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98–281 2016

STRENGTHENING MEDICAID PROGRAM INTEGRITY 

AND CLOSING LOOPHOLES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

SEPTEMBER 11, 2015 

Serial No. 114–74 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

(III) 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

BRETT GUTHRIE, Kentucky 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

SUSAN W. BROOKS, Indiana 

CHRIS COLLINS, New York 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

GENE GREEN, Texas 

Ranking Member 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

DORIS O. MATSUI, California 

BEN RAY LUJA ́ N, New Mexico 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(V) 

C O N T E N T S 

Page 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

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

Prepared statement .......................................................................................... 32 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 33 

Hon. Brett Guthrie, a Representative in Congress from the Commonwealth 

of Kentucky, opening statement ......................................................................... 35 

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

New Jersey, opening statement .......................................................................... 36 

WITNESSES

John Hagg, Director of Medicaid Audits, Office of Inspector General, U.S. 

Department of Health and Human Services ...................................................... 38 

Prepared statement .......................................................................................... 40 

Answers to submitted questions ...................................................................... 105 

Nico Gomez, Chief Executive Officer, Oklahoma Health Care Authority ........... 47 

Prepared statement .......................................................................................... 49 

Answers to submitted questions ...................................................................... 108 

Trish Riley, Executive Director, National Academy for State Health Policy, 

and Commissioner, Medicaid and CHIP Payment and Access Commissio ..... 55 

Prepared statement .......................................................................................... 57 

Answers to submitted questions ...................................................................... 110 

SUBMITTED MATERIAL

Terminated providers bill ....................................................................................... 3 

H.R. 3444 .................................................................................................................. 11 

H.R. 1570 .................................................................................................................. 14 

Electronic verification bill ....................................................................................... 18 

H.R. 2339 .................................................................................................................. 23 

H.R. 1771 .................................................................................................................. 28 

Statement of the Alzheimer’s Foundation of America, submitted by Mr. Pitts . 99 

Statement of Sandata Technologies, LLC, submitted by Mr. Pitts ..................... 101 

Statement of ResCare, submitted by Mr. Guthrie ................................................ 103 

(1) 

STRENGTHENING MEDICAID PROGRAM 

INTEGRITY AND CLOSING LOOPHOLES 

FRIDAY, SEPTEMBER 11, 2015 

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

The subcommittee met, pursuant to call, at 9:17 a.m., in room 

2322, Rayburn House Office Building, Hon. Joseph R. Pitts (chairman of the subcommittee) presiding. 

Present: Representatives Pitts, Guthrie, Murphy, Burgess, 

Blackburn, Lance, Griffith, Bilirakis, Long, Ellmers, Bucshon, 

Brooks, Collins, Green, Engel, Capps, Schakowsky, Butterfield, 

Castor, Sarbanes, Kennedy, and Pallone (ex officio). 

Also Present: Representative Mullin. 

Staff Present: Clay Alspach, Chief Counsel, Health; Gary Andres, 

Staff Director; Leighton Brown, Press Assistant; Noelle Clemente, 

Press Secretary; Graham Pittman, Legislative Clerk; Michelle 

Rosenberg, GAO Detailee, Health; Heidi Stirrup, Health Policy Coordinator; Josh Trent, Professional Staff Member, Health; Christine Brennan, Minority Press Secretary; Jeff Carroll, Minority Staff 

Director; Tiffany Guarascio, Minority Deputy Staff Director and 

Chief Health Advisor; Rachel Pryor, Minority Health Policy Advisor; and Samantha Satchell, Minority Policy Analyst. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

Mr. PITTS. The subcommittee will come to order. 

The chair will recognize himself for an opening statement. Today 

Medicaid is the world’s largest health coverage program. Medicaid 

plays a critical role in our healthcare system, providing access to 

needed medical services and long-term care for some of our Nation’s most vulnerable patients. The Congressional Budget Office 

estimates that Federal Medicaid expenditures will grow from $343 

billion this year to $576 billion in 2025. At the same time, State 

expenditures have grown significantly, today accounting for more 

than 25 percent of State spending in fiscal year 2014. 

Given the growing portion of the Federal budget dedicated to 

Medicaid and the fact that roughly one in five Americans may be 

served by the program in a given year, Congress has a responsibility—even a duty—to ensure that the program is safeguarded 

against waste, fraud, and abuse. And while there is never a perfect 

program, the status quo in Medicaid certainly can be improved. 

2 

The increasing size, complexity and vulnerability of Medicaid have 

led the GAO to designate it a high-risk program that can too easily 

be subjected to fraud and abuse. 

Both Federal and state governments play critical roles in oversight of program integrity efforts. And while I believe states are 

and should be treated as full partners in the program, the reality 

is that Congress has a duty to expect the best from states and take 

commonsense steps to help prevent fraud, waste, and abuse at systemic levels. After all, protecting the integrity of the Medicaid program is about ensuring the program is not only more accountable 

and transparent for taxpayers, it is about safeguarding program 

dollars and encouraging more meaningful access to care for patients who rely on the program. And that is why I am so pleased 

today to be discussing several bills that will help boost the integrity, oversight and accountability of the Medicaid program. 

First, a bill to be introduced by Dr. Bucshon and some of his colleagues would fix a problem identified by the HHS inspector general ensuring that providers terminated in one state don’t improperly bill the system or negatively impact patients in another state. 

[The bill follows:] 

3 


98281.040
4 


98281.041
5 


98281.042
6 


98281.043
7 


98281.044
8 


98281.045
9 


98281.046
10 

Mr. PITTS. Second, Representative Brooks and I have introduced 

H.R. 3444, which would operationalize a proposal in the President’s 

budget to help reduce Medicaid and CHIP fraud in the territories 

of the United States. 

[The bill follows:] 

11 


98281.047
12 


98281.048
13 

Mr. PITTS. Next, Representative Bilirakis has introduced H.R. 

1570, a bipartisan bill which would bring increased transparency 

and information to Federal expenditures related to Medicaid and 

CHIP in U.S. territories. 

[The bill follows:] 

14 


98281.049
15 


98281.050
16 


98281.051
17 

Mr. PITTS. Fourth, Vice Chairman of the Health Subcommittee 

Brent Guthrie has a bill which would incentivize States to require 

providers of Medicaid personal care services to have electronic 

verification systems in place. This commonsense proposal will ensure taxpayers only pay for the services delivered to Medicaid 

beneficiaries. 

[The bill follows:] 

18 


98281.052
19 


98281.053
20 


98281.054
21 


98281.055
22 

Mr. PITTS. Fifth, I have introduced H.R. 2339, a commonsense 

proposal to give States better options to how lottery winnings are 

calculated for purposes of Medicaid eligibility. I hope we can all 

agree that multimillion dollar lottery winners should not be eligible 

to receive Medicaid, which is precisely the problem in current law 

that my bill would fix. 

[The bill follows:] 

23 


98281.056
24 


98281.057
25 


98281.058
26 


98281.059
27 

Mr. PITTS. Finally, Representative Mullin on the full committee 

has authored H.R. 1771, a bill which would close a loophole in current law identified by some GAO reporting. And this bill would 

amend the Social Security Act to count portions of income from annuities of a community spouse as income available to institutionalized spouses for purposes of Medicaid eligibility. 

[The bill follows:] 

28 


98281.060
29 


98281.061
30 


98281.062
31 


98281.063
32 

Mr. PITTS. It is my hope that through the policies we discuss 

today and through future actions by this committee, we can work 

together on a bipartisan basis to boost Medicaid program integrity 

while making the program more sustainable, accountable and 

transparent. I look forward to hearing our witnesses today. 

I would like to yield to Congressman Mullin to introduce one of 

our witnesses. 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

The Subcommittee will come to order. 

The Chairman will recognize himself for an opening statement. 

Today, Medicaid is the world’s largest health coverage program. Medicaid plays 

a critical role in our health care system, providing access to needed medical services 

and long-term care for some of our nation’s most vulnerable patients. 

The Congressional Budget Office estimates that federal Medicaid expenditures 

will grow from $343 billion this year to $576 billion in 2025. At the same time, state 

expenditures have grown significantly, today accounting for more than 25% of state 

spending in FY 2014. 

Given the growing portion of the federal budget dedicated to Medicaid—and the 

fact that roughly one in five Americans may be served by the program in a given 

year—Congress has a responsibility, even a duty, to ensure that the program is 

safeguarded against waste, fraud, and abuse. 

While there is never a perfect program, the status quo in Medicaid certainly can 

be improved. The increasing size, complexity, and vulnerability of Medicaid have led 

the GAO to designate it a ‘‘high-risk program’’ that can too easily be subjected to 

fraud and abuse. 

Both federal and state governments play critical roles in oversight of program integrity efforts. While I believe states are—and should be treated as—full partners 

in the program, the reality is that Congress has a duty to expect the best from 

states and take common-sense steps to help prevent fraud, waste, and abuse at systemic level. 

After all, protecting the integrity of the Medicaid program is about ensuring the 

program is not only more accountable and transparent for taxpayers; it is about 

safeguarding program dollars and encouraging more meaningful access to care for 

the patients who rely on the program. 

That’s why I’m so pleased today to be discussing several bills that will help boost 

the integrity, oversight, and accountability of the Medicaid program. 

First, a bill to be introduced by Dr. Bucshon and some of his colleagues would 

fix a problem identified by the HHS Inspector General-ensuring that providers terminated in one state don’t improperly bill the system or negatively impact patients 

in another state. 

Second, Representative Brooks and I have introduced H.R. 3444, which would 

operationalize a proposal in the president’s budget to help reduce Medicaid and 

CHIP fraud in the territories of the United States. 

Next, Representative Bilirakis has introduced H.R. 1570, a bipartisan bill which 

would bring increased transparency and information to federal expenditures related 

to Medicaid and CHIP in U.S. territories. 

Fourth, Vice Chairman of the Health Subcommittee Brett Guthrie has a bill 

which would incentivize states to require providers of Medicaid personal care services to have electronic verification systems in place. This common-sense proposal 

will ensure taxpayers only pay for the services delivered to Medicaid beneficiaries. 

Fifth, I have introduced H.R. 2339—a common-sense proposal to give states better 

options to how lottery winnings are calculated for purposes of Medicaid eligibility. 

I hope we can all agree that multi-million dollar lottery winners should not be eligible to receive Medicaid—which is precisely the problem in current law that my bill 

would fix. 

Finally, Representative Mullin on the full committee has authored H.R. 1771— 

a bill which would close a loophole in current law identified by some GAO reporting. 

This bill would amend the Social Security Act to count portions of income from annuities of a community spouse as income available to institutionalized spouses for 

purposes of Medicaid eligibility. 

It is my hope that through the policies we discuss today, and through future actions by this committee, we can work together on a bipartisan basis to boost MedVerDate Nov 24 2008 15:00 Jan 21, 2016 Jkt 037690 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-74 CHRIS
33 

icaid program integrity, while making the program more sustainable, accountable, 

and transparent. 

I look forward to hearing from our witnesses today, and I yield to ———————. 

Mr. MULLIN. Thank you, Chairman Pitts. 

And it is an honor to be able to sit on a subcommittee panel with 

you and introduce a Nico Gomez, our CEO of the Oklahoma Health 

Care Authority. Nico has brought in a unique approach to sometimes an agency that can be bogged down with bureaucracy by 

looking outside the box, by understanding that there is always a 

better way to do things. As he openly admits, it wasn’t his idea but 

it was his ability to hire good people which we constantly refer to 

in the private sector as being extremely smart. And he brought in 

an outside look by being able to get people to enroll at a simpler 

pace by being online. At the same time, and most importantly, it 

gives people and it gives the agency the ability to check the eligibility of the participant at any given time with the touch of a button. Instead of having to go through and audit them to see if they 

are eligible since it is based on a month-to-month income basis, 

they can simply push the button and find out their eligibility. 

I think it is something that not just Oklahoma can benefit from 

but the entire country can benefit from. 

So, Mr. Gomez, it is an honor to have you in D.C., even though 

his flight didn’t get in until 3 a.m. This morning. And as you can 

tell, he is still drinking coffee. So Nico thank you so much for being 

here. 

Mr. Pitts, thank you so much for the ability to introduce him. 

Mr. PITTS. The chair thanks the gentleman. 

Without objection, the gentleman will sit with the subcommittee 

today in the hearing. 

The chair now recognizes Mr. Green for 5 minutes for an opening 

statement. 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Thank you, Mr. Chairman. 

And good morning, and I thank our witnesses for being here 

today, even if you didn’t arrive until 3 a.m. 

Throughout its 50-year history, Medicaid has been an adaptable, 

efficient program that meets the healthcare needs of millions of 

children, pregnant women, people with disabilities, seniors, and 

low-income adults. Today Medicaid serves as a lifeline to nearly 72 

million Americans who depend on the program for health coverage. 

The Affordable Care Act included the most significant changes to 

the program since its creation. It expanded coverage, made improvements to promote program integrity and transparency, and 

advance delivery system reform. 

Thanks to these provisions, the uninsured rate is at a record low. 

The program continues to efficiently provide coverage to enrollees. 

Program integrity provisions of the ACA mark a shift from the traditional pay-and-chase model to a preventative approach in which 

fraudulent actors are kept out of the program before they commit 

fraud. 

34 

Today we are examining six Medicaid proposals, efforts that 

truly improve transparency and program integrity is something I 

think we all can support. 

The Affordable Care Act took major steps to improve program integrity in Medicaid, including new protocols for screening of suppliers and providers and additional authority to terminate entities 

that commit fraud. These are significant steps forward, and more 

can be done to ensure these reforms are fully implemented. 

We should also continue to examine other ways to further 

strengthen Medicaid for all beneficiaries so that dollars are spent 

on quality care without inappropriately limiting access. 

While we hear from all six proposals during today’s hearing, I 

want to take the opportunity to highlight two. Prior to the passage 

of the ACA, if a state terminated a provider’s participation in its 

Medicaid program, the terminated provider could potentially participate in a program of a different state. In the case of Texas, they 

would probably come to Oklahoma and vice verse, leaving the system vulnerable to fraud and abuse. The ACA took steps to prevent 

this from happening, but OIG has identified weaknesses in that 

process. 

One of the legislative proposals will build on the ACA with some 

technical changes. A proposal that would achieve its intent to further reduce waste, fraud and improve quality and safety in the 

Medicaid program is something, again, we can all support. 

