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78–988 2013

BUDGET AND SPENDING CONCERNS AT HEALTH 

AND HUMAN SERVICES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

MAY 9, 2012 

Serial No. 112–142 

( 

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 

CLIFF STEARNS, Florida 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

Vice Chairman 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

CHARLES F. BASS, New Hampshire 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

(III) 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

CLIFF STEARNS, Florida 

Chairman 

LEE TERRY, Nebraska 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

BRIAN P. BILBRAY, California 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

CORY GARDNER, Colorado 

H. MORGAN GRIFFITH, Virginia 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

DIANA DEGETTE, Colorado 

Ranking Member 

JANICE D. SCHAKOWSKY, Illinois 

MIKE ROSS, Arkansas 

KATHY CASTOR, Florida 

EDWARD J. MARKEY, Massachusetts 

GENE GREEN, Texas 

DONNA M. CHRISTENSEN, Virgin Islands 

JOHN D. DINGELL, Michigan 

HENRY A. WAXMAN, California (ex officio) 

(V) 

C O N T E N T S 

Page 

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

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

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

Hon. Janice D. Schakowsky, a Representative in Congress from the State 

of Illinois, opening statement .............................................................................. 4 

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

opening statement ................................................................................................ 5 

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

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

Texas, opening statement .................................................................................... 7 

Hon. Marsha Blackburn, a Representative in Congress from the State of 

Tennessee, opening statement ............................................................................ 8 

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

California, opening statement ............................................................................. 8 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, prepared statement ...................................................................................... 64 

WITNESSES

Norris Cochran, Deputy Assistant Secretary, Office of Budget, U.S. Department of Health and Human Services ................................................................. 10 

Prepared statement .......................................................................................... 13 

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

James C. Cosgrove, Director, Health Care, U.S. Government Accountability 

Office ..................................................................................................................... 18 

Prepared statement .......................................................................................... 20 

Carolyn L. Yocom, Director, Health Care, U.S. Government Accountability 

Office ..................................................................................................................... 18 

Prepared statement .......................................................................................... 20 

SUBMITTED MATERIAL

Article entitled, ‘‘Official: No taxpayer funds went to neuter Tenn. dogs,’’ 

The Hill, May 9, 2012, submitted by Mr. Stearns ............................................. 65 

Flyer from Nashville Humane Association, submitted by Mr. Stearns .............. 67 

Recovery.org report entitled ‘‘Grants—Award Summary, Nashville & Davidson County, Metropolitan Government of,’’ submitted by Mr. Stearns ........... 68 

Graph entitled, ‘‘Rising Budget Authority and Full-Time Equivalents at HHS: 

FY 2007-2013, submitted by Mr. Stearns .......................................................... 77 

(1) 

BUDGET AND SPENDING CONCERNS AT 

HEALTH AND HUMAN SERVICES 

WEDNESDAY, MAY 9, 2012 

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

The Subcommittee met, pursuant to call, at 10:07 a.m., in room 

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

(chairman of the subcommittee) presiding. 

Members present: Representatives Stearns, Terry, Burgess, 

Blackburn, Scalise, Barton, Schakowsky, Christensen, and Waxman (ex officio). 

Staff present: Sean Bonyun, Deputy Communications Director; 

Mike Gruber, Senior Policy Advisor; Carly McWilliams, Legislative 

Clerk; Andrew Powaleny, Deputy Press Secretary; Krista 

Rosenthall, Counsel to Chairman Emeritus; Alan Slobodin, Deputy 

Chief Counsel, Oversight; Sam Spector, Counsel, Oversight; John 

Stone, Counsel, Oversight; Roger Stoltz, Detailee-Oversight (GAO); 

Tim Torres, Deputy IT Director; Alex Yergin, Legislative Clerk; 

Alvin Banks, Democratic Investigator; Brian Cohen, Democratic Investigations Staff Director and Senior Policy Advisor; and Matt 

Siegler, Democratic Counsel. 

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

Mr. STEARNS. Good morning, everybody. 

We convene this hearing, the Subcommittee on Oversight and Investigations, on ‘‘Budget and Spending Concerns at Health and 

Human Services.’’ 

This is our fourth in our series of oversight hearings on the federal budget. This hearing aims to determine the results of the Department of Health and Human Services efforts to identify wasteful, duplicative or excessive spending and to assist in finding more 

spending cuts and savings, pursuant to the President’s ordered 

line-by-line review. 

HHS is the largest agency, by budget, under this committee’s jurisdiction and is second only to the Department of Defense. The 

President’s fiscal year 2013 budget requested $941 billion in outlays and $77 billion in discretionary budget authority for Health 

and Human Services, an increase of nearly 8 percent over last 

year’s outlays and a slight increase over last year’s discretionary 

budget. This increase is in addition to the $140 billion in Recovery 

Act funds provided to Health and Human Services programs. 

2 

HHS, as recently as 2009 fiscal year, was an agency of nearly 

80,000 Federal employees. According to fiscal year 2010 Office of 

Personnel Management data, these include 91 of the federal government’s top-100 highest-paid civil servants and 651 of the federal 

government’s top-1000 highest-paid civil servants. And Health and 

Human Services continues to grow. Between fiscal year 2007 and 

2013, the number of full-time equivalents rose from 64,000 to 

76,000, an increase of about 20 percent. 

At an agency as large as HHS, opportunities are ripe for wasteful 

and duplicative spending. It is clear that HHS has a long way to 

go to streamline its many, many multi-billion-dollar programs and 

restore trust in its management of our tax dollars. For example, 

HHS, just like DOE, failed to heed the President’s April 2009 order 

to Cabinet secretaries to identify a combined $100 million in budget cuts by July 2009. And there is clearly waste. 

The Centers for Disease Control’s Communities Putting Prevention to Work program, for which the Recovery Act made hundreds 

of millions of dollars available, has paid for signage to promote recreational destinations, intergenerational urban gardening and community bike-sharing programs around the country. CDC’s Web site 

even boasts that money under this program was provided to Kauai, 

Hawaii, ‘‘to develop remote school drop-off sites to encourage students and staff to walk farther distances to school entrances.’’ 

Perhaps HHS is telling Congress that we should eliminate mass 

transit as part of our war against obesity. Incredibly, this same 

program also funded free pet spaying and neutering. While a laudable goal, the Department of Health and Human Services should 

focus its limited resources on human health. 

Now, my colleagues, just last month, GAO released a report on 

the Medicare Advantage Quality Bonus Payment Demonstration 

program, which it estimated will cost $8.35 billion over 10 years. 

Secretary Sebelius says that she intends to go forward with this 

project despite the fact that GAO concludes that it is unprecedented in size and scope and that its design ‘‘precludes a credible 

evaluation of its effectiveness.’’ Obamacare stipulates cuts in Medicare Advantage funding. Therefore, the Wall Street Journal has 

suggested that the purpose of the demonstration project is to give 

a program that is popular with seniors a temporary reprieve past 

Election Day. And I think the Wall Street Journal is right. 

When we are borrowing 40 cents of every dollar we spend, we 

need to ensure that the American taxpayer is getting the proper 

value for their tax dollars. In order to learn more about Health and 

Human Services’ efforts, we will take testimony today from the 

Deputy Assistant Secretary for Budget at HHS, Norris Cochran, 

and Directors of Health Care at GAO, Carolyn Yocom and James 

Cosgrove, who will be providing joint testimony, and I welcome 

these witnesses this morning. 

I would point out that the HHS Office of the Inspector General 

declined the Subcommittee’s invitation to testify at this hearing, 

noting that due to statutory mandates and funding streams, it 

spends 80 percent of its limited resources on fighting fraud, waste 

and abuse in the Medicare and Medicaid programs. The IG also 

confirmed that it has not done any significant recent work looking 

3 

at duplicative programs within HHS, nor does it have plans to conduct such a review in the near future. 

For this reason, only GAO will be present at the hearing to provide an independent, outside assessment of Health and Human 

Services’ efforts to identify wasteful, duplicative and excessive 

spending within the agency. In the absence of the IG, this Subcommittee’s role in providing much-needed oversight of HHS 

spending and operations becomes all the more crucial and important. 

This Subcommittee, and the Committee as a whole, must remain 

deeply and regularly engaged with the agencies within its jurisdiction, including HHS as they define their priorities, identify their 

needs and set their goals for the years ahead. 

[The prepared statement of Mr. Stearns follows:] 

PREPARED STATEMENT OF HON. CLIFF STEARNS

We convene this hearing, the fourth in our series of oversight hearings on the federal budget. This hearing aims to determine the results of the Department of Health 

and Human Services’ efforts to identify wasteful, duplicative, or excessive spending 

and to assist in finding more spending cuts and savings, pursuant to the president’s 

ordered line-by-line review. 

HHS is the largest agency, by budget, under this committee’s jurisdiction and is 

second only to the Department of Defense. The president’s Fiscal Year 2013 Budget 

requests $940.9 billion in outlays and $76.7 billion in discretionary budget authority 

for HHS, an increase of nearly 8 percent over last year’s outlays and a slight increase over last year’s discretionary budget. This increase is in addition to the $140 

billion in Recovery Act funds provided to HHS programs. 

HHS, as recently as FY 2009, was an agency of nearly 80,000 federal employees. 

According to FY 2010 Office of Personnel Management data, these include 91 of the 

federal government’s top-100 highest-paid civil servants and 651 of the federal government’s top-1000 highest-paid civil servants. And HHS continues to grow. Between FY 2007 and 2013, the number of Full-Time Equivalents, rose from 63,748 

to 76,341, an increase of about 20 percent. 

At an agency as large as HHS, opportunities are ripe for wasteful and duplicative 

spending. It is clear HHS has a long way to go to streamline its many multi-billion 

dollar programs and restore trust in its management of our tax dollars. For example, HHS, just like DOE, failed to heed the president’s April 2009 order to cabinet 

secretaries to identify a combined $100 million in budget cuts by July 2009. And 

there is clearly waste. 

The Center for Disease Control’s Communities Putting Prevention to Work program, for which the Recovery Act made hundreds of millions of dollars available, 

have paid for signage to promote recreational destinations, intergenerational urban 

gardening, and community bike sharing programs around the country. CDC’s Web 

site even boasts that money under this program was provided to Kauai, Hawaii ‘‘to 

develop remote school drop-off sites to encourage students and staff to walk farther 

distances. . .to school entrances.’’ Perhaps, HHS is telling Congress that we should 

eliminate mass transit as part of our war against obesity. Incredibly, this same program also funded free pet spaying and neutering. While a laudable goal, the Department of Health and Human Services should focus its limited resources on human 

health. 

Just last month, GAO released a report on the Medicare Advantage Quality 

Bonus Payment Demonstration, which it estimated will cost $8.35 billion over 10 

years. Secretary Sebelius says that she intends to go forward with this project despite the fact that GAO concludes that it is unprecedented in size and cost and that 

its design ‘‘precludes a credible evaluation of its effectiveness.’’ Obamacare stipulates cuts in Medicare Advantage funding. Therefore, the Wall Street Journal has 

suggested that the purpose of the demonstration project is to give a program that 

is popular with seniors a temporary reprieve past Election Day. And I think the 

Wall Street Journal is right. 

When we are borrowing 40 cents of every dollar we spend, we need to ensure that 

the American taxpayer is getting the proper value for their tax dollars. In order to 

learn more about HHS’ efforts, we will take testimony today from the Deputy Assistant Secretary for Budget at HHS, Norris Cochran; and Directors of Health Care 

4 

at GAO, Carolyn Yocom and James Cosgrove, who will be providing joint testimony. 

I welcome the witnesses. 

I would point out that the HHS Office of the Inspector General declined the subcommittee’s invitation to testify at this hearing, noting that due to its statutory 

mandates and funding streams, it spends 80 percent of its limited resources on 

fighting fraud, waste, and abuse in the Medicare and Medicaid programs. The IG 

also confirmed that it has not done any significant recent work looking at duplicative programs within HHS, nor does it have plans to conduct such a review in the 

near future. 

For this reason, only GAO will be present at the hearing to provide an independent, outside assessment of HHS efforts to identify wasteful, duplicative, or excessive spending within the agency. In the absence of the IG, this subcommittee’s 

role in providing much-needed oversight of HHS spending and operations becomes 

all the more crucial. 

This subcommittee, and the committee as a whole must remain deeply and regularly engaged with the agencies within its jurisdiction, including HHS, as they define their priorities, identify their needs, and set their goals for the year ahead. 

Mr. STEARNS. With that, I recognize Ms. Jan Schakowsky, the 

ranking member who is substituting, as I understand, for Ms. 

DeGette. 

OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. It is my honor to 

be sitting in for Congresswoman Diana DeGette this morning as 

ranking member. 

Led by my Republican colleagues, we are here to talk about 

spending priorities in the Health and Human Services’ budget. 

Given the substantial short- and long-term deficit challenges we 

face, I understand the need to root out wasteful spending, and I am 

sure that every agency is being fiscally responsible. Because our 

test is to address those challenges while simultaneously constructing a strong foundation for a healthy and bright economic future for our country, I must point out what I see is the misplaced 

focus of my Republican colleagues. In March, the Republicans 

passed an irresponsible budget that will only make things worse 

for the middle class and those who aspire to it. The Republican 

budget makes it clear that their party puts the very richest Americans as the top priority and makes everyone else bear the burden. 

The Republican budget would do nothing to address income inequality. Instead, it would make it worse by increasing defense 

spending while slashing investments important to job creation, seniors, children and the middle class. The Republican budget mandates additional cuts to discretionary programs like Medicaid, food 

stamps, the Social Services Block Grant and the Prevention and 

Public Health Fund to insulate the Department of Defense from 

spending cuts triggered by the failure of the Joint Select Committee on Deficit Reduction. 

Our committee was directed to find at least $97 billion in cuts, 

nearly half of which came from public health programs. The committee has lost valuable time—time that we could have spent discussing ways to get needed health care to Americans who have lost 

their health insurance along with their jobs, who cannot afford 

costly insurance premiums. Instead, my Republican colleagues 

have repeatedly attacked Obamacare and once again they seek to 

repeal the law in their budget. We should be working to lower 

5 

health care costs by improving efficiency and providing access to 

prevention. 

Instead, my Republican colleagues have railed against the Prevention and Public Health Fund and repeatedly used its funding to 

force choices we shouldn’t and don’t have to make, like the choice 

between the elimination of funding for the Prevention and Public 

Health Fund or relief for students who are saddled with studentloan debt. 

If we want to build a healthier, economically strong America, we 

must maintain our investment in prevention. Understand what the 

fund is about: It is about preventing diabetes, heart disease, cancer, and it is about getting money to State and local governments 

and organizations so they in turn can put prevention programs in 

place that are designed to meet the needs of their communities. 

This is about keeping America healthy. 

My colleagues on the other side of the aisle lose sight of this goal 

when they try to rile people up by labeling the Prevention and Public Health Fund as a slush fund. It isn’t. Under the President’s 

2013 budget, the fund would support breast and cervical cancer 

screenings. Americans know that mammograms and pap smears 

are not slush. They are basic, routine and often lifesaving services 

for women. Cutting funding for prevention programs like breast 

and cervical cancer screening now will only lead to increased costs 

down the road. 

I have to say, I am really disappointed that some of my colleagues continue to that the CDC funds or the Prevention funds 

are used to spay and neuter dogs. They are not. HHS has confirmed it. Yet the same talking point that was used in committee 

making this claim was used on the floor during the student loan 

debate. 

The late Senator Moynihan said, ‘‘Sir, you are entitled to your 

opinion, not your own facts.’’ 

And Mr. Chairman, the priorities in the Republican budget are 

deeply flawed. They do not reflect the priorities of everyday Americans. 

While I believe the focus of this hearing is misplaced, I still hope 

that we can have a serious discussion about reducing our deficit 

without hurting the programs that benefit low-income families, 

children, seniors and individuals with disabilities. 

I yield back the balance of my time. 

Mr. STEARNS. I thank the gentlelady. 

I have here the recovery.gov Web site that confirms that the spay 

and neuter and wellness clinics for cats and dogs have been received in zip codes with higher rates of animal nuisance reports. 

And also, it was included in the Department of Health and Human 

Services as part of the Metro Public Health Department’s Community Putting Prevention to Work campaign. 

With that I look at the chairman emeritus of the full committee, 

the gentleman from Texas, Mr. Barton. 

OPENING STATEMENT OF HON. JOE BARTON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BARTON. Thank you, Mr. Chairman, for holding this hearing 

along with the ranking member, Ms. DeGette. 

6 

Department of Health and Human Services is an agency that 

spends over a trillion dollars. A trillion dollars is more than the entire federal budget spent the first year I was in Congress in 1985. 

A trillion dollars is more than the total GDP of almost every nation 

in the world. A trillion dollars is so much money that we can’t even 

get our hands on it. It is obvious that HHS can’t their hands on 

managing it either. 

The Inspector General at HHS declined to testify, admitting to 

subcommittee staff that the Department was so big and their resources so constrained that they have to focus everything they are 

doing on two programs, obviously, the two biggest, Medicare and 

Medicaid. Obviously, HHS has a huge mission to protect the health 

of the American people. This is a daunting challenge. Having said 

that, it doesn’t mean that we just throw up our hands and throw 

money at the problem. There are over 80,000 employees at HHS. 

There are about 40,000 cardiologists and neurologists in this country, so we have two HHS two bureaucrats for every cardiologist 

and neurologist that are actually trying to provide health services 

to the American public. 

President Obama has talked a good game about trying to manage 

the agencies better but HHS is one of the agencies that when the 

President specifically directed that certain steps be taken to eliminate waste, fraud and abuse and to cut overhead, HHS didn’t provide a program, didn’t even attempt it. 

So Mr. Chairman, here we have an agency that has a huge mission, admittedly, but their answer to ever problem is to create more 

bureaucracy that is more unmanageable and more uncontrollable. 

Hopefully this subcommittee on a bipartisan basis will first determine what the facts are and then perhaps we can get with the 

Health Subcommittee and start some sort of a reauthorization to 

put into statute some of the things that need to be done. 

With that, I thank the chairman. 

[The prepared statement of Mr. Barton follows:] 

PREPARED STATEMENT OF HON. JOE BARTON

Thank you Mr. Chairman. The Department of Health and Human Services (HHS) 

has been growing, expanding, and spending its way to an annual budget of 941 billion dollars in entitlements and 76.7 billion dollars in discretionary spending, which 

is over a trillion dollars. And, the agency received over 140 billion dollars in Recovery Act funding. 

The core mission of HHS is to protect the health of the American people. I understand that this is a challenging objective to meet, however, at a time when the federal government is borrowing over 40 cents of every dollar it spends, unemployment 

is over 8 percent, and medical and insurance costs are increasing, it is imperative 

that we maintain stringent oversight of these dollars to ensure that this money is 

working for the public to protect both their physical and economic health. 

During my congressional service, I have remained a strong advocate for systematic reform within HHS and its operating divisions. Bureaucracy has exploded at 

HHS, especially since the passage of President Obama’s health care law. This is evident on their organizational outline posted on their Web site. In the immediate Office of the Secretary alone there are six different chains of command. 

After that, there are seven Assistant Secretaries to the Secretary and they each 

have an office and support staff, the Deputy Assistant Secretary of the Office of 

Budget is a witness today. In addition, there are another 9 different official Offices 

and Departments complete with their own staffs, like the Office for Civil Rights and 

the newly created Office of Consumer Information and Insurance Oversight. All of 

this is within the single Office of the Secretary, under her control, and so far with 

inadequate oversight. 

7 

On top of this HHS Secretary-level bureaucracy, there are eleven different Operating Divisions under HHS, the largest being the Centers for Medicare and Medicaid Services, and including the Food and Drug Administration, the Centers for 

Disease Control and Prevention and the National Institutes of Health. HHS employs 

nearly 80,000 people, many of whom fall under the Title 42 program enabling them 

to earn more than $200,000 a year. According to the American Medical Association, 

there are only about 16,000 Neurologists and around 23,000 Cardiologists practicing 

in the United States. So, there are five times as many HHS employees as there are 

Neurologists and three and a half times as many HHS employees than Cardiologists. 

The Government Accountability Office and the HHS Inspector General’s Office 

have commented on the perpetual financial managements problems that are endemic at this agency. Today, I hope we illustrate to HHS and this 

Administration that we are serious about conducting meaningful oversight of federal agency budgets financed on the backs of hardworking American taxpayers. 

Mr. STEARNS. I thank the gentleman. 

The gentleman from Texas, Dr. Burgess, is recognized for 2 minutes. 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. I thank the chairman for the recognition. 

We are today focusing in the discretionary budget authorities 

within Health and Human Services, and recognize it represents almost a quarter of all federal outlays. President Obama has proposed $76 billion in discretionary spending for fiscal year 2013 in 

Health and Human Services. 

Now, both as an agency working on public health and administering public health programs, it has got to be, it has to be the 

center of universe in government integrity efforts. If we cannot get 

it right at HHS, where can we get it right? And if we get it right 

at HHS, everything else looks easy by comparison. 

On November 14, 2011, the Inspector General of Health and 

Human Services, Inspector General Levinson, notified Secretary 

Sebelius that an independent audit of Health and Human Services’ 

fiscal year 2011 financial statements found that ‘‘weaknesses continue to exist in financial management systems.’’ The Inspector 

General also confirmed that it has not done any significant recent 

work in looking at duplicative programs within Health and Human 

Services. 

