 

methods for recovering money the program paid improperly. Yet neither option is possible 

under current rules and strictures, leading to a Hobson's choice: we can either finally and 

fonnally identify an overpayment amount, and enter into a relatively short repayment 

arrangement (thereby triggering state repayment obligations to eMS), or we can put the provider 

out of business (thereby eliminating the specter of eMS withholding millions of dollars from the 

State's Medicaid payments). In the first case we either significantly restrict the total amount of 
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recovery available to that which the provider can repay within 60 days (or one year for fraud 

cases), or the state shoulders the burden of paying the CMS portion up front and recouping from 

the provider as time goes by. In the second case, the provider often escapes with no liability 

whatsoever. 

When the federal government pursues a provider for an overpayment, it rarely, if ever, seeks 

settlement approval from the State. The converse is not true. Perhaps there was a time when this 

was appropriate, when the federal government took a greater portion of any recovery. Today, the 

State and the federal government share the recoupment amount equally. If we had the authority 

to negotiate cases directly with providers to establish long-term payment plans, or had the 

flexibility to pursue assets in court for as long as that took and could repay 50% of the recoverywhatever it was - upon actual recovery, it is my belief we would unquestionably see our 

recovery rates and absolute dollars skyrocket. 

Summary 

Half of the equation in Medicaid fraud, waste and abuse detection and prevention is investigative 

and audit driven: getting the right technology and human resources to identify the behavior and 

actions that pose a risk to (he program. The other half is what we do with that infonnation once 

we get it. 

We believe there is a solid foundation for the CMS-state relationship, but also that the 

environment in which that relationship exists needs to change to improve. An attitude of 

cooperation and assistance is already evident but needs to extend further, to data access and 
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resource development. We need financial assistance to obtain tbe best technology to identify and 

combat waste, fraud and abuse. Recognizing that states are equal participants in recoveries, 

states should have the ability or at least eMS should have the authority to delegate it - to enter 

into settlement agreements designed to maximize recoveries for the state and federal 

governments, without fear those agreements will result in significant costs to the state's general 

revenue. 

It is of paramount importance to both the Medicare and Medicaid programs that program 

integrity efforts lead to dollars being saved, not recouped, to client services being provided, not 

falsified and to fraudsters and inappropriate payments being stopped early, not years later. 

I appreciate the efforts of eMS, and in particular am grateful for the efforts this subcommittee 

has made and continues to make. The Texas oro looks forward to partnering with eMS and 

other federal, state, and local agencies involved in the fight to rid OUf programs of fraud, waste 

and abuse. 
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GAO 

For Relt>a.se on DeUvC'ry 

ExpedC'(i at 10:00 a.m. EDT 

,June 14, 2012 

To access this report 

electronically, scan this 

QR Code. 

GAO-12-814T 

United States Government Accountability Office 

Testimony 

Before the Subcommittee on Federal Financial Management, 

Government Information, Federal Services, and 

International Security, Committee on Homeland Security 

and Governmental Affairs, U.S. Senate 

NATIONAL MEDICAID 

AUDIT PROGRAM 

CMS Should Improve 

Reporting and Focus on 

Audit Collaboration with 

States 

Statement of Carolyn L. Yocom 

Director, Health Care 

GAO 

Accountability * Integrity * Reliability 
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Chairman Carper, Ranking Member Brown, and Members of the 

Subcommittee: 

I am pleased to be here today to discuss the National Medicaid Audit 

Program. Until recently, Medicaid program integrity had been primarily a 

state responsibility. Specifically, states have been responsible for 

ensuring the qualifications of the providers who bill the program, detecting 

improper payments, recovering overpayments, and referring suspected 

cases of fraud and abuse to law enforcement authorities. 1 At the federal 

level, however, the Deficit Reduction Act of 2005 (ORA) created the 

Medicaid Integrity Program to oversee and support state program integrity 

efforts, and, among other actions, directed the Centers for Medicare & 

Medicaid Services (CMS) to hire contractors to review and audit state 

Medicaid claims data.' eMS established the Medicaid Integrity Group 

(MIG) to implement and oversee the National Medicaid Audit Program 

(NMAP).3 

My statement will highlight key findings from a report prepared at your 

request. 4 This report focuses on: (1) the effectiveness of the MIG's 

implementation of NMAP and (2) the MIG's efforts to redesign NMAP. To 

conduct this work, we analyzed NMAP data provided by the MIG and 

interviewed MIG officials. In addition, we reviewed reports submitted by 

the MIG's review and audit contractors and interviewed representatives of 

1An improper payment is any payment that should not have been made or that was made 

in an incorrect amount (Including overpayments and underpayments) under statutory, 

contractual, administrative, or other legaUy applicable requirements, This definition 

includes any payment to an ineligible recipient, any payment for an ineligible good or 

service, any duplicate payment, any payment for a good or service not received (except 

where authorized by law), and any payment that does not account for credit for applicable 

discounts. Improper Payments Elimination and Recovery Act of 2010, Pub. L. No. 111~ 

204, § 2(e), 124 Stat. 2224, 2227 (codified at 31 U.S.C. § 3321 note). The Centers for 

Medicare & Medicaid Services estimated that $21.9 billion (8 percent) of Medicaid's 

federal expenditures of $270 billion In fiscal year 2011 involved improper payments, the 

second highest amount reported by any federal program. 

'Pub. L No. 109-171, § 6034,120 Stat. 3, 74-78 (2006)(codified at42 U.S.C. § 1396u-6) 

eMS is the federal agency within the Department of Health and Human Services that 

oversees Medicaid 

3See GAO, Medicaid Program Integrity: Expanded Federal Role Presents Challenges to 

and Opportunities for Assisting States, GAO-12-288T (Washington, D.C .. Dec. 7, 2011). 

Page 1 

eMS Should Improve Reporting and Focus 

""n_"?-"?7(Washington, D.C .. June 14, 2012). 

GAO·12·814T National Medicaid Audit Program 
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each type of contractor. We also interviewed program integrity officials in 

11 states to obtain their perspectives on NMAP, and collected additional 

information from 8 states where the MIG has recently implemented 

changes to NMAP,5 We reviewed relevant Department of Health and 

Human Services Office of the Inspector General (HHS-OIG) reports, and 

interviewed HHS-OIG officials involved in early assessments of the MIG's 

review and audit contractors, More information on our scope and 

methodology is provided in the full report, We performed our work from 

July 2011 to June 2012 in accordance with generally accepted 

government auditing standards, 

We found that, compared to the initial test audits and the more recent 

collaborative audits, the majority of the MIG audits conducted under 

NMAP were less effective because they used Medicaid Statistical 

Information System (MSIS) data,6 MSIS is an extract of states' claims 

data and is missing key elements, such as provider names, that are 

necessary for identifying audit targets, Since fiscal year 2008, a small 

fraction (4 percent) of the 1,550 MSIS audits identified $7,4 million in 

potential overpayments, over two-thirds did not identify overpayments, 

and the remaining audits (27 percent) were ongoing, In contrast, 26 test 

audits and 6 collaborative audits-which used states' more robust 

Medicaid Management Information System (MMIS) claims data and 

allowed states to select the audit targets-together identified more than 

$12 million in potential overpayments, (See fig, 1,) Furthermore, the 

typical amount of the potential overpayment for MSIS audits ($16,000) 

was smaller than the amounts identified through test and collaborative 

audits-$140,000 and $600,000---respectively, 

SCMS had Implemented changes to NMAP In nine states, however, eight responded to 

our questions on the changes to the program. We selected these 11 states because of 

their geographic diverSity and because together they accounted for more than half of 

Medicaid spending and beneficiaries. 

6For this statement, we refer to audits that used MS1S data as MSIS audits. The other two 

types of NMAP audits (test audits and collaborative audits) used state claims data 

Page 2 GAO·12·814T National Medicaid Audit Program 
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Figure 1: Number of Audits and Total Potential Overpayments Identified and Sent to States for Recoupment (in millions of 

dollars) by Audit Approach, through February 2012 

Number of audits performed Potential overpayments (in millions) 

Notes: Test audits were conducted from 2007 through 2010. M818 audits began in 2008 and are 

ongoing. Collaborative audits began in 2010 as part of the redesign of the NMAP and are also 

ongoing. Dollar amounts shown are potential overpayments in final audit reports sent to states for 

recovery. They do not reflect the amounts in draft audit reports or the amounts actually recovered by 

the states. Percentages may not total 100 because of rounding 

The MIG reported that it is redesigning NMAP, but has not provided 

Congress with key details about the changes it is making to the program, 

including why it changed to collaborative audits, new analytical roles for 

its contractors, and its plans to monitor and evaluate the redesign. Early 

results showed that this collaborative approach may enhance state 

program integrity activities by allowing states to leverage the MIG's 

resources to augment their own program integrity capacity. However, the 

lack of a published plan detailing how the MIG will monitor and evaluate 

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GAO Contact and 

Staff 

Acknowledgments 

(291050) 

NMAP raises concerns about the MIG's ability to effectively manage the 

program. Given that NMAP has accounted for more than 40 percent of 

MIG expenditures, transparent communications and a strategy to monitor 

and continuously improve NMAP are essential components of any plan 

seeking to demonstrate the MIG's effective stewardship of the resources 

provided by Congress. 