I am concerned that two bills under consideration would scale 

back Medicaid eligibility under the guise of closing loopholes. The 

Affordable Care Act establishes a streamlined, coordinated eligibility determination system for Medicaid and CHIP as well as premium tax credits and cost-sharing subsidies. The approach was designed so that people can qualify for the appropriate program without gaps or duplication and move between insurance programs 

when their incomes change. 

H.R. 2339 would undermine this by requiring states to count 

lump-sum income as though it were income that the individual has 

received for up to 20 years after it is actually received. The bill is 

being described as a way to prevent people who win large lottery 

payouts from receiving Medicaid, but this is misleading. By counting all lump-sum income as monthly income, the overwhelming the 

majority of people it would affect all those who receive things like 

workers’ compensation settlements, unemployment, and retroactive 

disability payments. If 2339 became law, a significant number of 

low-income Americans who receive lump sum could be inappropriately determined ineligible for Medicaid and lose access to their 

health insurance. 

Coverage gaps due to temporary changes in income are bad for 

patients, providers, and health plans and ultimately is a waste of 

taxpayer dollars. This is a concept MACPAC has recommended in 

several reports to Congress. Gaps in coverage is an issue that I 

have been concerned about for years. For the last several Congresses I have worked with my colleague from Texas, Representative Joe Barton, to advance legislation to require 12-month continuous enrollment Medicaid and SCHIP. Proposals that ensure Federal and state taxpayer dollars are spent appropriately on delivering quality care and prevent fraud, waste, and abuse from occurVerDate Nov 24 2008 15:00 Jan 21, 2016 Jkt 037690 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-74 CHRIS
35 

ring should be supported. Good program integrity holds all stakeholders accountable without unintentionally impeding the access. 

I look forward to working with my colleagues on the committee 

to further strengthen the Medicaid program in key areas and build 

on the success. Again, I would like to thank our witnesses for being 

here today and look forward to the discussion on the legislative 

proposals under consideration. 

And I yield back. 

Mr. PITTS. The chair thanks the gentleman. 

I now recognize the vice chair of the subcommittee, Mr. Guthrie, 

5 minutes for his opening state. 

OPENING STATEMENT OF HON. BRETT GUTHRIE, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF KENTUCKY 

Mr. GUTHRIE. Thank you, Mr. Chairman. I thank you for yielding 

time. 

I appreciate the committee holding this hearing on efforts to 

strengthen Medicaid by reducing waste, fraud, and abuse. In doing 

so we can ensure the program’s longevity and effectiveness. 

Earlier this year, I introduced H.R. 2446, which would require 

states to put in place an electronic visit verification system for personal care services. Medicaid personal care services are becoming 

increasingly more important as the need for them continues to 

grow. However there is also growing concern about the high levels 

of improper payments in this area. 

My bill will help address these concerns by requiring states to 

adopt an EVV system to verify the date, time, and site of visit as 

well as the provider of the services. This is critical to ensure that 

beneficiaries receive the services they need. 

Many states already operate EVV systems, and they have seen 

a decrease in improper payments and significant cost savings for 

the states. 

I want to thank the subcommittee for holding this hearing; certainly Chairman Pitts for including it in today’s hearing. And by 

strengthening Medicaid, we can ensure those who need it can rely 

on it in the future. 

And I would like to yield time to my friend from Florida, Mr. 

Bilirakis. 

Mr. BILIRAKIS. Thank you. Thank you, sir, I appreciate it very 

much. 

And thank you, Chairman Pitts, for holding the hearing. 

Earlier this year, I, along with the delegates from all the territories, introduced the Medicaid and CHIP Territory Transparency 

and Information Act, H.R. 1570. CMS reports Medicaid CHIP data 

for all 50 states and the District of Columbia, but not the territories. Three months after introduction, CMS has started to report 

Puerto Rico data but not the other territories, and the level of data 

is less than what is reported for states. 

My bill would require CMS to provide the same data for the territories as it does for the states. Puerto Rico’s Medicaid program 

is facing some huge problems over the horizon. As a committee, we 

have to make some big policy decisions, and regardless of your policy views, we have to have all the data, all the information to unVerDate Nov 24 2008 15:00 Jan 21, 2016 Jkt 037690 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-74 CHRIS
36 

derstand the problem and exercise proper oversight over their program if we are to attempt to address these problems going forward. 

Thank you very much for the time, and I yield back. 

Mr. GUTHRIE. I yield back. 

Mr. PITTS. The chair thanks the gentleman. 

I now recognize the ranking member of the full committee, Mr. 

Pallone, 5 minutes for an opening statement. 

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

Mr. PALLONE. Thank you, Mr. Chairman, for convening this 

hearing on the six pieces of legislation before our committee. I am 

pleased to see that some of the bills we are considering here today 

are true efforts to improve program integrity in Medicaid in ways 

that will strengthen the Medicaid program. That is a longstanding 

priority of mine, and there is still some technical work to be done, 

but the draft proposal that would build on authority given to CMS 

and states to terminate fraudulent providers from the Medicaid 

program is a worthwhile policy. 

We need to do a better job in this area to make sure that providers eliminated in one state are no longer able to cross state lines 

and continue to be reimbursed for bad care for beneficiaries, and 

this legislation will do that. And I look forward to working with my 

colleagues on the proposal. 

The proposed legislation under consideration today that would 

encourage our territories, like Puerto Rico, to invest in the creation 

of Medicaid fraud control units that over the long term bring dollars back to beneficiaries is a no-brainer. 

I have to say, however, that another bill, H.R. 1570, requiring 

Web site information about the territories beyond Puerto Rico is a 

dramatic step, and I prefer to start first with the request to the 

agency for that information before enacting a law to that effect. 

While not harmful, this approach seems rigid and misguided. 

I appreciate the interest in cracking down on fraud in the personal care services and home and community-based care space. Ensuring beneficiaries actually receive quality PCS to which they are 

entitled is an issue of serious importance and one that I look forward to working with this committee on further. HHS and the Office of the Inspector General have published an extensive body of 

work examining Medicaid personal care services and has found significant and persistent compliance payment and fraud 

vulnerabilities that we will hear about today. I have concerns about 

H.R. 2446, as drafted, however. I do believe this issue should be 

addressed and look forward to a thorough review and assessment 

of recommendations for improvement. 

Unfortunately, we aren’t considering just program integrity bills 

today. The ultimate test for all Medicaid legislation should be to 

determine if the proposal supports overarching Medicaid objectives 

to strengthen coverage, expand access to providers, improve health 

outcomes, and increase the quality of care for beneficiaries. I believe that the majority of what we are looking at for program integrity in Medicaid today achieves these goals. However, efforts to 

scale back eligibility in the Medicaid program in any way is not 

37 

program integrity, and it is not closing loopholes. Proposals like the 

one we have here today that purports to address this so-called 

plight of lottery winners in Medicaid I think are completely unnecessary from a practical perspective. We have several checks in 

place and states already have the authority they need, but far more 

concerning is that H.R. 2339 is not about lottery winners at all; it 

is about undermining the streamlined coordinated eligibility approach the ACA established by allowing states to count lump-sum 

income that an individual may receive as though it were income 

that the individual is receiving for 1 to 20 years after actual receipt. And by ‘‘lump sum,’’ we are not talking about lottery winners; we are talking about uncompensated care settlement payments, Social Security disability back pay. We are talking about 

eliminating coverage for up to 20 years for a child on Medicaid because they have a parent that finally got a break with a little bit 

of income from selling the family home. Proposals like these that 

would undermine the coverage for millions of low-income individuals, including some of our most vulnerable children and seniors, 

are punitive to beneficiaries. 

Reviewing our final bill here today, H.R. 1771, I am pleased that 

perhaps we can have a discussion about long-term care insurance 

or the lack thereof. I appreciate this legislation’s effort to ensure 

spousal impoverishment protections remain when one spouse must 

enter a nursing home. 

As many of you know, I was a strong supporter of the CLASS 

Act that has since been repealed, and I have called repeatedly for 

a real discussion about a long-term care benefit that a middle-income family can depend on to be there when they need it. We have 

no long-term care insurance in this country, and until we are ready 

to have a discussion about improving options in the long-term care 

insurance marketplace, I am concerned about changes to Medicaid 

eligibility in this space even for a very small amount of individuals. 

Mr. Chairman, I have said repeatedly that the Medicaid program 

is the bedrock of the Nation’s safety net. I take protecting Medicaid 

seriously, and I have used some of the good program integrity proposals we have to consider here today as efforts to advance that 

goal. However, Medicaid is the lifeline of nearly 72 million children, elderly, and low-income individuals depend on for health coverage. And I will never support a proposal that would take that 

coverage away. 

So I want to thank you again for calling this hearing, and I look 

forward to working with you further to consider some of these initiatives, Mr. Chairman, and having a thoughtful discussion. Thank 

you. 

Mr. PITTS. The chair thanks the gentleman. 

That concludes the opening statements. As usual, the written 

opening statements of all members will may be made part of the 

record. And I would like to ask unanimous consent to submit the 

following documents for the record: letters from the Alzheimer’s 

Foundation of America and Sandata Technologies. 

Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. PITTS. We have one panel today. I will introduce them in 

order of your testimony. Thank you very much for coming today. 

38 

First of all, John Hagg, Director of Medicaid Audits, Office of Inspector General, U.S. Department of Health and Human Services; 

secondly, we have heard from Mr. Mullin the introduction for Nico 

Gomez, chief executive officer for Oklahoma Health Care Authority; 

and finally, Trish Riley executive director of the National Academy 

for State Health Policy, and Commissioner, Medicaid and CHIP 

Payment and Access Commission. 

Thank you very much for coming today. Your written testimony 

will be made a part of the record. You will each be given 5 minutes 

to summarize your written testimony. 

So at this time, Mr. Hagg, you are recognized for 5 minutes. 

STATEMENTS OF JOHN HAGG, DIRECTOR OF MEDICAID AUDITS, OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT 

OF HEALTH AND HUMAN SERVICES; NICO GOMEZ, CHIEF EXECUTIVE OFFICER, OKLAHOMA HEALTH CARE AUTHORITY; 

AND TRISH RILEY, EXECUTIVE DIRECTOR, NATIONAL ACADEMY FOR STATE HEALTH POLICY, AND COMMISSIONER, 

MEDICAID AND CHIP PAYMENT AND ACCESS COMMISSION 

STATEMENT OF JOHN HAGG 

Mr. HAGG. Good morning, Chairman Pitts, Ranking Member 

Green, and other distinguished members of the committee. Thank 

you for the opportunity to testify about the Office of Inspector General’s efforts to reduce fraud, waste, and abuse and to promote 

quality and safety in the Medicaid program. 

Protecting the integrity of Medicaid takes on a heightened urgency as expenditures and the number of beneficiaries served continues to grow. 

My testimony today focuses on three specific areas of concern 

that the OIG has identified to be problematic. 

First, terminated providers continue to participate in and bill 

Medicaid. Second, there are inadequate safeguards for personal 

care services. And third, the U.S. territories lack Medicaid fraud 

control units. 

Prior to the passage of the Affordable Care Act, if a state terminated a provider’s participation in its Medicaid program, the provider could potentially participate in another state’s Medicaid program, leaving the second state vulnerable to fraud, waste and 

abuse. To prevent this, states are now required to terminate a provider’s participation if that provider is terminated in another state. 

The termination has to be for cause, for example, for reasons of 

fraud, integrity, or quality. 

Through our work, we found significant problems. Specifically, 

we determined that not all states submitted data on terminated 

providers and that much of the data that was submitted did not 

relate to providers terminated for cause. We also found 12 percent 

of providers terminated in 2011 continued participating in other 

states’ Medicaid programs. 

To further complicate states’ ability to terminate providers, many 

states do not require providers that participate via managed care 

to be directly enrolled in Medicaid. If a state has not directly enrolled a provider, it cannot not terminate that provider, and it may 

39 

not even be aware that the provider is participating in its Medicaid 

program. 

The OIG believes that CMS should, one, require states to report 

providers terminated for cause rather than leaving it as voluntary; 

two, ensure that the information reported is uniform, accurate and 

complete; and three, require state Medicaid programs to enroll all 

providers participating in Medicaid managed care. 

Another problematic area within Medicaid is personal care services. These services allow many elderly people and those with disabilities to remain in their homes rather than being placed in a 

nursing facility. As more and more state Medicaid programs explore home care options, OIG believes it is critical that adequate 

safeguards exist to prevent fraud, waste and abuse in personal care 

services. Through our work, OIG discovered some payments for 

these services were improper because they were either not provided 

in accordance with state requirements, not supported by adequate 

documentation, billed during periods in which the beneficiaries 

were institutionalized, or were provided by attendants that failed 

to meet state qualifications. 

Over the years, we have made a number of recommendations to 

CMS to address Medicaid’s deficiencies within the delivery of personal care services, including requiring qualification standards for 

care attendants be consistent across states, requiring care attendants to be enrolled or registered with the states, and requiring 

dates, times and attendants’ identities to be listed on Medicaid’s 

claims. Currently, none of these recommendations have been implemented. 

Another way the OIG helps protect the integrity of Medicaid is 

by overseeing the state Medicaid fraud control units. Fraud control 

units currently operate in 49 states and the District of Columbia, 

but none are in the five U.S. territories. 

The major barrier to establishing fraud control units in the territories is the nature of Medicaid funding. Unlike Medicaid funding 

for the states, the territories receive a capped appropriation and 

routinely use the full amount appropriated. This becomes a disincentive to allocate scarce Medicaid dollars to the establishment 

and operation of fraud control units. 

Legislation could remove the disincentive. This could be accomplished by exempting unit funding from the capped Medicaid appropriation. OIG believes that such a change would also be cost efficient, specifically in Puerto Rico, which has a total Medicaid enrollment of more than 1 million beneficiaries which is comparable 

to Medicaid enrollment of many medium-sized states. 

In conclusion it is critical that we strengthenoversights to ensure 

that Medicaid funds are spent appropriately. Thank you for your 

interest in our work and for the opportunity to appear before you 

today. 

[The prepared statement of Mr. Hagg follows:] 

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Mr. PITTS. The chair now recognizes Mr. Gomez 5 minutes for 

your summarization. 

STATEMENT OF NICO GOMEZ 

Mr. GOMEZ. Good morning, Chairman Pitts and Ranking Member 

Green, and distinguished committee members, good morning. It is 

honor to share Oklahoma’s perspectives and experiences on a critically important topic like program integrity in an ever changing 

healthcare delivery environment. It is important to note that this 

testimony is that of only one state’s program. It is not made on behalf of any of the other states or associations. Equally important 

is acknowledgment that solutions offered here are not to the exclusive benefit of Oklahoma. This testimony highlights and reinforces 

the need for state flexibility rather than uniform mandates. 