So I guess we have to ask ourselves, how much fraud is enough 

for the government to take notice? I will tell you the answer. The 

answer is zero, and it must be zero, and that must be the focus at 

Health and Human Services, but really, the lack of internal oversight, the lack of prosecutors with a background in health care law 

really compromises our abilities to actually get anything done. 

So we are comfortable with the current situation? I can’t believe 

that we would be, and if we are not, when are we going to correct 

it? And that applies to the committee, both sides of the dais, and 

it applies to the agency, everyone from the Secretary on down. 

Health care expenditures are going to go nowhere but up, and 

Health and Human Services’ work in public health is going to continue to rise. Developing new and innovative approaches must 

make sure that every dollar is spent where it belongs, and that is 

delivering services to the people. 

I yield back. 

8 

Mr. STEARNS. The gentleman’s time has expired, and our side is 

complete. Oh, Mrs. Blackburn. I am sorry. The gentlelady from 

Tennessee is recognized for 1 minute. 

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TENNESSEE 

Mrs. BLACKBURN. Thank you, Mr. Chairman. I thank you for the 

hearing. Welcome to our witnesses. We are glad that you are here. 

As you have heard, this is a necessary hearing. It is our fourth 

in a series to look at waste, fraud and abuse, and the reason we 

are doing this is because our constituents come to us and they let 

us know they are taxed too much, they are tired of it and they are 

frustrated with seeing the waste in our federal bureaucracies. HHS 

employs over 80,000 federal workers, and you do have a large portion of our budget that you are expending every day. 

Mr. Cochran, specifically for you, I want to hear about the steps 

that HHS has taken to comply with the President’s call for agencies to identify $100 million worth of administrative savings nearly 

2 years ago, see where you are in that process. Additionally, let us 

quantify generated savings from the President’s Executive Order 

13589 from November 9, 2011, and I want to know what is actually 

savings and then where you have double counted or used funds to 

justify your cost increases or activities. 

Finally, after our experience with the Department of Energy and 

Solyndra, I have very real concerns about similar financial mismanagement at HHS as brought to our attention by Ernst and 

Young, and we will explore that a bit today, and I yield back. 

Mr. STEARNS. I thank the gentlelady and now recognize the ranking member of the minority, Mr. Waxman from California. 

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

Mr. WAXMAN. Mr. Chairman, wasteful federal spending should 

be eliminated. Fraud and abuse should be wiped out. I have long 

supported bipartisan efforts to cut spending and reduce waste and 

fraud. But we must recognize that HHS and the agencies contained 

in the department have a vital, lifesaving mission: providing health 

care to millions of Americans; investing in disease prevention and 

scientific research; keeping the food and drug supply safe. We must 

be smart about how we achieve savings or we put these important 

programs at risk. 

Mr. Chairman, if you want to learn how to cut the budget in a 

sensible way, I would suggest you take a look at the work we did 

in the Affordable Care Act. A Democratic Congress, working with 

President Obama, passed into law provisions that cut waste and 

abuse from Medicare and Medicaid. We gave HHS important new 

authority and power to identify and prevent Medicare and Medicaid fraud. The net result is hundreds of billions of dollars in savings without the need to cut Medicare benefits or erode the core 

promises of the program. 

Unfortunately, the cuts in the Republican budget passed by the 

House don’t meet this standard. They take direct aim at our NaVerDate Nov 24 2008 15:44 Mar 05, 2013 Jkt 037690 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 112\112-142 CHRIS
9 

tion’s commitment to provide health care to seniors and our most 

vulnerable citizens. The Republican budget would repeal the Affordable Care Act, end the basic Medicare guarantee by turning the 

program into a voucher system, directly cut seniors’ benefits by increasing the Medicare eligibility age, and slash funding for Medicaid, breaking the social safety net. The Republican budget would 

also deny coverage to 33 million Americans and allow the worst 

abuses of the insurance industry, like denying coverage to those 

with preexisting conditions, to continue, and it would cut off benefits like coverage of young adult children and closing the Part D 

drug donut hole that millions of Americans are enjoying today. 

The Republican budget’s Medicare cuts would eliminate the program’s basic guarantees. They would increase costs for seniors, according to CBO, by up to $2,200 per beneficiary starting in 2030. 

This is not holding down costs. This is simply shifting costs. And 

the Republican budget would increase the Medicare eligibility age 

from 65 to 67, meaning millions of older Americans would be stuck 

waiting for Medicare with no employer coverage or inadequate coverage. 

The Republican budget also cuts Medicaid by a stunning amount—$1.7 trillion over the next decade—turning the program 

into a block grant and threatening access to health care for millions of low-income children, families, pregnant women, and seniors 

in nursing homes. 

And Mr. Chairman, the Republican budget does more than devastate Medicare and Medicaid. FDA, NIH, CDC, and the Head 

Start program are all part of HHS. The Republican budget would 

hurt all of them. The Republican budget cuts non-security discretionary spending for all government agencies, including HHS, 

below levels agreed to under the Budget Control Act, by 5 percent 

in 2013 and by 19 percent in 2014 and beyond. 

The Republican budget lacks specific details, but the implications 

are clear: cuts in the FDA budget for food safety and inspection, 

cuts in the NIH budget for basic science research, reduced capacity 

for CDC to respond to emerging diseases, fewer kids who are eligible for Head Start, less money to fight Medicare and Medicare 

fraud. These cuts in basic health programs would be a huge mistake. They would be pennywise and pound foolish, costing our Nation more money and more in terms of human suffering than they 

could possibly save. 

Mr. Chairman, I hope we can find a way to work together to find 

bipartisan solutions to cutting waste, fraud and abuse at HHS and 

at other agencies in the federal government. But the Republican 

budget proposal is not the answer. It cuts Medicare and Medicaid, 

eliminates health care coverage for 30 million Americans under the 

Affordable Care Act, and includes devastating cuts to basic programs at FDA, NIH, CDC, and throughout HHS. I hope the Republicans will rethink that approach, and I yield back my time. 

Mr. STEARNS. I thank the gentleman. I just remind him, we are 

looking at budget and spending—— 

Mr. WAXMAN. I am going to reclaim my time and say that I don’t 

think it is appropriate for the chairman to comment on each Democratic statement. We have 5 minutes each side. 

Mr. STEARNS. I know. 

10 

Mr. WAXMAN. If somebody on your side wants to yield you 

time—— 

Mr. STEARNS. Well, I appreciate what you are—— 

Mr. WAXMAN. But I do want to point out that I don’t understand 

this business of neutering dogs. Is this an anti-abortion issue? Is 

it a family planning issue? Is this something where we have—is 

this waste, fraud, and abuse? 

Mr. STEARNS. It certainly—— 

Mr. WAXMAN. I would like to yield to the chairman unlimited 

time, because I don’t have the power to do that. 

Mr. STEARNS. Well, I have given you the brochure just to corroborate my opening statement and also to point out we are talking 

about budget spending concerns at HHS. 

With that, let me introduce our witnesses. Mr. Norris Cochran, 

Deputy Office Secretary, Office of Budget, the United States Department of Health and Human Services; Ms. Carolyn L. Yocom, 

Director, Health Care, U.S. Government Accountability Office; and 

Mr. James C. Cosgrove, Director, Health Care, U.S. Government 

Accountability Office. And I understand the two of you, there will 

be a joint statement from the two of you. Is that correct? 

As you know, the testimony that you are about to give is subject 

to Title XVIII Section 1001 of the United States Code. When holding an investigative hearing such as this committee is doing, the 

Committee has a practice of taking testimony under oath. Do you 

have any objection to taking testimony under oath? The chair then 

advises you that under the rules of the House and the rules of the 

Committee, you are entitled to be advised by counsel. Do any of 

you wish to be advised by counsel? In that case, if you would please 

rise and raise your right hand, I will swear you in. 

[Witnesses sworn.] 

Mr. STEARNS. We now welcome your 5-minute summary, and we 

will start with you, Mr. Cochran. 

TESTIMONY OF NORRIS COCHRAN, DEPUTY ASSISTANT SECRETARY, OFFICE OF BUDGET, U.S. DEPARTMENT OF HEALTH 

AND HUMAN SERVICES; JAMES C. COSGROVE, DIRECTOR, 

HEALTH CARE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; AND CAROLYN L. YOCOM, DIRECTOR, HEALTH CARE, 

U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

TESTIMONY OF NORRIS COCHRAN 

Mr. COCHRAN. Thank you, Chairman Stearns, Representative 

Schakowsky, members of the subcommittee. Thank you for the opportunity to speak about the Department of Health and Human 

Services’ stewardship of the resources provided by Congress. 

In my role as the Budget Director at HHS, I oversee the formulation of our annual budget. I and my colleagues in the Department 

are committed to efficiently achieving the outcomes intended by 

Congress. I will keep my initial remarks brief and respectfully request that my written testimony be incorporated into the record. 

Mr. STEARNS. So ordered. 

Mr. COCHRAN. I will briefly summarize key aspects of the President’s fiscal year 2013 budget request for HHS including the use 

11 

of unobligated balances and highlight efforts to improve program 

performance and integrity and to achieve savings. The fiscal year 2013 budget for HHS totals $932 billion in budget authority and $941 billion in outlays. It is comprised of many types 

of funding including Medicare, Medicaid and other entitlements 

and other mandatory spending, discretionary budget authority, 

user fees, and funding made available through transfers from 

sources such as the Prevention and Public Health Fund, and the 

Public Health Service Evaluation set-aside. 

As HHS develops the annual budget request, we conduct a thorough review of our ongoing activities and eliminate or reduce funding for outdated, duplicative and low-performing programs. The 

HHS discretionary budget request includes more than $2 billion in 

reductions and eliminations across HHS’s many components. These 

reductions and terminations are informed by analysis of impact 

and performance data and the setting of priorities in a tight budget 

environment. These reductions are enabling HHS to propose a discretionary budget that is cut overall by $218 million while still 

making priority investments in key areas including biodefense to 

protect the safety of our Nation through the development of medical countermeasures, the Indian Health Service to address extreme health disparities experienced in Indian Country, and the 

Centers for Medicare and Medicaid Services to keep up with beneficiary growth and implement the Affordable Care Act. In addition, HHS proposes net mandatory savings of $366 billion over 10 years. These savings include $303 billion in Medicare, $56 

billion in Medicaid, program integrity savings, as well as mandatory investments to strengthen child support enforcement, child 

care and foster care, and to continue TANF-related activities. 

In developing our annual budget, HHS with OMB also assesses 

whether the presence of unobligated balances enables the Department to request less funding from Congress than would otherwise 

be needed. For example, the budget request this year for bioterrorism and emergency preparedness assumes the use of more than 

$400 million in unobligated balances to achieve our preparedness 

goals. 

As HHS components execute the budget, we continually work to 

eliminate unnecessary costs. For instance, HHS is currently in the 

process of reducing our spending in targeted categories such as 

travel and supplies by more than $800 million. 

HHS program and policy leaders also monitor the outcomes of 

the programs we administer and make needed adjustments to improve program performance. This is exemplified by regular datadriven meetings chaired by our Deputy Secretary during which 

senior officials review progress and key next steps for achieving 

measurable priority goals. In the areas of program integrity and 

budget execution, HHS benefits from the expertise of the HHS Office of Inspector General and the Government Accountability Office. 

For instance, before we spent funding from the Recovery Act, we 

worked with our OIG colleagues to better prevent waste, fraud and 

abuse with those investments. 

With respect to program integrity, we are particularly proud of 

a joint effort with CMS, the Office of Inspector General and the Department of Justice through which multi-agency teams of federal, 

12 

State and local investigators combat Medicare fraud. Just last 

week, charges were made against 107 individuals for their alleged 

participation in Medicare fraud schemes involving approximately 

$452 million in false billing, which represents the largest single 

takedown in the history of this effort. 

In conclusion, Mr. Chairman, thank you again for inviting me to 

testify about HHS stewardship of taxpayer resources. I look forward to answering your questions. 

[The prepared statement of Mr. Cochran follows:] 

13 


78988.001

Statement of Norris Cochran 

Deputy Assistant Secretary for Budget 

U.S. Department of Health and Human Services 

Before the 

Subcommittee on Oversight and Investigations 

Committee on Energy and Commerce 

U.S. House of Representatives 

May 9, 2012 

Chairman Steams. Ranking Member DeGette, and Members of the Subcommittee. thank you for 

the opportunity to speak about the Department of Health and Human Services' (HHS) processes 

for developing budget requests and ensuring responsible stewardship of all resources 

appropriated by Congress. As the Deputy Assistant Secretary for Budget at HHS. one of my 

responsibilities is to oversee the formulation of the Department's budget, and I am a member of a 

team of senior officials that is committed to using taxpayer resources to achieve the outcomes 

intended by Congress in the most efficient manner possible. 

Formulating Budget Requests 

The release of the President's Budget for HHS each February represents the culmination ofa 

year of comprehensive analysis and review by program offices, budget and evaluation experts, 

and policy officials. This process involves a review of each line of our budget. in the interest of 

identifying a mix of investments that will cost-effectively improve the health and wellbeing of 

our nation. As a result of this careful review, each year we propose eliminating or reducing 

funding for programs that are outdated, duplicative, or low-performing. For instance. in the 

fiscal year 2013 Budget HHS identified $2 billion in discretionary terminations and reductions. 

In addition. HHS included proposals to improve activities by consolidating separate grants that 
14 


78988.002

support similar efforts. such as in the area of state substance abuse prevention. As we fomlUlate 

our budget request we also seek opportunities to make investments today that will yield greater 

retums in the future. such as the Health Care Fraud and Abuse Control program that has retumed 

over $20 billion to the Medicare trust funds since 1997 and has a three-year return-on-investment 

ratio of7.2 to 1. 

Using Unobligated Balances 

In developing our annual budget proposal. we also assess whether the presence of unobligated 

balances enables us to request less funding from Congress than would otherwise be needed. As 

an example, for fiscal year 2013 our request for bioterrorism and emergency preparedness 

assumes the use of more than $400 million in unobligated balances to achieve preparedness 

goals. In many instances. the availability of unobligated balances is the intentional result of 

Congress appropriating funding for use over the course of multiple years. This approach is often 

taken for initiatives that involve preparing for events that are difficult to predict. such as 

preparedness for an influenza pandemic. and projects intended to be carried out over a long 

period of time, such as buildings and facilities construction. As HHS develops plans for utilizing 

such funding, we take into account both current and future nccds to ensure the investments are 

well planned and the objectives are fulfilled. 

Spending Efficiently 

HHS continually seeks to identify and eliminate unnecessary costs. in the interest of ensuring 

that our resources are optimally deployed to promote health and wellbeing. For instance, as part 

of the Administration's broader efforts to promote efficient spending, HHS is undertaking new 

measures to further reduce our spending on items such as travel, printing, professional services, 

2 
15 


78988.003

supplies and materials. and emplo)ee information technology devices. Reducing spending in 

these categories will enable us to redirect resources to mission critical investments that more 

directly benefit our programs' targeted populations. 

Evaluating Program Performance 

At HHS we carefully monitor the outcomes of the programs we administer. and make 

adjustments to improve program performance. In addition to this ongoing expectation for all of 

our programs. on a quarterly basis senior policy officials review our progress toward achieving a 

number of high priority. measureable. and ambitious goals. As part of this process. our Deputy 

Secretary chairs data-driven meetings during which senior officials report on progress to date 

and discuss upcoming actions that will contribute to the achievement of each goal. One of our 

current goals is to further reduce the national rate of health care associated infections. in 

recognition that each year such infections contribute to thousands of deaths and billions of 

dollars in excess healthcare expenditures. Rcviewing program performance is one of a number 

of ways that HHS drives toward achievement of the ambitious goals articulated in our Strategic 

Plan (see hltp:llwww.hhs.gov/secretary/about/stratplan [v20 1 O-IS.pdf). 

Stewardship of Recovery Act Resources 

The American Recovery and Reinvestment Act (Recovery Act) provided $140 billion to HHS 

programs, of which $ I 10 billion had been spent by grant and contract recipients by the end of the 

last fiscal year. Most of the remainder was made available by the Act for a longer period to 

serve as an incentive to hospitals and health care providers to adopt and meaningfully use health 

information technology. The vast majority of Recovery Act funds helped state and local 

communities cope with the effects of the economic recession, but HHS Recovery Act funds are 

3 
16 


78988.004

also making long-term investments in the health of the American people and the health care 

system itself~ HilS has ensured transparency and accountability in the management of its 

Recovery Act funds. At its height, HHS received more than 23,000 status reports from grantees 

and contractors that received Recovery Act funding from flHS discretionary programs. Over the 

past three years. more than 99 percent of the required recipient reports have been submitted on 

time. These reports are available to the public online, and non-filers have been sanctioned. 

More importantly, HHS worked to identify risks for fraud. abuse. and waste and took steps to 

mitigate those risks. 

Ensnring Program Integrity 

Over the last few years. HHS has adopted a more proactive stance toward the identification and 

mitigation of risks associated with implementing large and complex public programs. During 

fiscal year 20 I O. HHS developed a more comprehensive approach to assessing the challenges 

facing our programs and addressing programmatic vulnerabilities. The vision for this effort has 

been embraced by HHS leaders including the head of each of the Department's major 

components, while day-to-day activities are coordinated by the Department's Office of Finance 

and directed by senior officials in each of these same components. 

IIHS also proactively leverages the expertise of the HHS Office of Inspector General (OIG) and 

the Government Accountability Oftlce (GAO). For instance, before we spent our first dollar of 

Recovery Act funding, senior policy oftlcials sat down with our IG to develop a plan for 

ensuring that our focus on stimulating the economy by implementing programs quickly was 

balanced with proper attention to sound oversight and the prevention of waste. fraud, and abuse. 

4 
17 


78988.005

In instances where the OIG or GAO identifies threats to program integrity, HHS seeks to 

effectively and efficiently address these threats, 

A program integrity effort of which HHS is particularly proud is the Heath Care Fraud 

Prevention and Enforcement Action Team (IlEA T) initiative. This joint program between HHS 

and the Department of Justice is focused on preventing and deterring fraud, and enforcing antifraud laws around the cOllntry. A prominent aspect of this effort is the Medicare Fraud Strike 

Force, a multi-agency team of federal. state and local investigators that combats Medicare fraud 

by targeting enforcement to geographic hot spots identified through the use of technology. Since 

inception, Strike Force operations have charged more than 1.330 defendants who falsely billed 

Medicare for more than $4 billion. Just last week, charges were made against 107 individuals for 

their alleged participation in Medicare fraud schemes involving approximately $452 million in 

false billing, which represents the largest single takedown in the history of this effort. 

Conclusion 

Mr. Chairman, thank you again for inviting me to testify about the Department of Health and 

Human Services' (HHS) processes for developing budget requests and ensuring responsible 

stewardship of taxpayer resources. I look forward to answering your questions. 

5 
18 

Mr. STEARNS. I thank the gentleman. 

Mr. Cosgrove, your opening statement, please. 

TESTIMONY OF JAMES C. COSGROVE 

Mr. COSGROVE. Chairman Stearns, Ms. Schakowsky, members of 

the subcommittee, I am pleased to be here with my colleague, 

Carolyn Yocom, as you discuss budget considerations at HHS, 

which is responsible for both discretionary spending and mandatory spending. These funds support a variety of important activities. However, the overwhelming share goes to Medicare and Medicaid, and for that reason, our remarks today focus on HHS’s responsibilities for those two programs, which are administered by 

the Department’s Centers for Medicare and Medicaid Services. 

Over the past several years, GAO has recommended that HHS 

and CMS take a variety of actions to enhance agency oversight of 

Medicare and Medicaid and foster more prudent spending. We are 

pleased that many of our recommendations have been implemented, saving money for taxpayers and beneficiaries. For example, CMS saved at least $3.4 billion over 5 years from implementing multiple recommendations on the oversight of Medicaid 

supplemental payments. 

However, some of our recommendations remain unaddressed and 

so today we want to focus on those key recommendations made 

within the last 6 years where HHS has not taken action or only 

partially addressed the recommendation. Some of our still open recommendations would help reduce improper payments and enhance 

payment safeguards in traditional fee-for-service Medicare. For example, we recommended that CMS require its contractors to identify potentially improper claims when billing reaches atypical levels. CMS agreed, but has not implemented our recommendation. 

We recently noted that CMS could better screen providers to avoid 

enrolling those who are intent on committing fraud. 

To enhance payment safeguards, in a 2008 report, we recommended that CMS adopt front-end approaches such as considering requiring prior authorization for certain diagnostic imaging 

services. Although not implemented, the President’s 2013 budget 

does call for such an approach. 

We also believe that HHS needs to address certain issues related 

to the Medicare Advantage program. Approximately one in four 

beneficiaries are enrolled in private health plans that participate 

in Medicare Advantage. These plans are popular because relative 

to traditional Medicare, they typically cover more services and cost 

beneficiaries less. However, Medicare’s payments to these plans, 

specifically, the adjustments for beneficiaries’ health status, could 

be improved and a billion or more dollars could be saved annually. 

We recommended specific steps that CMS could take to better ensure the accuracy of its required payment adjustment. CMS commented that our findings were informative but it did not indicate 

that it would implement our recommendation. 