Our report includes recommendations that the Acting Administrator of 

CMS ensure that the MIG's (1) planned update of its comprehensive plan 

provides key details about NMAP, including its expenditures and audit 

outcomes, program improvements, and plans for effectively monitoring 

the program; (2) future annual reports to Congress clearly address the 

strengths and weaknesses of the audit program and its effectiveness; and 

(3) use of NMAP contractors supports and expands states' own program 

integrity efforts through collaborative audits. In commenting on a draft of 

our report, HHS partially concurred with our first recommendation but 

believed that CMS's annual report to Congress was a more appropriate 

vehicle for reporting NMAP results than its comprehensive plan. HHS 

concurred with the other two recommendations. 

Chairman Carper, Ranking Member Brown, and members of the 

Subcommittee, this concludes my prepared remarks. I would be pleased 

to respond to any questions you may have at this time. 

For questions about this statement, please contact Carolyn L. Yocom at 

(202) 512-7114 or yocomc@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this statement. Individuals making key contributions to this testimony 

include Walter Ochinko, Assistant Director; Sean DeBlieck; Leslie V. 

Gordon; and Drew Long. 

Page 4 GAO~12·814T National Medicaid Audit Program 
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Testimony Before the 

U.S. Senate Committee on Homeland Security 

and Governmental Affairs 

Subcommittee on Federal Financial Management, Government 

Information, Federal Services, and International Security 

June 14, 2012 

10a.m. 

Location: 342 Dirksen Senate Office Building 
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Introduction 

Testimony of: 

Ann Maxwell 

Regional Inspector General for Evaluation and Inspections 

Office ofInspector General, U.S. Department of Health and Human Services 

Good morning, Chairman Carper, Ranking Member Brown, and other distinguished Members of 

the Subcommittee. I am Ann Maxwell, Regional Inspector General for Evaluation and 

Inspections of the U.S. Department of Health and Human Services (HHS) Office oflnspector 

General (OIG). I appreciate the opportunity to appear before you to discuss OIG's recent work 

focused on Medicaid program integrity. 

My testimony today is based on several evaluations recently issued by OIG that focused on two 

national Medicaid integrity programs intended to augment States' efforts to protect Medicaid 

from fraud, waste, and abuse.' This body of work offers insights into the effectiveness of the 

Centers for Medicare & Medicaid's (CMS) National Medicaid Audit Program and the MedicareMedicaid Data Match Program (Medi-Medi Program). 

OIG's work reveals that these programs are not effectively accomplishing their missions. A 

primary objective for both programs is to identify improper payments for recovery. However, 

both programs had low findings of actual overpayments and, as a result, yielded negative returns 

on investment. These programs also delivered very few referrals of potential fraud to OIG and 

our law enforcement partners. In many ways, these programs resemble a funnel through which 

significant Federal and State resources are being poured in and limited results are trickling out. 

In evaluating these programs, we found a variety of challenges that limited their potential to 

successfully identify Medicaid overpayments and potential fraud. Most fundamentally, there are 

significant shortcomings in the data available to conduct efficient, national Medicaid program 

integrity oversight through data analysis and data mining. In addition, variation in State 

Medicaid policies presented significant learning curves for integrity contractors, which had 

difficulty accurately applying the policies unique to each State. These problems led Medicaid 

Integrity Contractors (MIC) to misidentify potential overpayments and the Medi-Medi Program 

to identify fewer overpayments and fewer cases of potential fraud for Medicaid than it did for 

Medicare. 

1 01G evaluations that scrve as the basis for this testimony are: (1) Early Assessment q!Review '\iedieoid Integrity Contractors, 

OEI-05-10-00200, Fcbntary 2012; (2) Early Assessment of."ludit Afedicaid Integn"ty Contractors, OEI-05-1 0-0021 0, fv1arch 

2012~ (3) Status of 244 Provider Audit T orgels Identified [,~<;ing Review ,\ledicaid Integn"ty Contractor Ana(vsiso OEI-05-1 0-

00201, Apri12012; and The ;\fedicare-Medicaid (Medi-Medi) Data ",fateh Program, OEI-09-08-00370, Apri12012. 

U.S. Senate Committee on Homeland Security and Govemmental Affairs 

SuhCOl1unittcc on Federal Financial :Management, Government Ini<mnation, Federal Scnices, and 

Intcmational Security 

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The potential of these programs to safei,>uard Medicaid may also have been diminished by the 

way that CMS administered them. While the National Medicaid Audit Program appeared to 

suffer from too much CM S involvement, the Medi-Medi Program experienced the opposite 

problem: a lack of involvement by all of the relevant staff at the Federal level. In addition, CMS 

did not always hold the contractors operating these programs accountable for perfonning their 

contracted tasks. 

Federal Medicaid Integrity Programs Were Created To Augment States' 

Efforts 

The task of ensuring Medicaid program integrity has historically fallen primarily on States; the 

Federal Government has provided support and oversight. States have their own program 

integrity or inspector general ottlces dedicated to Medicaid. In addition, OIG supports the 

Medicaid Fraud Control Units (MFCU), which handle the majority of Medicaid fraud cases. 

Only recently, legislation has led to a greatly expanded role in Medicaid program integrity for 

CMS. The Deficit Reduction Act (ORA) of2005 established the Medicaid Integrity Program to 

fight fraud, waste, and abuse. The DRA requires CMS to contract with entities to identify 

overpayments to Medicaid providers. CMS contracted with two types of MICs-Review MICs 

and Audit MICs-to identify such overpayments. Together, their efforts are known as the 

National Medicaid Audit Program. 2 

In general, Review MICs conduct data mining on Medicaid claims, and Audit MICs conduct 

audits of specific providers. More specifically, Review MICs use Medicaid claims data made 

nationally available through CMS's Medicaid Statistical Information System (MSIS) to identify 

providers that potentially received overpayments. Audit MICs then audit selected providers to 

determine whether they had received actual overpayments that should be recouped by the State. 

This is what we refer to as the "traditional process." 

Tn addition, CMS established a "collaborative process," in which CMS assigned collaborative 

audits when States were willing to participate. Collaborative audit targets are selected with the 

involvement of Audit and Review MTCs, States, and CMS. The States provide input on program 

areas that are vulnerable to overpayments and the State policies that apply to those program 

areas. MICs, CMS, and the States then jointly develop data mining models to identify potential 

overpayments. Instead of using MS IS, collaborative audits identify potential overpayments 

using data available in each State's Medicaid Management Information System (MMIS). All 

parties then determine which providers identified with potential overpayments should be audited. 

A third contractor type. Education MICs. was also created by the DRA, but they arc not involved in the audit 

program. 

2 u.s. Senate COIllinittee on Homeland Security and Govcmmcntal A1Tairs 

SUbCOl1Ullittl!c on Fcdc'fal Financial 11anag\..'111cnt, Govemmcnt Infonnation, Federal Services, and 

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The DRA also funded an expansion of the Medi-Medi Program. The Medi-Medi Program 

enables CMS and participating State and Federal agencies to collaboratively analyze billing 

trends across the Medicare and Medicaid programs to identify potential fraud, waste, and abuse. 

Palticipation by State Medicaid agencies and other Federal agencies is optional, and States must 

contribute their own resources to participate. The purpose of analyzing Medicare and Medicaid 

claims data collectively is to detect billing patterns that indicate possible overpayments or fraud 

that may not be evident when analyzing the data separately. 

CMS requires Medicare integrity contractors, known as Program Safeguard Contractors (PSC), to 

perform mandated Medi-Medi Program integrity tasks, which consist of: 

• identifying program vulnerabilities by using computer algorithms to look for payment 

anomalies that may indicate improper payments or potential fraud; 

• coordinating State and Federal actions to protect Medicare and Medicaid expenditures; and 

• increasing the effectiveness and efficiency of Medicare and Medicaid prepayment denials 

and recovery offraudulent, wasteful, or abusive expenditures] 

Federal Program Integrity Efforts Show Limited Results in Protecting 

Medicaid From Fraud and Abuse 

As CMS took on a more active role in Medicaid program integrity at the Federal level, OIG 

assessed those efforts. Our evaluations assessed the results of the National Medicaid Audit 

Program, operated by CMS and the MICs, and the Medi-Medi Program, operated by the PSCs. 