Oklahoma maintains a dedication of integrity in every aspect of 

our Medicaid program. Recent changes have included improving 

the process for determining member eligibility, provider contracting 

and enrollment, claims payments, medical necessity, asset 

verification, and service verification. Prior to the implementation of 

the Affordable Care Act, Oklahoma made investments toward developing the Nation’s first fully automated, realtime online enrollment system. Currently, two-thirds of Oklahoma’s applicants for 

Medicaid are received from a personal or public computer through 

our online system. 

When added to the benefit of our community partners, more than 

99 percent of our applications processed in the community are processed in realtime using a rules-based decision engine. In addition 

to relieving a tremendous administrative burden, this system allows for realtime enrollment, while strengthening the state’s ability 

to verify reported information with various sources, including the 

Social Security Administration, Department of Homeland Security 

and the Oklahoma Employment Security Commission. 

Oklahoma’s pride is in its constant dedication to improving its 

program’s integrity reflected in its payment error rate measurement. The Payment Error Rate Measurement Program is an audit 

conducted by CMS on a 3-year rolling average to measure the accuracy of payments made to Medicaid covered goods and services. The 

audit takes into consideration member eligibility, provider eligibility, and medical necessity. Oklahoma’s most recent PERM audit 

identified a.24 percent error rate, .24 percent amongst the lowest 

of the 17 states with the same cycle. Most states are around 9 percent. 

This success is a testament to the engaged provider services and 

training infrastructure as well as Oklahoma’s continual audits to 

using PERM criteria in the interim during and between PERM audits, something we are very proud of. 

Many of the issues being addressed in the upcoming hearings are 

issues that Oklahoma is facing or has attempted to address in the 

past. 

One issue in particular we have attempted to address on our own 

and now with the help of Congressman Mullin we are able to address in H.R. 1771. Since its creation, the statutes and regulations 

governing the Medicaid program have been amended numerous 

times and now consist of complex, interrelated provisions that are 

48 

often difficult to understand. One such area surrounds standards 

to prevent spousal impoverishment. Medicaid statutes allow the 

spouse of a Medicaid applicant for long-term care to keep a certain 

amount of his or her resources so that he or she is not required 

to become impoverished before their spouse can receive long-term 

care. Unfortunately, individuals are now using court-recognized 

loopholes to transfer significant resources to a spouse, transfers 

that would normally disqualify them from Medicaid. 

States have denied applicants who are clearly above Medicaid’s 

income standards or resource limit standards only to have the 

court order the approval of such applications as a result of certain 

estate-planning loopholes that they recognize are contrary to Medicaid’s intended purpose but can only be corrected by Congress. 

In an attempt to curtail the practice, Oklahoma denied such application using this loophole that resulted in the Morris v. Oklahoma Department of Health and Human Services. Morris is the 

seminal 10th Circuit decision which directly impacts not only Oklahoma but five other states in the circuit, but it also has been extended and relied upon in at least three other Federal circuits and 

several state courts. 

The Court’s rulings essentially permits a married couple to shelter potentially unlimited amounts of assets through the use of nonassignable, nontransferable annuities in order for the spouse in 

need of medical care to qualify for Medicaid. In reversing the district court, the court of appeals stated, although we understand the 

district court’s concerns regarding the exploitation of what can only 

be described as a loophole in the Medicaid statutes, we conclude 

that the problem can only be addressed by Congress. 

The passage of H.R. 1771 would be a needed step towards preserving shrinking resources that would help empower states to ensure those applicants truly in need can still access quality services. 

I would like to thank Congressman Markwayne Mullin for agreeing 

to working with the states remedying this and look forward to 

working together with the committee. And with that, I conclude my 

remarks and am happy to answer any questions. 

[The prepared statement of Mr. Gomez follows:] 

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Mr. PITTS. The chair thanks the gentlemen. 

I now recognize Ms. Riley 5 minutes for your summary. 

STATEMENT OF TRISH RILEY 

Ms. RILEY. Good morning, Chairman Pitts, Ranking Member 

Green, and members of the subcommittee. 

I have served as the commissioner of MACPAC, the Medicaid 

and CHIP Payment and Access Commission, since its inception in 

2010. As you know, MACPAC is a congressional advisory body 

charged with analyzing and reviewing Medicaid and CHIP policies 

and making recommendations to Congress, the Secretary, and the 

states on issues affecting these programs. 

I am one of 17 members appointed by the GAO. 

While I am also executive director of the National Academy for 

State Health Policy, my comments today solely reflect the work of 

MACPAC. 

We very much appreciate the opportunity to be here today as the 

subcommittee considers changes to the Medicaid program. The 

Commission shares the subcommittee’s interest in ensuring Federal and state taxpayer dollars are spent appropriately on delivering quality, necessary care, and preventing fraud, waste and 

abuse from taking place. When designed and implemented well, 

program integrity policies and procedures should ensure that eligibility decisions are made correctly, prospective and enrolled providers meet Federal and state participation requirements, services 

provided to enrollees are medically necessary and appropriate, and 

provider payments are made in the correct amount for the appropriate services. 

The Commission has identified and shared with you through our 

reports to Congress a number of challenges associated with implementation of an effective and efficient Medicaid program integrity 

strategy, including overlap between Federal and state responsibilities, insufficient collaboration and information sharing among Federal agencies and the states, diffusion of authority among multiple 

Federal and state agencies, lack of information on the effectiveness 

of program integrity initiatives, and appropriate performance 

measures. We also identified concerns about lower Federal matching rates for state activities not directly related to fraud control; incomplete and outdated data; and few program integrity resources 

for delivery system models other than fee for service. 

Specifically, the Commission recommended that the Secretary of 

HHS should collaborate with states to create feedback loops to simplify and streamline program integrity requirements, determine 

which current Federal program integrity initiatives are most effective, and take steps to eliminate programs that are redundant, outdated, or not cost-effective. 

In addition, in order to enhance states’ ability to detect and prevent fraud and abuse, the Commission has recommended that the 

Secretary should develop methods for better quantifying the effectiveness of program integrity activities. The Secretary should assess analytic tools for detecting and preventing fraud and abuse 

and promote the use of those tools that are most effective. 

56 

In addition, the Department should improve dissemination of 

best practices in program integrity and enhance program integrity 

training programs. 

The measures before the subcommittee today also speak to other 

policy objectives of interest to the Commission, including simplification, transparency, and the alignment of policies across Federal 

health programs. Even so, I want to clarify that MACPAC has not 

reviewed nor expressed its views on the merits of the six specific 

initiatives that are the focus of today’s hearing. My written statement provides technical comments on the potential implications of 

these proposals and issues that could be addressed as the subcommittee considers them. 

Again, thank you very much for this opportunity to appear before 

the committee, and we would of course be happy to provide technical information from the staff or to answer questions today. 

[The prepared statement of Ms. Riley follows:] 

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Mr. PITTS. The chair thanks the gentlelady. That concludes the 

opening statements. We will now begin questions, and I will recognize myself 5 minutes for that purpose. 

Mr. Hagg, the U.S. territories are already required by law to 

have a Medicaid fraud control unit. Is that correct? 

Mr. HAGG. I believe that is correct, yes. 

Mr. PITT. Given that, can you explain why the territories do not 

already have such units and how H.R. 3444, the Medicaid and 

CHIP Territory Fraud Prevention Act, would encourage their creation? 

Mr. HAGG. Yes. I think they don’t have fraud control units now 

has to do with how their Medicaid programs are structured or how 

the funding of those programs are structured. In the territories, the 

Medicaid programs are capped, unlike the states, where it is openended. To create fraud control units, the funding that it would take 

to start up the units and then to operate the units would take 

away from trying to provide for services for beneficiaries in the territories. I think that is a difficult decision for them, taking away 

funds that could be used to provide services. 

The bill will move the funding that would be required to run the 

fraud control units out of that capped amount. And so it should 

take that disincentive from creating a program away. 

Mr. PITTS. Thank you. 

And, Mr. Hagg, your work found that the lack of uniform terminology for the reasons for provider terminations caused challenges 

for state agencies. Can you please explain the challenges created, 

how the policy we are discussing today could help resolve those 

challenges? 

Mr. HAGG. Well, you know as far as uniform terminology, we performed two studies involving terminated providers. The first was 

looking at the action CMS had taken to create a central data system that would house all of the providers that had been terminated. And looking at that data set, we found some states didn’t 

submit any data at all. We found some states that submitted data, 

but the data wasn’t complete. They were missing, for example, an 

address for the provider. And then as far as uniform terminology, 

we found that some states were submitting providers that had been 

terminated for reasons other than cause, reasons other than fraud 

or integrity or abuse issues. So say for example in a state if they 

terminated a provider because of billing inactivity, some states 

would submit that information to the central database, other states 

potentially could look at that database and say, ‘‘We need to terminate that provider as well,’’ even though there wouldn’t be a reason 

to. So only providers terminated for cause should be submitted to 

that central data system; not other ones. 

And so uniform terminology or guidance provided by CMS about 

uniform terminology could help correct that issue. 

Mr. PITTS. Mr. Gomez, according to the GAO, some states have 

indicated that the use of annuities as a Medicaid planning tool 

have increased in recent years, despite congressional action most 

recently as part of the Deficit Reduction Act to eliminate this loophole. Has Oklahoma seen an increase in the use of annuities in recent years? And if so, why do you think this is the case? 

Mr. GOMEZ. Mr. Chairman, thank you. 

69 

Yes, we have seen an increase in the number of annuities as, 

quite frankly, families have found ways to avoid the 5-year 

lookback on income and assets. And it has allowed also a growth 

in the number of promissory notes too, which this amendment 

doesn’t deal with. But it is a growing issue where we have allowed 

the annuity to be able to shelter assets so the spouse can in the 

community—the spouse, the institutionalized spouse, will be able 

to qualify for the program when the assets are there to be able to 

help pay for the services provided. 

Mr. PITTS. Mr. Gomez, do you think it is appropriate for millionaires or multimillionaires to be receiving Medicaid while at the 

same time there are disabled children on the waiting lists for home 

and community-based services? 

Mr. GOMEZ. That is why we are here, Mr. Chairman, is because 

we have, in Oklahoma, have cut the program hundreds of millions 

of dollars over the last couple of years, and every time we cut the 

program, we recognize that there are potential families that are 

getting access to the Medicaid program who are not financially 

qualified. So to answer your question, no. 

Mr. PITTS. So if I told you that states are barred from 

disenrolling multimillionaire lottery winners from Medicaid, I 

would assume that you would find this troubling, yes? 

Mr. GOMEZ. Yes, I would find that troubling. 

Mr. PITTS. Furthermore, while the Federal Government is paying 

100 percent of the cost of Medicaid expansion, including the medical bills of millionaire lottery winners, there are disabled children 

and HIV patients on waiting lists for some Medicaid programs, so 

do you think it is fair to use Medicaid dollars to pay for lottery winners? 

Mr. GOMEZ. The purpose of Medicaid is to provide coverage for 

low-income families and other categorically related individuals who 

meet certain eligibility requirements. And it is an income-based 

program, so it is very difficult to make an argument for anybody 

above a low-income. 

Mr. PITTS. Can you explain how it is that Medicaid policy permits million or multimillion dollar lottery winners to retain Medicaid coverage when they can clearly afford to purchase their own 

health insurance? 

Mr. GOMEZ. Well, the way the system is set up now through 

Medicaid is we look at eligibility on a month-by-month basis we are 

not able to look at it from a, so a person could receive a lottery winning within a given month and then come back and reapply the 

next month and be qualified for the program, which I don’t believe 

that was the program’s intent. 

Mr. PITTS. I see my time is expired. 

I recognize the ranking member, Mr. Green, 5 minutes for questions. 

Mr. GREEN. Thank you, Mr. Chairman. 

Mr. Gomez how many recipients, how many people receive Medicaid in Oklahoma on any given day? 

Mr. GOMEZ. Over a given course of a year, we will serve about 

1 million Oklahomans. Oklahoma only has about 3.6, 3.7 million 

Oklahomans, so more than 25 percent of our population is utilizing 

the Medicaid program in a given year. 

70 

Mr. GREEN. How many people have you identified that are either 

using the lottery exception or even the annuity in Oklahoma? Do 

you have a number? 

Mr. GOMEZ. Ranking Member Green, I do not have a number, 

but I am happy to provide that to the committee for the record. 

Mr. GREEN. Do you think it would be more than 100 out of the 

million people? 

Mr. GOMEZ. I would really hesitate to speculate, but I am happy 

to give you the information. 

Mr. GREEN. I would love to see that information because I would 

like to see—obviously we want folks who need the program to get 

it, but if we also through up some impediment, we may end up excluding people who really do need it but again thank you. 

One of the reasons the Affordable Care Act changed from the 

previous asset test of Medicaid into the current modified adjusted 

gross income formulas is to streamline and coordinate eligibility between Medicaid and health insurance marketplaces. 

Ms. Riley, can describe the complexity of implementing this legislation for purposes of keeping coverage streamlined and coordinated? Do you think the legislation moves us backwards in a patchwork system where we potentially have 50 different rules for eligibility? 

Ms. RILEY. Well, I understand the concern of wanting to be sure 

that we have a quality affordable healthcare system and that we 

have investments in coverage that are appropriate. That said, there 

has been enormous undertaking in the states, through the Affordable Care Act, to try to integrate the eligibility systems between 

the Federal marketplace and Medicaid. And I think giving states 

options to change some of that, could certainly make it more complex. 

Mr. GREEN. Would this potentially create additional cost at the 

Federal level and particular with the Federally facilitated marketplaces in 37 states? 

Ms. RILEY. I think it could. Again, this would be a state option 

so it is unclear how each state would tweak its eligibility determinations, and as such when integration with the Federal marketplace to try to streamline and make eligibility smoother and simpler, would require the Federal marketplace to have to make a 

tweak to its Federal system for each change that every state 

makes. 

Mr. GREEN. Is it correct, and I am reading the legislation that 

it is potentially applying to anything such as Social Security disability back payments, workers’ compensation, in any amount at all 

and the state would prorate the amount monthly for up to 20 years 

even if you no longer have access to those funds? 

Ms. RILEY. I am sorry I didn’t hear the end of the question, I am 

sorry. 

Mr. GREEN. Would this legislation potentially applying the Social 

Security disability back payments, workers’ compensation, or any 

amount at all that the state could pro rate that would amount to 

monthly up to 20 years even though it is not available to them over 

that 20 years? 