We also recommended that HHS cancel its Quality Bonus Payment Demonstration for MA plans. This demonstration, estimated 

to cost more than $8.3 billion, is poorly designed and unlikely to 

yield meaningful results. Although intended to encourage highquality health care, most of the money will go towards plans of avVerDate Nov 24 2008 15:44 Mar 05, 2013 Jkt 037690 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 112\112-142 CHRIS
19 

erage quality. Moreover, because of design shortcomings, it will be 

nearly impossible to evaluate whether the $8.3 billion influenced 

the quality of care provided. We therefore recommended that HHS 

cancel the demonstration and implement instead the quality bonus 

payments provided for by PPACA, which pays bonuses only to 

plans that achieve above-average quality levels. 

Our substantial work on the Medicaid program has also resulted 

in numerous recommendations to improve program management, 

several of which remain open. For example, gaps remain in the 

oversight of State supplemental payments to hospitals and other 

providers for uncompensated care. We recommended that CMS 

make such payment arrangements transparent and ensure that the 

agency has reviewed and approved these arrangements. CMS has 

acted on some of these recommendations. We believe additional action is warranted. 

Several times we have reported that HHS had approved State 

Medicaid demonstrations that could increase federal costs despite 

a policy against such increases. HHS has since reported taking certain steps such as monitoring the budget neutrality of ongoing 

demonstrations. However, no changes are planned in the methods 

used to determine budget neutrality and ensure the federal government’s financial liability is not increased. 

CMS has been inconsistent in reviewing States’ rate setting for 

compliance with Medicaid managed care actuarial soundness requirements. In 2010, we found that one State received billions of 

federal dollars that had not been certified by an actuary, and another State’s rates hadn’t been fully reviewed since the requirements went into effect. We recommended that CMS improve its 

oversight of State rate setting, and while HHS agreed with the recommendations and has taken steps to improve its oversight, it has 

not yet completed actions that would ensure the quality of the data 

or develop guidance for reviewing the rates. 

In conclusion, given the size and scope of the programs for which 

it is responsible, HHS must be vigilant in seeking ways to reduce 

spending, prevent improper payments and improve the efficiency of 

operations. We look forward to working with this committee to help 

the Department further advance its performance and accountability. We are happy to answer any questions you might have. 

[The prepared statement of Ms. Yocom and Mr. Cosgrove follows:] 

20 


78988.006

GAO 

For Rekase on Delivery 

E}.1)(O'cted at 10:00 a.m. EDT 

Wednesday, z\1ay g, 2012 

To access this report 

electronically, scan this 

QRCode. 

Don't have a QR code 

reader? Several are 

available for free online. 

GAO-12-719T 

United States Government Acconntability Office 

Testimony 

Before the Subcommittee on Oversight 

and Investigations, Committee on Energy 

and Commerce, House of Representatives 

DEPARTMENT OF 

HEALTH AND HUMAN 

SERVICES 

Opportunities for Financial 

Savings and Program 

Improvements in Medicare 

and Medicaid Remain 

Statement of James Cosgrove 

Director, Health Care 

Carolyn L. Yocom 

Director, Health Care 

GAO 

Accountability * Integrity'" Reliability 
21 


78988.007

Highlights of GAO-12-719T, before the 

Subcommittee on Oversight and 

Investigations. Committee on Energy and 

Commerce, House of Representatives 

Why GAO Did This Study 

HHS manages hundreds of complex 

programs benefiting the health and 

well-being of Americans, accounting 

for a quarter of all federal outlays. For 

fiscal year 2012, HHS IS responsible 

for approximately $76 billion in 

discretionary spending and for an 

estimated $788 blUion in mandatory 

spending. The size and critical mission 

of the two largest HHS programs, 

Medicare and Medicaid, make it 

imperative that HHS is fiscally prudent 

yet vigilant in protecting the 

populations that depend on these 

programs. In recent years, GAO has 

identified shortcomings and 

recommended actions to enhance 

operations and correct inefficiencies in 

Medicare and Medicaid, and HHS has 

implemented many recommendations, 

resulting in billions of dollars in 

savings. Because agencies now must 

do more with less, recommendations 

not yet implemented are opportunitIes 

for further conserving HHS funds and 

strengthening oversight of programs 

serving the nation's most vulnerable 

populations 

GAO was asked to testify on issues 

related to HHS's budget. This 

statement draws from GAO's prior 

work, including work on these two 

high-risk programs, in whIch GAO 

made recommendations related to 

(1) the management of Medicare and 

(2) the need for additional oversight of 

Medicaid, To the extent informatIon 

was available, GAO updated the status 

of these recommendations. 

View GAO-12-719T. For more information, 

contact James Cosgrove at (202) 512-7114 or 

cosgroveJ@gao.gov or Carolyn L Yocom at 

(202) 512-7114 or yocomc@gao.gov 

DEPARTMENT OF HEALTH AND HUMAN 

SERVICES 

Opportunities for Financial Savings and Program 

Improvements in Medicare and Medicaid Remain 

What GAO Found 

Over the past several years, GAO has made a number of recommendations to 

the Centers for Medicare & Medicaid Services (CMS)-an agency within the 

Department of Health and Human Services (HHS)-to increase savings in 

Medicare fee-for-service and Medicare Advantage (MA), which is a private plan 

alternative to the traditional Medicare fee-far-service program. Open 

recommendations that could yield billions of dollars in savings remain in many 

areas, such as the following: 

Minimizing improper payments and fraud in Medicare. GAO 

recommended that CMS require contractors to automate prepayment 

controls to identify potentially improper claims for medical equipment and 

supplies, expand current regulations to revoke billing privileges for home 

health agencies with improper billing practices, designate authorized 

personnel to evaluate and address vulnerabilities in payment systems, and 

enhance payment safeguards for physicians who use advanced imaging 

services. 

Aligning coverage with clinical recommendations. GAO recommended 

that eMS provide coverage for services recommended by clinical experts, as 

appropriate, given cost-effectiveness and other criteria. 

Better aligning payments to MA plans. To ensure that payments to MA 

plans refiect the health status of beneficiaries, GAO recommended that eMS 

more accurately adjust for differences between MA plans and traditional 

Medicare providers in reporting beneficiary diagnoses. GAO also 

recommended that CMS cancel the MA Quality Bonus Payment 

Demonstration because its design precludes it from yielding meaningful 

results. 

GAO has made recommendations to CMS regarding Medicaid program 

oversight. Open recommendations remain in many areas. such as the following: 

Improving oversight of Medicaid payments. GAO recommended that 

CMS adopt transparency requirements and a strategy to ensure that 

supplemental payments to providers have been reviewed by CMS. These 

supplemental payments are separate from and in addition to those made at 

states' regular Medicaid rates. 

Ensuring Medicaid demonstrations do not increase federal liability. 

GAO recommended that eMS revise its approval process for demonstrations 

to ensure they are budget neutral, which GAO subsequently referred to 

Congress as a matter for consideration. 

The size of Medicare and Medicaid requires CMS to focus continually on the 

appropriateness of the methodology for payments that these programs make and 

the pre- and postpayment checks that can help ensure that program spending is 

appropriate, overpayment recovery is expedient, and agency practices with 

regard to operations for these programs are efficient. Therefore, GAO urges 

HHS to ensure action is taken on open recommendations to advance its 

performance and accountability. 

_____________ United States Government Accountability Office 
22 


78988.008

Chairman Stearns, Ranking Member DeGette, and Members of the 

Subcommittee: 

We are pleased to be here today to discuss budget considerations at the 

Department of Health and Human Services (HHS). As the federal 

government's principal agency for protecting the health of Americans and 

providing essential human services, especially for vulnerable populations, 

HHS manages over 300 highly complex programs, which account for 

almost a quarter of all federal outlays. For fiscal year 2012, HHS is 

responsible for approximately $76 billion in discretionary spending and 

approximately $788 billion in outlays of mandatory spending. With this 

funding, HHS provides health care insurance for one in four Americans 

through its two largest programs-Medicare and Medicaid-and 

administers more grant dollars than all other federal agencies combined. 

HHS also funds disease research and prevention, oversees the safety 

and effectiveness of medical products, and helps ensure that the nation is 

prepared to respond to public health emergencies, among other things. 

HHS's size, diverse programs, and critical mission render its finances 

particularly important as Congress and the administration seek to 

decrease the cost of government while improving its performance and 

accountability. 

In recent years, we have examined a broad range of issues, identified 

program design and oversight shortcomings, and made numerous 

recommendations to enhance agency operations. In particular, many of 

these recommendations relate to the Medicare and Medicaid programswhich are the responsibility of the Centers for Medicare & Medicaid 

Services (CMS), an agency within HHS. HHS has implemented many of 

these recommendations, resulting in billions of dollars of savings. Other 

recommendations have led to program improvements that, while not 

always quantifiable, have nonetheless enhanced the efficiency of agency 

operations. For example, in 2004, we reported on CMS's management of 

its Medicare Secondary Payer debt, which occurs when Medicare pays 

for services that are subsequently determined to be the financial 

responsibility of another payer. 1 CMS's implementation of our 

recommendation that it reduce the number of contractors managing this 

workload resulted in savings of $86 million from 2006 through 2010. More 

Medicare Secondary Payer: Improvements Needed to Enhance Debt Recovery 

Process, GAO·04·783 (Washington, D.C.: Aug. 20, 2004). 

Page 1 GAO·12-719T 
23 


78988.009

recently, greater savings have been realized as a result of work on CMS's 

oversight of states' Medicaid supplemental payment arrangements. 2 In 

2007, we reported on a CMS oversight initiative established in response 

to our work, which increased the agency's scrutiny of state Medicaid 

financing arrangements and resulted in savings of approximately 

$3.4 billion from fiscal year 2007 through 2012.3 

While HHS has successfully implemented many of our recommendations, 

our remarks today will focus on spending for which HHS is responsible in 

the context of recommendations we have made that it has yet to 

implement and that we therefore consider open. Specifically, we will 

concentrate on our recommendations to improve the Medicare and 

Medicaid programs. We have designated both as high-risk programs, in 

part because of their size, complexity, susceptibility to improper 

payments, and the need to improve program management. 4 The 

recommendations that we will discuss include those that were recently 

made, those not yet fully implemented, and others for which no actions 

have been taken, although several years have elapsed since they were 

made. These recommendations-some of which could result in financial 

savings-include those that address (1) missed opportunities for savings 

in the management of Medicare and (2) the need for additional oversight 

of Medicaid. 

Our testimony today draws on our prior products, issued from January 

2007 through April 2012, including our work on overlap and duplication of 

federal programs that may result in inefficient use of taxpayer funds. 5 To 

the extent that information was available, we updated the status of HHS's 

2Medlcaid supplemental payments are payments separate from and in addition to those 

made at states' regular Medicaid rates. 

3GAO, Medicaid Financing.- Federal Oversight Initiative Is Consistent with Medicaid 

Payment Principles but Needs Greater Transparency, GAO-07-214 (Washington, D.C.: 

Mar. 30. 2007). 

<1GAO, High-Risk Series: An Update, GAO~11-278 (Washington, D.C .. February 2011). 

5GAO, 2012 Annual Report: Opportunities to Reduce Duplication, Overlap and 

Fragmentation, Achieve Savings, and Enhance Revenue, GAO-12-342SP (Washington, 

D.C.: Feb. 28, 2012); Follow-up on 2011 Report: Status of Actions Taken to Reduce 

Duplication, Overlap, and Fragmentation, Save Tax Dollars. and Enhance Revenue, 

GAO-12-453SP (Washington. D.C.: Feb. 28. 2012): and Opportunities to Reduce Potential 

Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue, 

GAO~11~318SP (Washington, D.C.: Mar. 1.2011). 

Page 2 GAO·12·719T 
24 


78988.010

Missed Opportunities 

for Savings in 

Medicare 

Medicare Fee-for-Service 

implementation of these recommendations in May 2012. Detailed 

information on the scope and methodology for our prior work can be 

found in the reports that we have cited throughout this testimony. We 

conducted the underlying performance audits in accordance with 

generally accepted government auditing standards. Those standards 

require that we plan and perform the audits to obtain sufficient, 

appropriate evidence to provide a reasonable basis for our findings and 

conclusions based on our audit objectives. We believe that the evidence 

obtained provides a reasonable basis for our statement today. 

In the past several years, we have made a number of recommendations 

for eMS to address missed opportunities for savings in the Medicare 

program, which the agency has not fully implemented. These include 

recommendations related to the Medicare fee-for-service (FFS) and 

Medicare Advantage (MA) programs. 

Minimizing improper payments and fraud. We have a body of issued 

and ongoing work about improper payments in Medicare. In 2007, we 

reported on program integrity activities conducted by eMS contractors to 

minimize improper payments for medical equipment and supplies. 6 We 

recommended that eMS require its contractors to develop automated 

prepayment controls to identify potentially improper claims when billing 

reaches atypical levels. eMS agreed with the recommendation, but has 

not implemented it. The agency has added other prepayment controls to 

flag claims for services that were unlikely to be provided in the normal 

course of medical care. However, implementing our recommendation and 

adding additional prepayment controls could enhance identification of 

improper claims before they are paid to reduce reliance on "pay and 

chase" strategies. 7 In 2009, we reported that fraudulent and abusive 

practices in home health agencies, such as overstating the severity of a 

beneficiary's condition, contributed to Medicare home health spending 

and utilization.8 To strengthen controls on improper payments in home 

Medicare: Improvements Needed to Address Improper Payments for Medical 

Equipment and Supplies, GAO-07-59 (Washington, D.C.: Jan. 31, 2007). 

7We have ongoing work updating eMS's progress in implementing prepayment controls, 

8GAQ, Medicare: Improvements Needed to Address Improper Payments in Home Health, 

GAO-09·185 (Washington. D.C.: Feb. 27, 2009). 

Page3 GAO-12·719T 
25 


78988.011

health agencies, we recommended that CMS amend current regulations 

to expand the types of improper billing practices that are grounds for 

revocation of billing privileges. CMS told us that it has begun to explore its 

authority to expand the types of practices that are grounds for revocation 

of billing rights. We believe that CMS should do so expeditiously. 

In 2010, we recommended that CMS designate responsible personnel 

with authority to evaluate and promptly address vulnerabilities identified to 

reduce improper payments' CMS concurred with this recommendation 

and has begun to implement this process, but does not yet have written 

policies and procedures for a fully developed corrective action process 

that includes monitoring of actions taken. '0 Likewise, we recently testified 

before the Senate Committee on Finance regarding CMS efforts to 

combat Medicare fraud." We reiterated our prior recommendation and 

noted that CMS could do more to strengthen provider enrollment 

screening to avoid enrolling those intent on committing fraud, improve 

pre- and postpayment claims review to identify and respond to patterns of 

suspicious billing activity more effectively, and identify and address 

vulnerabilities to reduce the ease with which fraudulent entities can obtain 

improper payments. 

Enhancing payment safeguard mechanisms. In 2008, we reported on 

rapid spending growth for advanced imaging services. '2 We 

recommended that CMS examine the feasibility of adding front-end 

approaches, such as prior authorization, to improve payment safeguard 

mechanisms. CMS has not implemented our recommendation, but is 

currently engaged in a demonstration project to assess the 

appropriateness of physicians' use of advanced diagnostic imaging 

services furnished to Medicare beneficiaries. 

Medicare Recovery Audit Contractmg: Weaknesses Remain in Addressing 

Vulnerabilities to Improper Payments, Although Improvements Made to Contractor 

Oversight, GAO-10~143 (Washington, D,C.: Mar. 31. 2010). 

lOWe have ongoing work updating eMS's progress in implementing these 

recommendations. 

11GAO, Medicare: Important Steps Have Been Taken, but More Could Be Done to Deter 

Fraud, GAO·12-671T (Washington, D.C.: Apr. 24. 2012). 

;2GAO, Medicare Part B Imaging Services: Rapid Spending Growth and Shift to 

Physician Offices Indicate Need for eMS to Consider Additional Management Practices, 

GAO-08-4S2 (Washington. D.C.: June 13, 2008). 

Page 4 
26 


78988.012

Medicare Advantage 

Aligning coverage for services with clinical recommendations. We 

reported in early 2012 that Medicare beneficiaries' use of preventive 

services did not always align with the U.S. Preventive Services Task 

Force's recommendations, '3 We concluded that opportunities exist to 

improve the appropriate use of preventive services through means such 

as revising coverage and cost-sharing policies and educating 

beneficiaries and physicians. In the case of osteoporosis screening, for 

instance, Medicare coverage rules may preclude utilization of the 

recommended screening by all those for whom the service is 

recommended. Conversely, given that the Task Force recommended 

against prostate cancer screening for men aged 75 or older, the absence 

of cost sharing for that population may encourage inappropriate use of 

this service. To better align preventive service use with clinical 

recommendations, we recommended that CMS provide coverage for 

Task Force recommended services, as appropriate, given costeffectiveness and other criteria. In response to our recommendation, the 

agency slated that it had recently used its authority to expand benefits to 

cover several new preventive services. This additional coverage, 

however, does not address the misalignment that remains between 

Medicare coverage for certain services and the corresponding Task Force 

recommendations. We also offered a matter for congressional 

consideration. We suggested that Congress consider requiring 

beneficiaries to share the cost of the services if they receive services the 

Task Force recommends against. 

Better reflecting beneficiary health status in payments to MA plans. 

In 2010, the federal government spent about $115 billion on the MA 

program, a private plan alternative to the Medicare FFS program. In 

January 2012, we reported that CMS could achieve billions of doliars in 

additional savings by more accurately adjusting for differences between 

MA plans and Medicare FFS providers in the reporting of beneficiary 

diagnoses. '4 CMS uses this diagnosis data and other information to 

construct a risk score for each beneficiary. Higher risk scores result in 

13GAO, Medicare: Use of Preventive Services Could Be Better Aligned with Clinical 

Recommendations, GAO-12-81 {Washington, D.C.: Jan. 18, 2012}. 

14GAO, Medicare Advantage: eMS Should Improve the Accuracy of Risk Score 

Adjustments for Diagnostic Coding Practices, GAO-12-51 (Washington, D.C.: Jan 12, 

2012). 

Page 5 GAO-12·719T 
27 


78988.013

increased Medicare payments to plans, while lower risk scores result in 

reduced Medicare payments to plans. Risk scores should be the same 

among all beneficiaries with the same medical conditions and 

demographic characteristics, regardless of whether they are in MA or 

Medicare FFS. MA plans have an incentive to code diagnoses more 

comprehensively because doing so affects plan payments, which is not 

the case in Medicare FFS. CMS is required by law to make an adjustment 

to MA risk scores to bring them in line with those of Medicare FFS. In this 

report, we found that CMS's adjustment for diagnostic coding differences 

was too small. We estimated that MA beneficiary risk scores in 2010 were 

from 4.8 to 7.1 percent higher than they likely would have been if they 

had been enrolled in FFS, while CMS's adjustment for diagnostic coding 

differences was only 3.4 percent. Compared to CMS's analysis, our 

analysis incorporated more recent beneficiary data and accounted for 

additional beneficiary characteristics that affect risk scores, such as 

health status and sex. A revised methodology that incorporated this 

information could have saved Medicare between $1.2 billion and 

$3.1 billion in 2010 in addition to the $2.7 billion in savings from the 

adjustment CMS made. We expect that savings in 2011 and future years 

would be even greater. CMS has continued to use its 2010 adjustment 

method for 2011 and 2012, even though both we and CMS noted an 

upward trend in the impact of coding differences over time. To improve 

the accuracy of the adjustment made for differences in coding practices 

over time, we recommended that the Secretary of HHS direct the 

Administrator of CMS to incorporate the most recent data available in its 

estimates; identify and account for all years of diagnostic coding 

differences that could affect the payment year for which any adjustment is 

made; account for the upward trend of the annual impact of coding 

differences in its estimates; and to the extent possible, account for all 

relevant differences in beneficiary characteristics between the MA and 

Medicare FFS populations. CMS stated that it found our findings 

informative, but did not comment on our recommendations. 

Canceling the MA Quality Bonus Payment Demonstration. We 

recently reported that CMS could achieve billions of dollars in savings by 

canceling the MA Quality Bonus Payment Demonstration-which CMS's 

Office of the Actuary has estimated will cost more than S8 billion over 

Page 6 GAO-12-719T 
28 


78988.014

Need for Additional 

Oversight of Medicaid 

10 years.'5 Rather than implement the quality bonus payments prescribed 

in the 2010 Patient Protection and Affordable Care Act (PPACA), as 

amended, CMS is conducting a nationwide demonstration to test whether 

a scaled bonus structure would lead to larger and faster annual quality 

improvement for MA plans at various performance levels. Compared with 

PPACA's quality bonus payment system, the demonstration extends the 

bonuses to average-performing plans, accelerates the phase-in of the 

bonuses for plans with above-average performance, and increases the 

size of the bonuses in 2012 and 2013. We found that the demonstration's 

estimated $8.35 billion cost offsets more than one-third of PPACA's MA 

payment reductions during its 3-year time frame and that most of the 

additional spending will go to average-performing plans rather than to 

high-performing plans. The MA Quality Bonus Payment Demonstration 

dwarfs all other Medicare demonstrations-both mandatory and 

discretionary-conducted since 1995 in its estimated budgetary impact. It 

is at least seven times larger than that of any other Medicare 

demonstration conducted since 1995 and is greater than the combined 

budgetary impact of all those demonstrations. For a variety of reasons, 

the design of the demonstration precludes a credible evaluation of its 

effectiveness in achieving CMS's stated research goal. We therefore 

believe that it is unlikely that the demonstration will produce meaningful 

results. Accordingly, we recommended that the Secretary of HHS cancel 

the demonstration and allow the MA quality bonus payment system 

established by PPACA to take effect. HHS did not concur with our 

recommendation, stating that it believed the demonstration supports a 

strategy to improve the delivery of health care services, patient health 

outcomes, and population health. 