These evaluations also sought to identify barriers that might be limiting the efficiency and 

effectiveness of these programs integrity efforts." 

Federal Program Integrity E.ffort.~ Were Limited in Their Ability To identify Medicaid 

Overpayments 

The National Medicaid Audit Program had limited results during the time of our review. Audits 

of providers selected using the traditional process had particularly limited results. As Chart 1 

demonstrates, during our review period, Review MICs initially identified 113,378 providers with 

potential overpayments of $282 million, but after perfonning audits, the Audit MICs eventually 

;I CJ\I1S is transitioning program integrity ,York from PSCs to Zone Program Integrity Contractors (ZPIC), The chief difft.'Icncc 

bet'wccn PSCs and ZPICs is thatZPICs cover broader geographical areas and multiple parts of the Medicare program, \"hereas 

PSCs cover more limited arcas and scopes~ 

,i OIG's three evaluations of the National Medicaid Audit program arc an early assessment afthe program. These evaluations 

focused on program integrity activities conducted as the result of assignments CMS made to "MICs between January 1 and 

JmlC 30, 2010. CMS completed the process of m .... arJ.ing WC task orders to cover all regions ofthc country in the fhll of2009. 

Our evaluation of the Medi-Medi Program tocused on 2007 and 2008. 

3 u.s. Senate COlmnittee OIl Homeland Security and Govemmental AtTairs 

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found that only 25 of these providers had overpayments, which totaled $285,629. The remaining 

102 completed audits found no overpayments. 

Chart 1 shows the process that resulted in the identification of $285,629 in actual overpayments. 

Chart 1: Identification of Overpayments From Review MIC Analysis 

A separate evaluation of audits assigned to Audit MICs also found few completed audits with 

findings of overpayments. OIG found that 81 percent of these 370 audits either did not or are 

unlikely to identify overpayments. At the time of our review, only 11 percent of assigned audits 

were completed with findings, totaling $6.9 million in overpayments. The remaining audits had 

not progressed enough to draw conclusions about likely outcomes. 

Most of the overpayment findings ($6.2 million) resulted from seven completed audits that used 

the collaborative approach. The remaining $700,000 in overpayments was identified by 

35 audits that used the traditional approach. 

4 u.s. Senate COIIDllittee on Homeland Security and Governmental AtTairs 

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The Medi-Medi Program also had limited results, recovering few funds for the Medicaid 

program. Between 2007 and 2008, the Medi-Medi Program recovered $11.3 million for 

Medicaid. During the same time period, Medi-Medi recovered more than three times that 

amount $34.9 million for Medicare. While the amount recovered for Medicaid increased 

from $3.5 million in 2007 to $7.8 million in 2008, the total amount was still low compared to 

expenditures on the program. 

Only 5 of the 10 participating States as of 2008 recovered Medicaid overpayments during our 

period of review. 5 Two of the participating States ultimately withdrew from the program, 

finding that it offered them minimal benefits. One of the two States that withdrew reported that 

it invested $250,000 of its own resources in the program, but recovered only $2,000 over a 

5-year period (which included 2007 and 2008). However, during 2007 and 2008, that State also 

administered its own Medicaid integrity program, which recovered $28.9 million. 

Identified Overpayments Yielded a Negative Return on Investment 

The National Medicaid Audit Program did not identify overpayments commensurate with the 

investment CMS made in the program. In fiscal year (FY) 2010, CMS paid Review and Audit 

MICs approximately $32.1 million. Audit MICs identified $6.9 million in overpayments for 

assignments made in the first 6 months of calendar year 2010. Although we did not collect data 

for the other 6 months of the fiscal year, we have no infonnation that would lead us to expect 

significantly different results. Projecting the 6-month results over a full year would yield less 

than $14 million, well below the annual expenditures. Further, these overpayment totals 

represent expected recoveries, not actual recoveries, and therefore may not all materialize as 

providers are given the chance to appeal the findings. 

The Medi-Medi Program also had a poor return on investment Although the Medi-Medi 

Program had better results for Medicare than for Medicaid, it was still not enough to achieve a 

positive return on investment during the time period we reviewed. In 2007 and 2008, Medicare 

and Medicaid expenditures recovered were $46.2 million and expenditures avoided were 

$11.6 million, bringing the program total to $57.8 million. However, CMS spent $60 million on 

the program during this same period. 

Federal Program Integrity Contractors Made Few Medicaid Fraud Referrals 

The National Medicaid Audit Program generated limited law enforcement referrals. During the 

time of our review, Review MICs did not identify any potential Medicaid fraud leads from their 

data mining efforts for CMS to review CMS officials stated that they have now formalized the 

process for Review MICs to identify potential fraud leads. Audit MICs, however, have referred 

a limited number of fraud referrals to law enforcement over the course of the program. 

)) After 2008, 7 additional States joined the Medi-Medi Program, resulting in a total of 15 participating States. As a result of the 

transition to ZPICs, tile seven additiona1 States joined the ML.'i.li-Medi Program as part oUhree geographic areas. 

5 u.s. Senate Committee on Homeland Security and Govemmental AtTairs 

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The Medi-Medi Program also produced a small number of Medicaid law enforcement referrals. 

Over the 2 years we reviewed, the Medi-Medi Program produced 10 law enforcement referrals 

for Medicaid among the 10 participating States. Results for Medicare were better, although still 

limited, with 56 fraud referrals in this time period. Further, the vast majority of all referrals were 

in just 1 State, accounting for 41 percent (27 of 66) of the total referrals. 

Poor Quality of Data Hindered National Medicaid Program Integrity Work 

The poor quality of the Medicaid data on which these programs rely hindered their ability to 

efficiently detect suspicious trends in Medicaid claims for further auditing or investigation. 

Review MICs use MSIS claims data to identify potential overpayments, the only national 

database of Medicaid claims and beneficiary eligibility information. However, OIG has found 

that the MSIS data are not current, available, complete, and accurate." Further, MSIS does not 

capture all data elements that can assist in the detection offraud, waste, and abuse. 

Unlike the MICs, PSCs obtain Medicaid claims data directly from each participating State's 

MMIS to match them to Medicare data. These data are typically more complete and accurate. 

However, each State's MMIS data set is unique, rendel1ng it difficult to match it to other States' 

MMIS data or to Medicare data. 

The inaccuracies in and incompleteness of the MSTS data led Review MICs to misidentify 

providers with potential overpayments. One of the primary reasons audits resulted in no findings 

of overpayments was that the MSIS data used to pinpoint an audit target were inaccurate. Tn 

some instances, the reason that audits resulted in no findings of overpayments was that claims for 

outpatient services appeared as inpatient claims in MSIS, making the claims appear suspicious 

when they were, in fact, legitimate. In other cases, the State adjustments to claims were not 

reflected in MSIS, leading Review MICs to conclude that the State had overpaid a provider for a 

service when it had not. 

The Medi-Medi Program faced different challenges attempting to use existing Medicaid data to 

fultill its program integrity goals, mainly, efficiently matching State Medicaid data to Medicare 

data. The Integrated Data Repository was designed to automate the process of matching Medicaid 

to Medicare data. The repository contains data from Medicare Parts A, B, and D. However, as of 

the date of this testimony, Medicaid data are not yet included in the repository and are not projected 

to be available for use by the Medi-Medi Program until at least 2015. 

According to CMS, Medicaid data in their current form would not be appropriate to integrate into 

the Integrated Data Repository. MSIS data lack many of the standardized data elements needed for 

program integrity work and often lack consistency across States. Similarly, States' MMISs do not 

o (JIG, .HS/.S'Data Use./ulnessJorDetecting Fraud, FVasfe, and Abuse, OE1-04-07-00240, August 2009. 

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allow for efficient matching to Medicare data because the data are structured to meet State-specific 

needs, containing variables and data definitions unique to each. 

Medicaid Contractors Had Difficulty Accurately Applying State Medicaid 

Program Policies 

Both the National Medicaid Audit Program and the Medi-Medi Program encountered problems 

when contractors incorrectly applied State Medicaid policies in their analyses of Medicaid data. 

Knowledge of State Medicaid policies is critical to correctly interpreting the data. 

MICs misidentified audit targets because they lacked the appropriate knowledge of each State's 

Medicaid program policies. Five of the seven State Medicaid oversight agencies interviewed 

stated that the audit targets were often inappropriate because of misinterpretation of State policy. 

For example, 44 audit targets were selected because of misidentified duplicate payments for 

services provided to dually eligible beneficiaries (i.e., beneficiaries enrolled in both Medicaid 

and Medicare). In these cases, Medicaid made two payments for each beneficiary's hospital 

stay, but in this instance, both payments were appropriate7 . 8 

The Medi-Medi program also encountered these same issues with interpreting and analyzing 

Medicaid claims data. Four of the ten participating State Medicaid program integrity agencies 

said that the Medicare program integrity contractors administering the program do not 

understand Medicaid and that as a result they primarily analyze Medicare claims data. 