Ms. RILEY. Yes. It is my understanding of the bill that it would 

do just that. Certainly we all appreciate the lottery issues, but as 

71 

written lump sums could be SSDI payments, disability payments, 

and others. 

Mr. GREEN. We have a lot of program integrity bills that we are 

considering today that are focused on niche areas. I want to take 

a step backward and look more globally at the landscape, the program integrity in Medicaid. Can you describe MACPAC’s work on 

program integrity to date? 

Ms. RILEY. I can. We have taken a very serious look at program 

integrity both in our March 2012 report and our March 2013 report 

to the Congress. We have seen a real complexity in program integrity where there are multiple state and Federal agencies that have 

various aspects of program integrity, including the Department of 

Justice, numerous Health and Human Services agencies, and state 

governments, often competing often redundant. And we have suggested that there is a real need to streamline those activities, to 

look where there is redundancy, and to find out where the best 

practices exist among the states. 

Importantly, while we invest in Medicare fraud control units 

with a 75-25 match, we do not invest in other activities states need 

to undertake to prevent fraud at that same level, notably the administration of the program. 

Mr. GREEN. Thank you. 

Mr. Chairman, I have some other questions I would like to submit to Ms. Riley on highlights, low-matching rates for activities not 

directly related to fraud control, and things like that. I appreciate 

MACPAC’s reports and hope that Congress can act on those both 

to save Federal money, but also—because in Texas, our match is 

about 65 percent Federal, about 35 percent state, and somewhere 

along the way we need to match that. We want the states’ participation but we also want to make it to where it is we can get that 

fraud that we are looking at. 

Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman. 

We will submit the followup questions to you in writing. Please 

respond. 

The chair now recognizes the vice chairman of the subcommittee, 

Mr. Guthrie, 5 minutes for questioning. 

Mr. GUTHRIE. Thank you, Mr. Chairman. I appreciate that very 

much. First, I have a unanimous consent request to enter into the 

record a letter from ResCare. 

Mr. PITTS. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. GUTHRIE. Thank you, Mr. Chairman. 

This is a question for Mr. Hagg. We agree it is important to ensure that patients receive the services they are supposed to and 

that taxpayer resources are protected. In that vein, I introduced 

H.R. 2446, which would require states to use electronic visit 

verification for personal care services under Medicaid. So I would 

like to discuss some the work your office has done in this area of 

fraud and abuse of personal care services. 

In 2012, in your year 2012 portfolio report on personal care services, you outline a series of audits that were done in eight locations, seven states and then one city, that identified over $582 milVerDate Nov 24 2008 15:00 Jan 21, 2016 Jkt 037690 PO 00000 Frm 00077 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-74 CHRIS
72 

lion in questionable costs. There was a wide error rate from zero 

percent in one state to over 40 percent in another. 

Can you walk us through some of the issues you found in those 

audits, and what were the most frequent problems you saw? 

Mr. HAGG. Yes, I would be glad to. The main issues we found 

were providers submitting claims that didn’t follow all of the Federal and state requirements. Some examples would be just acrossthe-board qualifications of the attendants not being met, things 

like background checks, specific training, things like that. We 

found that proper supervision wasn’t provided. There is a certain 

level of supervision for the attendants, and in some cases, it wasn’t 

always met. We found instances where physician approval or authorization hadn’t been set up for the service to be provided. We 

found instances where plans of care hadn’t been approved or set 

up. Other cases where there was just a lack of documentation. 

Without the documentation, you can’t tell if it is just sloppy record 

keeping or if the service was never provided. We found a lot of instances where we had a bill for a specific beneficiary yet we knew 

from data match that beneficiary was in an institution, a hospital 

or a nursing home, at the same time. 

Those are the main type things. There are a lot of different areas 

across the board, a lot of high error rates, a lot of dollars as you 

point out. But those are I think the main buckets of the problems 

that we found. 

Mr. GUTHRIE. Thank you. Your report also outlined a number of 

concerns about quality of care for beneficiaries receiving personal 

care service due to some of these problems. Can you outline how 

the Medicaid beneficiary suffers because of some of these instances? 

Mr. HAGG. Well, the quality of care issues that came out of those 

reports, what we tried to do in a lot of those audits, not in every 

one but a lot of them, we tried to interview the beneficiaries receiving services. And a lot of the responses we received back had to do 

with the attendant stealing from the beneficiary or abusing them, 

or threats of abuse. I think there were cases of abandonment where 

the attendant would be out shopping for groceries or someplace 

with the beneficiary, and they would say: My shift is up. It is time 

for me to go, and they would leave them there. Those are the type 

of quality type of issues that we mainly identified. 

Mr. GUTHRIE. Thank you. And the electronic visit verification 

systems provide information on the date, time, duration location of 

service as well as the type of service performed. How do you think 

the availability of such information will help minimize the problems you identified? 

Mr. HAGG. Well, I think it would help. Of the problems that I 

have laid out, some of them I don’t think would be addressed by 

the electronic visit verification, but some would. When you have 

cases of lack of documentation, I would think EVV would help clear 

that up. You are either providing the service at that location or you 

are not. 

The same thing with beneficiaries who are in institutions at the 

same time were receiving a bill at the same time. The same thing 

for where we have time sheets of an attendant that says they were 

73 

in a different location yet we have a bill for somebody else. I think 

EVV would help or may help address those type issues. 

Mr. GUTHRIE. Thank you. Those are my questions, and I yield 

back my time. 

Mr. PITTS. The chair thanks the gentleman. 

Now I recognize the ranking member of the full committee, Mr. 

Pallone, 5 minutes for questions. 

Mr. PALLONE. Thank you. I understand that we have a piece of 

legislation here to tighten up eligibility in the Medicaid long-term 

care space, and I think this bill has been drafted in a way that it 

is careful, unlike the other eligibility legislation under consideration today, and it is drafted to guard against unintended consequences that can be harmful for beneficiaries. 

However, I still remain concerned about tightening eligibility in 

Medicaid when overall we have no other alternative for people of 

low and moderate income to invest in long-term care planning so 

that a long-term care benefit is there for people when they need it. 

So before we start tightening up on Medicaid, we need to have a 

real conversation on long-term care in this country so that we don’t 

take away the lifeline for people without having any other options 

in place. 

The reality is that this legislation would change the historical 

consideration of a spouse’s income as separate and that is a big 

precedent to set in the absence of long-term care reform in this 

country. 

In addition, I understand that income and resource counting in 

the various eligibility pathways for long-term care in the Medicaid 

program are incredibly complex already. 

Ms. Riley, I know that MACPAC has done a fair amount of work 

in Medicaid, so can you give us an overview of the commission’s 

work on long-term care and any recommendations you have in that 

regard? 

Ms. RILEY. I am very happy to. Obviously, this is an area of great 

concern for the Commission, given that Medicaid does pay, as you 

say, 61 percent of all the long-term care costs in the Nation, and 

on the converse to the point of the cost effectiveness, while longterm care clients represent about 6 percent of users, they use 51 

percent of Medicaid dollars. So it is an area of great concern to the 

Commission. 

To date, we have looked and have reported to you about the managed care, managed care initiatives and long-term care, at rebalancing between home and institutional care, and about the data 

needs that we really have to address to be able to address some 

of the broader issues. 

On our plate for future work is to look at the merits of standardizing functional assessments affecting who gets into coverage, to 

look strongly at the quality measures in long-term care, to focus on 

housing and assisted living, and particularly to look at how the 

new Medicaid managed care regulations may impact efforts to 

manage care and long-term care. 

Mr. PALLONE. And I understand used to be the Director of Aging 

in Maine. What areas of recommendations can you share for our 

consideration based on the challenges that you encountered in your 

operational experience? 

74 

Ms. RILEY. I am aging in place. That was a very long time ago. 

Mr. PALLONE. Well we are all aging in place. 

Ms. RILEY. I think the tragedy is that we still have a situation 

where in this country the majority of long-term care services are 

still paid for by Medicaid—we had hoped 30 years ago that might 

not be the case—and that Medicaid funding remains a critically important program. 

I think way back in those days we were just beginning state recovery efforts, which relate very much to the work here, very important efforts to make sure Medicaid is spent properly and efficiently and effectively. And I think what one learns running the 

programs is the devil is always in the details. It is very difficult 

to think about how to implement these kind of programs, and one 

needs to think about all the alternatives and the administrative demands and the costs of those and weigh those against what the 

benefit will be. 

Mr. PALLONE. I can just say I guess many people probably already know this, but I just hate the whole spend down provision. 

I think it is awful. I am so tired after 27 years in Congress of having these people call up my office who are involved in spend down 

and all the terrible implications of that. And I would really like to 

see them—and I know not to take away from the chairman or our 

Republican colleagues, I know they are not going to be in favor of 

some kind of Medicare, new Medicare benefit for long-term care, 

but I really think we need to, we really need to do that at some 

point because the way we operate where we make people spend 

down and then go on Medicaid is just, I can’t imagine, I have never 

looked, but I can’t imagine any other country in the world operates 

that way. It is just the most stupid thing to do. And availability 

of long-term care insurance is very, very limited. If anything, it 

seems like it is more limited. 

And I know that when we did the Affordable Care Act, that we 

were subject to certain spending limitations. And so we really 

couldn’t address this. We tried to do the CLASS Act and that got 

repealed with regard to community-based care. But for constitutional care, we just can’t continue to operate this way. And I just 

hope at some point, Mr. Chairman, even though there may be Republican opposition, that we can have some kind of hearing or deal 

with this larger issue of paying for long-term care in a different 

way than we do. So thank you very much. 

Mr. PITTS. The chair thanks the gentleman. 

I now recognize Dr. Burgess 5 minutes for questions. 

Mr. BURGESS. Thank you, Mr. Chairman. I will try to find a 

microphone where I can actually see the panelists. It may be difficult so I apologize if I am talking to you through someone. OK, 

Mr. Pallone brought up some points and actually used the debate 

to say the Republicans were not interested enough in long-term 

care. 

Look, I haven’t been on this committee nearly as long as Mr. 

Pallone. I will in no universe be able to spend the amount of years 

on the committee that Mr. Pallone has spent. But I do remember 

the Deficit Reduction Act of 2005. And we talked at that time about 

things we might do to get people interested in purchasing longterm care insurance who could afford it. And that was met with a 

75 

lot of resistance. Now, I buy my health insurance in the individual 

market, and as a consequence, I pay for that with after-tax dollars. 

So those are really expensive dollars to have to spend. 

And we do the exact same thing to people who want to provide 

long-term care insurance for themselves or their families. They pay 

for it with after-tax dollars, and there has been an absolute stonewall providing any type of recognition that this was a benefit or 

this was an activity that we would like to encourage people to do. 

I can think of no more loving gift that a parent can give to their 

children than to carry long-term care insurance so that they, the 

parent, are not a burden to their children. Not everyone can afford 

long-term care insurance. I understand that. I pay for a policy myself. I understand how the policies are sometimes difficult to find, 

and, yes, they can be expensive. We have made that harder. We 

made that harder with the Affordable Care Act when the CLASS 

Act provision was thrown in at the last minute, very little consideration, no hearings, no evidence collected. And as a consequence, 

companies that were involved in providing long-term care insurance, because the assumption was then made that, hey, the Affordable Care Act is now taking care of long-term care insurance, when 

it wasn’t, and we had to abandon the provisions of the CLASS Act 

because they were so bad and a classic insurance death spiral that 

now people are, in fact, left with less than they had before. 

So I apologize. I didn’t mean to go off topic, but I felt that there 

needed to be some counterbalance to that debate. Now since I am 

off-topic already let me stay of off topic. 

Mr. Gomez, your Governor, Mary Fallin, who served with us here 

in the House of Representatives several years ago, and we miss 

her, but we do value her service to the people of Oklahoma as their 

chief executive, she signed a bill last March or April that was a requirement for prescription drug monitoring, the requirement for 

physicians to check against a database before prescribing certain 

drugs. We have had I don’t know how many hearings this year in 

the Health and Oversight Subcommittees on prescription drug 

abuse. 

And we go back and forth with the prescription drug monitoring 

issue. But you guys solved it in your State when Governor Fallin 

signed that into law—well, it will go into effect I guess in November. So you haven’t quite solved it yet. But you are on the road to 

doing that. When Governor Fallin was at the National Governors 

Association meeting this summer and Secretary Burwell was addressing that meeting, she asked Secretary Burwell about, would 

it be possible to require that same type of prescription drug monitoring in Medicaid? And I guess my confusion then is why does 

being on Medicaid somehow exempt someone from prescription 

drug monitoring? Or is it that this is such a good idea, we ought 

to use it, since there is a Federal jurisdiction for Medicaid, that we 

should apply it in a Federal sense across the country? Can you 

clarify that for me? 

Mr. GOMEZ. Let me clarify by what is happening in Oklahoma 

is Governor Fallin and that legislation has empowered the use of 

a realtime database that is available to physicians and pharmacies 

and for us in the Medicaid program to be able to monitor prescription drug abuse in the program. And it requires physicians to look 

76 

at, when they make a prescription, to look and see if there has 

been some abusive pattern, physician shopping, or ER diversion, 

something like that, to where they have been able to see it. 

Mr. BURGESS. Right. We get that. We have authorized the monitoring program here in this committee. It is called NASPER. We 

are in a fight with the appropriators, so they have got their own— 

so is there anything that prevents Oklahoma from using the database for their Medicaid patients? 

Mr. GOMEZ. No. We actually have access to the database today. 

Mr. BURGESS. So the same requirement that will be there for 

anyone else is there for Medicaid patients? 

Mr. GOMEZ. Yes, sir. 

Mr. BURGESS. This is an important point because, I mean, the 

CDC has already pointed out where the prescription drug, the difficulties with prescription drugs are expanding, state expenses and 

Federal expenses for prisons, jails, what have you, recovery programs. So it is extremely, if we want to talk about saving money 

in Medicaid, it seems to me this is one of the places where we 

should focus. 

Mr. Hagg and Ms. Riley, let me just ask a brief question. The 

problem with third-party liability, a state that is paying a Medicaid 

bill for someone who actually has coverage from another insurance 

company, and there is a GAO report from—now it is over 10 years 

ago. It has been very frustrating to me that this cannot be, this is 

a problem that cannot be fixed, but is the issue of somebody who 

has got coverage with a regular indemnity insurance plan and yet 

the state is picking up the tab because that person is also covered 

by Medicaid. In other words, Medicaid should be the provider of 

last resort, not first resort. Can either of you address that? 