We have conducted a substantial body of work on Medicaid program 

management. Our recommendations have involved a variety of topiCS and 

have included different aspects of payment arrangements with states. 16 

15GAO, Medicare Advantage~ Quality Bonus Payment Demonstration Undermined by High 

Estimated Costs and Design Shortcomings, GAO~ 12-409R (Washington. D.C.: Mar. 21, 

2012). 

16We recently testified about eMS's oversight of Medicaid program integrity. See GAO, 

Medicaid: Federal Oversight of Payments and Program /ntegn"ty Needs Improvement, 

GAO-12-674T (Washington, D.C.: Apr. 25, 2012). We also have ongoing work In thIS area. 

Page 7 GAO·12-719T 
29 


78988.015

Improving oversight of supplemental payments. We have reported on 

varied financing arrangements involving supplemental paymentsdisproportionate share hospital (DSH) payments that states are required 

to make to certain hospitals and other non-DSH supplemental 

payments-that increase federal funding without a commensurate 

increase in state funding." Our work has found that while a variety of 

federal legislative and eMS actions have helped curb inappropriate 

financing arrangements, gaps in oversight remain. For example, while 

there are federal requirements designed to improve transparency and 

accountability for state DSH payments, similar requirements are not in 

place for non-DSH supplemental payments, which may be increasing. 

From 2006 to 2010, state-reported non-DSH supplemental payments 

increased from 

$6.3 billion to $14 billion; however, according to eMS officials, reporting 

was likely incomplete. We made numerous recommendations aimed at 

improving oversight of supplemental payments. We have recommended 

that eMS adopt transparency requirements for non-DSH supplemental 

payments and develop a strategy to ensure that all state supplemental 

payment arrangements have been reviewed by eMS. eMS has taken 

action to address some of these recommendations, but we continue to 

believe additional action is warranted. eMS has raised concern that 

congressional action may be necessary to fully address our 

recommendations. 

Ensuring Medicaid demonstrations do not increase federal liability. 

HHS has authority to waive certain statutory provisions to allow states to 

implement Medicaid demonstrations that are likely to assist in achieving 

program objectives. By policy, these demonstrations should not increase 

federal costs. However, we reported in 2008 that HHS had approved two 

state Medicaid demonstrations that could increase the federal financial 

liability substantially. 18 This report followed earlier work that had identified 

similar concerns with HHS approvals of state Medicaid demonstrations 

that were not budget neutral. At the time of our work in 2007, HHS 

disagreed with our recommendation to improve the demonstration review 

17GAO, Medicaid: eMS Needs More Information on the Billions of Dollars Spent on 

Supplemental Payments. GAO-08-614 (Washington D.C.: May 30, 2008) and GAO, 

Medicaid: Ongoing Federal Oversight of Payments to Offset Uncompensated Hospital 

Care Costs Is Warranted, GAO-l0-59 (Washington D.C.: Nov. 20, 2009). 

18GAO, Medicaid Demonstration Waivers: Recent HHS Approvals Continue to Raise Cost 

and Oversight Concerns, GAO-08-87 (Washington, D.C.: Jan. 31, 2008). 

Page 8 GAO·12·719T 
30 


78988.016

process through steps such as clarifying the criteria for reviewing and 

approving states' proposed spending limits and ensuring that valid 

methods were used to demonstrate budget neutrality. Consequently, we 

referred this to Congress for consideration. HHS subsequently reported 

taking steps, such as monitoring the budget neutrality of ongoing 

demonstrations, to improve its oversight. However, no changes are 

planned in the methods used to determine budget neutrality of 

demonstrations to ensure that demonstrations do not increase the federal 

financial liability. 

Improving rate-selting methodologies. In August 2010, we reported 

that CMS had not ensured that all states were complying with federal 

Medicaid requirements that managed care rates be developed in 

accordance with actuarial principles, appropriate for the population and 

services, and certified by actuaries. i9 For example, we found significant 

gaps in CMS's oversight of 2 of the 26 states reviewed-CMS had not 

reviewed one state's rate setting in multiple years and had not completed 

a full review of another state's rate setting since the actuarial soundness 

requirements became effective in August 2002. Variation in practices 

across CMS regional offices contributed to these gaps and other 

inconsistencies in the agency's oversight of states' rate setting. This work 

also found that CMS's efforts to ensure the quality of the data used to set 

rates were generally limited to requiring assurances from states and 

health plans-efforts that did not provide the agency with enough 

information to ensure the quality of the data used. With limited information 

on data quality, CMS cannot ensure that states' managed care rates are 

appropriate, which places billions of federal and state dollars at risk for 

misspending. We made recommendations to improve CMS's oversight of 

states by implementing a mechanism to track state compliance with 

Medicaid managed care actuarial soundness requirements, clarifying 

guidance on rate-setting reviews, and making use of information on data 

quality in overseeing states' rate setting. HHS agreed with these 

recommendations, and as of May 2012, CMS officials indicated that they 

were reviewing and updating the agency's guidance and exploring the 

incorporation of information about data quality into its review and approval 

of Medicaid managed care rates. 

19GAO, Medicaid Managed Care: eMS's Oversight of States' Rate Setting Needs 

Improvement, GAO-10-B10 (Washington, D.C.: Aug. 4, 2010). 

Page 9 
31 


78988.017

Concluding 

Observations 

GAO Contacts and 

Staff 

Acknowledgments 

Improved financial stewardship of federal programs is becoming 

increasingly important as the pressure to reduce spending mounts. In an 

agency as large as HHS, the need for vigilance in continuously seeking 

out cost savings cannot be overstated. In our work, we have examined 

many aspects of HHS operations and made recommendations to help 

HHS prevent unnecessary spending, save money, recover funds that 

should rightfully be returned, improve the efficiency of agency operatiDns, 

and imprDve service fDr beneficiaries. HHS has implemented many Df our 

recommendations that have proven to be financially beneficial while also 

enhancing program management However, there are still 

recommendations we have made that remain open, While we recognize 

that SDme of the recDmmendatiDns we have highlighted today are 

relatively new, Dthers are several years old, HHS has made clear that it is 

cDmmitted tD imprDving the nation's health and well-being while 

simultaneously contributing to deficit reduction, We therefore urge HHS tD 

expedite action on our open recommendations to further advance its 

performance and accountability, 

Chairman Stearns, Ranking Member DeGette, and Members of the 

Subcommittee, this completes our prepared statement We would be 

pleased to respond to any questions that you may have at this time, 

If you or your staff have any questions about this testimony, please 

contact us at (202) 512-7114 or cosgrovej@gao.gov and 

yocomc@gao,gov, Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this 

statement GAO staff who made key contributions to this testimony are 

listed in appendix I. 

Page 10 GAO·12-719T 
32 


78988.018

Appendix I: GAO Contacts and Staff 

Acknowledgments 

GAO Contacts 

Staff 

Acknowledgments 

(291047) 

James Cosgrove, (202) 512-7114 or cosgrovej@gao.gov 

Carolyn L. Yocom, (202) 512-7114 or yocomc@gao,gov 

In addition to the contacts named above, Geri Redican-Bigot!, Assistant 

Director; Kelly DeMots; Helen Desaulniers; David Grossman; Elizabeth T. 

Morrison; and Kate Nast made key contributions to this statement. 

Page 11 
33 


78988.019

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34 


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35 

Mr. STEARNS. Thank you. 

And with that, I understand, Ms. Yocom, you are here to assist 

if we have any questions. You are sort of a detail expert? 

Ms. YOCOM. That is correct. 

Mr. STEARNS. Let me start by—Mr. Cochran, I think you just 

heard Mr. Cosgrove indicate in his opening statement many things 

he has recommended you have not done. Isn’t it true that the 

President has committed to conducting an exhaustive line-by-line 

review in the spending budget to reduce unnecessary waste, fraud 

and abuse? Isn’t that true? Yes or no. 

Mr. COCHRAN. Yes. We go through an exhaustive review each 

year. 

Mr. STEARNS. And the idea was to increase efficiency and to overall provide ways to do better with less. I think that was the idea, 

and in fact, that is what the GAO had indicated to you, that we 

want to do more with less. I think we have a hard realizing—the 

statistics I gave you this morning in my opening about the huge 

number of employee increase and the amount of money you have 

got, it doesn’t appear that you are actually doing more with less. 

And when I hear Mr. Cosgrove talk, he noted that they have implemented some of the recommendations but not all the GAO recommendations to conserve HHS funds and strengthen the oversight 

of the program. So I guess the question is, why haven’t you implemented many other detailed recommendations that he mentioned 

including one that caught my eye was dealing with bonuses that 

he brought to bear on your watch. So I guess the main question 

is, considering what we see here, for instance, canceling the MA 

Quality Bonus Payment Demonstration program. Why haven’t you 

implemented all the other things that he suggested? 

Mr. COCHRAN. Well, CMS has leadership for managing Medicare 

and Medicaid, and as we heard, has made progress on a number 

of the recommendations. We have also incorporated a number of 

recommendations and findings in our annual budget request such 

as in the area of medical devices. We are finding efficiencies 

through identifying discretionary programs—— 

Mr. STEARNS. No. The question is, why haven’t you implemented 

the other recommendations? You have implemented some, is what 

Mr. Cosgrove said, but the ones he outlined, why haven’t you done 

those? 

Mr. COCHRAN. There are—— 

Mr. STEARNS. You don’t have the money? 

Mr. COCHRAN. Well, there are different reasons. Again, this is 

managed principally by CMS at the operating division level. In 

some cases, it could be an issue of whether or not they have existing authorities. In other cases CMS continues to work with and 

talk to GAO. 

Mr. STEARNS. OK. So you are working on them? Is that what you 

are saying? 

Mr. COCHRAN. In a number of areas. 

Mr. STEARNS. Now, canceling the MA Quality Bonus Payment 

Demonstration, there is an estimate, it could save $8 billion over 

10 years. Are you familiar with that recommendation? 

Mr. COCHRAN. I am familiar with the—— 

36 

Mr. STEARNS. Is there a reason why you didn’t implement that 

recommendation from the GAO? 

Mr. COCHRAN. The Secretary, as she has testified to the House, 

has indicated that HHS has made a policy decision to continue that 

demonstration. 

Mr. STEARNS. Even though the GAO said it should be canceled, 

you have agreed to override their recommendation. Is that true? 

Mr. COCHRAN. The position of the Department as articulated by 

the Secretary is to continue—— 

Mr. STEARNS. So you are going to override their recommendation? I understand. I just want to understand that if they make a 

recommendation you don’t agree with, you are just not going to implement it. 

I have a slide here that if possible I would like to bring out. The 

number of full-time equivalents, or FTEs, at HHS has been rising 

over the past several years. Is that true? Yes or no. I mean, you 

just confirmed to us that the budget continues to grow as does the 

number of full-time equivalent employees. In fact, the President’s 

request of Congress for HHS funding from year to year continues 

to rise. Isn’t that true? 

Mr. COCHRAN. The areas where we have had FTE growth are 

principally in the Food and Drug Administration, which is funded 

both by budget authority provided by the Congress and by user fees 

from industry as well as the Indian Health Service, which provides 

direct medical care to Indian Country and those populations. 

Mr. STEARNS. Mr. Cochran, the HHS was apparently absent from 

the list of the 15 agencies that were heeding the President’s April 

2009 order to Cabinet secretaries to identify a combined $100 million in budget cuts by July 2009. Wasn’t that true that you were 

absent from that? 

Mr. COCHRAN. HHS identified savings in two areas. That process 

is managed by OMB. You are correct that it was not carried in that 

memo. The two areas at HHS identified subsequent to the delivery 

of the memo are in data centers where we have consolidated data 

centers in CDC and FDA starting in fiscal year 2009, and the migration from paper to electronic filing principally in FDA but as 

well as CDC and ACF. 

Mr. STEARNS. Well, I think you can realize from this standpoint, 

it just seems odd that given the President has instructions in April 

2009 in his first major attempt to demonstrate a serious effort to 

cuts budgets and to streamline federal spending and at the same 

time HHS was apparently absent from the list of the 15 agencies 

that were heeding the President’s April 2009 order to Cabinet secretaries. So we just find that a little puzzling. 

And my time is expired. I recognize the ranking member, Ms. 

Schakowsky. 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. 

I would like to ask the witnesses some questions about Medicare’s fraud prevention efforts. Reducing fraud has been an Obama 

Administration priority, and we are seeing significant taxpayer 

savings as a result of these efforts. The Administration’s antifraud 

efforts recovered a record $4.1 billion, taxpayer dollars, last year. 

It is the second year in a row for a new record. The Administration 

has recovered a total of $10.7 billion over the past 3 years. ProsecuVerDate Nov 24 2008 15:44 Mar 05, 2013 Jkt 037690 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 112\112-142 CHRIS
37 

tions are way up from 797 in fiscal year 2008 to 1,430 in fiscal year 

2011, a more than 75 percent increase. So the Affordable Care Act 

gives HHS a broad range of new tools to reduce waste, fraud and 

abuse, a national screening program, and I heard Mr. Cosgrove 

talk about pre-screening for providers, enhanced screening for providers in high-risk areas like durable medical equipment and home 

health care, required disclosure of prior association with delinquent 

providers and suppliers, onsite visits as part of the enrollment 

process, new CMS powers to enact a moratorium on enrolling new 

providers, and new funding to fight fraud. 

So Mr. Cochran, can you offer some perspective on these new 

tools and how will they help CMS cut fraud? 

Mr. COCHRAN. Yes. As you know, this has been a major area of 

focus for the Administration. The number of recoveries has increased dramatically, as you note, in the last 3 years alone totaling 

$10.7 billion. Some of the authorities that CMS is now using that 

come specifically from the Affordable Care Act include efforts to 

create a risk-based screening process for new and enrolling providers. Also, importantly, CMS now has the express authority to 

suspend payments to a provider or supplier pending an investigation wherever there is a credible allegation of fraud. In addition, 

the Act, for example, requires face-to-face encounters between patients and practitioners prior to a physician certifying eligibility for 

Medicare’s home health, and the Act also provides resources that 

are available to CMS and our Office of Inspector General where we 

partner with the Department of Justice in our health care fraud 

and abuse control areas. 

Ms. SCHAKOWSKY. Mr. Cosgrove, would you agree that these new 

authorities under the Affordable Care Act will help HHS fight 

fraud? 

Mr. COSGROVE. With your permission, I would like to see if Carolyn Yocom could address the question. Carolyn is an expert both 

on the Medicaid program and on the overall program integrity efforts. 

Ms. YOCOM. Good morning. We would agree that there is more 

work for CMS to do and some elements of PPACA do help provide 

aspects of improvement. Our three areas where we would suggest 

that CMS continue to work have to do with the provider enrollment, making sure that those enrollments are strengthened and 

that there are core elements for provider compliance in place. 

A second area would be looking at post-payment claims review 

and also pre-payment claims review, which prevents the money 

from even going out the door until it is certain that it should. We 

have ongoing work in those areas. 

And then lastly, to look at weaknesses within identifying known 

vulnerable areas, and again, we have ongoing work in this area 

that we expect to be reporting on. 

Ms. SCHAKOWSKY. Thank you. 

The CBO has estimated these changes will save more than $7 

billion over the next 10 years, so clearly, and I think that CMS 

agrees, more needs to be done, but would you say that what is happening right now is a step in the right direction? 

Ms. YOCOM. Yes, it is a step in the right direction. We have not 

done work looking at the savings. That is CBO’s jurisdiction. 

38 

Ms. SCHAKOWSKY. And Mr. Cochran, in your testimony, you 

noted something that many of us saw on the news just last week, 

107 people were charged in a $450 million Medicare fraud scheme, 

the largest Medicare fraud ever. What can you tell us about the 

Administration’s efforts that resulted in this bust? 

Mr. COCHRAN. Well, one key aspect in this effort is a collaboration between HHS and the two components, principally being the 

Centers for Medicare and Medicaid Services and our Office of Inspector General, and the Department of Justice. Another key aspect is that it involves both taking intelligence from headquarters 

but also importantly, focusing with agents and experts on the 

ground in nine key areas, strike forces, they are called, in higher 

risk areas and that has enabled HHS and DOJ to really step up 

enforcement by having more direct involvement where we face the 

greatest amount of fraud. 

Ms. SCHAKOWSKY. Mr. Chairman, I know my time is up, but I 

went out on a drive-around with the strike force and I would recommend that it is very worthwhile for members in those areas to 

do that. Thank you. 

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

Mr. Terry from Nebraska is recognized for 5 minutes. 

Mr. TERRY. Thank you, Mr. Chairman. 

Continuing with you, Mr. Cochran, so I better understand our efforts on waste, fraud and abuse, there is nothing that frustrates 

our constituents more than abuse of something so sacrosanct as our 

Medicare and Medicaid programs. Especially, seniors really feel 

cheated when somebody is stealing from the program. They feel 

like they have been stolen from. Of course, there are different levels. There is outright fraud, there is improper payments, which 

may not be fraud but still payments that shouldn’t have been 

made. 

So I want to break this up into a couple different areas. First of 

all, on page 2 of your statement, Mr. Cochran, when I was reading 

it, you mentioned that you seek opportunities or the agency seeks 

opportunities to make investments that will yield greater returns 

in the future such as the Health Care Fraud and Abuse Control 

program that has returned over $20 billion to the Medicare trust 

fund since 1997 and then has a return of investment of 7.2 to 1 

but yet we are hearing today from statements that there has been 

hundreds of billions saved in the last 2 years and $42 billion saved 

over the last 2 years. So that begs the question of whether there 

are more health care fraud and abuse control programs that 

weren’t referenced in your statement. 

Mr. COCHRAN. The initial description of recoveries to the trust 

funds including the $10 billion over the last 3 years is in reference 

to the work that we are doing with DOJ in health care fraud and 

abuse. The larger numbers, if I understand your question, relate to 

not necessarily fraud and abuse. Some of the savings in the 2013 

budget as well as the Affordable Care Act relate to fraud and 

abuse. Others are reductions in payments again often informed by 

GAO’s analysis as well as efforts to improve quality. 

Mr. TERRY. It is reduced payments. Is that an issue of correcting 

improper payments? Because reduction just means you are paying 

somebody less. 

39 

Mr. COCHRAN. Well, in the area of improper payments, there can 

be—— 

Mr. TERRY. No, I am just asking for further clarification when 

you said that those further savings came from reductions of payments. I want to know if those were improper payments that were 

pulled back or just simply a reduction like a doctor was paid $48 

instead of $50. 

Mr. COCHRAN. I see. Yes. My reference to reduced payments relates to areas where CMS, GAO, in some cases OIG, and we also 

work closely with the Office of Management and Budget in this 

area where we have found that reimbursements are sort of out of 

balance or exceed what should arguably be provided for the level 

of service. Through legislative changes and budget proposals, those 

reimbursements are—— 

Mr. TERRY. Well, let us follow up on that, Mr. Cosgrove. GAO 

has designated Medicare and Medicaid as high-risk programs due 

to their susceptibility for improper payments estimated to be about 

$65 billion in fiscal year 2011. 

Mr. Cosgrove or Ms. Yocom, does HHS appear to be doing everything it can to address the enormity of the improper payments 

issue? 

Ms. YOCOM. There is always more to do. Any improper payment 

rate that is as high as it is right now, there is more work to be 

done. 

Mr. TERRY. Specifically then, can you outline what their efforts 

have been in the last 2 years? 

Ms. YOCOM. I can give you a general sense of some places where 

CMS has moved forward. They have strengthened some elements 

of their provider enrollment. They have designated risks across the 

levels of providers so they have a sense of who to keep the best eye 

on. 

Where they need to do more work has to do with fingerprinting 

those providers, making sure that there are final regulations to ensure disclosure, and then also some core elements for provider compliance programs. That would allow them to strengthen more. That 

is one example. 

Mr. TERRY. I am just confused. If I could have another 5 seconds? 

Fingerprint our providers? Our doctors have to be fingerprinted to 

be reimbursed? 

Ms. YOCOM. For criminal background checks.[The reference to 

fingerprinting was made in conjunction with the statement regarding the level of risk associated with different providers. In 2012, 

GAO reported on CMS’s plans to subject high-risk providers and 

suppliers to fingerprint-based background checks.] 

Mr. STEARNS. The gentleman from Texas, Mr. Barton, is recognized for 5 minutes. 

Mr. BARTON. Thank you, Mr. Chairman. 

We have all seen the reports in the last several months about 

some of these abuses of public funds, the GSA and their trips to 

Las Vegas, the Secret Service and their escapades in South America. We all hope that those are exceptions and not the rule, that 

not everybody in the government behaves that way. 

But I look at HHS, and by the admission of the Inspector General, he doesn’t phrase it quite this way but it is an agency that 

40 

is almost not controllable because it is so big. So this subcommittee 

hopefully on a bipartisan basis is going to begin a process to determine what, if anything, can be done if we need to change statutory 

authority to regain control. Staff has indicated to me that at HHS, 

this is just a small example but it is big enough to have significance, that not just the travel budget at HHS but that the international travel budget is between $56 and $67 million per year, 

and then it has gone up 15 percent between fiscal year 2009 and 

fiscal year 2011. Why in heaven’s name, Mr. Cochran, would international travel be over $50 million a year and why would it be 

going up 5 to 10 percent a year? International. This is health domestically, Health and Human Services domestically. 