Poor Program Administration Diminished the Potential of These Program 

Integrity Efforts 

Our evaluations also reveal that poor administration of the National Medicaid Audit Program and 

the Medi-Medi Program appears to have limited their effectiveness. In addition, CMS did not 

always hold contractors accountable for the tasks outlined in their contracts. These are issues 

OIG has identified in the administration and oversight of Medicare integrity contractors for the 

past decade. 

Basic Program Design Limited Efficiency anti Effectiveness 

Both the National Medicaid Audit Program and the Medi-Medi Program were constrained by 

elements of their program design. The National Medicaid Audit Program appears to have been 

constrained by the lack of communication among the contractors and States. At the time of our 

review, all communication, whether between Review and Audit MICs, between MICs and States, 

7 One pa~m(,'nt covered all inpatient services, and the second payment covered the coinsmance for ancillary sCfYlces billed to 

Medicare during the hospital stay. lile State Medicaid agency is required to pay t()[ the Medicare coinsurance lor dually eligible 

beneficiaries. 

8 Social Sc'Curity Act, §§ 1902(a)(IO)(E) and 1905(p), 42 U.S.C. §§ 1396a(a)(IO)(E) and 1396d(p). States may din", in the 

policies that detL'Imme hmv Medicare and Medicaid claims for dually eligible beneficiaries arc submitted and recorded, 

7 U-S. Senate Committee on Homeland Security and Govemmcntal Affairs 

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or between MICs and different divisions within CMS, went through a multistep process 

controlled by CMS. According to the MICs, this served to slow the flow of information and 

delayed work. Audit MICs stated that they felt compelled to duplicate Review MIC analyses 

because they could not easily communicate with Review MICs or States. The inability to 

communicate freely also meant MICs could not take full advantage of States' knowledge of State 

Medicaid policies. 

CMS stated in response to our report that it considered its involvement to be responsible 

oversight in establishing a new program. Now that the program has been in existence for several 

years, CMS is allowing freer communication among all the parties involved in the National 

Medicaid Audit Program. 

While the National Medicaid Audit Program appeared to suffer from too much CMS 

involvement, the Medi-Medi Program experienced the opposite problem: a lack of involvement 

by all of the appropriate CMS staff. Federal Medicaid program integrity staff were not 

incorporated into the administration of the program. Rather, the Medi-Medi Program was 

administered entirely by the Medicare Program Integrity Group. Both States and Medi-Medi 

contractors indicated that this resulted in a deemphasis on Medicaid program integrity within the 

program, leaving the majority of Medi-Medi activities focused on Medicare claims analysis. In 

response to our evaluation, CMS stated that it is assessing ways to increase the involvement of 

Medicaid program integrity staff. 

CMS Did Not Hold Contractors Fully Accountable 

MICs were not held accountable for completing all of their contracted tasks. Review MICs' task 

orders with CMS state that Review MICs are to provide or recommend audit leads, among other 

tasks. However, during our review period, CMS stated that it expected Review MICs only to 

conduct data analysis and provide lists of providers ranked by the amount of their corresponding 

potential overpayments and did not expect them to recommend audit leads. As a result, Review 

MICs did not single out any individual providers on their lists as specific audit leads. Rather, 

ReviewMICs provided lists containing a total of more than 113,000 providers to CMS for its 

review. CMS selected only 244 of these providers as audit targets, suggesting that CMS did a 

significant amount of work to screen the provider lists. Thus, it appears that CMS staff 

completed much of the Review MICs' contracted tasks themselves. 

Similarly, CMS did not hold PSCs fully accountable for their administration of the Medi-Medi 

Program. Although CMS conducts annual assessments ofPSCs, CMS did not fonnally evaluate 

the PSCs on each of the contracted Medi-Medi tasks. OIG found CMS's documentation ofPSC 

perfonnance to be insufficient for drawing conclusions about their effectiveness in completing 

Medi-Medi tasks. 

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OIG Recommends Improvements to Medicaid Data and Program 

Administration 

To improve the efficiency and effectiveness of these programs, we recommend that CMS: 

• Devote the resources necessary to improve the quality of the Medicaid data available to 

conduct national Medicaid program integrity data analysis and mining; 

• Improve the ability of contractors to properly analyze Medicaid data in light of Statespecific policies; 

• Evaluate the goals, design, and operations of both programs to determine what aspects of 

these programs should be part of a national Medicaid program integrity strategy. For the 

National Medicaid Audit Program, CMS should consider increasing the use of 

collaborative audits. Collaboration among Audit MICs, Review MICs, States, and CMS 

during audits appears to have improved the selection of audit targets and the efficiency 

of the audit process, leading to better results. 

• Hold contractors accountable for all of the tasks outlined in their contracts by establishing 

clear expectations that align with the contracts and evaluating all tasks during the annual 

assessments. 

In response, CMS stated that it has an initiative underway, called Transformed MSIS, to improve 

the quality of national Medicaid data. Additionally, CMS stated that it has redesigned its approach 

to audit assignments, instructing Audit MICs to focus on collaborative projects. In fact, CMS 

stated that it assigned more audits through the collaborative process than through the traditional 

process in 2011. CMS has also stated it has made significant strides in enhancing the effectiveness 

of the Medi-Medi Program. However, evidence of this has not been made available. 

Conclusion: More Needs To Be Done To Protect the Integrity of Medicaid 

Payments 

~IG's body of work raises questions about the overall effectiveness of the National Medicaid 

Audit Program and the Medi-Medi Program in protecting Medicaid from fraud, waste, and 

abuse. OIG's work reveals that neither program produced results commensurate with the 

investments made in them. 

Given the size of current Federal and State outlays for Medicaid and the potential for increased 

outlays as the beneficiary population expands, a robust national approach to Medicaid program 

integrity is imperative. 

9 UX Senate Committee on Homeland Security and (j-ovenllnental Affairs 

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International Security 

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While we are encouraged by the changes that CMS has made, more must be done to improve 

these programs and ensure the economical investment of Federal and State dollars. Critically, 

CMS needs to improve data available to each program to enable them to efficiently and 

effectively identify potential overpayments and possible fraud. 

Thank you for your interest in this important issue and for the opportunity to be a part of this 

discussion about better protecting Medicaid funds from fraud, waste, and abuse. 

10 u.s. Senate COIllillittee on Homelmld Secmity and Govemmcntal Affairs 

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"SAVING T AXPA YER DOLLARS BY CURBING 

WASTE AND FRAUD IN MEDICAID" 

Questions For The Record 

Chairman Tom Carper 

QUESTIONS FOR DR. BUDETTI OF CMS 

1) Improved Screening of Medicare and Medicaid Providers 

One of the success stories highlighted during the hearing was the very recent and notable 

improvement in the CMS ability to verify Medicare providers (e.g. the removal of 23,000 

providers lacking licenses or who had died from the CMS database). It was mentioned that 

CMS is exploring the same review methods for state Medicaid needs. What are the plans 

and timelines for this initiative new initiative for Medicaid? 

Answer: We are partnering with one State to screen all of the State's Medicaid providers using 

the Automated Provider Screening (APS) system. Once the analysis is complete, we will provide 

the results back to the State for their action as appropriate. The goal of this test project is to 

demonstrate the utility of using an automated screening application to screen Medicaid 

providers, and we expect results later this year. 

Just recently, CMS armounced another initiativeto assist States in their program integrity efforts. 

On May 30th, we launched the "CMS Provider Screening Innovator Challenge." This Challenge 

addresses our goals of improving our abilities to streamline operations, screen providers, and 

reduce fraud and abuse. Specifically, the Challenge is an innovation competition to develop a 

multi-State, multi-program provider screening software application which would be capable of 

risk scoring, credentialing validation, identity authentication, and sanction checks, while 

lowering burden on providers and reducing administrative and infrastructure expenses for States 

and Federal programs. Further information about the Challenge is available at 

www.medicaid.gov. 

2) Improved Anti-Fraud Data Sharing 

During the hearing, the Members of the panel and the witnesses discussed the 

opportunities for sharing data and information that would help identify waste and fraud. 

understand that mauy states Medicaid agencies would like to access relevant Medicare and 

other relevant data that could prove useful for curbing waste and fraud within Medicaid. 

Could you describe the steps that CMS is taking to facilitate or provide additional access to 

Medicare or other federal data to state Medicaid agencies, or state law enforcement 

agencies? Please comment on any timelines or plans, as well as any technical or legal 

challenges, for providing access to: 

Medicare Fraud Prevention System; 

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Provider screening information from the Automated Provider Screening System; 

The full Suspension Database; 

Fraud Investigation Database (FID): 

Data from the Integrated Data Repository (IDR). 