Mr. HAGG. I would be glad to try. Over the years, we have done 

a little bit of work involving third-party liability. Clearly, there is 

probably more work that needs to be done. I know states go to 

great efforts through contractors and through their own staff to try 

to identify people on Medicaid who do have other insurance with 

data matches and other actions to try to recoup that money that 

they would have spent for those beneficiaries or to try to prevent 

it from going out the door to begin with. I think states do a pretty 

good job with that. But just like anything, there is more work that 

needs to be done. 

Mr. BURGESS. Not according to the GAO report, but I may talk 

to you more about that further because it is not an insignificant 

amount of money we are talking about. It can be as much as 25 

percent in some States. 

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

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentlelady from California, Ms. Capps, for 5 minutes of questions. 

Mrs. CAPPS. Thank you, Chairman Pitts and also Ranking Member Green, for holding this hearing. And we have another topic that 

I think we need to address, I hope we can, in terms of long-term 

healthcare needs. But our Nation’s Medicaid Program is a critical 

safety net for all Americans who know that if they fall on hard 

times, they will not need to sacrifice their access to health care. 

The Affordable Care Act took great strides in streamlining eligiVerDate Nov 24 2008 15:00 Jan 21, 2016 Jkt 037690 PO 00000 Frm 00082 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-74 CHRIS
77 

bility to the program, ensuring that it would be there for those who 

need it. And many of these bills would help—that we are addressing today—would help strengthen this program further. And they 

should be supported. But I want to focus on one which I have heard 

here today, H.R. 2339. And I believe that is not one of these that 

should be supported. I am curious about the situation of a young 

child whose parent may receive a lump-sum payment. So to be 

clear, and I think this is a common misperception, the parent receives the lump sum. But it is actually the child who is the Medicaid enrollee. And that is what the misconceptions are about. The 

Medicaid Program in this case is for the child. As we all know, the 

majority of Medicaid enrollees are children. And this is followed 

closely by low-income elderly and by disabled individuals, with a 

very small proportion of parents and low-income adults rounding 

out the program. 

Ms. Riley, if a child’s parent received a lump sum for any amount, $50,000 or whatever, and then, of course, that would be 

taxed I am sure, but the child is actually the Medicaid enrollee. 

Would the bill, as drafted, potentially count against the child’s eligibility not just 1 month, but from then on? I will let you answer 

that question or address it. 

Ms. RILEY. As I understand the bill, it would, indeed, have that 

potential. And our staff could certainly do some more technical 

analysis on that. 

Mrs. CAPPS. How long could that amount potentially count 

against the child’s Medicaid eligibility? 

Ms. RILEY. As I understand the bill, if it was over $50,000, it 

could count for 20 years. 

Mrs. CAPPS. So that that lump-sum amount, no matter what the 

parent or adult spent it on, would make sure this child was not eligible for a very long time. 

Ms. RILEY. That would be how I would read the bill, yes. 

Mrs. CAPPS. So you are saying it is possible this bill could be interpreted in a way that would cause a child to lose Medicaid eligibility for the rest of their childhood, even if the family’s financial 

status were to change in the next 5, 10, or 20 years or even in the 

next month because that lump sum is a precarious amount in some 

respects. 

Ms. RILEY. Right. And it gets stretched over months, yes. 

Mrs. CAPPS. Right. I think this actually has, as it is being interpreted differently by many, I find it very concerning in the underlying challenges because it is, the truth is that H.R. 2339 could 

have many unintended consequences, consequences that could keep 

poor kids from care really for their lifetime and leave many others 

in limbo because the eligibility isn’t an overnight thing. So please 

comment, I have some other time and this is the topic I wanted to 

address, if you would like to make further statement about it. 

Ms. RILEY. I think that is a possibility. I think the definition is 

broad. And I think it would also depend on how each state would 

interpret it. So it would also be a variation in the program across 

states. 

Mrs. CAPPS. I see. So this is something that I can’t support. And 

I hope my colleagues will reconsider their, if they are supporting 

it, because I think on the surface it may seem very attractive, but 

78 

underneath there’s some unintended consequences that I think 

could be very harmful. And it goes back to the basic thought that 

it is the parents who receive the benefit when it actually is Medicaid in most cases in this case are designed to benefit poor children and those with disabilities. Thank you. 

I yield back the balance of my time. 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

Dr. Murphy for 5 minutes for questions. 

Mr. MURPHY. Thank you, Mr. Chairman. 

Thank you, panel, for being here. 

As we are talking about the integrity here, one of the things we 

had a hearing on in our Oversight and Investigations subcommittee, which I chair, was the idea that Medicaid has $17.5 billion in improper payments and maintains a high threshold of tolerance on that. I want to talk about one area where it is not just 

going after those who are being fraudulent but a policy within 

Medicaid—and Mr. Hagg particularly, get your comments on this— 

in HHS’ OIG report from March of this year, it was entitled ‘‘Second Generation Antipsychotic Drug Use Among Medicaid-Enrolled 

Children: Quality-of-Care Concerns.’’ I don’t know if you are familiar with this report. 

Mr. HAGG. Not overly, no. 

Mr. MURPHY. OK. Then I will give you some information on it. 

Mr. HAGG. Great. 

Mr. MURPHY. They describe in there that 8 percent of second 

generation antipsychotics, otherwise known as SGAs, were prescribed for the limited number of medically accepted pediatric conditions, only 8 percent. That means 92 percent of claims that were 

not prescribed for medically accepted pediatric indications were off 

label, off label. There is a quality of care concern that was identified in this report and medical records where 67 percent of claims 

for SGAs prescribed for children. And there was two or more problems for 49 percent. I will read you one of the case studies. 

A 4-year-old child diagnosed with ADHD and a mood disorder in 

which—this was reviewed by a child and adolescent psychiatrist. 

They said there was no evidence in the child’s medical history of 

any monitoring while the child was taking the sampled SGA. The 

reviewer stated that individual, family, and behavioral therapy 

should have been attempted before initiating treatment with drugs. 

However, there was no evidence in the child’s medical record indicating that such therapies were attempted. They also went on to 

say that the child was prescribed four psychotropic drugs during 

the review period of which two were antipsychotics. The reviewer 

noted there was no appropriate doses prescribed of antipsychotics 

for this child’s condition. And the reviewer stated that the treatment with the SGA was not appropriate for a 4-year-old. 

Now, it made a series of recommendations. First, to work with 

state Medicaid Programs to perform utilization review of SGAs prescribed to children. Second, CMS should work with State Medicaid 

Programs to conduct periodic reviews of medical records associated 

with claims for SGAs prescribed to children. And, third, CMS 

should work with states to consider other methods of enhanced 

oversight of SGAs prescribed to children, such as implementing 

peer-reviewed programs. Apparently, CMS concurred with all these 

79 

recommendations. Are you familiar with any of this? Do you know 

if any progress was made on any of these recommendations? 

Mr. HAGG. Unfortunately, I am not familiar with that work. I 

would be glad to take questions back to my colleagues at the OIG 

and get back to you with answers. 

Mr. MURPHY. Would you, please? Thank you. 

Either of you familiar with this as state issues? 

Ms. RILEY. It is very serious issue. And I know, I believe that is 

the report, Congressman, that spoke specifically to foster children 

and their disproportionate use of these. 

Mr. MURPHY. Yes, in 2011, talked about foster children. This 

looked at a wider range of kids. But, yes, you are right about that 

too. 

Ms. RILEY. I know that MACPAC has taken that under very serious attention and is looking at, particularly around the focus on 

foster children, and we reported on that in our June 2015 report 

to Congress. 

Mr. MURPHY. So here is something I am thinking for the states 

and also with regard to your office too, sir, we are all very concerned about people who are involved with waste, fraud, and abuse. 

But there is a Medicaid policy that says you can’t see two doctors 

in the same day, same day doctor rule. So the pediatrician identifies, a mother brings a 17-year-old to the doctor and says, ‘‘I am 

very concerned, my son is talking to himself; he is hearing voices; 

he is doing poorly in school; he has lost his friends; he is isolated,’’ 

and that pediatrician rightfully says, ‘‘We need to have you see a 

psychiatrist immediately. This is a very serious concern. Oh, you 

are on Medicaid? I am sorry, you have to go home.’’ This is the 

rule. 

And so what happens is, I wonder if this is perhaps one of the 

reasons why over 72 percent of antipsychotic drugs are prescribed 

by nonpsychiatrists. You can imagine the outrage if I said 72 percent of heart surgeries were performed by people who weren’t surgeons. So what I see here is while people may be operating within 

the rules of Medicaid, it may be actually inviting these kind of improper cases. So when we look at what has happened in the past 

where this committee has rightly been concerned, 50 deceased providers and 50 providers who have been excluded from Medicaid and 

people on suspended or revoked licenses can all bill Medicaid, my 

concern is we have rules within Medicaid that say just because you 

have an M.D. or D.O. After your name, you can still prescribe. But 

we end up with what I think is a pretty amazing report from the 

Office of Inspector General saying something is wrong here. And I 

hope that this is something that States comment on and your office 

comments on too and recognizes that part of the problem we have 

here is to fix this. 

This committee, everybody in this committee knows we have to 

fix things in mental health. People have got some tremendous ideas 

how we are going to do this. But I hope this is one of those areas 

that Medicaid can also review to fix this harm that is happening 

to our children. 

Thank you. I yield back. 

Mr. PITTS. The chair thanks the gentleman. 

80 

Now recognizes the gentlelady from Florida, Ms. Castor, 5 minutes for questions. 

Ms. CASTOR. Thank you, Mr. Chairman. 

And good morning. Like many of the other members, I am very 

concerned with the unintended consequences of H.R. 2339. Medicaid eligibility was recently updated. And it was tied to the modified adjusted gross income measure to streamline eligibility and 

prevent gaps in coverage. Now, H.R. 2339 proposes a surgical 

change in the law to prevent lottery winners from maintaining 

Medicaid eligibility. But as currently drafted, children and other 

individuals may be affected by the change. In MACPAC, a relatively quick review of this legislation, can the Commission foresee 

problems with implementation and unintended consequences? 

Ms. RILEY. We don’t take positions on particular pieces of legislation. The staff has looked at this. And I think the concerns are 

around the definition of lump sum and the discussions we have 

earlier that, in fact, it could catch payments for disability, for an 

accident, for somebody who has been paid a disability payment. We 

know that there is a 2-year wait for people for SSDI. And then 

there is often a lump-sum payment for the person who may, in fact, 

have medical bills to pay. So I think the issue here would be the 

issue of how broad the definition is. 

Ms. CASTOR. Right. So we have some work to do here. Many of 

the bills on the agenda today target provider fraud and individual 

eligibility. But I would like to ask you all as experts whose responsibility is it to enforce Medicaid and the Social Security Act statutes when a state does not follow the law? Mr. Hagg? 

Mr. HAGG. Well, CMS is responsible for the broad Federal oversight of the program. 

Ms. CASTOR. I know this probably has never happened in Oklahoma. But, generally speaking, what is your answer? 

Mr. GOMEZ. Well, CMS has the oversight. And it is one of those 

things where we have auditors in our office every day looking at 

every aspect of the program, both Federal and state level. 

Ms. CASTOR. OK. 

Ms. RILEY. CMS. 

Ms. CASTOR. And can you give me an example where a state was 

in violation of the law under Social Security Act, Medicaid statutes, 

and they took action and addressed the situation? 

Mr. HAGG. Yes. A lot of the examples that we see in that area 

have to do with state financing arrangements, mechanisms the 

states use to help fund the state’s share of Medicaid payments. At 

times, we see states pushing the limits or working in gray areas 

to try to obtain Federal Medicaid funds in some cases when they 

shouldn’t be, when it is inappropriate. And those are examples 

when CMS would need to jump in and take action. 

Ms. CASTOR. Ms. Riley, what about when a state limits access to 

care and, for example, children are being denied access to pediatricians or specialists? Have you seen an example where CMS came 

in and did some kind of enforcement action or exercised their oversight? 

Ms. RILEY. Let me get back to you and ask the staff to make sure 

that we do a comprehensive review. But there certainly is CMS 

oversight. 

81 

Ms. CASTOR. Mr. Gomez, do you know of an example there? 

Mr. GOMEZ. Speaking for Oklahoma, in my 15 years in the Medicaid Program, we have never found, been found to have violations. 

Ms. CASTOR. Here is what I am getting at, and if you all can look 

at this situation, at the end of December, a Federal court judge 

said to the State of Florida that your restrictive networks for specialists and pediatricians, they are so restrictive that you have, in 

effect, denied access to care for kids to medical services. They 

weighed in on reimbursement rates that are so low that they can’t 

get doctors to participate. 

During the 8 months, in the interim, the State of Florida, rather 

than stepping up and saying, ‘‘OK, we are going to rectify the situation,’’ has said, ‘‘Talk to the hand, no. In fact, we are going to continue to limit these networks.’’ And all of the children’s medical directors across the state now are in protest because children now 

are being screened out. They don’t have access to specialists. And 

it would seem that, especially after the Armstrong case by the U.S. 

Supreme Court, that it really is up to CMS to enforce and step in. 

I don’t know what else these kids can do if they have to rely on 

Federal regulators. 

Ms. RILEY. And that is the charge of the Medicaid and CHIP 

Payment and Access Commission. It is the broad set of activities 

in which we are engaged. And I am not familiar with this particular case. But I am certain—we have a Commission meeting 

coming up, and I can assure you it will be one of the topics we talk 

about. 

Ms. CASTOR. Kids across Florida would be grateful if the Commission would take a look. Thank you. 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

the gentleman from New Jersey, Mr. Lance, 5 minutes for questions. 

Mr. LANCE. Thank you very much. And good morning to you all. 

My last name is Lance. I am sitting here because I would like to 

interact with the distinguished panel. I don’t know a lot about this 

issue, but I am certainly interested in it. And I come from a small 

family law practice where, on occasion, middle-aged children come 

into the law practice—my late father and my twin brother who 

practices law now—wishing to impoverish their parents. And we 

throw them out of the office. And this is an issue that concerns me 

greatly. 

Now, am I right, did I hear you say, Ms. Riley, that 60 percent 

of all nursing home costs are through the Medicaid Program? 

Ms. RILEY. Long-term services and support. 

Mr. LANCE. And am I right that 37 percent of all child births in 

this country are through Medicaid? 

Mr. GOMEZ. In Oklahoma, it is about 60 percent. 

Mr. LANCE. Sixty percent of child births. Now, Medicaid, as I understand it, is a shared program? 

Mr. GOMEZ. Yes, sir. 

Mr. LANCE. Costs borne by the Federal Government and costs 

borne by the State Government? 