Mr. COCHRAN. The travel in 2011, as you noted, is $65 million. 

It was $57 million in 2010, $67 million in 2009. So relative to 2009, 

it is down just a little bit. But more to your question, the areas 

within HHS where there is the greatest amount of international 

travel are the Centers for Disease Control and Prevention, which 

operates directly funded programs in HIV/AIDS as well as global 

immunization areas like polio as well as executes on behalf of the 

Department of State major portions of the President’s emergency 

plan for AIDS relief. 

The second primary areas for international travel include the 

National Institutes of Health that does scientific work globally as 

well and the Food and Drug Administration. 

Mr. BARTON. Could we invite those people to the United States 

and have them pay their dime to come see us since we are the experts? Do we have to go overseas? I understand there needs to be 

some. I am not saying zero. But if the international travel budget 

is $50 million a year, it is good to know that it has gone down a 

little bit. Do you happen to know what the Secretary’s travel budget is? 

Mr. COCHRAN. I do not. We would be happy to get back to you 

on that. The Office of the Secretary overall has a smaller travel 

budget, and especially international travel budget. Within the Office of the Secretary, the main travel costs are the Office of Global 

Affairs, which again in partnership with CDC, NIH and FDA helps 

implement some of our Congressionally funded international missions, but I don’t know off the top of my head what—— 

Ms. SCHAKOWSKY. Would the gentleman yield for one sentence? 

Mr. BARTON. Sure. 

Ms. SCHAKOWSKY. The CDC and the FDA have both made clear, 

their travel budgets are down compared to those of the second term 

of the Bush Administration, so the trajectory is correct. 

Mr. BARTON. Well, that is good information. Let us keep it going 

that way. Let us keep the trend going. That is good to know. 

I have got one minute left. This is a standard question that I ask 

every agency that comes before us. Mr. Cochran, can you tell me 

of the 80,000 employees at HHS, how many of them have a government credit card? 

Mr. COCHRAN. I do not have that information with me or off the 

top of my head, but we would be happy to get back to you. 

Mr. BARTON. Do you have a government credit card? 

41 

Mr. COCHRAN. Yes, I was issued a credit card. I myself don’t 

travel, it is not in the nature of my work, so I haven’t used it for 

quite some time. 

Mr. BARTON. So you have one but you don’t use it? 

Mr. COCHRAN. I don’t use it often. That is correct. 

Mr. BARTON. Well, if you have it, you should be allowed to use 

it. 

Mr. COCHRAN. I just—— 

Mr. BARTON. I want the record to show, I have a government 

credit card issued to me by the United States Congress for travel, 

and I use it to put gasoline in my leased vehicle and I use it, as 

he said, on occasion when I travel domestically outside my district 

for airfare or hotel. I am not saying it is illegal or immoral to have 

one but I am saying that we ought to have an accountability protocol, and most of the federal agencies tend to issue them fairly liberally and tend not to oversee them, if at all. That is a standard 

question. 

My time is expired, Mr. Chairman. I yield back. 

Mr. STEARNS. I thank the gentleman, and the gentlelady from 

Tennessee, Ms. Blackburn, is recognized for 5 minutes. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. 

I want to thank our witnesses for being here. I think as you can 

hear from the questions that we are asking, it does appear that 

HHS is now too big to control, and listening to the GAO report certainly lends an understanding of that. You can go look after a couple of programs but you have got all this other spending that is 

going on that you can’t seem to get your hands around, as Mr. Barton said, the travel budget, and you have to say why in this time 

when our constituents are saying the federal government takes too 

much out of our pockets and it wastes money that we don’t have 

and it spends money on programs that we don’t want. Certainly, 

there is a disconnect between what the citizens want and what you 

all thing you have the right for whatever reason you feel entitled 

to spend money, the taxpayers’ money. 

Ms. Yocom, I wanted to come to you. In reading the testimony 

that you and Mr. Cosgrove had for us today, and in looking at how 

you have gone into look at the payments, the fraudulent payments, 

etc., in working with the States, have you all looked at the 

TennCare payment structure for Tennessee as you have audited 

the different states? 

Ms. YOCOM. We have looked at Tennessee with regard to the actuarial soundness requirements for Medicaid managed care but we 

haven’t done an intensive look at the rate-setting methodology 

itself. 

Mrs. BLACKBURN. OK. Thank you. I would be interested at some 

point when you all do that to know if you do look at that methodology, and since it is one of the early waiver programs and is kind 

of the test case for what is now Obamacare or managed care, I 

would be interested to see what you found. I know what my experience was as a Tennessee State senator and how the program failed 

to live up to what the promises were. 

Going back to Mr. Terry’s question, you mentioned some of the 

core elements that were needed for some fiscal soundness. Are you 

looking at implemented new technologies that will help with the 

42 

tracking and the payments and the disbursements and there is a 

way to put some more transparency into this process? Either of 

you. 

Ms. YOCOM. I want to make sure I understand. In terms of the 

review of payments within CMS and HHS? 

Mrs. BLACKBURN. Correct. 

Ms. YOCOM. There is, I think it is called IDR, and then 1–PI, one 

program integrity, which is a set of electronic review systems that 

look at claims overall in an attempt to combine them. This is important with respect to Medicare and Medicaid to get those claims 

in one place so they can do reviews and look for indications that 

there could be improper payments. 

Mrs. BLACKBURN. Patterns? 

Ms. YOCOM. Yes, patterns. 

Mrs. BLACKBURN. All right. And is that widely used? 

Ms. YOCOM. It is being used on the Medicare side. Medicaid is 

not yet up and running. We do have recommendations aimed at 

CMS putting a plan in place to make this more broadly available. 

Mrs. BLACKBURN. What kind of timeline is that installation moving forward on? 

Ms. YOCOM. I think one of our—I am pretty sure that one of our 

recommendations has to do with CMS developing a timeline. I do 

not believe at this point they have one. 

Mrs. BLACKBURN. OK. Thank you for that. 

Mr. Cochran, I want to come to you on the co-op program that 

was established under PPACA. OMB says they expect that the taxpayers may lose $370 million in this program from unpaid loans to 

nonprofit insurers. The estimate is that as many as 50 percent of 

the loans issued under this program may not be repaid. Are you 

familiar with these estimates? 

Mr. COCHRAN. I am not immediately familiar with the particular 

numbers you cite. We have them but I am familiar with the role 

and the process that OMB goes through for all loan programs to 

estimate a default rate that they use as a way of scoring the overall cost of the program. That then enables HHS to determine the 

number of loans that can be made within the appropriation that 

Congress provided. 

Mrs. BLACKBURN. Well, how can you know that you have them 

but you are not familiar with them when you are talking about a 

program that is expected to lose money? How can you be so 

dismissive of that? I mean, does that not concern me? 

Mr. COCHRAN. It was not my intention to be dismissive. I just 

don’t want to misquote numbers that I don’t have in my head, but 

I do know OMB plays a key role in setting those default estimates, 

which then informs HHS on the number of grants that can be 

made within the appropriation that is provided. 

Mrs. BLACKBURN. OK. Then let me ask you the question this 

way. How does stewardship of the taxpayer dollar figure in to the 

decisions, the departmental decisions, on the loans that you are 

going to approve or disapprove through this co-op program? 

Mr. COCHRAN. Well, we work with OMB on the establishment of 

that rate to determine what the default rate would be in order 

to—— 

Mrs. BLACKBURN. So you are accepting of the premise of default? 

43 

Mr. COCHRAN. In every program, there is some portion that for, 

you know, a variety of reasons—— 

Mrs. BLACKBURN. OK. I am out of time. Can I ask Mr. Cosgrove 

to follow up on this? 

Do you all have any advice for best practices or due diligence 

that would help them? I find it a little bit perplexing that I have 

a department with a trillion-dollar budget. You are flying all over 

the world. OMB says your loan program is set up to lose $370 million, and you work with them to set a default rate and it seems 

like that that is kind of standard operating procedure. Are we 

missing something in this, Mr. Cosgrove? Do you have any guidance that you would provide to him for how they could go about 

not planning to fail? I want you to succeed when you are dealing 

with taxpayer money but let us not plan to fail. 

Mr. COSGROVE. I am leery about providing any explicit guidance. 

This is something that we haven’t looked at before. We would be 

happy, but we haven’t looked at it, so—— 

Mr. STEARNS. The gentlelady’s time has expired. 

Ms. Christensen, are you ready, or do you want me to take one 

more on the right side? 

OK. I recognize Dr. Burgess for 5 minutes. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Clearly this is one of the most important hearings we will have 

all year. All of this information is important. I will never get to all 

the questions I have. I am going to submit some in writing, and 

Mr. Cochran, I trust that we will get those answers in a timely 

fashion. It is extremely important that we do. We have got some 

big decisions to make. 

In your testimony, you talked about unobligated balances, and I 

must tell you, I am concerned about that concept of money that 

was not spent for what it was intended and now we are using it 

just within the agency. And the reason it concerns me is, I don’t 

know precisely what the discretionary appropriation was but for 

the past 3 years it has been about $60 billion to $70 billion a year, 

so we are looking at a figure around $200 billion. You received 

money in the American Recovery Act? Is that right? In the stimulus bill? 

Mr. COCHRAN. HHS, yes, received—— 

Mr. BURGESS. How much? 

Mr. COCHRAN [continuing]. Appropriations in the stimulus bill. 

The largest—— 

Mr. BURGESS. Well, the aggregate number. It was well over $100 

million, was it not? 

Mr. COCHRAN. Yes. Some of the major portions—— 

Mr. BURGESS. OK, $100 million, and in the Affordable Care Act, 

there was pre-program money coming to HHS for implementation, 

so is it fair to say another $100 million in the Affordable Care Act? 

We are looking at half a trillion dollars in discretionary appropriations to HHS in the last 3 years. That is to say nothing of the mandatory money that you get to administer—to pay for the programs 

at Medicare and Medicaid. 

So this is an enormous amount of money that this agency has, 

and again, the concept of reprogramming money just bothers me. 

Either that should offset your next year’s appropriation or it should 

44 

be paid back to the federal Treasury to pay down the year’s deficit. 

Why doesn’t that happen? 

Mr. COCHRAN. That is what we are doing with the balances. My 

reference to using balances as a way to reduce the amount of new 

resources requested from Congress is specifically in areas where 

Congress provided them for a purpose and we are using those balances for that purpose. 

Mr. BURGESS. Here is the problem that we have. It was pretty 

much in evidence on this travel question that came up. Look, I get 

the fact that if the CDC did not go over to Geneva and literally run 

the World Health Organization, an outbreak of a deadly disease 

could be a serious problem on American soil, so I get the fact that 

that is important. But we have no level of detail. When we ask for 

your travel, here is this volume of dollars that is given. We really 

need the breakdown. How much travel was for CDC, how much 

was for HRSA? HRSA has got no business going other places in the 

world, so if they have an international travel item, that may be a 

red flag that this committee would want to know. And I am not 

picking on you because this has been a historic problem in Health 

and Human Services and the EPA, trying to get the level of detail 

in a budget, a balance sheet, that any private corporation could 

provide us if we were to ask it of them. You guys can’t do it, and 

I have this discussion with Mr. Larsen at CCIIO. We need a level 

of detail when we ask for budgetary information, so I am going to 

ask you, I don’t expect you to have it today but I am going to ask 

you for the budgetary, the line item budgetary information on these 

reprogrammed or unobligated funds and whether they were stimulus monies, PPACA monies or just regular discretionary appropriation monies because, again, we can’t know how to help you 

until we really understand where the problems are. 

Now, Ms. Yocom, you made a statement about the improper payment rate as high as it is now. How many dollars are we talking 

about in this improper payment rate? 

Ms. YOCOM. I am not sure I can give you a specific—— 

Mr. BURGESS. Well, get one for me because I would like to have 

it, because this improper payment rate makes a big difference. We 

are struggling with what to do with the Sustainable Growth Rate 

formula. We would like to be able to offset that. If there is a 10- 

year budgetary window that equals or surpasses the amount of 

money it would take to place the Sustainable Growth Rate, we 

could solve a huge problem in Medicare, a huge problem for HHS. 

Why can’t we have that information so we can solve that? 

Now, you referenced also the concept of, or I guess, Mr. Cosgrove, 

it was you when you talked about a red flag when billing reaches 

atypical levels. Did I hear you right when you said that? 

Mr. COSGROVE. That is correct. 

Mr. BURGESS. So in other words, when the money going out the 

door is just clearly a red flag or an outlier, CMS should be able, 

or HHS should be able to say, uh-oh, we have got a problem here. 

Is that correct? 

Mr. COSGROVE. That is correct. We are recommending that they 

increase their ability to look for patterns so that—— 

Mr. BURGESS. OK. Here is a pattern for you. More money spent 

on cosmetic braces in the State of Texas in Medicaid dollars than 

45 

the rest of the country combined. How is that not a red flag? What 

are all these great metrics that have been put in place and you 

didn’t catch this? This was 2 or 3 weeks ago. These guys are laughing at you. You have got to do a better job with this. 

I know my time is expired, Mr. Chairman. I hope we will have 

an opportunity to go to a second round because this information is 

so critical, but I know Ms. Christensen just got here so I will yield 

back. 

Mrs. BLACKBURN [presiding]. The gentleman yields back. 

Ms. Christensen, you are recognized for 5 minutes. 

Dr. CHRISTENSEN. Thank you, Madam Chair. 

We all recognize that we are in fiscally challenging times and the 

responsibility to ensure that we are making financially sound decisions is shared by all of us. But when it comes to health and health 

care, making financially sound decisions is more complicated than 

just slashing budgetary line items based on a price tag without any 

consideration really given to the long- and even the short-term economic consequences of those decisions. 

So Madam Chair, if we want to talk seriously about decreasing 

the long-term health care spending, we should talk about the cost 

controls in the Affordable Care Act and how we can build on them. 

So I would like to ask the witnesses some questions about just how 

we do that. 

Mr. Cosgrove, with a system that truly rewards doctors, for example, for quality and which decreases financial incentives to deliver unnecessary care, would that decrease Medicare costs? 

Mr. COSGROVE. That is definitely the direction that we need to 

be moving in. Right now, we have a system that pays for volume 

of services, and the more providers do and the more expensive the 

services they provide, the more they get paid, and that is the 

wrong incentive. 

Dr. CHRISTENSEN. Right. Thank you. And the Affordable Care 

Act takes a big step in that direction with a number of delivery 

system reforms in order to make Medicare and in time the broader 

health care system pay for value. It develops accountable care organizations so Medicare will pay one provider to coordinate all of a 

senior’s care rather than paying many providers, no matter what 

the cost. It experiments with bundled payments so that Medicare 

would pay a lump sum for quality care rather than separately for 

each treatment. Also, within the Affordable Care Act, it implements the Independence at Home Demonstration Project to bring 

home-based primary care to some of Medicare’s sickest and most 

frail seniors who are unable to make it to a doctor’s office. 

Mr. Cochran, these delivery systems reforms in the Affordable 

Care Act, are they projected to reduce the growth of Medicare expenditures? 

Mr. COCHRAN. Yes. The—— 

Dr. CHRISTENSEN. The accountable care and—— 

Mr. COCHRAN. Yes. There are a number of quality provisions in 

the Act, there are payment reforms in the Act, there are program 

integrity reforms in the Act. That on total I believe CBO extended 

the Medicare solvency from 2016 to 2024. 

Dr. CHRISTENSEN. Right. In fact, the Congressional Budget Office 

has estimated the Affordable Care Act will reduce the federal defVerDate Nov 24 2008 15:44 Mar 05, 2013 Jkt 037690 PO 00000 Frm 00051 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 112\112-142 CHRIS
46 

icit by $210 billion this decade and more than a trillion in the following 10 years, and these are significant cost savings. We should 

be talking about how we can build on them instead of repealing the 

Affordable Care Act as the House Republican budget does. 

And Mr. Cochran, can you talk about what CMS is doing to make 

Medicare more efficient and save federal dollars? 

Mr. COCHRAN. There are a number of things that CMS is working on in the area of quality, there is the national initiative known 

as Partnership for Patients that is designed to improve safety and 

reduce readmissions, which both improves the quality of health as 

well as saves costs. There is a value-based purchasing effort to reward quality and efficiency in hospitals as well as public transparency efforts to provide more information about quality for nursing homes and other providers as well as accountable care organizations that are just being launched to encourage coordination and 

preventive care and bring down costs and improve quality. 

Dr. CHRISTENSEN. Thank you. 

These are all important steps, Madam Chair. These reforms all 

have one thing in common. They save taxpayer money and improve 

the quality of care without shifting costs to seniors or eroding the 

core basic benefits of the Medicare program, and in this way they 

stand in sharp contrast to the Republican budget. There is always 

a right way and a wrong way to cut the federal budget and reduce 

health care costs, and the Republican budget is exactly the wrong 

way. 

Mr. Cochran, I think I have a little more time. I wanted to ask 

you another question. The Joint Center for Political and Economic 

Studies released a report a couple years ago that found that eliminating racial and ethnic health disparities could save the Nation 

$1.24 trillion in direct and indirect medical costs over a 3-year period. In your testimony, you mentioned that one of your many responsibilities was to investigate a mix of investments that would 

improve the health and wellbeing of the Nation in a cost-effective 

manner. So given the extremely high costs to absorb every year 

that racial and ethnic health disparities are not eliminated, don’t 

you think that the national strategy that the Department of Health 

and Human Services has developed and is implementing right now 

is another component that would help to achieve the larger objective to improve the health and wellbeing of the Nation in a costeffective manner? 

Mr. COCHRAN. Yes. The work that the Office of the Assistant Secretary for Health and some of our key operating divisions are doing 

both to develop and implement the strategy is important as is the 

investments that the President’s budget proposes in key areas including the Indian Health Service that I mentioned earlier, the 

Ryan White HIV/AIDS program including for drug treatment as 

well as a number of programs across HRSA and CDC that target 

those populations that are most vulnerable. 

Dr. CHRISTENSEN. Thank you. 

Thank you, Madam Chair. 

Mr. STEARNS. And I recognize for 5 minutes the gentleman from 

Louisiana, Mr. Scalise. 

Mr. LOUISIANA. Thank you, Mr. Chairman. I appreciate you having this hearing as we have had a number of hearings on the budgVerDate Nov 24 2008 15:44 Mar 05, 2013 Jkt 037690 PO 00000 Frm 00052 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 112\112-142 CHRIS
47 

ets of the various agencies and things we are trying to do to control 

spending in Washington, and unfortunately, we don’t have enough 

people in Washington that are serious about controlling spending 

and that is why we have got over a trillion-dollar deficit again, and 

so I think it is important that we look at the budget and scrutinize 

it and ask some of the questions that our members have been asking. 

Mr. Cochran, HHS has requested a billion dollars in additional 

funding to implement the President’s health care law, and that is 

in addition to the billion that has already been appropriated for implementation when it was originally enacted in March of 2010. 

First of all, why the need for an additional billion dollars on top 

of the billion that was already in the original bill? 

Mr. COCHRAN. The original bill does include a billion, and the 

Congressional Budget Office initially estimated that it would cost 

roughly $1 billion per year to implement the Act. We have to date 

obligated roughly half of that billion dollars. The 2013 budget 

projects using the remainder this fiscal year in 2012 and the investment in 2013, and the proposed increase within the Centers for 

Medicare and Medicaid Services is to continue that effort. A major 

component within that request is to launch the health insurance 

exchanges, and there is a need for investments in 2013 in order to 

launch the exchanges in 2014 after which time they largely become 

self-sustainable. 

Mr. SCALISE. So where did you get this billion dollars from? Did 

you just redirect it from other parts of the HHS budget? You had 

a billion dollars that was literally just lying around to go and take 

and move to to put in the area of the funding for Obamacare that 

was under, I guess underanticipated? 

Mr. COCHRAN. The original billion that was in the Affordable 

Care Act or the billion—— 

Mr. SCALISE. The additional billion, the additional billion dollars 

that has been requested. 

Mr. COCHRAN. So in formulating the annual budget, we go 

through each operating division and we work closely with the Office of Management and Budget to identify savings both to reduce 

the deficit overall but also to fund priority areas. We have identified roughly $2 billion in savings across HHS in our discretionary 

budget, which enabled us to invest proposed investments in the Indian Health Service, biodefense preparedness as well as CMS. 

Mr. SCALISE. Have you all ever thought about investing in reducing the deficit if you have got too much money in your budget and 

you have gone through and you have identified areas where you 

can savings? You know, because one of the things I am looking at, 

the President issued an Executive Order directing you all to establish a plan to reduce 20 percent below 2012 levels for costs associated with travel, employee information technology, printing, other 

things, and from what we are looking at here, the quote, unquote, 

savings that you identify here, it looks like you are using those to 

spend in other areas to absorb cost increases. So are you actually 

saving in terms of reducing the deficit or just moving money from 

one area of your budget to another area of your budget to keep 

spending at the same levels? 

48 

Mr. COCHRAN. The 2013 President’s budget includes savings of over $300 billion on the mandatory side by slowing the rate of 

growth in—— 

Mr. SCALISE. So not just actual cuts, you are just slowing the 

rate of growth? You are not actually reducing from prior levels? 