Specifically, for the IDR, while there is the separate question of when the Medicaid state 

data will be included as part ofthe IDR, the issue is also regarding timelines and challenges 

for simply providing access to the states for the IDR Medicare data. 

Answer: We agree that the sharing of information between the States and CMS is important to 

improving collaboration and avoiding duplication with respect to potential fraud, waste, and 

abuse. CMS is evaluating many of the tools used in Medicare for opportunities to transfer the 

knowledge and lessons learned to the Medicaid program. Specifically, CMS is evaluating the 

use of the twin pillars, the Fraud Prevention System and Automated Provider Screening, on State 

data. CMS is also actively pursuing ways to apply advanced data analytics technology, including 

predictive analytics, to the Medicaid program. CMS is currently working to identifY specific FPS 

algorithms applicable to Medicaid and will be performing an analysis of one State's Medicaid 

claims data using the identified algorithms. Once the analysis is complete, we will share the 

results with the State. We anticipate the analysis being complete before the end of the year. As 

another example, CMS is engaged in an additional pilot to screen all of one State's Medicaid 

providers using the APS. Once the analysis is complete, we will provide the results to the State 

for their action as appropriate. The goal of this test project is to demonstrate the utility of using 

an automated screening application to screen Medicaid providers, and we expect results later this 

year. Once we test the effectiveness of these types of solutions in Medicaid, our goal is to 

expand these capabilities to more States. CMS is also supporting States' use of predictive 

analytics through technical assistance and education. 

All States can request and gain access to the Fraud Investigation Database (FID). Fifteen States 

have accessed the FID since 2007. Currently, three State Medicaid Agencies (CT, KY, and OK) 

and one MFCU (AZ) have users actively accessing the FID. CMS plans to provide additional 

guidance to States on the purpose, use, and access to the flO. 

At this time, there are no plans to provide direct access to the Integrated Data Repository. There 

are privacy, contractual, operational and potential regulatory constraints that need to be resolved 

in order to implement an efficient and effective process for sharing Medicare data with States for 

program integrity. CMS' ability to release fee-for-service Medicare data to States is limited by 

both the Health Insurance Portability and Accountability Act (HIPAA) and the Privacy Act. The 

HIP AA Privacy Rule outlines certain permitted uses and disclosures, such as research, health 

care operations, and health oversight activities. For each disclosure, HIP AA limits not only the 

actual data that can be released, but also how the entity (including States and law enforcement) 

receiving the data can use the data. 

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However, CMS is committed to enhancing the quality and availability of our data to States. 

CMS is keenly aware that States' appropriate access to Medicare data and analytic tools could 

strengthen the State agency's ability to prevent and mitigate improper Medicaid payments. CMS 

is working toward solutions to provide States with sufficient access to CMS data for program 

integrity purposes. 

The agency does release Medicare data to States for research purposes, which could include 

some data analysis for program integrity; we are looking into what flexibilities may be within 

existing research protocols to allow States, for example, to use predictive analytic models to 

identifY fraudulent activity worth scrutiny. We anticipate solutions will need to be implemented 

in stages based on current constraints and technology. 

Additionally, CMS recently launched an initiative to transform the agency's approach to data and 

analytics. The Office of Information Products and Data Analysis (OIPDA) was established in 

May 2012 to make development, management, use, and dissemination of data and information 

resources a core function ofCMS. Over time, the initiative will modernize CMS' intricate data 

systems and policies, facilitate improved data sharing with States, and help the agency to achieve 

the greatest improvements in health care delivery. 

3) Improvements to "Medi-Medi" Program 

In April of2012, the HHS OIG reported that the Medicare and Medicaid Data Match 

("Medi-Medi") program has produced limited results and few fraud referrals. During 2007 

and 2008, the voluntary program, in which 10 States had chosen to participate, received 

$60 million in appropriations. However, the programs only prevented and recouped $57.8 

million in improper payments. Hence, Medi-Medi yielded a negative return on investment. 

Please describe any plans and associated timelines for improving and expanding the 

Medicare and Medicaid Data Match program. Specifically, what steps is CMS taking to 

improve upon the program's current return on investment for identifying and recovering 

improper payments, or for increasing fraud referrals? 

Answer: The Inspector General's recent report reviewed data from 2007 and 2008. Since the 

period of review, CMS has made significant strides in enhancing the effectiveness of the 

Medicare-Medicaid (Medi-Medi) data program. The Medi-Medi program has been and 

continues to be a useful tool in helping to fight fraud, waste and abuse. While CMS has already 

implemented many of the suggestions made by the OIG, CMS is currently assessing ways the 

program can be improved and be more beneficial to States. CMS will share lessons learned from 

States that have made successful referrals and recouped Medicaid expenditures with other States 

to enhance program effectiveness. 

Cross-State beneficiary data checks 

Currently, there is no robust systematic process in use to fmd duplicates beneficiaries 

within the Medicaid program, which means that the state Medicaid agency in one state 

cannot easily check with the state agencies in other states to identify duplicate beneficiaries. 

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However, there is at least one method that CMS and the states could engage, such as the 

HHS Public Assistance Reporting Information System or "PARIS." 

Please describe any plans or initiatives to increase the cross checking among states for 

duplicate Medicaid enrollees. Also, is CMS or HHS exploring any steps to increase the 

effectiveness or facilitate the use of the PARIS as a method for Medicaid eligibility checks? 

Answer: Per §1903(r)(3) ofthe Social Security Act, a State must have in operation an eligibility 

determination system which provides for data matching through the Public Assistance Reporting 

Information System (PARIS) facilitated by the Secretary (or any successor system), including 

matching with medical assistance programs operated by other States. Currently, CMS is 

exploring Public Assistance Reporting Information System (P ARIS)-related webinars and other 

educational materials with the Medicaid Integrity Institute to help increase the cross-checking 

among States for duplicate Medicaid enrollees. 

4) Exploring national provider enrollment for Medicaid 

Currently, each state enrolls providers under its own Medicaid program. During the 

hearing, you described the concept of establishing a national enrollment process. Hence, a 

central entity, presumably CMS, would enroll providers as opposed to each individual state 

Medicaid agency. You mentioned that CMS is exploring the issue. Does CMS have plans 

for such an initiative, including potential pilot or demonstration programs? Have there 

been discussions with states or other entities regarding this concept? 

Answer: As I mentioned during the hearing, CMS is talking to States about applying the 

Automated Provider Screening (APS) system that we are putting into place for Medicare 

providers and suppliers to States' Medicaid providers and suppliers. CMS is engaged in a pilot 

to screen all of one State's Medicaid providers using the APS. Once the analysis is complete, we 

will provide the results to the State for their action as appropriate. The goal of this test project is 

to demonstrate the utility of using an automated screening application to screen Medicaid 

providers, and we expect results later this year. Once we test the effectiveness of these types of 

solutions in Medicaid, our goal is to expand these capabilities to more States. CMS is also 

supporting States' use of predictive analytics through technical assistance and education. 

Just recently, CMS announced another initiative to assist States in their program integrity efforts. 

On May 30th, we launched the "CMS Provider Screening Innovator Challenge." This Challenge 

addresses our goals of improving our abilities to streamline operations, screen providers, and 

reduce fraud and abuse. Specifically, the Challenge is an innovation competition to develop a 

multi-State, multi-program provider screening software application which would be capable of 

risk scoring, credentiaHng validation, identity authentication, and sanction checks, while 

lowering burden on providers and reducing administrative and infrastructure expenses for States 

and Federal programs. Further information about the Challenge is available at 

www.medicaid.gov. 

On January 24, 2011, CMS armounced a new rule (CMS-6028-FC) implementing a number of 

the Affordable Care Act's powerful new fraud prevention legislative tools. Under the rule, 

which took effect on March 25, 2011, CMS is conducting enhanced screening of categories of 

providers and suppliers that have historically posed a higher risk of fraud or abuse before they 

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enroll in Medicare. States are required to conduct similar risk -based screening of providers and 

suppliers before enrolling in Medicaid or CHIP. To avoid duplication of effort between CMS and 

the States, the rule provides that the States may rely upon a screening performed by the Medicare 

program. 

CMS is also collaborating with our State partners to ensure that those caught defrauding 

Medicare will not be able to defraud Medicaid, and those identified as fraudsters in one State 

will not be able to replicate their scams in another State's Medicaid program. Specifically, the 

Affordable Care Act and CMS' implementing regulations require States to terminate from the 

Medicaid program those Medicare providers or suppliers whose billing privileges have been 

revoked, or terminated for cause by another State's Medicaid or CHIP program. To support 

State efforts to share such information, CMS implemented a web-based application that allows 

States to share information regarding terminated providers and to view information on Medicare 

providers and suppliers that have had their billing privileges revoked for cause. We are 

confident that this interactive tool for States is the beginning of a smarter, more efficient FederalState partnership, integrating technology solutions to routinely share relevant program 

information in a collaborative effort. 