Mr. GOMEZ. Yes, sir. 

Mr. LANCE. But it is not equal across this country. And it depends on the state—is that accurate?—as to percentages? 

82 

Mr. GOMEZ. Yes, sir. 

Mr. LANCE. And in Oklahoma, what is the percentage? 

Mr. GOMEZ. This October, it will be 60.99 percent. 

Mr. LANCE. Roughly 61 percent is paid by—— 

Mr. GOMEZ. The Federal Government. 

Mr. LANCE [continuing]. The Federal Government. That certainly 

is not true in all of the states? 

Mr. GOMEZ. No, sir. 

Mr. LANCE. I live in New Jersey. And we pay more than most 

states. Is that accurate? 

Mr. GOMEZ. I believe so. 

Mr. LANCE. And there are states that pay as much as 50 percent. 

And New Jersey is one of them. So this is not a program that is 

equal across the United States. 

Now specifically regarding the impoverishment of parents or of 

a spouse, you are telling me, Mr. Gomez, that the 10th Circuit has 

ruled that there can be no clawback for annuities? Is that what are 

your telling me? 

Mr. GOMEZ. Yes, sir. 

Mr. LANCE. Could you explain that in a little greater detail to 

me? Because this certainly interests me greatly. 

Mr. GOMEZ. Let me find the note on that particular section. 

Mr. LANCE. Take your time. Here in Washington, everybody is in 

too much of a rush. 

Mr. GOMEZ. The rationale of the court’s decision in Morris and 

similar cases has been extended in other courts in at least on the 

10th Circuit decision to other financial vehicles that similarly 

thwart Medicaid’s intended purpose. In particular, we have seen an 

increase in the use of non-assignable, nontransferable promissory 

notes. But that is not the issue, but the issue of annuities, to shelter assets, which the courts have—— 

Mr. LANCE. And this means that a couple go to an insurance 

company and give that insurance company $100,000 or $200,000 or 

$5000,000, purchasing an annuity. And then when one of the couple go into a nursing home, there is the claim that that half of the 

marital unit is impoverished and the other spouse can receive 100 

percent of the annuity. Is that what is occurring? 

Mr. GOMEZ. Yes, sir. 

Mr. LANCE. And the 10th Circuit said that was legal? 

Mr. GOMEZ. What they are saying is that, the court’s ruling essentially permits a married couple to shelter potentially an unlimited amount of assets through a non-assignable, nontransferable 

annuity in order for the spouse of medical need to qualify for Medicaid. 

Mr. LANCE. And is that based upon the fact that we have not 

contemplated that here and the Mullin legislation would rectify 

that? 

Mr. GOMEZ. Let me go back and say Medicaid statutes allow for 

a spouse of a Medicaid applicant for long-term care services to keep 

a certain amount of his or her resources. 

Mr. LANCE. I understand that. 

Mr. GOMEZ. So the amount of the spouse of the applicant is referred to as community spouse and the institutionalized spouse. 

The amount the community spouse is allowed to retain is called the 

83 

community spouse resource allowance, CSRA. So, in general, Medicaid will divide that couple’s total resources in half to determine 

the CSRA. What the 10th Circuit said is that money can be diverted in that where the spend down can be achieved and still protect—— 

Mr. LANCE. Thank you. I am sure this is not a large problem in 

the number of persons who utilize this loophole. But I certainly 

think that it should be closed and closed pronto. And I commend 

Congressman Mullin in his efforts. And I think the purpose of the 

law is not to permit this type of diversion. And I certainly think 

that it borders on fraud and, in my opinion, is immoral. 

Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman. 

I now recognize the gentlelady from Illinois, Ms. Schakowsky, for 

5 minutes of questions. 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. We have talked 

about that personal care services may be an area that is vulnerable 

to fraud. And we must make sure that beneficiaries are receiving 

the services that they need at the right time in the right way. However, I have concerns about a penalty on the State’s FMAP in an 

environment with Medicaid, where Medicaid Programs really are 

struggling right now administratively. 

So, Ms. Riley, I know that MACPAC has not extensively studied 

this issue. But the Commission has looked at Medicaid administrative infrastructure. Could you tell us, what are some of the challenges that are being faced in this space? 

Ms. RILEY. In the verification space? The states have an array 

of activities which they pursue. And I think the notion of electronic 

validation raises questions about the cost of that. It is, again, the 

cost-benefit tradeoff. I think there are 9 or 10 states that currently 

have those systems. They have said that they are succeeding in 

getting savings from those activities. But I don’t, we are not aware 

of any evaluations that have been underway or completed that 

would tell us really what the cost-benefit analysis of that 

verification activity is. 

Ms. SCHAKOWSKY. That is what I am concerned about. Because 

if the state doesn’t implement the electronic verification system, 

under this legislation that is being considered, they face a cut in 

their Medicaid reimbursement. But there aren’t any start-up funds 

or implementation funds before the penalty begins to go into effect. 

So is it possible that when States spend Medicaid dollars to build 

these systems, they are going to need to decrease the spending that 

they have on services? Basically, what is the tradeoff? 

Ms. RILEY. Well, it is obviously a laudable goal to make sure we 

root out any fraud and abuse in this very important area. It is a 

$16 billion spend. The elderly and people with disabilities depend 

on these services. That said, I think it is a good example of one of 

the issues that MACPAC has raised in one of its reports. We pay 

fraud and abuse and fraud control units with a 75/25 match. But 

we pay for the activities like EVV with a 50/50 match. So there are 

not startup funds, and there is sort of a disincentive to do the 

frontend activity with a lower match rate, but a higher match rate 

to go get them when there is a mistake or fraud has occurred. So 

I think it raises an important question that MACPAC has raised 

84 

in the past about whether we ought to invest differently in state 

administrative functions that could better prevent fraud and abuse. 

Ms. SCHAKOWSKY. So is this decision-making underway right 

now at MACPAC? 

Ms. RILEY. It was a recommendation from MACPAC in I believe 

our March 2012 report and a discussion that we have had numerous times with the states. It is really frustrating that one wants 

to do more to prevent fraud and abuse. And that enhanced match 

could address. Of course, that is a cost to the Federal Government, 

so it is easy to talk about and difficult to do. But I think it is, 

again, a balancing act of how much to invest after the fact to go 

and recoup from fraud and abuse practices versus before the fact 

to try to prevent them. And EVV is a good example of such an initiative. 

Ms. SCHAKOWSKY. So how can we get at a real cost-benefit analysis then? 

Ms. RILEY. I think it would be useful, there are the 10 states like 

Oklahoma that are now engaged in EVV. And I think it would be 

a fairly quick kind of study. And I will certainly speak with our 

staff about whether we can take a look at that. 

Ms. SCHAKOWSKY. OK. I do want to go back to this issue that 

was raised by Representative Castor about the issue of the treatment of lottery winnings and other lump-sum income. You spoke 

to it a bit. I mean, it is one thing to talk about a lottery winner 

and, you know, millions of dollars or whatever. But it really does 

lump, if you will, together these other things—and you actually 

raise the issue of disability. I am really worried about that, that, 

as you pointed out, that disabled individuals frequently have to 

wait a year or more, you mentioned 2 years, for their application 

to be processed for disability. And that is after the mandatory 2- 

year waiting year. And, generally, they are paying for other living 

expenses and medical bills during that time. So if they are eventually determined to be eligible for SSDI and then get a lump-sum 

payment to cover that waiting period but that then deprives them 

of the Medicaid benefit, then how are they to pay back all the expenses that they had while they were waiting? 

Ms. RILEY. I think that is a question in the drafting of the bill 

about how broadly one defines ‘‘lump sum.’’ 

Ms. SCHAKOWSKY. I just think that putting those two things together, that there ought to be—I totally get somebody strikes it 

lucky and gets the lottery. But I am over my time. Thank you. 

Mr. PITTS. The chair thanks the gentlelady. 

I now recognize the gentleman from Florida, Mr. Bilirakis, 5 

minutes for questions. 

Mr. BILIRAKIS. Thank you, Mr. Chairman. I appreciate it. 

Commissioner Riley, our U.S. territories have Medicaid programs. But unlike the states, they have different rules that govern 

their Medicaid Program, such as eligibility or payment rules. Can 

you briefly talk about how their program may differ from the mainland if you think CMS should provide this type of information on 

its central Web site like they do for the states? 

Ms. RILEY. Again, Congressman, we haven’t taken a position on 

this. But the MACPAC has long been a supporter of good, consistent data from all the states and territories. I think this bill inVerDate Nov 24 2008 15:00 Jan 21, 2016 Jkt 037690 PO 00000 Frm 00090 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-74 CHRIS
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cludes the same sorts of information states now must report. So it 

is very much related and would be consistent with what states now 

have to report. 

Mr. BILIRAKIS. Thank you. Thank you. 

According to Puerto Rico’s Resident Commissioner, the Ways and 

Means Green Book used to have a chapter on social welfare programs from the territories, such as Medicaid. However, that chapter has been removed because a nonpartisan Congressional Research Service, CRS, could not find enough publicly available information to keep it accurate and up to date. 

Commissioner Riley, MACPAC is the nonpartisan legislative 

branch agency that provides Congress with policy and data analysis for Medicaid and CHIP. If Congress needs information to make 

policy decisions, for example, if the ACA Medicaid funding for 

Puerto Rico will be entirely spent before 2019, what does MACPAC 

have to do to find information on the territories to carry out your 

advisory role? 

Ms. RILEY. That is a very good question. We have a wonderful 

staff who provide detailed information to us. And we can certainly 

take a look at how much we report on the territories. 

Mr. BILIRAKIS. Thank you. Please get back to me on that as well. 

Ms. RILEY. We will. 

Mr. BILIRAKIS. Mr. Hagg, do the territories have the same Medicaid data reporting requirements as the 50 states and the District 

of Columbia? If so, can you think of a reason why CMS would not 

include the same information about the territories as they do for 

the 50 states and D.C.? 

Mr. HAGG. I believe they do have the same reporting requirements. And no, I can’t think of a reason why it couldn’t be shared. 

Mr. BILIRAKIS. OK. Good. Mr. Hagg, again, I know that you don’t 

take positions on pieces of legislation. I understand that. But, in 

general, does OIG typically favor greater transparency? 

Mr. HAGG. Yes. 

Mr. BILIRAKIS. In general. 

Mr. HAGG. Yes. In general, more transparency is better than less. 

Mr. BILIRAKIS. Very good. Thank you. 

I yield the rest of my time to Representative Guthrie. 

Mr. GUTHRIE. Thank you. Thank you for yielding. I want to clarify a question just before, one of the questions was about the cost 

of EVV Programs and on the states, and my legislation mandates 

providers use EVV. It does not mandate that states purchase or 

spend anything to create its own program or moving forward. The 

disparity between EVV and fraud system is not a disincentive at 

all. And states should still have an incentive. And there are already people out there that are doing EVV and the states aren’t 

building a program, aren’t setting up a program. It is not separate 

and distinct. There are people currently doing this, so it wouldn’t 

cost the states money. I just want to clarify that point. Thank you. 

Mr. PITTS. The chair thanks the gentleman. 

I now recognize the gentleman Mr. Butterfield 5 minutes for 

questions. 

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

you for holding this important hearing today. 

86 

Thank you to the witnesses for your attendance. Mr. Chairman, 

several weeks ago, we all celebrated the 50th anniversary of Medicaid. It was a great day. The benefits of Medicaid cannot be overstated. More than 72 million Americans rely on this program. Seventy-five percent of children who live in poverty in this country depend on Medicaid. Greater than 10 million school-aged children 

who live in poverty depend on Medicaid. 

I represent, Mr. Chairman, one of the poorest congressional districts in the country. More than one out of every four people in 

North Carolina’s first congressional district lives in poverty. One 

out of three of our children live in poverty. Medicaid is absolutely 

critical to my constituents. It is especially important to children in 

eastern North Carolina. As I child, I graduated from high school 

in 1965, the year of the enactment of Medicaid. And I recall, as a 

child, as a high school student, none of my classmates ever, ever, 

ever received any type of medical treatment or dental treatment 

because they couldn’t afford it because 90 percent of our school students lived in poverty. 

Democrats on this committee have done our part to strengthen 

Medicaid. I want all Americans to understand and appreciate the 

importance of Medicaid. The Affordable Care Act, which was drafted by this committee, it actually strengthened Medicaid. I remember the debate so well. It strengthened Medicaid’s integrity by requiring regular risk-based grading of providers and suppliers. The 

ACA increased termination authority to ensure that malicious actors cannot participate in the program. And so it is abundantly 

clear that the ACA improved the integrity of the Medicaid Program 

across the board. 

So I am interested in hearing more today about how to ensure 

that the ACA termination requirements are upheld. We want to 

uphold those in each and every state. I am also interested in protection Medicaid beneficiaries from potentially harmful changes to 

eligibility. 

Mr. Hagg, Director Hagg, thank you. The integrity of the Medicaid Program is critical to ensure that beneficiaries are not taken 

advantage of. It is important that the Federal Government and our 

States work together to ensure Medicaid beneficiaries have access 

to care, reliable care. Can you describe, sir, whether the ACA 

strengthened the law to prevent providers terminated for cause 

from operating in other states? 

Mr. HAGG. It did, yes. There is a requirement that if a provider 

is terminated in one state or Medicare, they are required to be terminated in other states as well. So, yes, it is a very good upfront 

program integrity control to ensure that bad actors aren’t able to 

access state Medicaid programs. 

Mr. BUTTERFIELD. Has the ACA had a positive impact as of this 

date in reducing the number of terminated providers from operating in other states? 

Mr. HAGG. Yes, it has. It is a start for sure. It was CMS’ responsibility to try to set up a central data system that would house all 

the terminated providers so that other states could access. Based 

on our work, we found various limitations with that database. We 

found that, based on some testing we performed, there are some 

providers still that are terminated in one state that are still operVerDate Nov 24 2008 15:00 Jan 21, 2016 Jkt 037690 PO 00000 Frm 00092 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-74 CHRIS
87 

ating in other states. And we have made recommendations on how 

to improve that so those things don’t happen any longer. 

Mr. BUTTERFIELD. If you know, will the draft legislation that I 

am working on in conjunction with Mr. Bucshon address the recommendations made by OIG to further eliminate the participation 

of terminated providers? 

Mr. HAGG. Most of the problems we found would be addressed. 

The one difference I would point out is we have recommended that 

providers who operate in managed care environments be required 

to enroll as providers. I believe the legislation talks about having 

the providers register with the state and then a process of having 

the state notify the managed care network if that provider should 

be terminated. That is a good start. We believe having them enroll 

rather than register would create that direct legal authority between the state agency and the provider. 