Mr. COCHRAN. It is reductions relative to the baseline that CBO 

establishes and then—— 

Mr. SCALISE. You know, in Washington, unfortunately, people 

use a different set of languages than American people use across 

the country. Our small business owners, families, when they sit at 

their kitchen table and they say we have to balance our budget, we 

have to cut because we have less money this year, they don’t say 

well, instead of having a 10 percent increase, we will just spend 5 

percent more and call that a cut. They don’t call it a cut. A cut 

means if you were spending $50,000 one year and you got $45,000 

the next year, that is a cut. You don’t say well, we had $50,000 last 

year, we are going to get $55,000 next year and so that is a cut 

because we wanted 60. I know that is kind of chic to use that 

around here but, you know, people back home don’t get it when 

they hear wait a minute, the agency actually has more money and 

they are talking about how they reduced spending and they had 

less money than the proposal from the President’s request. It is 

still more money, and they want to see—again, we are borrowing 

a trillion dollars than what we are spending. 

I want to ask a couple questions as I am running out of time. 

You know, I think some of the other members had asked some 

questions about travel and even fleet vehicles. If you can just get 

the committee the number of vehicles that you have that are assigned to employees that they are able to take home. Can you get 

the committee that number, how many vehicles HHS has throughout the agency that are allowed to be taken home by employees? 

Mr. COCHRAN. I can tell you that across HHS, our Program Support Center carries these statistics and reports there are 4,900 vehicles across HHS. Those aren’t all for the purpose of executive 

travel or vehicles that someone would take home necessarily. They 

are primarily in the areas for movements of providers in the Indian 

Health Service. 

Mr. SCALISE. I am not asking you to give me the number. If you 

have the number here right now, that is great, but if you don’t 

have the number, can you get the committee that number, the 

number of vehicles that are allowed to be taken home by employees? 

Mr. COCHRAN. Yes. Well, I can tell you that we have—— 

Mr. SCALISE. It is a yes or no question. I am just asking if you 

can get me that number. 

Mr. COCHRAN. I will certainly work—I guess my only hesitation 

is, I am not sure how we have the data in terms of whether it is 

coded as—— 

Mr. SCALISE. You are not sure how many people are taking home 

vehicles? 

Mr. COCHRAN. No, we know that there are 4,900 vehicles. We 

will do our best to provide the information you are requesting. 

Mr. SCALISE. And if you can do the same thing on—we have 

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national travel. Can you give me within the travel budget how 

much was spent on first-class travel? Because there have been 

some outside reports that have looked at tens of millions of dollars 

in cost savings we can achieve just by having government employees when they are flying on the taxpayer nickel to fly coach, not 

economy, not business class or first class. And so if you can give 

me the amount of money that is spent on either first-class or business-class travel? Is that something you can get to the committee? 

Mr. COCHRAN. We will work toward that. Travel overall, we are 

reducing by 17 percent, and the vast majority of travel is coach 

now. I don’t know that there is much first class or business class. 

Mr. SCALISE. We have seen some outside agencies have looked at, 

some outside groups have looked at this and seen tens of millions 

of cost savings that they could achieve, and I am sure your agency 

is one like most agencies that have the ability to do that. I am just 

asking if you can get us that information. 

Mr. STEARNS. The gentleman’s time has expired. 

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

Mr. STEARNS. If you could accommodate him, that would be helpful. 

We are going to do a second round of questioning, and I will start 

out. Mr. Cochran, there is a Health and Human Services Executive 

order. It is 13589. It proposed just under $900 million in cuts to 

administrative expenses. Is that true? Does that ring a bell? 

Mr. COCHRAN. Yes, sir. 

Mr. STEARNS. OK. 

Mr. COCHRAN. The HHS target is $876 million. 

Mr. STEARNS. OK. And it is noted in the budget of fiscal year 

2013 that ‘‘agencies are redirecting some savings to absorb other 

cost increases and fund priorities activities.’’ Isn’t that correct? 

Mr. COCHRAN. In some areas, our budget requests have come 

down—— 

Mr. STEARNS. Yes or no to that statement. Is that correct, that 

you in fact in your opening statement said, ‘‘We are seeking opportunity to make investments today that will yield greater returns in 

the future such as the health care fraud and abuse control system 

has returned’’—in other words, what I am saying is, that you have 

indicated that your agencies are redirecting some savings that you 

find here elsewhere. Isn’t that true? 

Mr. COCHRAN. In some cases, that is correct. In other cases, we 

have reduced agency budgets, and that was made possible by—— 

Mr. STEARNS. OK, but in some cases—you are—OK. So I guess 

what we are concerned about that are you taking this Executive 

Order 13589 where you have roughly $900 million in savings or 

cuts in administrative expenses, are you considering that savings 

that you are redirecting elsewhere into other government programs? Is that true? Is that what is happening? 

Mr. COCHRAN. In some areas, take, for example—— 

Mr. STEARNS. So the answer is yes? 

Mr. COCHRAN [continuing]. Where we are investing that—— 

Mr. STEARNS. So the answer would be yes? Some would be yes, 

in some cases you are taking the so-called cuts and you are funneling them into other areas and you are considering them savings 

that you can use elsewhere. I am just trying to show to the comVerDate Nov 24 2008 15:44 Mar 05, 2013 Jkt 037690 PO 00000 Frm 00055 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 112\112-142 CHRIS
50 

mittee here that the impact of these cuts are going to obviously be 

significantly less if you take that $876 million that you are saving 

in administrative costs and you are funneling it into another program, there won’t be any savings. 

Let me move on to the next question. You are aware that Health 

and Human Services has the most highly paid civil servants anywhere in the federal government? Would that be yes? Would that 

be true? 

Mr. COCHRAN. Health and Human Services is subject to the same 

general schedule rules—— 

Mr. STEARNS. Well, let me just say, the fact is, you have the most 

highly paid civil servants anywhere in the federal government. For 

example, over 90 of the 100 most highly paid civil servants anywhere in the federal government work for Health and Human Services and these 90 are capped at $375,000 a year. Isn’t that true? 

The cap is $375,000 a year? 

Mr. COCHRAN. That is in reference to a specific, what is called 

Title 42 authority. 

Mr. STEARNS. The answer is yes, they have a $375,000 cap. That 

is true. That is correct, isn’t it? 

Mr. COCHRAN. Under one specific authority. Most agency employees are under the—— 

Mr. STEARNS. And over 650 of the federal government’s 1,000 

highest paid civil servants work at Health and Human Services 

and its component agencies. Isn’t that true? 

Mr. COCHRAN. The majority of Title 42 employees that are under 

a different authority for a different salary level are at the National 

Institutes of Health and they are scientific—they are primarily scientific positions in—— 

Mr. STEARNS. Well, we have them including—these high-paid salary people are CDC, FDA, the Indian Health Service and NIH. 

Isn’t that true where most of these highly paid civil servants are? 

Isn’t that true? 

Mr. COCHRAN. Yes, the largest number are at NIH. You referenced the Indian Health Service. There are some providers, medical doctors—— 

Mr. STEARNS. And in 2009, more than 530 NIH employees appear to have earned salaries of over $200,000 and above, and that 

is more than the President’s own Cabinet. Isn’t that true? 

Mr. COCHRAN. Under this particular authority. The vast majority 

of HHS employees are under the same system. 

Mr. STEARNS. So I think the dichotomy here is that the Cabinet 

officials are getting less than 530 of NIH employees, and then if 

you look at the salaries of these 90 of the most highly paid, which 

have a cap of $375,000, you see that these people are getting well 

paid even compared to some of their colleagues here, not to mention how they are well paid compared to the private sector. 

My last area of concern here is the—let us see. We have the 

Health Reform Implementation Fund. The President proposed an 

additional $1 billion in discretionary funding for the implementation of the PPACA through the Center for Consumer Information 

and Insurance Oversight at CMS. As of January 31st, we have 

some figures here that stop at January 31, 2012. I guess the quesVerDate Nov 24 2008 15:44 Mar 05, 2013 Jkt 037690 PO 00000 Frm 00056 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 112\112-142 CHRIS
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tion is, can you update this graph to take us up further beyond 

January 31st? 

Mr. COCHRAN. Yes, sir. 

Mr. STEARNS. OK. Mr. Cochran, how has CMS used its resources 

from the implementation fund since January? Can you tell us that? 

Although we don’t have the data, can you just maybe bring us up 

to speed on how much of the fund remains? 

Mr. COCHRAN. Of the billion, $471 million has been obligated as 

of February 29th. Some of that is for personnel. More of it is for 

contractual services and the expenditures have been for closing the 

Part D coverage gap, one of the key provisions in the Act, as well 

as developing the new value-based purchasing models for Medicare 

providers that we talked about earlier as well as helping plan and 

prepare for the establishment of the State and federal exchanges. 

Mr. STEARNS. All right. My time is expired. 

Ms. Schakowsky is recognized for 5 minutes. 

Ms. SCHAKOWSKY. I wanted to just set the record straight on a 

couple of things. 

Regarding the salaries under the Title 42 program, Dr. Harold 

Varmus, the Director of NIH under the Bush Administration, who 

now runs the Sloan-Kettering Cancer Center, said, ‘‘If we don’t pay 

enough to keep the best, we condemn ourselves to mediocrity.’’ So 

my understanding, Mr. Cochran, is, we are trying to at least keep 

competitive to hire scientists that are required to have doctoral degrees in order to receive those high salaries. Is that not true? 

Mr. COCHRAN. Yes. 

Ms. SCHAKOWSKY. I also wanted to put into the record, Mr. 

Chairman, this is an article from Healthwatch, the Hill’s health 

care blog, ‘‘House Republicans who say taxpayer funds went to 

spay and neuter dogs in Nashville have the story wrong. There was 

a spay and neuter clinic but it was funded by a Touchmark charities grant to the Nashville Humane Association,’’ said Alisa 

Haushalter, whose job includes directing a federally funded program in the city known as the CPPW. That is the one you were 

referring to here. 

So maybe the entire program—it says, ‘‘As a partnering agency, 

we would have had staff members that were there greeting people 

at the event and so forth but the funding was not from us.’’ So I 

would like to put that in the record. 

Mr. STEARNS. By unanimous consent. 

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

Mr. STEARNS. We will also, if you have no objection, put in these 

two flyers that I have given you, the one on the temporary veterinarian clinic initiative as funded in part by the Department of 

Health and Human Services as part of the Metro Public Health Department’s Community Putting Prevention to Work campaign, 

which shows and corroborates that, together with these two web 

pages, which also corroborate. We will put both of them in by 

unanimous consent. 

Ms. SCHAKOWSKY. OK. 

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

Mr. STEARNS. So ordered. 

Ms. SCHAKOWSKY. I wanted to talk about the Republican budget 

priorities and women. From Medicare and Medicaid to the PrevenVerDate Nov 24 2008 15:44 Mar 05, 2013 Jkt 037690 PO 00000 Frm 00057 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 112\112-142 CHRIS
52 

tion and Public Health Fund, HHS is responsible for programs that 

millions of women rely on for critical health care needs, and I want 

to talk about some of the drastic changes to these programs that 

my Republican colleagues have recently endorsed through the 

budget and appropriations process. 

The House Republican budget would turn Medicaid into a block 

grant, repeal the important new benefits under the Affordable Care 

Act and cut federal funding for Medicaid by a staggering $1.7 trillion over the next decade. 

Mr. Cochran, am I correct that Medicaid covers more than 40 

percent of all births in the United States? 

Mr. COCHRAN. I don’t have that statistic with me but that sounds 

roughly correct. 

Ms. SCHAKOWSKY. And so what Medicaid does is, it offers a solution for low-income pregnant women who can’t afford private insurance by covering maternity and prenatal care. Dramatic cuts to the 

program truly would have a disastrous effect on women and their 

children. 

The Medicare program also provides important benefits for 

women. Mr. Cochran, am I correct that 56 percent of all Medicaid 

beneficiaries are women? 

Mr. COCHRAN. That sounds correct. Again, I am sorry, I do not 

have that data with me. 

Ms. SCHAKOWSKY. Well, the House Republican budget ends the 

guarantees we have made to our seniors by turning Medicare beneficiaries over to private insurers. It shifts costs to seniors. In fact, 

CBO has said that by 2030, beneficiaries could pay up to $2,200 

more because of these changes, disproportionately falling on women 

because they have longer life expectancies. 

I am looking at you, Mr. Cosgrove. Did you want to say something in this regard? 

Mr. COSGROVE. No, I am simply acknowledging the fact that 

women do tend to live longer and so especially on the Medicare 

program you do expect to see more women, more older women. 

Ms. SCHAKOWSKY. Thank you. 

Mr. Cochran, can you tell us the purpose of the Prevention and 

Public Health Fund? 

Mr. COCHRAN. Yes. The Prevention and Public Health Fund, the 

primary purpose is to support programs, activities, interventions at 

the State and local levels to prevent chronic disease, to reduce the 

use of tobacco, prevent obesity, help communities target health 

issues in their area. It is also being used to support childhood immunizations as well as some activities in the infectious disease 

area like hepatitis C. 

Ms. SCHAKOWSKY. And isn’t it also true that $140 million of the 

fund goes toward breast and cervical cancer screening services? 

Mr. COCHRAN. As proposed in the 2013 budget, the fund will support those activities, yes. 

Ms. SCHAKOWSKY. Which would help pay for 326,000 women to 

get breast cancer screening and for 284,000 women to get cervical 

cancer screenings and Republicans are voting to take it away. 

And Mr. Chairman, I would just say this is a sad example of how 

the Republican budget is dangerous for women, and I yield back. 

Mr. STEARNS. The gentlelady yields back. 

53 

The gentlelady from Tennessee is recognized for 5 minutes. 

Mrs. BLACKBURN. Thank you, Mr. Chairman. 

And Mr. Cochran, I wanted to come back to you, if I could. In 

my opening statement, I mentioned that I wanted to hear from you 

regarding the steps that you all had taken to comply with the 

President’s call for agencies to identify $100 million worth of savings. Are you able to articulate that list or do you have a list? 

Mr. COCHRAN. Yes—at that time we identified savings in the 

area of data centers at CDC and FDA as well as the migration 

from paper to electronic filing primarily at FDA as well as at CDC 

and ACF. In addition, we have subsequently identified—— 

Mrs. BLACKBURN. Hold on just a moment there. So you have 

identified CDC, FDA and the paper to electronic filing. So what 

portion, how much money from each of those? 

Mr. COCHRAN. Well, for the President’s Executive order in these 

administrative areas, we are reducing spending by 21 percent. 

Mrs. BLACKBURN. And the budget was increased how much prior 

to your making this reduction? 

Mr. COCHRAN. The 2013 budget, it is a decrease of $218 million. 

It is roughly flat on the discretionary spending. 

Mrs. BLACKBURN. Your 2010 budget and the stimulus funding 

was a good percentage. I will get that number for you so that you 

have it. I don’t have that exact number in front of me. So if you 

could submit in writing the answers to those, that list, that would 

be very helpful for us. We want to be able to see what you all have 

done to actually make these spending reductions and to live that. 

One other question for you along the same line. We are working 

through reconciliation looking at the sequestration and reconciliation, so what are you all at HHS doing to prepare for reconciliation and the reductions that are going to come? 

Mr. COCHRAN. Well, prepare for reconciliation or for sequestration? For sequestration, the Administration’s position is that the 

2013 budget provides specific savings proposals that if enacted 

would enable us to achieve the reductions to the deficit without relying on sequestration. 

Mrs. BLACKBURN. OK. So you feel like you are ahead of the 

game? 

Mr. COCHRAN. Well, the President’s proposals overall, including 

HHS and other departments would enable savings with specific reductions—— 

Mrs. BLACKBURN. Let us do this. Why don’t you submit in writing what you all are doing to make preparations to meet the sequestration numbers and to meet the reductions that we are going 

to continue to bring forward? May I remind you, you are an agency 

that as we read your reports and as we hear from your Inspector 

General, who should be here with us today and is not, and as we 

listen to GAO, it is very evident to us that you all are too big to 

manage. You have gotten too unwieldy. You are into areas where 

you should not necessarily be. You are spending money in ways 

that you should not, ought not to be spending it, and it is our responsibility to come back and to exercise some oversight on that. 

That is what we are doing here today. 

And I know that maybe you weren’t provided all of the information that you needed to have to handle this hearing today but even 

54 

if you were not properly given the information, with all due respect 

to you, let us just be sure that we submit all of this writing because it is something that it is important to us. It is important to 

our constituents. It is important to the hospitals and to the providers that serve all of these individuals that walk through their 

doors every day wanting health care and we come up here and we 

talk to you all and we see a lot of the money that ought to be going 

out there to individuals, to enrollees, to the health care system is 

spun up, tied up, wadded up over here in HHS and it is something 

that we want to get our hands around and help you all be more 

efficient and do a better job for the taxpayers, and I yield back. 

Mr. STEARNS. The gentlelady yields back. 

Ms. Christensen, I am glad you are here. Thank you. You are 

recognized for 5 minutes. 

Dr. CHRISTENSEN. Thank you, Mr. Chairman. 

Before I ask my questions, Ms. Yocom and Mr. Cosgrove, I wanted to just highlight on page 5 part of your testimony on aligning 

coverage with recommendations of the U.S. Preventative Services 

Task Force. I am sure you are aware that there have been several 

recent recommendations coming from that task force that not only 

I but others consider questionable, and they don’t take into account 

some of the outlying groups like racial and ethnic minorities. For 

example, in the breast cancer recommendations, black and Jewish 

women are at risk for breast cancer at early ages, it didn’t seem 

to take that into account. And it didn’t take into account the high 

prostate cancer incidence in African American men with their recent prostate screening recommendations. So at least think that to 

tie reimbursement too tightly to all of their recommendations can 

be harmful to some groups in our population and will deny them 

access to some needed care because they won’t be able to afford it. 

So I don’t know how you address it but I wanted to call your attention to that because some of their recommendations are very questionable and really don’t take into account the entire population in 

the United States. Go ahead. 

Mr. COSGROVE. I just wanted to say that CMS has the authority 

to consider the recommendations of the task force when they are 

making coverage decisions. We didn’t independently—because of 

that authority, we didn’t independently go on and have experts 

that would look behind the task force recommendations. 

Dr. CHRISTENSEN. But you still recommended CMS provide coverage for task force recommendation services, you do say as appropriate. 

Mr. COSGROVE. Correct. 

Dr. CHRISTENSEN. OK. Thank you. 

But, you know, I listen to my Republican colleagues, and HHS 

houses agencies that Americans rely on every day to protect their 

health and keep them safe like the FDA, National Institutes of 

Health, Centers for Disease Control. The House Republican budget 

would result in drastic cuts and undercut the essential functions of 

these agencies, and I want to explore some of those implications of 

those cuts. 

So Mr. Cochran, my understanding is that the Republican budget 

would make across-the-board cuts in discretionary spending. Is 

that correct? 

55 

Mr. COCHRAN. There are across-the-board cuts associated with 

sequestration that CBO estimates roughly 8 percent—— 

Dr. CHRISTENSEN. But they are going beyond that. 

Mr. COCHRAN. The House budget resolution does set spending 

levels not specific to HHS but government-wide that are below 

those established in the Budget Control Act for 2013 and 2014. 

Dr. CHRISTENSEN. And I am correct that this discretionary 

spending is what provides a significant amount of budget to the 

agencies like the Food and Drug Administration, NIH and our new 

Institute of Minority and Health Disparities and CDC? 

Mr. COCHRAN. Yes. The majority of resources for our discretionary agencies outside of the entitlements is regular budget authority. Almost all of NIH’s budget is provided that way. FDA is 

supported by a combination of budget authority and user fees. 

Dr. CHRISTENSEN. So to single out just one, can we talk about 

what FDA’s essential functions are? Can you tell us about what 

their essential functions are? 

Mr. COCHRAN. Yes. FDA’s mission is to protect the public’s 

health by ensuring the safety, the efficacy, the security of human 

as well as veterinary drugs. They work on biologics and devices. 

They also work to protect the U.S. food supply. They are having 

new responsibility over the regulation of tobacco products to reduce 

youth smoking. And they are working to accelerate the review and 

approval of medical countermeasures to protect the public against 

bioterrorism attacks. 

Dr. CHRISTENSEN. Right, and these cuts would jeopardize the 

safety of our drugs, our vaccines and medical services. And then at 

NIH, the center of U.S. medical research, one of the greatest research institutions in the world, but that Republican budget would 

mean that NIH would have less money available for cutting-edge 

research into breast cancer, HIV, Alzheimer’s and others and 

health disparities. 

So how much funding does NIH currently receive to conduct scientific research? 

Mr. COCHRAN. NIH’s budget is $30.7 billion. 

Dr. CHRISTENSEN. Thank you. And we know that that money is 

well spent. As a matter of fact, I believe it is level funded in 2013 

and that does not allow them to really make the kinds of research 

investments that they need. Their studies have led to development 

of the MRI, how viruses cause cancer, the mapping of the human 

genome with all that is going to lead to, and they boost our economy through medical breakthroughs. According to one study, for 

every dollar of public funding for scientific research, the drug industry gets a $3 return. So deep cuts to NIH would be an irresponsible fiscal decision. 

So I appreciate your helping to explain the impact of the Republican budget, not just on Medicare and Medicaid but on other important government programs. So thank you for your testimony 

and your answers. 

Mr. STEARNS. I think to the gentlelady, I would say that we are 

trying to control the budget. We will have to do some cost cutting 

somewhere if we are going to do that. 