5) Medicaid Integrity Contractor Program Changes 

a) During the hearing, you described that some of the current Medicaid Integrity 

Contractor task orders will not be renewed, and that CMS is in the process of 

examining the program needs and expenditures. Is CMS preparing a Redesign 

Action Plan, or taking other steps to change the task orders, especially in order to 

create a more effective and more collaborative program? We request that you share 

the Redesign Action Plan, and any similar plans under a different name for 

improving the MIC program, or summaries with the Subcommittee. 

Answer: CMS has continued to identify additional opportunities for improvements in the design 

and operation of the Medicaid Integrity Program to improve the overall effectiveness of the 

program and to better support States' efforts to combat Medicaid fraud, waste, and abuse. CMS 

is incorporating lessons learned from our early implementation efforts and initial successes with 

collaborative audits. We have also taken into consideration recommendations from the Office of 

Inspector General, the Government Accountability Office, National Association of Medicaid 

Directors, and the Medicaid and CHIP Payment and Access Commission. CMS is implementing 

the program redesign as a phased approach that involves piloting new concepts and sharing best 

practices with States. 

CMS is reconfiguring the National Medicaid Audit Program (NMAP) to a more effective and 

less burdensome approach that includes collaborative audits. Over the next year, we will also 

enhance the Medicare-Medicaid Data Match Program (Medi-Medi), expand reviews to managed 

care plans, support our education efforts to promote fraud prevention with an expansion of the 

Medicaid Integrity Institute, and pilot the redesign of State program integrity reviews. CMS is 

also monitoring States' progress in their implementation of Medicaid Recovery Audit 

Contractors (RACs). By the Fall 2012, CMS plans to have the results ofa pilot testing the 

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applicability of the Medicare Automated Provider Screening application to screen one State's 

Medicaid providers. 

CMS' plan of action for the redesign of the NMAP is outlined below. 

1. Discontinued assignment of new audits based solely on Medicaid Statistical Information 

System (MSIS) data review and analysis with a refocus of new assignments on 

collaborative audits: February 2011. 

a. Initiated realignment of Review Medicaid Integrity Contractor's (MIC) tasks with 

the activities identified in the redesign of the NMAP: March 201l. 

b. Discontinued 3 of 5 Review MIC task orders for options years that were scheduled 

to be renewed in August and September, 2012. 

2. Developed and expanded Collaborative audits: 

a. Initiated 3 collaborative audits in January 2010; 

b. Expanded to 137 audits in IS States: June 2012; 

3. Develop and implement enhanced data reporting by States to fill gaps in the Medicaid 

Statistical Information System (MSIS): 

a. Pilots initiated with 10 states April-July, 2011; 

b. Review of pilots: Summer 2012; 

c. Publish guidance for all States to provide access to expanded data set: release to 

State CIOs for review and comment; and, 

d. Incorporate into IDR: 2014. 

4. Reconfigure Medi-Medi to complement the collaborative audit program: 

a. Review oftest and future planning initiated April 2012; 

b. Implementation to start in FY 2013. 

5. Monitor return on investment of old and new approach to NMAP: Ongoing. 

b) You have indicated that you expect to make collaborative audits a larger part of 

CMS' program integrity efforts. Could you please explain the process or 

methodology for implementing collaborative audits, the expected number of 

collaborative audits to be completed, as well as any planned performance measures to 

be used to measure the effectiveness of completed collaborative audits? 

Answer: CMS has presented the collaborative audit approach to all States through a combination 

of one-on-one meetings, meetings with the National Association for Medicaid Program Integrity, 

discussions with the Fraud and Abuse Technical Assistance Group (TAG), and through 

conversations between our contractors and States. Additionally, CMS has educated two State 

Medicaid Fraud Control Units on the possibility of using the collaborative audits to help address 

their needs. 

During the implementation of a collaborative audit, CMS works with the State to identifY areas 

that warrant further investigation and to develop audit targets. In many cases, the corresponding 

data for the collaborative audits are provided or supplemented by the States, making the data more 

complete and thus increasing the accuracy of any audit findings. Through this process, CMS can 

more effectively support a State's program integrity efforts. Since the earliest collaborative 

audits were assigned to the Medicaid Integrity Contractors (MICs) in January 2010, CMS has 

worked with States to assign a total of 137 collaborative audits in 15 States that represent 

approximately 53% of all Medicaid expenditures. CMS is currently in discussion with 15 

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additional States, and anticipates expansion to four of those States by the Fall of2012. CMS 

expects to have collaborative projects with 30 states by the end of Fiscal Year (FY) 2013. CMS 

is in the process of projecting the impact of a substantial shift of audits to collaborative audits 

including the anticipated return on investment. We are working to develop a return on 

investment (ROI) methodology that accounts fully for the impact of these efforts. 

The advent of Medicaid Recovery Audit Contractors (RACs) will add a new component to 

States' audit efforts and we are working with States to anticipate and minimize any duplication 

with the NMAP audits. In particular, because the States manage the RAC program and work 

closely with CMS in developing the collaborative audits, we believe this structure will lend itself 

to a more efficient audit process and reduce redundancy between the Medicaid RACs and the 

MICs. We are working with our CMS partners as well to craft a comprehensive managed care 

program integrity strategy. 

c) As early as August 2009, the HHS OIG reported that Medicaid Statistical Information 

System (MSIS) data is often outdated, and does not contain many ofthe data elements 

needed for detecting improper payments. During your testimony, you mentioned that 

the new Transformed-MSIS database will include many new data elements that can 

assists in fraud, waste, and abuse detection efforts. Does the current T-MSIS pilot 

program include the full range of data elements described in the recommendations 

proposed in the rccent HHS OIG 2009 report, "MSIS Data Usefulness for Detecting 

Fraud, Waste, and Abuse" (OEI-04-07-00240)? 

Answer: There are 100 data elements consolidated by the OIG from the 182 elements 

identified by the Medicaid Integrity Group as useful for Medicaid fraud, waste, and abuse 

analysis. Of those 100 elements, 93 have been incorporated into the current TransformedMedicaid Statistical Information System (T-MSIS) release, while the remaining 7 elements are 

being evaluated for inclusion with the subsequent release ofT-MSIS either through direct 

collection or through linkage to reference files. 

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Post-Hearing Questions for the Record 

Submitted to Dr. Budetti 

From Senator Scott P. Brown 

"Saving Taxpayer Dollars by Curbing Waste and Fraud in Medicaid" 

June 14th, 2012 

1. Question: You have indicated that you expect to make collaborative audits a larger 

part of CMS' program integrity efforts. According to your testimony, you plan on 

expanding to 30 states by the fall of 2013. However, there was no indication of a plan or 

goal to extend beyond 30 states. 

What is the timeframe for expanding these audits to all 50 states and territories? What 

are the challenges for expanding to the states at a faster pace? If the primary challenge 

is a question of resources, what are the resources necessary to expand to aliSO states 

and territories by the end of 2013? 

Answer: CMS has presented the collaborative audit approach to all States through a combination 

of one-on-one meetings, meetings with the National Association for Medicaid Program Integrity, 

discussions with the Fraud and Abuse Technical Assistance Group (TAG), and through 

conversations between our contractors and States. Additionally, CMS has educated two State 

Medicaid Fraud Control Units on the possibility of using the collaborative audits to help address 

their needs. 

During the implementation of a collaborative audit, CMS works with the State to identify areas 

that warrant further investigation and to develop audit targets. In many cases, the corresponding 

data for the collaborative audits is provided or supplemented by the States, making the data more 

complete and thus increasing the accuracy of any audit findings. Through this process, CMS can 

more effectively support a State's program integrity efforts. Since the earliest collaborative 

audits were assigned to the Medicaid Integrity Contractors (MICs) in January 2010, CMS has 

worked with States to assign a total of 137 collaborative audits in 15 States that represent 

approximately 53% of all Medicaid expenditures. CMS is currently in discussion with 15 

additional States, and anticipates expansion to four of those States by the fall of2012. CMS 

expects to have collaborative projects with 30 states by the end of Fiscal Year (FY) 2013. CMS 

is now in the process of projecting what we anticipate collaborative audits will yield over the 

next year which will assist us in evaluating the efficiency of the collaborative audits. 

2. Question when will the T-MSIS pilot program be completed? When will T-MSIS be 

fully operational? When will T-MSIS incorporate all State data? What are any 

barriers that Congress should be aware ofthat may delay the timeframes indicated 

above? 

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Answer: The IO-State Pilot has officially concluded on June 29, 2012 and has been approved to 

continue in project status. Currently, the pilot's final assessment evaluation report is being 

finalized. 