Mr. BUTTERFIELD. All right. 

Finally, Commissioner Riley, you mentioned in your testimony 

that Federal rules are already in place to prevent providers terminated in one state from operating in others. Are those Federal 

rules as a result of the ACA law that we have been talking about? 

Ms. RILEY. I believe that is correct. 

Mr. BUTTERFIELD. Would you agree that the ACA has strengthened the Medicaid Program’s integrity? 

Ms. RILEY. Yes. And I think CMS has restructured and strengthened its work with the states as well. 

Mr. BUTTERFIELD. Thank you. Thank all three of you. 

I yield back. 

Mr. PITTS. The chair thanks the gentleman. 

I now recognize the gentleman from Indiana, Dr. Bucshon, for 5 

minutes of questions. 

Mr. BUCSHON. Thank you, Mr. Chairman. 

Along that same line, Mr. Hagg, we were talking about, Mr. 

Butterfield was talking about, does CMS require reporting into 

their system? Because from the information I have, at this point, 

over a year and a half after your recommendation, 4 1⁄2 years after 

the ACA requirement, CMS does not require such reporting of terminated providers. Is that true or not true? 

Mr. HAGG. That is my understanding as well. We have made the 

recommendation that it be required. I think CMS said they concur 

with our recommendations. But then they pointed to information 

provided to states that talks about being encouraged. It doesn’t talk 

about being required. 

Mr. BUCSHON. You probably know in government agencies, if you 

encourage something, it never happens; you have to require it most 

likely. And other than that, have they given an explanation of why 

they haven’t required it? 

Mr. HAGG. Beyond that, no. 

Mr. BUCSHON. OK. Can you also talk about the challenges that 

states may have faced in complying with the Medicaid requirements to terminate a provider’s participation in their Medicaid program if that provider is terminated for cause from a Medicaid Program from another state? 

88 

Mr. HAGG. Sure. The challenges are that there needs to be a central data set that states can look to to determine whether a provider has been terminated in another state. 

Mr. BUCSHON. So really CMS needs to have a required reporting 

to a database? 

Mr. HAGG. We believe so, yes. 

Mr. BUCSHON. OK. And in your opinion, does the draft bill address this challenge, some of the states’ challenges do you think? 

Mr. HAGG. My understanding, the draft bill makes it a requirement, yes. Again, the one thing I would point out is that we do recommend that managed care providers enroll rather than register. 

Mr. BUCSHON. Understood. And we are also talking about for 

cause. So can you give maybe some examples of why a provider 

would be terminated for cause from the Medicaid Program? 

Mr. HAGG. Yes, for cause would be they have committed fraud 

or patient abuse. Or some other type of billing privilege that they 

have abused. Rather than just being an inactive biller, that 

wouldn’t be for cause. 

Mr. BUCSHON. Is there quality determinations in there too? 

Mr. HAGG. Absolutely, yes. If there is some type of patient abuse 

or a quality care issue, absolutely. 

Mr. BUCSHON. And that would be reported to the state or to CMS 

if they had those issues? 

Mr. HAGG. If the state is aware of that, that type of abuse, then, 

yes. If they terminate that provider for cause, they should report 

that provider to CMS. 

Mr. BUCSHON. Mr. Gomez, could you talk maybe about the process of terminating providers from your state Medicaid Program and 

how that process works in your state? 

Mr. GOMEZ. We have a 30-day with cause termination and a 60- 

day without cause termination. 

Mr. BUCSHON. So I am talking about the process of, how do you 

determine that it is for cause? Who does that in your state, for example? I am just trying to get—— 

Mr. GOMEZ. We have a Medicaid Fraud Control Unit, as each 

state does, and we rely heavily on them in the determination of 

fraud. And then we actually have through our contracting system 

the ability to go—if we have a new provider coming into the state— 

the ability to go look on the database and see if that provider has 

been terminated in other state. 

Mr. BUCSHON. So, for example, I was a physician before. So there 

are physicians that get their privileges terminated at their hospital 

for a variety of reasons, right. Does that type of information get to 

the state? 

Mr. GOMEZ. It does. We have an agreement with the licensure 

boards in order to be able to share that information. If there is a 

licensure issue, we will be able to take appropriate action within 

our contract. 

Mr. BUCSHON. Thank you, Mr. Chairman. 

I yield back. 

Mr. PITTS. The chair thanks the gentleman. 

I now recognize the gentleman from Maryland, Mr. Sarbanes, 5 

minutes for questions. 

Mr. SARBANES. Thank you, Mr. Chairman. 

89 

Ms. Riley, I apologize if the topic has been touched upon already 

or this question in particular. But I am interested in this, the bill 

that relates to someone converting assets to income through purchase of an annuity and the proposed change for how that might 

be handled. I gather that right now there is some protections that 

make the state the ultimate beneficiary of annuity proceeds in the 

case where that spouse dies. So there is a way for the state to benefit. 

But now there is a proposal to I guess divide in half the proceeds 

during the period in which both spouses are alive, one being in the 

institution and the other being still at home. And I just wondered 

if you could speak to what you think, first, the incidence of, like, 

how frequently do you have a sense the situation is even arising 

where somebody is doing that annuity purchase under circumstances where there is a spouse that is institutionalized, and 

then within that universe, how often it is the case that the 

amounts we are talking about would be such that you could argue 

that they were trying to kind of waste or hide or redirect assets 

that would otherwise create a profile that would disqualify the 

spouse from institutional care? 

And I would imagine, as well, that if somebody for the right reasons was converting assets to an income stream, that if you required that 50 percent of that be allocated to the institutionalized 

spouse, you might create a situation where the spouse that remains 

at home would actually qualify faster for institutional care based 

on their profile because there is a reduced amount of income available to them. So in terms of the income profile, you might actually 

be adding someone onto the state’s burden who otherwise because 

of a smartly purchased annuity would be able to cover their expenses through that if they ultimately ended up in an institutionalized setting. So maybe you could comment on some of those issues. 

Ms. RILEY. The law currently protects the spouse at home to a 

max of $119,000. I don’t believe there is any data that I am aware 

of, we can certainly have the staff look at this, that talks about the 

number of people who would be eligible for this kind of annuity. I 

suspect it is small. And you are correct, there remain the estate recovery provisions for long-term care, so that the state is compelled 

by Federal law to go after the remaining estate after the death of 

the spouse. 

Mr. SARBANES. All right. Thank you. 

I have no other questions. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentleman from New York, Mr. Collins, 5 minutes for questions. 

Mr. COLLINS. Thank you, Mr. Chairman. 

I want to thank all the witnesses as well. We are delving into 

something. And I do think, regardless if there is some disagreement, we all do agree no one wants to see the system gamed. As 

Mr. Lance said, you know, he will throw somebody out of the office 

if they walk in to explicitly game the system. 

But a couple other questions, I may delve into that a little bit, 

but my question, Mr. Gomez, the electronic verification system 

that—Oklahoma uses that as I understand? 

Mr. GOMEZ. Correct. 

90 

Mr. COLLINS. Give me an idea of what Oklahoma would consider 

the return on that investment, was an investment to get into that. 

Mr. GOMEZ. We actually with that independently evaluated. We 

have been in the EVV system for a little over 5 years. And the first 

3 of that system, Oklahoma has had a 5-to-1 return on its investment through cost savings and cost avoidance. 

Mr. COLLINS. That is what I expected. And I guess I would just 

point out for anyone who is a little bit worried that whether the 

Federal Government piece is 75/25 or 50/50, I know if I am running 

a State and the return is 5 to 1, I don’t even need the Federal Government to pay any of it. There is smart, and there is stupid. So 

while we would all like to see perhaps if you are in the state the 

Federal Government paying 75 percent, I don’t know too many 

things in life that are 5 to 1. So, Mr. Gomez, I appreciate that. 

Now, we talked a little bit about annuities. I think Mr. Sarbanes 

made it sound like if there is an annuity, half of that annuity goes 

to the community spouse, and half goes to the institutional spouse. 

But isn’t it true that in gaming the system, the annuity can give 

100 percent to the community spouse? 

Mr. GOMEZ. That is my understanding, yes. 

Mr. COLLINS. Right. And that is a big difference. So it isn’t like 

they are buying this annuity and giving half the money to the institutionalized spouse. In fact, the whole way of gaming the system 

is buying an annuity where none of it goes to the institutional 

spouse. The community spouse gets all of the benefit going forward, 

and it doesn’t count. I mean, that is how you game the system. So 

I just wanted to be clear. It was left kind of hanging there that in 

the annuity, half of that would be going to the institutionalized 

spouse, and that is not the case. 

In your written testimony, Mr. Gomez, you also mentioned promissory notes. You didn’t really cover that. And I think we know 

what annuities are, and it is certainly clear how that could be 

gamed. Can you maybe in just a very short time, is there also an 

issue on promissory notes? 

Mr. GOMEZ. Yes. I think what we are seeing as we are dealing 

with the annuities in the state of Oklahoma, we are seeing the 

practice then change to a number of applicants using the court’s 

logic to extend that to promissory notes, to where, again, they are 

using, it is the same impact, so it is where you are able to shelter 

some of the wealth from that in a way that is not intended. 

Mr. COLLINS. So I guess it just goes back, there is creativity in 

the financial world as we saw with derivatives. That didn’t go so 

well. But there are hedge funds out there. The minute smart people get together and say how are we going to game the system— 

whether it is on taxes or, in this case, on impoverishing yourself— 

there is a lot of folks that make a lot of money coming up with the 

next financial product to get past the law. And I guess the real 

issue here is the fact that Congress plays a role. Is that really what 

the courts ruled? It was almost like saying: We know this is wrong, 

but if Congress doesn’t act, there is nothing we can do. 

Mr. GOMEZ. Correct. That is what the 10th Circuit effectively 

said. 

Mr. COLLINS. And I guess, the other thing that came out in the 

hearing, one of the things about going almost last is you get to 

91 

hear the other testimony, is some thought, frankly, by the other 

side that parents aren’t responsible for their kids. Oh, my God, the 

parent won the lottery; the kid might not be on Medicaid. I think 

it is the fundamental responsibility of parents in the United States 

to take care of their kids. If they have got money and wealth, their 

kids shouldn’t be on Medicaid. And if there is a way, because somebody has won the lottery literally, their kids shouldn’t be on Medicaid. We shouldn’t apologize for the fact the family is wealthy now; 

the kids aren’t going to be on Medicaid. That is what parents do. 

They take care of their kids. 

So, again, back to this piece, and we have nuanced the issue of 

spreading it out over 1 month. But it isn’t like you count it, if they 

win $100,000, that $100,000 doesn’t count every month for the next 

20 years to disqualify the child. It counts now for 1 month. But if 

you won a few thousands dollars, a state could decide how to implement this. And if they did spread it over time, it might be $100 

dollars a month, and that is not going to disqualify the child anyway. There was some insinuation that this one-time winning of, 

$20 million is $20 million, but $20,000 would then disqualify this 

child from Medicaid for the rest of their life. But if you took 

$20,000 and you then spread it over 20 years, that is $1000 a year. 

Then you spread that over 12 months, you are talking about $90 

a month. That is not going to disqualify a child from Medicaid, is 

it, Ms. Riley? 

Ms. RILEY. I don’t believe so. I think the example is a higher 

number. And I think that is the issue with the definition. 

Mr. COLLINS. Sure. And if it is $20 million, the kid shouldn’t be 

on Medicaid. We do have to be careful in our wording. But in this 

case, as far as I know, it would go back to the states to decide how 

to implement it. States are not in the business of hurting their own 

citizens and certainly not hurting children. At some point, at the 

Federal level, we just need to trust the judgments of our elected 

is officials in the 50 states and our territories to do what is right 

by their folks and not try to nuance this in a way that, quite frankly, is disingenuous. 

Thank you, Mr. Chairman. I yield back. 

Mr. PITTS. The chair thanks the gentleman, now recognizes the 

gentleman from New York, Mr. Engel, for 5 minutes for questions. 

Mr. ENGEL. Thank you, Mr. Chairman. 

Thank you, Mr. Green. 

You know, nobody wants anyone to game the system. I certainly 

don’t. And I think that we need to crack down if people are gaming 

the system for sure. But I think we have to be careful not to imply 

that somehow Medicaid needs to be denigrated because people are 

gaming the system. Medicaid is something that is very, very important. It is a critical safety net. There is some hostility around here 

toward it, and I think that we need to point out how important it 

is. There are 72 million Medicaid beneficiaries. There are many 

Americans who face economic hardship or sudden exorbitant 

healthcare costs. And I want to talk about my state of New York. 

We have made significant strides in our efforts to reform Medicaid, 

both in terms of cutting costs and improving the quality of care 

that patients receive. Governor Cuomo, in June, announced that 

over the past year, Medicaid spending per person in New York fell 

92 

to a 13-year low. And during the same period, the Affordable Care 

Act allowed more than half a million additional New Yorkers to enroll in Medicaid, which is, I think, a significant step in the effort 

to reduce the number of Americans who are uninsured. New York 

has also had success boosting program integrity through the use of 

corporate integrity agreements. And these agreements are extended to providers that had compliance issues, an alternative to 

barring the said providers from the Medicaid Program and consequently triggering service shortages to beneficiaries. Corporate 

integrity agreements afford these providers opportunities to improve their compliance and set up mechanisms through which their 

compliance can be monitored more closely. 

In 2013, corporate integrity agreements allowed New York’s Medicaid Program to save over $58 million. That is significant. So, 

Ms. Riley, I would like to ask you this, I understand that MACPAC 

has recommended that CMS disseminate best practices concerning 

program integrity so that states may replicate other states’ successes. Would New York’s success, as I just mentioned, using corporate integrity agreements be considered a best practice worth 

emulating? And, more broadly, can you speak to the value of focusing more of our efforts on sharing best practices like the example 

I have outlined? 

Ms. RILEY. MACPAC is very much concerned about that. There 

is quite a disparate set of activities across the states. And I think 

the New York example sounds very intriguing. I think part of the 

problem is we don’t have a good definition of what best practices 

are and what works and what doesn’t. So it would be helpful to be 

able to have a set of criteria against which to measure state activities and then disseminate those that work across the country. And 

it was very much a recommendation of MACPAC. 

Mr. ENGEL. Thank you. So if something works in one state, it 

may not work in every state, but it may work in many more states? 

Ms. RILEY. That is right. It may not work in Oklahoma, but 

Oklahoma may be able to tweak it a bit so it works better. And 

that certainly is an experience that we have seen in MACPAC. 