The gentleman from Texas, Dr. Burgess, is recognized for 5 minutes. 

56 

Mr. BURGESS. Thank you, Mr. Chairman. 

I do want to go on record as saying there has been no bigger critic of the Title 42 program than myself, but I understand the necessity of having a Title 42 program. If we have the best virologists 

on the face of the earth, we want to be able to pay him or her an 

amount commensurate with their ability. If we have the person 

who sequenced the human genome working at NIH, we want to be 

able to pay him or her to a degree commensurate with their ability. 

But we don’t need to be paying entry-level biologists and chemists, 

and I won’t say that HHS has been as guilty of that as EPA has 

been over the years but it just points out that this committee must 

have oversight. If we are willing to spend more money to have top 

researchers in their field, we must have oversight into how those 

dollars are spent. 

Off the editorial statement now. Let me just ask a question, Mr. 

Cochran. Dr. Christensen is very critical of the budgetary process. 

It is OK within her purview to do that. You may have heard or 

read in the papers the Supreme Court heard oral arguments about 

the Affordable Care Act at the end of March. Did you read about 

that? 

Mr. COCHRAN. Yes, I am aware. 

Mr. BURGESS. And then there was a lot of chatter afterwards 

that maybe something might happen to the Affordable Care Act. 

Can’t know, won’t know for another 6 weeks. But are you doing 

anything within your agency to prepare for the Supreme Court 

voiding a portion or all of the Affordable Care Act? 

Mr. COCHRAN. The HHS again principally the Centers for Medicare and Medicaid Services as well as other components are focused on implementing the Act, which is the law of the Congress. 

Mr. BURGESS. Focused? They are going on light speed. I am 

sorry. Continue on. 

Mr. COCHRAN. I mean, I will stop there. That is where we are 

putting our attention is to carry out—— 

Mr. BURGESS. So there are no contingency plans, what if this 

thing gets struck down by the highest court in the land? 

Mr. COCHRAN. The focus is on implementing current law. 

Mr. BURGESS. So the answer is no, there are no contingency 

plans? We are not paying attention to current events surrounding 

our agency, and if the world comes crashing down around our ears 

on June 30th, so be it. Is that the impression you wish to give the 

committee? 

Mr. COCHRAN. I wouldn’t phrase it that way. I would say that we 

are—— 

Mr. BURGESS. I am trying to help you. 

Mr. COCHRAN. We are focused on implementing—CMS is focused 

on implementing the Act that is current law. 

Mr. BURGESS. So by inference, there are no contingency plans, 

and if your world comes to an end, then so be it. 

Well, let me just ask you this. We have heard all this great testimony about all the wonderful tools you have under the Affordable 

Care Act for combating fraud and waste. A lot of this just sound 

like good management practices, and I suspect a lot of those were 

going on and we could study GAO reports from previous years and 

find that many of those things have already been going on. But if 

57 

there are specific tools that you were granted under the Affordable 

Care Act, what happens July 1st if the Affordable Care Act is no 

more? Do you stop prosecuting fraud in the Department of Health 

and Human Services? Do you just give up? 

Mr. COCHRAN. CMS, our Office of Inspector General, DOJ, they 

have—CMS, for example, has tools that have been enhanced 

through the Affordable Care Act but they have been working in 

this area for a long period and have funding and authorities that 

preceded the Act. 

Mr. BURGESS. So you wouldn’t just throw up your hands and say 

we give up, fraudsters win, we are going to just hand the money 

over to the crooks, right? 

Mr. COCHRAN. This is one of the highest priorities of the Department and it is an area of great focus. 

Mr. BURGESS. The loss of the Affordable Care Act would not inhibit your abilities to fight fraud. Is that correct? Is that a fair 

statement? 

Mr. COCHRAN. The law provides CMS with additional authorities 

that have enabled them to—that are enabling them to do a better 

job. 

Mr. BURGESS. If I may, you wouldn’t grind to a halt on July 1st 

or 2nd if the Supreme Court so rules? 

Mr. COCHRAN. There are authorities and funds that precede the 

Act, and it is a major area of focus, a major priority for the Department. 

Mr. BURGESS. Again, suffice it to say, fraud enforcement is not 

going to go away if the Affordable Care Act is struck down by the 

Supreme Court. You and I don’t know the answer to that at this 

point so it is obviously a point of some conjecture. 

What is not a point of conjecture is the sequestration that is 

going to happen. I have to tell you, I was a little disturbed by your 

answer to Representative Blackburn’s questions about sequestration. You are giving us the impression that the President’s budget 

for 2013 actually included those sequestration cuts. 

Mr. COCHRAN. I am sorry, no. The President’s budget includes 

specific targeted reductions that would make sequestration unnecessary to achieve the same end. Sequestration is an approach of 

across-the-board reductions—— 

Mr. BURGESS. Sequestration, you can’t just say it is not necessary. I mean, it is a law. The President signed it. Surely he remembers that. 

Mr. COCHRAN. And the policy of the Office of Management and 

Budget and of the Administration is to work with the Congress to 

find specific reductions and avoid an across-the-board approach to 

finding savings. 

Mr. BURGESS. Well, OK. Sequestration starts when? January 1st 

of 2013? And what are the efforts that are ongoing now in working 

with the Congress to identify? You have 8 percent of your discretionary budget, if I understand things right. Does that sound right, 

8 percent, that you have to cut? 

Mr. COCHRAN. CBO estimates, right, just roughly 8 percent 

would be not just—but across discretionary spending. 

Mr. BURGESS. Well, that is a lot more than the reductions that 

are proposed in the President’s budget for 2013, correct? 

58 

Mr. COCHRAN. That is correct. The President’s budget proposes 

a mix of—and not just in HHS but government-wide a mix of discretionary reductions, mandatory reductions, and other—— 

Mr. BURGESS. Well, correct me if I am wrong, but the way the 

law reads, the law that the President signed is that sequestration 

comes from HHS, right? 

Mr. COCHRAN. No, the law created a committee to find specific 

savings. Sequestration was a backstop to that. The Administration’s position is to—— 

Mr. BURGESS. That was the Super Committee. They failed. We 

all got that. They fell to earth. So January 1st, you have to come 

up with 8 percent in cuts in your agency. How are you proposing 

to do that? 

Mr. COCHRAN. The way sequestration is modeled is to have a 

strict across-the-board reduction as opposed to the targeted savings 

that the Administration’s budget proposals would—— 

Mr. BURGESS. And are you preparing for those across-the-board 

reductions within your agency? You are the Budget Director, right, 

or the Assistant Budget Director? 

Mr. COCHRAN. I am, and the focus is on working with Congress 

to identify specific reductions as opposed to relying on across-theboard reductions. 

Mr. BURGESS. So what specifically have you done to work with 

Congress? You have got 6 months before this thing kicks in. 

Mr. Chairman, I beg some indulgence. You have given other people extra time. This is of critical importance. 

Mr. STEARNS. The gentleman asks for unanimous consent for another 30 seconds. 

Mr. BURGESS. Would the gentleman please answer the question? 

What have you done to work with this committee, this Congress in 

order to avoid that 8 percent across-the-board reduction that you 

are going to see January 1st? 

Mr. COCHRAN. Well, the President submitted a budget in February that has a number of proposals and seeks to work with the 

Congress to have those proposals be enacted. 

Mr. BURGESS. With all due respect, that budget was pure fantasy. It did not garner a single vote in the House of Representatives on either the Republican or Democratic side. I think we are 

going to have to do better than that. Would you not agree with 

that? 

Mr. COCHRAN. I would agree we have a long way to go and—— 

Mr. BURGESS. So what is your proposal to work with this committee and Congress to avoid the sequestration across-the-board 

cuts to identify those areas of savings and/or cuts that can occur? 

Mr. STEARNS. The gentleman’s time has expired. You are welcome to answer the question, and if you can’t, perhaps you could 

come back and provide us written material. 

Mr. COCHRAN. By the way, our jurisdiction is just within the Department of Health and Human Services. We have proposed over 

$300 billion in specific reductions on the mandatory side as well as 

specific discretionary reductions. We briefed the Appropriations 

Committee on the discretionary budget. 

Mr. STEARNS. Would the gentleman from Texas like to go a third 

round? Because we could do that. 

59 

Mr. BURGESS. Yes, I would be happy to. 

Mr. STEARNS. I am not sure we will all use it, but I think I will 

take a third round and perhaps the ranking member and then we 

will come back to the gentleman, and he may not need his full 5 

minutes. 

I think the point that the gentleman from Texas is making is 

pretty important here, and I think as the Subcommittee on Oversight, we should have an understanding of what is going to happen 

with sequestration. The Impoundment Control Act and the AntiDeficiency Act are going to complicate the budgeting process for 

your department. I think we all agree. The Act includes two main 

prohibitions. One, agencies can’t spend more money than they have 

or spend money before they have it, and two, agencies cannot accept voluntary services. On the other hand, the Impoundment Control Act requires that agencies obligate the amount that Congress 

has appropriated. So in anticipation of the sequestration, what is 

the Department’s plan to prevent violating these two laws? 

Mr. COCHRAN. For our discretionary budget, it has in pretty recent history often been the case that at the beginning of the fiscal 

year we are under a continuing resolution where we don’t yet know 

what Congress will provide for that full year, and in those situations, we operate at a lower level with respect to not releasing all 

grant funds, and in particular in this case under a continuing resolution in the fall leading up to January would take the same approach. 

Mr. STEARNS. Mr. Cosgrove, do you have any comments that you 

might have relative to the sequestration and what Mr. Cochran has 

said? 

Mr. COSGROVE. I don’t specifically. My understanding is that 

agencies would need instructions from OMB, and those have not 

been provided, but I am not an expert on the sequestration law. 

Mr. STEARNS. Ms. Yocom, do you have anything you might add? 

Ms. YOCOM. I don’t. 

Mr. STEARNS. OK. Mr. Cochran, what percentage reduction 

amounts of cuts would hit HHS discretionary budget authority, for 

example, on NIH? Do you have any feel for that? 

Mr. COCHRAN. Under sequestration? 

Mr. STEARNS. Yes. 

Mr. COCHRAN. CBO estimates sequestration would be roughly 8 

percent, 7.8 percent. 

Mr. STEARNS. And that would be true on CDC too? 

Mr. COCHRAN. For the majority of funds, yes. 

Mr. STEARNS. FDA? 

Mr. COCHRAN. For the majority of funds, yes. 

Mr. STEARNS. OK. I think that is going to complete my comments. 

Ms. Schakowsky? 

Ms. SCHAKOWSKY. Thank you. 

I wonder if the gentleman and all those so interested in what 

HHS is doing to prepare for sequestration are equally as committed 

to the requirements for the defense budget under sequestration, 

which have been protested from day one on the Republican side of 

the aisle and have looked at the Prevention Fund as a way to help 

avoid cuts on the military side. 

60 

All this focus, which I agree, we want to cut all waste, fraud and 

abuse, we want to be absolutely efficient, and that frankly is why 

we passed the Affordable Care Act, or as I fondly call it, 

Obamacare. Is it not true, Mr. Cosgrove or Ms. Yocom, that the 

projection in savings under the Affordable Care Act is $210 billion 

over the next 10 years and $1 trillion over the 10 years after that, 

that repealing it would in fact raise the deficit? 

Mr. COSGROVE. CBO did estimate savings associated with passage of the Act. Yes, that is correct. 

Ms. SCHAKOWSKY. And at the same time, the Republicans added a $400 billion drug benefit program, unpaid for and with a prohibition that Medicare could even negotiate with the pharmaceutical 

companies for lower prices and have consistently opposed efforts to 

reduce the Medicare Advantage overpayments to insurance companies. So I am more than willing to roll up my sleeves with you and 

with HHS to figure out the ways that we can achieve needed savings in our health care spending but I just really find offensive the 

selective criticisms. I want to repeat that the travel budget is down 

from the second year of the Bush Administration, that they see a 

17 percent further cut. I don’t object to asking for the details but 

the affect here that somehow there is a disregard for saving taxpayer dollars I think is really misspent. In fact, I think we can look 

at how the Republican budget would increase Medicare fraud, and 

I want to ask a couple of questions about that. 

The Republican budget repealing the Affordable Care Act, which 

contains significant new tools for fraud detection and prevention, 

new resources to fight Medicare and Medicaid fraud, and so while 

Dr. Burgess was saying you are going to still fight fraud, but 

doesn’t the Affordable Care Act give you new tools to do that, Mr. 

Cochran? 

Mr. COCHRAN. It does. 

Ms. SCHAKOWSKY. And what is the typical return on investment 

for every dollar spent on Medicare fraud? 

Mr. COCHRAN. The return on investment for the last 3 years for 

our health care fraud and abuse account has been 7 to 1. 

Ms. SCHAKOWSKY. And would these significant budget cuts and 

eliminating the new authorities given to HHS to prevent fraud before it happens impact your agency’s ability to fight fraud? 

Mr. COCHRAN. CMS is finding the new authorities to be helpful 

in moving away from what is sometimes called a pay and chase 

and toward being able to suspend payments before they are made 

whenever there is an investigation of a credible allegation of fraud. 

The resources that the Act provides are important for not only the 

work of CMS as well as our Office of Inspector General in our partnership with the Department of Justice. 

Ms. SCHAKOWSKY. And the Republicans’ budget impact on preventing fraud in the Medicare program would also be profound. 

The Republican proposal to turn Medicaid into a block grant would 

result in dramatically decreased federal contribution to State Medicaid programs, a cut of more than $810 billion over the next decade. 

Mr. Cochran, wouldn’t such a dramatic cut on the federal contribution mean that States’ antifraud spending would be increasingly in competition with their spending on patient care? 

61 

Mr. COCHRAN. In the context of reduced resources, that tradeoff 

is—I think it would be logical to expect that sort of tradeoff. The 

emphasis of the Administration on Medicaid is to find specific reductions and to retain its core function as a specific benefit for lowincome populations. 

Ms. SCHAKOWSKY. Well, I think this is a powerful example of 

why the Republican budget is so misguided. It is pennywise and 

pound very foolish, making cuts that would result in increased 

Medicare and Medicaid fraud and cost taxpayers more in the long 

run, and I yield back. 

Mr. STEARNS. The gentlelady yields back. She is one of the first 

Democrats to use ‘‘Obamacare’’ in a way that she is proud of, and 

I think that is something. I would say to her that the cost savings 

that she talks about obviously come from the reduction in Medicare 

by $500 billion. 

So with that, Dr. Burgess is recognized for 5 minutes. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Mr. Cochran, a former Member of Congress, Charles Stenholm, 

Democrat from Texas, provided what I think is a very useful 

model, and I really do wish that Health and Human Services would 

look at this and follow this. He was trying to do with inappropriate 

transfers of funds within the crop insurance program because he 

was on the ag committee, and I think the senior Democrat on the 

ag committee at the time, and it occurred to him, even within his 

own district that there were crop insurance payouts that were far 

in excess of what would be expected in the area. So they developed 

a predictive modeling program with Dr. Bert Little at Carlton State 

University in Texas, a relatively small State university in Texas, 

and using this predictive modeling program were able to achieve 

significant savings in the crop insurance program, and what they 

found much to their surprise was, once they started looking, the 

problem diminished, that is, people were willing to perhaps make 

embellished reports as long as no one paid any attention to them. 

But when there was seen that in fact there was this increased 

scrutiny, the numbers dropped. 

So I would just suggest that to you. We are all looking at ways 

to find additional dollars, and again, the gentleman’s name is Dr. 

Bert Little down at Carlton State. The crop insurance program that 

Mr. Stenholm developed through an earmark when he was in Congress turned out to be enormously helpful and protective of the program. 

Now, look, we have had a lot of discussion about a lot of different 

things. The Supreme Court is going to rule irrespective of the Republican budget. So forget for just a minute about any evil associated with the Republican budget. You have the Supreme Court 

going to rule. And you are telling me that you won’t have the tools 

you need if the Supreme Court strikes down the entirety of the Affordable Care Act? 

Mr. COCHRAN. No, sir. There are important tools that are included in the Affordable Care Act as well as resources for CMS and 

the Office of Inspector General. There are tools that precede the 

Act and resources that precede the Act as well. 

Mr. BURGESS. Very well, and they will continue to be there and 

be utilized, and if you need additional authority because the AffordVerDate Nov 24 2008 15:44 Mar 05, 2013 Jkt 037690 PO 00000 Frm 00067 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 112\112-142 CHRIS
62 

able Care Act has vaporized overnight, you will be able to come 

back to Congress and ask for that authority. Is that not correct? 

Mr. COCHRAN. Well, the Administration’s focus is on using the 

tools that are current law to carry that out. 

Mr. BURGESS. I get it, but there is a court case out there. You 

admitted that you had read about it. 

Well, what you must be aware of, the law of the land is the 

Budget Control Act of last August, dreadful piece of legislation, but 

nevertheless, it is there and it proposes an 8 percent across-theboard. You are developing your budget, your fiscal year 2014 budget now, are you not? You don’t want until the last minute to develop that? 

Mr. COCHRAN. That is correct. We are just now starting to—— 

Mr. BURGESS. Are you taking into account that that 8 percent 

across-the-board hammer is hanging over your head January 1st? 

Mr. COCHRAN. We formulated our budgets each year under the 

guidance that comes from OMB. We typically would get that over 

the summer. What we are doing now is looking at our performance 

information, looking at priority areas, identifying where we can 

find additional savings, and with that, the effort for the 2014 budget formulation will become, you know, more fulsome once we get 

the guidance from OMB. 

Mr. BURGESS. OK. Well, Ms. Schakowsky correctly pointed out 

how the Pentagon is actively engaged in what it will have to do to 

deal with sequestration and are there ways to avoid it. We don’t 

hear much out of HHS, and you have got the same sword of Damocles hanging over your head as the Department of Defense. 

Let me just ask you this. Going back to the Affordable Care Act, 

and I know you don’t want to think about the Supreme Court, but 

you have a Medicaid payment rate. In fact, there was a story out 

today on Politico Probe about the Medicaid payment rate which 

was just finalized, and it is going to pay Medicaid at the higher 

rate as authorized by Medicare. Are you prepared if that goes away 

July 1st? Are you prepared to step up to the plate to do something 

as far as provider payments in Medicaid or is that just tough luck 

for the docs? 

Mr. COCHRAN. For Medicaid, you mean with respect to the Statefederal share? 

Mr. BURGESS. No, I am talking about, there was an enhanced 

payment rate in Medicaid up to the level—in primary care up to 

the level of as reimbursed by Medicare currently so that there 

wasn’t that discrepancy in the payment rates between Medicare 

and Medicaid. You guys are going to take are of the docs if this 

thing goes away? 

Mr. COCHRAN. Well, the emphasis for CMS as well as for the Department is to implement what is now current law and to carry out 

the provisions of the Affordable Care Act. 

Mr. BURGESS. You have told me that before. You know, your authority to pay providers under Medicare and Medicaid may evaporate July 1st, according to some AP reports that were out last 

week. You have got to be having some contingency plans on what 

do you do to keep the Nation’s doctors seeing your Medicare patients after July 1st in the absence of the Affordable Care Act. You 

just have to. 

63 

Mr. COCHRAN. The emphasis of the Department and of CMS is 

carrying out current law. 

Mr. BURGESS. This is the equivalent of taking the Fifth on this 

issue. You have to be preparing because, I mean, again, I didn’t 

make up this AP report. It bothered me when I saw it as well. I 

think we should be doing some contingency planning at the committee level. We, after all, are the committee of jurisdiction over 

these programs but I cannot believe that your agency, that Secretary Sebelius and the Administrator at CMS are not sitting down 

and at least looking at some black and white numbers of what do 

we do to take care of our docs if they Affordable Care Act vanishes 

in the morning dew. 

Mr. STEARNS. The gentleman’s time has expired. 

Mr. BURGESS. May the gentleman provide us a response? You 

have got to be doing some contingency planning. 

Mr. COCHRAN. The focus is on implementing what is current law, 

and at CMS, analysis that we are doing related to the Act has to 

do with—— 

Mr. BURGESS. Mr. Chairman, I am not going to get an answer 

but what I would like to suggest is that this committee request respectfully from the agency information regarding this, because it is 

important. If every doctor doesn’t get a paycheck July 1st, we are 

going to be in a hell of a shape. Perhaps we could request meeting 

notes, emails. There is bound to have been some discussions that 

have gone on at CMS about what happens the day after the Affordable Care Act is—if the Supreme Court says it is unconstitutional. 

Mr. STEARNS. I think that the gentleman is correct. I think the 

committee can formally request from you what actions your agency 

intends to take in the event of deferral of budget money because 

of sequestration, the tools you are going to use. I think that is a 

reasonable request in the event this occurs. I think your agency 

should get back to us, as Dr. Burgess pointed out, with some chronology of things and tools you are going to do, because for you to 

continue to say we are just going to implement Obamacare, it is 

like he said, you are taking the Fifth, and I think there is a point 

where Congress oversight, our responsibility under the Constitution, we have a right to ask this and ask what you are going to 

do. That is what I am requesting formally. 