We are evaluating what elements can be implemented at this time nationwide. Our evaluation of 

the pilot, and forthcoming guidance, will not only consult the pilot States but also gamer input 

from all state Medicaid and CHIP programs. We should know more once the evaluation is 

complete in the coming months. 

Currently, the goal is to fully expand nationwide by January 1,2014, and States will continue 

working towards implementation throughout the coming months. The driving force behind this 

current timeframe is the Affordable Care Act's Medicaid eligibility expansion. 

State resources remain a prominent risk to timely implementation. Without available resources to 

acquire needed hardware/software and complete mapping of required indicators for data 

extraction, transformation, and loading, implementation may be delayed. 

When will Medicaid data be incorporated into the Integrated Data Repository? Please 

provide to the Subcommittee the plan and timelines for incorporating Medicaid data into 

the IDR, including the completion of any current pilot or demonstration programs. 

Answer: Incorporating State Medicaid data into the IDR is a priority and we are working 

diligently to incorporate Medicaid data for alISO States into the IDR. We are aware that States 

have new and competing priorities in the current fiscal environment and we are working closely 

with them to help streamline data requests under the agency's Medicaid and CHIP Business 

Information and Solutions (MACBIS) data initiative. This initiative is intended to result in the 

development of a national system to address the needs of Federal and State Medicaid partners. 

CMS intends to incorporate Medicaid data for all 50 States into IDR by the end of fiscal year 

2014. 

1. Question: Is there a Comprehensive Medicaid Program Integrity ROI which aggregates 

all taxpayer investment in program integrity activities across State and Federal 

programs? Is there a Federal Medicaid Program Integrity ROI? I understand that 

many States publish a ROJ figure. How valuable would it be to have metrics and 

comparable State ROI data so that taxpayers can have some feedback on how their 

money is being spent? 

Answer: CMS is in the process of projecting the impact of a substantial shift of audits to 

collaborative audits including the anticipated return on investment. We are working to develop 

an ROI methodology that accounts fully for the impact of these efforts. . 

CMS is supporting the Medicaid Fraud and Abuse Technical Assistance Group (TAG), a 

national forum for regional representatives of State Medicaid program integrity directors to 

discuss Medicaid-related fraud and abuse control activities, in its development of a standard set 

of measures and assumptions to initiate a standardized method for measuring the ROI of the 

State Medicaid integrity programs. In May 2012, a special one-day meeting of several State 

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Medicaid Program Integrity officials (ROI workgroup) was convened. The goal of the session 

was to construct a framework to define ROI that will allow States (and others) to more easily 

compare and contrast the effectiveness of program integrity efforts among States. The May 

meeting was precipitated by recommendations from the Medicaid Fraud and Abuse TAG 

meeting held in January 2012. Topics were referred for development with the objective to gather 

information pertaining to current Medicaid PI ROI measurements made by States, ROI 

measurement techniques that might be available from other sources and State-specific issues that 

arise when ROI measurements are made or attempted. 

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Questions for the Record 

Dr. Peter Budetti, Deputy Administrator and Director for Program Integrity 

Centers for Medicare and Medicaid Services 

Senate Committee on Homeland Security & Government Affairs 

Subcommittee on Federal Financial Management, Government Information, 

Federal Services and International Security 

"Saving Taxpayer Dollars by Curbing Waste and Fraud in Medicaid" 

June 14,2012 

Senator Pryor 

1. In your testimony, you mention a number of different initiatives that CMS is 

implementing to strengthen Medicaid. However, there have been problems with 

programs, like the Medi-Medi Program and the National Medicaid Audit Program that 

have not provided a positive return on the investment. Has CMS developed specific 

metrics for evaluating the return on investment in new initiatives? 

Answer: eMS is in the process of projecting the impact of a substantial shift of audits to 

collaborative audits including the anticipated return on investment. We are working to develop 

an ROI methodology that accounts fully for the impact of these efforts. eMS is supporting the 

Medicaid Fraud and Abuse Technical Assistance Group (TAG), a national forum for regional 

representatives of State Medicaid program integrity directors to discuss Medicaid-related fraud 

and abuse control activities, in its development of a standard set of measures and assumptions to 

initiate a standardized method for measuring the ROI of the State Medicaid integrity programs. 

In May 2012, a workgroup of several State Medicaid PI officials was convened to construct a 

framework for a measure of ROI that will enable States to more easily compare and contrast the 

effectiveness of PI efforts among States. 

Additionally, eMS has made significant strides in addressing concerns raised by the Office of 

the HHS Inspector General regarding the ROI of the Medicare-Medicaid (Medi-Medi) data 

program. The OIG's April 2012 report on Medi-Medi evaluated data from 2007 and 2008, and 

since the period of review, eMS has worked to enhance the effectiveness of the Medi-Medi 

program. The Medi-Medi program has been and continues to be a useful tool in helping to fight 

fraud, waste and abuse. While eMS has already implemented many of the suggestions made by 

the OIG, eMS is currently assessing ways the program can be improved and be more beneficial 

to States. eMS will share lessons learned from States that have made successful referrals and 

recouped Medicaid expenditures. 

eMS implements the Medi-Medi program via contracts. As a measure of the extent to which the 

Medi-Medi program is achieving its goals, eMS evaluates the contractor's overall performance 

annually in the following four key areas specified in their contracts: business relations, 

timeliness, quality and cost control. Each key element within the four areas receives a score of 

unsatisfactory (0 points), marginal (1 point), satisfactory (2 points), very good (3 points) or 

exceptional (4 points). 

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2. The Integrated Data Repository (IDR) houses a large amount of data that could be 

useful for states to help fight fraud. What is the status of state access to the IDR? 

Answer: At this time, there are no plans to provide direct access to the Integrated Data 

Repository. There are privacy, contractual, operational, and potential regulatory constraints that 

need to be resolved in order to implement an efficient and effective process for sharing Medicare 

data with States for program integrity. eMS' ability to release fee-for-service Medicare data to 

States is governed by both the Health Insurance Portability and Accountability Act (HIPAA) and 

the Privacy Act. The HIP AA Privacy Rule would permit certain uses and disclosures of interest 

to the State Medicaid agencies, such as research, health care operations, and health oversight 

activities .. [eMS would have to insert here how Privacy Act restrictions could be satisfied] 

However, eMS is committed to enhancing the quality and availability of our data to States. 

eMS is keenly aware that States' appropriate access to Medicare data and analytic tools could 

strengthen the State agency's ability to prevent and mitigate improper Medicaid payments. eMS 

is working toward solutions to provide States with sufficient access to eMS data for program 

integrity purposes. 

The agency does release Medicare data to States for research purposes, which could include 

some data analysis for program integrity; we are looking into what flexibilities may be within 

existing research protocols to allow States, for example, to use predictive analytic models to 

identify fraudulent activity worth scrutiny. We anticipate solutions will need to be implemented 

in stages based on current constraints and technology. 

Additionally, eMS recently launched an initiative to transform the agency's approach to data and 

analytics. The Office ofInformation Products and Data Analysis (OIPDA) was established in 

May 2012 to make development, management, use, and dissemination of data and information 

resources a core function of eMS. Over time, the initiative will modernize eMS' intricate data 

systems and policies, facilitate better data sharing with States, and help the agency to achieve the 

greatest improvements in health care delivery. 

3. As I understand it, eMS is planning to use Medicare's Automated Provider Screening 

(APS) system and the Fraud Prevention System (FPS) for Medicaid. Both the APS and 

the FPS are fairly new programs and still need further evaluation of their effectiveness 

in Medicare. Has eMS established metrics for evaluating the effectiveness of the APS 

and FPS in Medicare? 

a. How will eMS evaluate the APS and the FPS to ensure that successes from their 

use in Medicare will translate to the same successes in Medicaid? 

Answer: eMS is required to report on the use of the Fraud Prevention System as well as 

certification from the Department of Health and Human Services' Office of Inspector General 

(OIG) on the actual and projected savings to the Medicare fee-for-service program. eMS is 

continually evaluating the APS as part of the IT Investment Lifecycle. 

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eMS is evaluating the use of predictive analytics, advanced screening and other sophisticated 

analytic techniques developed for the twin pillars, the Fraud Prevention System and Automated 

Provider Screening, on State data through the use of pilot projects. eMS is also actively 

pursuing ways to apply advanced data analytics technology, including predictive analytics, to the 

Medicaid program. eMS is currently working to identifY specific FPS algorithms applicable to 

Medicaid and will be performing an analysis of one State's Medicaid claims data using the 

identified algorithms. Once the analysis is complete, we will share the results with the State. 

We anticipate the analysis being complete before the end of the year. As another example, eMS 

is engaged in an additional pilot to screen all of one State's Medicaid providers using the APS. 