Mr. ENGEL. Thank you. My second question concerns H.R. 1771. 

Mr. Sarbanes referred to a little bit. It would modify the manner 

in which spousal income purchase through an annuity would be 

considered in evaluating eligibility for nursing home coverage. And 

let me, Ms. Riley, go to you again. I know that MACPAC has done 

a lot of work regarding long-term care in the U.S. Is it accurate to 

say that Medicaid provides the sole form of long-term care insurance in the U.S. today? 

Ms. RILEY. It provides 61 percent of all spending on long-term 

care services. 

Mr. ENGEL. As a follow up, can you speak to the importance of 

protections against spousal impoverishment in states with high 

costs of living, like New York? Might this legislation have the unintended consequences of leaving a community spouse with very meager resources because she happens or he happens to live in a highcost-of-living state like New York? 

Ms. RILEY. Well, I think that is always a question in these adjustments about the difference in cost of living across the country. 

And that is a very legitimate question. Obviously, today spouses 

93 

are protected up to the limit of $119,000. It is interesting to think 

about the unintended consequence that could occur if this bill 

passes and that would be to wonder if people would stop buying annuities and then maybe become eligible sooner. It is a question, I 

think, without an answer at this point. 

Mr. ENGEL. But something we should look into? 

Ms. RILEY. I think always the unintended consequences are the 

most difficult to contemplate but need to be considered. 

Mr. ENGEL. Thank you very much. 

Thank you, Mr. Chairman. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentleman from Virginia, Mr. Griffith, 5 minutes for questions. 

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

for holding this hearing. As always, these hearings are very enlightening. I came in today without any questions related to annuities and long-term care insurance, and now I have all kinds of 

questions. 

But let me say this, Ms. Riley has indicated—and I didn’t look 

it up—but she has been in this field for quite some time and the 

hope had been that long-term care insurance would help offset 

some of what Medicaid is having to pay. Folks are going to look at 

the money, when you are talking about putting a loved one into a 

nursing home, they are going to look at this as a tax avoidance situation, as opposed to tax evasion. A lot of folks today have said, 

this is immoral or nobody wants to game the system. The people 

are going to find a way to hang onto their assets if they can. 

And one of the things we have to be careful of, and, Mr. Chairman, we may need to have a roundtable discussion among our 

members, we have to be careful that we don’t go too far in a direction because people are going to figure out a way. And one of those 

ways is to go through a divorce, as long as the spouse who is the 

spouse in the nursing home or incapacitated in some way needing 

the care is competent. Because they want to pass assets on to their 

children, they are going to figure out a way. And if the only way 

left is divorce, they will divorce. They will reach a property settlement agreement. They will transfer all the money to the healthy 

spouse. And then the healthy spouse will start working on ways to 

get that to the children. People will do that. 

So this is a complicated issue. It is not one where we need folks 

on each side of the aisle pointing the finger at the other side of the 

aisle. We need to see if we can’t come up with a new paradigm, a 

new way to do this. 

I don’t have the answer, Mr. Chairman. But I have heard a lot 

of concern on a lot of issues regarding promissory notes, et cetera, 

annuities. But we need to figure out a way that we can make it 

so that it is affordable for the average American family to have a 

loved one in long-term care without losing everything they have 

worked for 45 or 50 years. And they are going to want to pass it 

on to their kids. So as long as even the incapacitated party is competent, they are going to figure out a way. And they are going to 

game, if you want to call it gaming the system, they are going to 

game the system because in the long-term, it is better off for their 

loved ones. So I don’t know the answer. But let’s not think there 

is a quick and easy solution. 

94 

And I think, Ms. Riley, you would agree with that. 

Ms. RILEY. Yes, sir. I think there is some good news and that is 

if one is concerned about the spending in Medicaid on long-term 

care, when I started in this field, Medicaid spending for long-term 

care was about 75 percent of the total bill, as I recall. And so we 

have improved economic conditions, improved income supports for 

older people; some use of long-term care insurance has changed 

that situation. 

Mr. GRIFFITH. And, Mr. Hagg, I got off on that and what I was 

really going to ask about was in your written testimony, the OIG 

has a body of work related to healthcare provider taxes and how 

that impacts Medicaid Programs. I have a bill in that would do 

some lowering. The President’s Fiscal Commission recommended 

eliminating the use of provider tax providing for non-Federal share 

of Medicaid funding. 

Can you just discuss that issue in the minute and 40 seconds I 

have left? 

Mr. HAGG. We have done some recent work involving healthcare 

provider taxes. In one state we looked at a healthcare provider tax 

that didn’t follow the existing rules that are in place. To us, it 

looked like it would have been impermissible. In talking to the 

state about it, the state said, they disagreed, they didn’t think it 

was a healthcare tax at all. They just said it was a general gross 

receipts tax, and therefore those Federal Rules did not apply. We 

issued a report to CMS. CMS responded by saying they agreed 

with the position we had taken, but they felt like they hadn’t done 

a good enough job of providing clear guidance to the states on what 

was expected. So I think sometime about last year they put out a 

letter providing that guidance, and at some point, we plan to follow 

up at the appropriate time to make sure that guidance is now 

being followed. 

Mr. GRIFFITH. Well, I think we need to do something. Virginia 

historically has tried to follow the rules, but for those states that 

have done other things creatively to figure out way to make the finances work for their states, they have eaten up some of the money 

and really put Virginia at a disadvantage. And so Virginia has consistently rejected a so-called bed tax but many states have that. We 

think other states are gaming the system to our detriment, and so 

we would like to see it be a level playing field and everyone know 

what the rules are. 

So thank you for your work on that. 

With that, Mr. Chairman, I yield back. 

Mr. PITTS. The chair thanks the gentleman. 

And now the chair recognizes the gentlewoman from Indiana, 

Mrs. Brooks, 5 minutes for questions. 

Mrs. BROOKS. Thank you, Mr. Chairman. 

To the panel, thank you all so much for being here and for helping us understand these complex issues. I am a former United 

States Attorney and so I have worked with my state’s Medicaid 

Fraud Control Unit, I think we called it MFCU is the acronym that 

I recall. It has been a few years, but I understand all too well the 

nationwide prevalence of the problem of Medicaid fraud, and I am 

encouraged by the fact that the committee is taking up the issues 

of program integrity. 

95 

I also am very pleased that Chairman Pitts has introduced, and 

I am working with him, on H.R. 3444, the Medicaid and CHIP Territory Fraud Prevention Act because it is important that our territories also have Medicaid Fraud Control Units. And I want to dive 

into that a little bit further. 

Can you, Mr. Hagg, really just talk with us, and I know Chairman Pitts started out by talking about the units and how they are 

funded and so forth, but can you give us, based on your experience 

with the Fraud Control Units in the states, can you explain further 

why this is a wise investment of our Federal dollars to make sure 

that the territories set up Medicaid Fraud Control Units? 

Mr. HAGG. Well, in general, yes, the Fraud Control Units in 

states, they are the groups that are primarily responsible for investigating Medicaid fraud. They are also responsible for investigating 

patient abuse when it occurs in healthcare facilities. Now we would 

be supportive in expanding that, their authority over patient abuse. 

Right now, they have authority when it occurs in the hospital or 

nursing home. But if patient abuse occurs in a home-based setting, 

for example, they currently don’t have the authority to investigate 

that, and we think that is something that should be expanded. 

The Fraud Control Units do a great job. They, I think, 2014 had 

about 2 billion in recoveries, around 1,300 or so in convictions. It 

equates to about a return of 8 1⁄2 to 1 for every dollar spent, they 

return about 8 1⁄2. So we think they are very important in Medicaid 

program integrity. 

Mrs. BROOKS. Thank you. You anticipated my next question, 

which was actually about the amount of recovery that the units, 

that the Medicaid Fraud Control Units across the country have recovered, and that is $2 billion that is reinvested for other patients, 

is that correct? Or how is the $2 billion then when it is recovered 

by the government units that recover it, how is that money used? 

Mr. HAGG. I am not sure exactly how that process works. But 

certainly, yes, it is, it is more money available that can be used to 

provide legitimate healthcare services to Medicaid beneficiaries 

that need the services. 

Ms. BROOKS. I think just to repeat, that was $2 billion recovered. 

Mr. HAGG. Two billion. 

Mrs. BROOKS. How many Medicare fraud units are there in the 

country right now roughly? 

Mr. HAGG. There are 50, 49 states and the District of Columbia. 

Mrs. BROOKS. Thank you. And Mr. Gomez can you just share 

with me the experience in Oklahoma and the work that Oklahoma 

is doing, the benefits, and how do states like Oklahoma feel about 

the fact that the territories don’t have Medicaid Fraud Control 

Units? 

Mr. GOMEZ. Well, I think for Oklahoma we take a lot of pride in 

making sure that we have appropriate program integrity pieces in 

place, and we actually do counsel states with our territories and try 

to share information in terms of how to improve the integrity of the 

system, even if they don’t happen to have some of the resources 

that other states or territories have. So we do a lot of sharing of 

information to see what we are seeing on certain activities and how 

can we share that information to strengthen other programs. 

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So when we find in Oklahoma, when we find weaknesses in the 

program using technology, we try to fix it in the system so we can 

prevent that money instead of a pay-and-chase situation preventing 

on the front end. 

Mrs. BROOKS. I think Mr. Hagg brought up while I initially was 

more focused on the fraud aspects and the amount of money that 

would be recovered, I think your point about the Medicaid Fraud 

Control Units being, are they actually the primary units investigating patient care issues, Mr. Hagg? 

Mr. HAGG. Patient care issues that occur in healthcare facilities, 

yes. 

Mrs. BROOKS. OK. 

And, Ms. Riley, any comments you would like to make based on 

your experience about Medicaid Fraud Control Units and the patient care issues? 

Ms. RILEY. They clearly are an important front line and they rest 

in attorneys general offices and work closely with Medicaid programs, and so it certainly seems that the territories could benefit 

from that kind of support. 

Mrs. BROOKS. And so because the territories don’t have these, is 

that not happening now then, the patient care issues with respect 

to healthcare facilities, how is that being monitored then? 

Ms. RILEY. There are a variety of ways that states look at patient 

care, not just through the fraud lens, and there are numerous reports and numerous activities of state licensing boards as well as 

Medicaid agencies that look at the quality of patient care. 

Mrs. BROOKS. Thank you. 

Thank you. I yield back. 

Mr. PITTS. The chair thanks the gentlelady and now recognizes 

the gentlelady from North Carolina, Mrs. Ellmers, 5 minutes for 

questions. 

Mrs. ELLMERS. Thank you, Mr. Chairman. 

And thank you to our panel, and I will just start off by saying 

I have a few questions here, and I apologize for not being here for 

the full committee. It is getting back to town, and being the third 

day back, we are all pretty busy, and I had some other issues I had 

to take care of. But I want to start, Mr. Gomez, asking you about 

the Deficit Reduction Act, so I guess my point is if I ask you a 

question that has already been presented, please indulge me because I apologize for the redundancy. 

But in the Deficit Reduction Act of 2005, implemented new policies that intended to try to close the loopholes related to the use 

of annuities as a Medicaid planning device. However, based on the 

testimony that has taken place today and just what I have listened 

to, it obviously has not achieved that goal. 

Can you please explain what the DRA did and why that has not 

sufficiently closed the loopholes? 

Mr. GOMEZ. I think the best way I can explain it is the relevant 

findings of the 10th Circuit Court where we took this issue from 

Oklahoma, so couples can purchase a qualifying annuity payable to 

the community spouse without affecting the institutionalized 

spouse’s eligibility for Medicaid benefits. So couples can purchase 

the annuities as a lawful spend down of the institutionalized 

spouse’s resources. The court will only limit transfers made to the 

97 

community spouse after the applicant has been deemed eligible for 

Medicaid assistance so it allows for the unlimited transfer of resources before the applicant is approved. The DRA actually was 

trying to, had that 5-year look back and this is a way to get around 

that. 

Mrs. ELLMERS. OK, so along the line of, in the discussion again 

on annuities, the 2014 GAO report of elder law attorneys told the 

GAO undercover investigators that annuities could be created 

quickly and thus are a tool for last minute Medicaid planning. Is 

this something that you have seen in Oklahoma, and typically how 

many months elapse between the creation of an annuity and the 

submission of the Medicaid application? 

Mr. GOMEZ. Please allow me to get back with you on that length 

of time, I don’t know, but we certainly would be happy to get that 

back to you for the record. 

Mrs. ELLMERS. Ms. Riley, do you have a comment on that at all? 

Ms. RILEY. I don’t, but we would be happy to look at. 

Mrs. ELLMERS. That would be great because that gives us a little 

bit better perspective when we are talking about timelines. 

Mr. Hagg, your office, OIG, has a long history of raising serious 

concerns to waste, fraud, and abuse involving personal care services and having the discussion I was listening very closely to my 

colleague from Indiana in a very interesting conversation. 

You have already made numerous recommendations to CMS. 

What actions has CMS taken in response to your recommendations and how can the legislation that we are discussing here today 

really help to fulfill some of the goals that haven’t been met? 

Mr. HAGG. Involving personal care services, we have made a 

number of recommendations. I think CMS is generally in agreement with those recommendations that more guidance is needed, 

that more uniformity is needed. I think there is maybe a disagreement in how you go about doing that because of the limited Federal 

Rules that are there now and all the problems we found we felt like 

a regulation was needed to really spell out what the Federal Government is looking for. I think CMS doesn’t want to go that far, 

and maybe that is part of the problem with whether the recommendations have been implemented or not. Certainly with the 

problems we found, electronic verification would I think address 

some of those issues, not all of them, but it would address some 

of them. 

Mrs. ELLMERS. Great. Well, thank you very much. And like I 

said, this is a really important hearing for us, and we really do appreciate your input on this. Hopefully we will be able to craft that 

legislation in the manner that will make some real hurdles and improvement so thank you. 

Mr. Chairman, thank you, again, and I yield back the remainder 

of my time. 

Mr. PITTS. The chair thanks the gentlelady. That concludes the 

questions of the members. 

The members will have followup questions. We will send those 

to you in writing. We ask you to please respond promptly. 

This has been a very interesting, very informative, and excellent 

hearing. We thank you for your testimony, and we look forward to 

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working together on behalf of the people to address these issues 

that we have heard about today. 

I remind, members that they have 10 business days to submit 

questions for the record, and members should submit their questions by the close of business on Friday, September 25. 

Without objection, the subcommittee is adjourned. 

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

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