Once the analysis is complete, we will provide the results to the State for their action as 

appropriate. The goal of this test project is to demonstrate the utility of using an automated 

screening application to screen Medicaid providers, and we expect results later this year. Once 

we test the effectiveness of these types of solutions in Medicaid, our goal is to expand these 

capabilities to more States. eMS is also supporting States' use of predictive analytics through 

technical assistance and education. 

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"SAVING TAXPAYER DOLLARS BY CURBING 

WASTE AND FRAUD IN MEDICAID" 

Questions For The Record 

Chairman Tom Carper 

QUESTION FOR MR. DOUGLAS WILSON- Incentivizing States for Recoveries 

The Affordable Care Act included an important provision which extended the time period from 

60 days to one year for states to pay the federal government its share of any identified Medicaid 

overpayments. During the hearing, there was some discussion about the need for further 

flexibility by states in recovering identified overpayments, or in repaying the federal share of 

identified overpayments? Are there some additional steps for incentivizing the states for 

improved recoveries of overpayments that Congress should consider? 

Yes. Because states are prohibited from negotiating the amount of overpayment to be recouped, 

states are faced with one of three options: I.) collect the overpayment in full if possible, 2.) 

drive the provider out of business or into bankruptcy so as to avoid liability for the federal share, 

or 3.) delay and minimize the identification of overpayments to avoid creating liability for 

federal repayments that may be uncollectible. The first option is only feasible if the 

overpayment amount is small enough to be borne by a solvent provider. The second option may 

create access to care issues. The third option results in inaccurate estimates of the extent of 

fraud, waste, and abuse. 

If states were authorized to negotiate fair and reasonable repayment amounts, without incurring 

federal liability for the remaining identified overpayments, providers could afford to settle larger 

cases rather than exploring bankruptcy. States could resolve more cases in shorter time frames, 

because liquid providers would not insist upon lengthy contested case hearings. The state and 

federal governments would recover some money, rather than absorbing tota:llosses. The 

attached document presents the historical and regulatory background, and clarifies the proposed 

solutions that would best work in the State of Texas. 

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United States Government Accountability Office 

Washington, DC 20548 

August 17, 2012 

The Honorable Scott P. Brown 

Ranking Member 

Subcommittee on Federal Financial Management, 

Government Information, Federal Services, and 

International Security 

Committee on Homeland Security and Governmental Affairs 

United States Senate 

Dear Senator Brown, 

It was a pleasure to appear before your Subcommittees on June 14, 2012, to discuss 

saving taxpayer dollars by curbing waste and fraud in Medicaid. The attached 

enclosure provides responses to the question for the record you posed. If you or your 

staff have any additional questions related to this matter, please contact me at (202) 

512-7114 or yocomc@gao.gov. 

Sincerely yours, 

Carolyn L. Yocom 

Director, Health Care 

Enclosure 
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Post-Hearing Questions for the Record 

Submitted to Carolyn Yocom 

Government Accountability Office 

From Senator Scott P. Brown 

"Saving Taxpayer Dollars by Curbing Waste and Fraud in Medicaid" 

June 14, 2012 

1. Question: I understand that many States publish a ROI figure. How 

valuable would it be to have metrics and comparable State ROI data so 

that taxpayers can have some feedback on how their money is being 

spent? 

Having state methodologies and state reported ROI data would provide 

an opportunity to compare and contrast state methodologies, which 

could serve as a benchmark for evaluating how CMS computes an ROI 

for the Medicaid Integrity Program. In addition, state ROI data would 

provide CMS with important information to help hold states accountable 

for accurately reporting state Medicaid program integrity recoveries. 

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Post-Hearing Questions for the Record 

Submitted to Ann Maxwell 

Department of Health and Human Services Inspector General 

From Senator Scott P. Brown 

"Saving Taxpayer Dollars by Curbing Waste and Fraud in Medicaid" 

June 14th, 2012 

1. Question: My understanding is that there is a RCF AC Return-OnInvestment (ROI) figure, which in 2011 was $7.20 to 1 based on a 3 year 

rolling average for the RCF AC partners. I also understand that all 

discretionary Medicaid Integrity program funding is included in a 

separate Medicaid Integrity program ROI published in a separate report. 

Could you provide this Medicaid program integrity information for the 

past few years? 

Answer: 

The Office of Inspector General does not produce a report that contains a 

Medicaid Integrity Program return on investment, nor do we have such 

statistics that we could provide. We recommend consulting with the 

Centers for Medicare & Medicaid Services. 
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CMS SETTLEMENT ISSUES 

Background 

§6506 of the Affordable Care Act provides a general rule that a state's single source Medicaid 

agency one year from the date of discovery of an overpayment to a provider to recover or seek to 

recover the overpayment before the Federal share must be refunded to CMS. The agency must 

refund the Federal share of overpayments at the end of the one year period following discovery 

whether or not the State has recovered the overpayment from the provider. 

The agency is not required to refund the Federal share of an overpayment made to a provider 

when the State is unable to recover the overpayment amount because the provider has been 

detennined bankrupt or out of business. 42 CFR §433.318. A partial collection of an 

overpayment amount by the State from a provider during the one year period following 

discovery does not change the recovery period for the original overpayment amount due to CMS. 

42 CFR §433.316. 

In the event of fraud, the state has one year to repay to CMS the amount of overpayment 

identified, unless a delay can be attributed to a judicial or administrative process, in which case 

the deadline is 30 days after the conclusion of the process. 

Except for fraud, the agency must refund the Federal share of overpayments at the end of the 1-

year period following discovery, whether or not the State has recovered the overpayment from 

the provider. 42 CFR §433.316. 

Generally, a fraud overpayment is "discovered" when it is identified by any State Medicaid 

agency official or other State official, the Federal Government or the provider, and the 

overpayment is communicated to the provider in final written notice. A final written notice 

allows the provider to contest the detennination. 42 CFR §433.304. 

Non-fraud overpayments are "discovered" on the earliest of: 

(1) The date on which any Medicaid agency official or other State official first 

notifies a provider in writing of an overpayment and specifies a dollar amount 

that is subject to recovery; 

(2) The date on which a provider initially acknowledges a specific overpaid 

amount in writing to the Medicaid agency; or 

(3) The date on which any State official or fiscal agent of the State initiates a 

fonnal action to recoup a specific overpaid amount from a provider without 

having first notified the provider in writing. 42 CFR §433.316(c). 
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Exceptions 

• Bankruptcy. The agency is not required to refund to CMS the Federal share if-

(I) The provider has filed for bankruptcy in Federal court at the time of discovery of 

the overpayment or the provider files a bankruptcy petition in Federal court before the 

end of the I-year period following discovery; and 

(2) The State is on record with the court as a creditor of the petitioner in the amount 

of the Medicaid overpayment. 42 CFR §433.318(c). 

o If the State recovers any portion of an overpayment under a courtapproved discharge of bankruptcy, the agency must refund to CMS the 

Federal share of the overpayment amount collected. 42 CFR §433.320(e). 

o If a provider's petition for bankruptcy is denied in Federal court, the 

agency must credit CMS with the Federal share of the overpayment. 42 

CFR §433.320(f). 

• Out of Business. The agency is not required to refund to CMS the Federal share if the 

provider is out of business on the date of discovery of the overpayment or if the provider 

goes out of business before the end of the I-year period following discovery. 

Texas IssueslRisks 

» Historically, repayment was a non-issue. Investigations ranged from $25-$35 million 

annually spread over an average of 1 0 cases, while recoupments averaged 8%. 

» In FY 2012,010 investigative efforts dramatically increased with related increases in the 

number of cases worked (more than 100) and the amount of questioned costs. 

» With the significant increase in productivity comes enhanced risk for the State: oro 

success could put the State at risk for funds that will never be recovered. 

» Ifproviders cannot repay overpayments, their option is to close or declare bankruptcy, 

the practical effect of which is to discharge any obligation to the state or federal 

government. 

» Providers oro targets currently are large: 60,000 dental patients, 30,000 medical patients. 

Billings routinely exceed $15 million; providers with billings of $30-85 million are not 

rare. 
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» These substantial providers can drag out litigation, hire experts to challenge everything 

from statistical sampling to medical conclusions, and ultimately still avoid any repayment 

by declaring bankruptcy. 

» Many providers have indicated a willingness to negotiate, provided OIG demonstrates 

flexibility on I) overall repayment amount and 2) payment terms, including length of 

repayment period and structure of debt retirement. 

Proposed Solution 

» The Texas OIG proposes a Medicare solution. Currently, based upon our meeting and 

understanding from CMS Medicare providers are permitted to negotiate settlement 

agreements with CMS and get extended repayment periods. The Texas OIG proposes 

that states have authority to settle all Medicaid claims on behalf of the state and federal 

governments, returning to eMS the federal share of what the state recovers when states 

receive payment. 

» The solution contemplates negotiating both the overall amount of repayment and the term 

of repayment, and is currently in practice with Medicare.