We are going to wrap up this hearing. I have the opportunity to 

give some closing comments. You mentioned, Mr. Cochran, under 

Obamacare that Obamacare provides additional funding to fight 

waste, fraud and abuse in Medicare and Medicaid, I believe, but it 

is also true that there remains billions of dollars to be saved immediately only if Health and Human Services would simply implement all of the GAO’s outstanding recommendations that were in 

Mr. Cosgrove’s opening statement, that are in his written statement that he gave us. So I think before Health and Human Services goes around asking for more money in order to cut waste, 

fraud, and abuse, we should start with the savings that the GAO 

has presented here, clearly, abundantly as pointed out, and obviously, in our opinion, and I think it appears to be from the GAO, 

you have not implemented and responded to those recommendations and you in fact pointed out one of them that you are going 

to totally disregard in dealing with the bonus program. 

64 

So that is the closing statement, and I thank the witnesses for 

the hearing. We want to put in by unanimous consent this little 

graph that we put on the slide. Without objection? 

Ms. SCHAKOWSKY. Without objection. 

Mr. STEARNS. So ordered. 

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

Mr. STEARNS. And in conclusion, I would like to thank the witnesses and members that participated in today’s hearing. I remind 

members that they have 10 business days to submit questions for 

the record, and I ask that the witnesses all agree to respond 

promptly to these questions. 

With that, the subcommittee is adjourned. 

[Whereupon, at 12:20 p.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

PREPARED STATEMENT OF HON. JOHN D. DINGELL

Mr. Chairman, thank you for holding this important hearing today. The Department of Health and Human Services is the agency that ensures the health and well 

being of our nation’s citizens. If we do not have a healthy society as our base to 

build off of, nothing else really matters. If we have a sickly workforce, all the jobs 

bills in the world won’t make a difference. This is why we have and will continue 

to fund this agency the best we can. 

The Department of Health and Human Services is responsible for implementing 

the Affordable Care Act. An Act that, if taken away, will take away health insurance from 33 million Americans. I realize these are difficult times and difficult decisions have to be made, but the propositions my friends on the other side of the aisle 

are putting forth are far from solutions, they are not even options. Mr. Ryan’s budget, for all intents and purposes, gets rid of Medicare and Medicaid as we know it. 

I fail to understand how cutting programs that provide health care for those who 

need it most will save us money in the long run. Foresight does not seem to be a 

gift that the Republicans who drafted this budget have. 

HHS is clearly striving to streamline their budget and save taxpayer dollars. They 

are working hard to implement recommendations from GAO reports that will 

achieve savings and reduce Medicare fraud. And HHS is succeeding. Just last week 

the Medicare Fraud Strike Force took down over 100 individuals responsible for 

$452 million in false billing practices. 

Protecting and improving the public’s health are vital goals of HHS and I know 

they work hard to meet these goals while using taxpayer dollars wisely. It would 

not be wise for Congress to wantonly disregard their important mission by indiscriminately cutting funding. 

65 


78988.021

5/9/12 OffiCIal No taxpayer funds wen! to neuter Tenn. dogs· The Hill's Healthwatch 

Til HILL 

Official: No taxpayer funds went to neuter Tenn. dogs 

By Elise Viebeck -

House Republicans who say taxpayer funds went to spay and neuter dogs in Nashville have the story wrong, a 

local public heatth official involved with the effort told The Hill 

'There was a spay-and-neuter clinic, but it was funded by a PetS mart Charities grant to the Nashville Humane 

Assoeiation," said Alisa Haushaher, whose job includes directing a federally funded anti-obesity program in the 

city known as Communities Putting Prevention to Work (CPPW), 

Republicans on the House Energy and Corrunerce Committee t",,:eled CPPW in a statement Wednesday, 

saying that the program gave $7.5 million to ~ashville, which used the grant to provide "free pet spaying and 

neutering. I! 

Ilaushaher said thls was not what happened, 

"Nashville did receive a $7.5 million grant in March 20 I 0 Wlder the stin1ulus act. and stray dogs numing at large 

are very much an issue in our city," she told The Hill 

"But the spay-neuter clinic was paid for with a private grant." 

"As a partnering co-agency, we would have had staff members that were there greeting people at the event, and 

so f()Jih. But the funding was not fi'om us, II she said. 

The Energy and Comm,rce GOP pointed to two documents on recovery.gov, a site that tracks activities under 

the stimulus bil~ that list the spay-neuter clinics in quarterly updates submitted by the Nashville CPPW. 

The reports appear to give updates on local public health happenings in general- e,'ents Hmlshalter descnbcd 

as "of inter ese' to the CPPW's mission - as well as dcscnbing the group's activities. 

Haushaker said it's lUlderstandable why those records could be "misconstrued" to ,iew the spay-neuter clinics as 

taxpayer-fimded. 

She said that CPPW reports include all the group's work, "collaborative" and otherwise, and other activities of 

interest. 

"Nashville has been selected for an HBO documentary about 'Obesity in America,'" one entry reads. 

thehilt .comlblogs/healthwatch/. , .1225367 -offlcia!·no-taxpayer ~funds·went-to·neuter~tenn·dogs?tmpl= 112 
66 


78988.022

5/9/12 Official. No taxpayer funds went to neuter Tenn. dogs - The Hlil's Healthwatch 

"Services ... occurred to prov'ide free spayineuter and wellness clinics Klr dogs and cats in order to curb animals 

running at large," the entry cited by Energy and Comnerce RepUblicans states. 

'The spay-neuter c!uJic was a project that we convened and supported, but that the Htnmne Association 

funded," Haushalter repeated. 

"We can asstn'e you no taxpayer funds were used." 

A ,·ideo by The Tennessean dated Feb. 9 appears to support this version of the story. 

CPPW "is working on an educational campaign promoting respollsible pct ownership, the importance of spayneuter, proper pet confinement as well as the leash laws in Davidson COtnlty," a man identified as a :'-lashvillc 

public heahh worker told the carnel". 

"And the Nashville Hwmne Association, one of our partners, is working on a PctSmal1 Charities grant that 

provides free targeted spay-neuter to residents," he said. 

Updated at 10:45 a.m. Friday. 

Source: 

thehjlLcomJblogsJhea!thwatchl .. .!225367~-officlal-no-taxpayer-funds-wenl-to-neuteHenn-dogs?tmpl= ... 212 
67 


78988.023

(Appointment Required) 

December 

Thursday, Dec 8th & 22nd 

Space is limited and filling up FAST! To secure your appointment, call 

Nashville Humane Association @ 615·354·6343 today! 

*Proof of residence & financial eligibility required 

The Temporary Veterinary Clinic initiali\'c the US. Department (?f Health {llld Human 

Services, as part (~fMctro Public Hea!th Department's LOI'I1lI1lIl1/T,'eJ PUffing Prerclltiol1 /(I Work campaign. 
68 


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RECOVERY.GOV & THE BOARD LOOKING FOR... SPECIAL FEATURES 

Read The Recovery k:t Projects In tilt NeiglibortWod Edward Tllfie Lights On Map 

'WbaJ Is The BACWf!ry Bsmrd? Opportun1~es & Be"lefits Comparison Maps 

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76 


78988.032

519/12 

What Does The R~very 

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Media Kit 

919 

78988.033

Rising Budget Authority and Full-Tim

Equivalents at HHS: FY 2007-2013 

Dollars in Billions 

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 

Actual Actual Actual Actual Actual Estimated Esti

Authority $657 $721 $779 $849 $883 $866 $

FY2007 % 100% 110% 119% 129% 134% 132% 1

FTEs 63,748 64,509 67,875 71,047 73,704 74,948 76

FY 2007 % 100% 101% 106% 111% 116% 118% 1

Source: HHS Fiscal Year 2009-2013 Budgets in Brief 
78 


78988.034

FRED UPTON, MICHIGAN 

CHAIRMAN 

Mr. Norris Cochran 

ONE HUNDRED TWELFTH CONGRESS 

HENRY A. WAXMAN, CALIFORNIA 

RANKING MEMBER 

(tCongrc~~ of tbc Wnitcb ~tatc~ 

~ou5e of ~epre5entattbe5 

COMMITTEE ON ENERGY AND COMMERCE 

2125 RAYBURN HOUSE OFFICE BUILDING 

WASHINGTON, DC 20515-6115 

Majority (202) 225-2927 

Minority (202) 225-3641 

May 25, 2012 

Deputy Assistant Secretary. Financial Resources 

Director of the Office of Budget 

U.S. Department of Health and Human Services 

200 Independence Avenue, S.W. 

Washington, D.C, 20201 

Dear Mr. Cochran: 

Thank you for appearing before the Subcommittee on Oversight and Investigations on May 9, 2012, to 

testify at the hearing entitled "Budget and Spending Concerns at HHS." 

At the hearing, you agreed to follow-up with Committee Members on several items addressed in your 

testimony, and which are attached. In addition, pursuant to the Rules of the Committee on Energy and 

Commerce, the hearing record remains open for 1 0 business days to permit Members to submit additional 

questions to witnesses, which are attached. The format of your responses to these questions should be as 

follows: (I) the name of the Member whose question you are addressing, (2) the complete text of the question 

you are addressing in bold, and then (3) your answer to that question in plain text. 

To facilitate the printing of the hearing record, please e-mail yourresponses.inWordorPDFformat.to 

Alex.Yergin@mail.house.gov by the close of business on Monday, June 11,2012. 

Thank you again for your time and effort preparing and delivering testimony before the Subcommittee. 

Sincerely, 

tJftf;::p Chairman 

Subcommittee on Oversight and Investigations 

cc: The Honorable Diana DeGette, Ranking Member, 

Subcommittee on Oversight and Investigations 

Attachment 
79 


78988.053

The Honorable Cliff Stearns 

Subcommittee on Oversight and Investigations 

"Budget and Spending Concerns at HHS" 

May 9, 2012 

Additional Questions for the Record 

Page 1 

I. Please provide a detailed breakdown of the $876 million in administrative savings HHS claims 

it will be implementing pursuant to Executive Order 13589. 

a. How much of these savings will be redirected to absorb other cost increases and fund 

priority activities? 

2. Since its inception, $140 billion has been provided under the Recovery Act to HHS. So far, 

$124.5 billion of this has been obligated by HHS through grants and contracts, Therefore, 

approximately $16 billion in Recovery Act funds remain unobligated. Does HHS have plans to 

deobligate or recertify any previously unobligated balances under the Recovery Act so that they 

can be put to another use? 

3. What actions has HHS taken to resolve concerns over financial management, such as those 

raised by the Ernst & Young independent audit of HHS FY 2011 financial statements? 

4. On July 14, 2011, HHS informed Congress of more than $1.4 billion in Antideficiency Act 

(ADA) violations in a variety ofHHS accounts during FYs 2002-2012. 

a. What has HHS done to resolve the 47 violations of the ADA totaling over $1.4 billion it 

identified in its July 14, 2011 letter to GAO? 

b. Specifically, how has the Department corrected the reported over-obligation or 

overspending of budgetary authority? 

5. What ADA violations have occurred subsequent to the July 14, 2011 letter? 

6. What corrective actions has HHS taken to safeguard against future ADA violations? 

7. At a March 6, 2012 appropriations hearing, the Subcommittee chairman asked the HHS 

Secretary to provide within 30 days a detailed 3-year corrective action initiative to rectify the 

HHS financial system and prevent ADA violations. Has this been done? Please provide a copy 

for the record. 

8. HHS recently requested $1 billion in additional funding for implementation ofPPACAbeyond the $1 billion already appropriated for implementation when the law was enacted in 

March 2010. Has fillS used funding from other parts ofthe HHS budget, such as programmatic 

funding for the administration of Medicare at CMS, to implement PPACA? 

9. Section 1311 ofPPACA requires the Secretary to award grants to states to establish health 

insurance exchanges. The law also provides the Secretary the authority to draw from the 

Treasury, as necessary. 

a. As you formulate the FY 2014 budget proposal - what is the anticipated spending 

amount for exchange grants? How is this amount determined? No grants may be 

awarded after January 1,2015. Do you have some sense of what may be required in the 

first quarter of FY 2015? 
80 


78988.054

Subcommittee on Oversight and Investigations 

"Budget and Spending Concerns at HHS" 

May 9, 2012 

Additional Questions for the Record 

Page 2 

b. How does the HHS budget office track these grants? Does HHS expect some of these 

grants to be recovered - unused? Are there progress reports submitted to HHS by the 

states? 

10. Please detail what the Budget Office is doing to prepare for automatic spending cuts to nondefense discretionary appropriations of approximately 8% as of January 2, 2013. 

11. If unobligated balances carried forward from previous fiscal years are exempt from 

sequestration, after January 2013, how much, if any, of HHS 's carryover unobligated balances 

will be reallocated to fill funding gaps created by sequestration? 

12. Please provide a list ofHHS programs exempt from automatic spending cuts under 

sequestration. 

13. Your authority to pay providers under Medicare and Medicaid may evaporate July 1st, 

according to some recent AP reports.! Please provide the contingency plans, including all 

documents and communications related to HHS's efforts to keep the Nation's doctors paid for 

their services after July 1st should the US Supreme Court strike down the Affordable Care Act, 

or any portion of it. 

The Honorable Joe Barton 

1. What is Secretary Sebelius' s travel budget? 

2. How many HHS employees have credit cards? 

The Honorable Michael C. Burgess 

I. The topic today before us is - how is HHS spending their budget and is this spending watched 

to ensure it is not duplicative, wasteful or fraudulent. I have two questions that point to the 

duplicative aspect: 

a. On March 29,2012, CMS published an "announcement" in the Federal Register 

regarding CMS' intent to establish a Federally-funded research center. And while we 

can differ over policy matters, I think we would both agree that transparency and candor 

should be our minimum standard. 

I Alonso-Zaldivar, Ricardo, "Medicare disruptions seen if health law is struck down," Washington Times, May 3, 

2012, http;//www.washingtontimes.cominews/20 12/mayi3/medicare-disruptions-seen-if-health-law-struckl?page~all 

2 
81 


78988.055

Subcommittee on Oversight and Investigations 

"Budget and Spending Concerns at HHS" 

May 9, 2012 

Additional Questions for the Record 

Page 3 

i. In that spirit, is the White House, HHS and or CMS creating a Federally-funded 

research center whose primary purpose is the implementation of the Affordable 

Care Act? And if so, can you please explain to all of us here today where those 

monies are coming from? Is Oak Ridge National Laboratory one of the entitieswho the Administration itself says (according to the OFR citation) knows little 

about health care - that the Administration is relying upon to be at the center of 

this new cloaked research center? 

b. In a similar vein, the CMS Innovations Center is spending half a billion dollars on 

Hospital Engagement Networks that appear to duplicate the work ofthe Medicare 

Quality Improvement Organizations, an effective program in my opinion. I hear this is 

creating confusion and frustration among the providers that are supposed to benefit. Can 

you explain to me the differences? 

c. What is or should the Department of Health and Human Services be doing to prevent 

and identifY such duplication of efforts? 

2. The Patient Protection and Affordable Care Act predicts drastic cost savings from fraud 

prevention as well as allocating 10 million annually for fiscal years 2011 through 2020 to such 

efforts. The Health Care and Education Reconciliation Act provides an additional $250 million 

for the period FY2011 through FY2016 for the Health Care Fraud and Abuse program. In 

order to combat fraud and use the money in the most effective manner, do you believe it would 

be beneficial to hire more federal prosecutors with backgrounds in health care fraud to combat 

this current problem as opposed to hiring prosecutors with no previous health care experience? 

3. As health care fraud schemes become more sophisticated, how do you plan to stay ahead of 

their activities and combat fraud? 

4. I have asked this question in full committee and I would still like to know your plans. The 

House has passed a reconciliation bill, but the Senate has signaled they do not have plans to take 

it up. In order to prevent the sequestration cuts, what is your proposal to work with this 

committee and Congress to avoid the sequestration across-the-board cuts to identify those areas 

of savings and/or cuts that can occur? 

The Honorable Steve Scalise 

1. Please provide to the Committee the number of HHS vehicles that are allowed to be taken home 

by employees. 
82 


78988.056

Subcommittee on Oversight and Investigations 

"Budget and Spending Concerns at HHS" 

May 9, 2012 

Additional Questions for the Record 

Page 4 

2. How much of the current fiscal year travel budget for HHS has been spent on first class or 

business class travel? 

4 
83 


78988.035

The Honorable Cliff Stearns 

Subcommittee on Oversight and Jmestigations 

"Budget and Spending Concerns at HilS" 

May 9. 2012 

Additional Questions for the Record 

I. Please provide a detailed breakdown of the $876 million in administrative savings 

HHS claims it will be implementing pursuant to Executive Order 13589. 

Answer: HHS has identified $876 million in cost savings in the following categories: Travel. 

Relocation, and Conferences ($66 million), Printing and Reproduction ($27 million), Employee 

IT Devices ($17 million), Executive Motor Fleet ($ .2 million), Management and Support 

Services ($225 million). and Supplies ($542 million). 

a. How much of these savings will be redirected to absorb other cost increases 

and fund priority activities? 

Answer: While some of the savings that will be achieved through this initiative are reflected as 

proposed reductions in the President's Budget, the majority of these savings are being reinvested 

to expand the reach of ongoing programs without a net increase in discretionary resources. An 

example of the savings includes FDA's data center consolidation and IT efficiencies, which 

results in a total savings of$19.7 million. Data savings were achieved by reducing the number 

of centers, eliminating redundant management teams. standardizing processes, consolidating 

operations support teams, and modernizing hardware and software infrastructure. In addition, 

FDA reduced the number of redundant IT devices as well as device and support costs. Further, in 

accordance with OMB Memorandum M-12-12, HHS will redirect savings from travel expenses 

to support transparency and accountability initiatives for the department and its agencies. 

2. Since its inception, $140 billion has been provided under the Recovery Act to HHS. 

So far, 5124.5 billion of this has been obligated by HHS throngh grants and contracts, 

Therefore, approximately 516 billion in Recovery Act funds remain unobligated. Does 

HHS have plans to deobligate or recertify any previously unobligated balances under the 

Recovery Act so that they can be put to another use? 

Answer: As of May 4.2012, HHS has obligated $124.9 billion to States, universities. local 

communities and other recipients; recipients have in turn spent nearly $1 J 6.2 billion. or 93% 

percent of total HHS Recovery Act funds. 

Nearly all of the remaining Recovery Act funds available for obligation in FY 2012 and beyond 

are for the Centers for Medicare and Medicaid Services' Health Infonnation Technology 

Incentive Programs which promote the meaningful use of Health IT. By statute, the incentive 

payments are not available to be put to another use. Furthermore, the statute specified that the 

Medicare and Medicaid Health Information Technology Incentive Programs could not begin to 

make incentive payments until FY 2011 and are to make payments over the following decade. In 

total over the life of the incentive programs, they are estimated to spend more than $25 billion to 

ensure that doctors and hospitals take advantage of health IT to benefit the Nation's health care 

system. 
84 


78988.036

Subcommittee on Oversight and 1m estigntions 

"Budget and Spending Concerns at HHS" 

Ma) 9,2012 

Additional Questions for the Record 

3, What actions has HHS taken to resolve concerns over financial management, such 

as those raised by the Ernst & Young independent audit ofHHS FY 2011 financial 

statements? 

Answer: Proper financial management and stewardship of public funds is a priority for the 

Department. HHS is committed to further strengthening internal control structure and financial 

systems that support our ability to etJectively execute HHS's mission, HHS has a strong 

financial management system and controls, which the Department continues to strengthen each 

year, HHS has earned a "clean" opinion from our independent auditors on its financial 

statements for each of the past 12 years. In addition. the Department has reduced the material 

weaknesses identified by auditors from four in 2007 to one in 201 I, This change represents a 

significant improvement in HHS financial management over time. and HHS continues efforts to 

strengthen financial statements and reporting processes and controls. 

For example, HHS is working to eliminate the remaining material weakness this year. During 

FY 2012, HHS is continuing Department-wide collaborative efforts to improve financial systems 

and controls. 

4. On July 14, 20ll, HHS informed Congress of more than SI.4 billion in 

Antideficiency Act (ADA) violations in a variety of HHS accounts during FYs 2002-2012. 

a. What has HHS done to resolve the 47 violations of the ADA totaling over 

$1.4 billion it identified in its July 14, 2011letter to GAO? 

b. Specifically, how has the Department corrected the reported over-obligation 

or overspending of budgetary authority? 

Answer: The Secretary notified Congress last July of 47 contracts in violation of the AntiDeficiency Act that that occurred over FY 2002-20 I O. As stated in the letter to Congress, the 

Secretary noted that there had been "a substantial lack of understanding throughout the 

Department of the legal limits on federal contracts; in particular, contracts that required effort or 

deliverables over a period of several years." The Department has made extensive and intensive 

efforts to correct misunderstandings and modify policies and procedures so that this longstanding problem could be solved. HHS has trained over 12,700 staff on appropriations law, 

updated the HHS Acquisition Regulation and internal HHS acquisition guidance, developed an 

appropriation law decision tree, and updated our Acquisition Plan template to ensure that 

program, contracting, and budget officials fund our acquisitions properly. Since HHS sent the 

letter to Congress, the President, and the Government Accountability Office (GAO) last July. the 

Department has updated its corrective action plan to include additional steps (see Enclosure I). 

5. What ADA violations have occurred subsequent to the July 14, 2011letter? 

Answer: HHS takes the Anti-Deficiency Act very seriously. HHS examines possible violations 

very intensely and carefully. These reviews are often lengthy and complex, but HHS remains 

committed to reporting any violations we find upon completion of such reviews. For reference, 
85 


78988.037

Subcommittee on Oversight and Im estigations 

"Budget and Spending Concerns at HHS" 

May 9. 2012 

Additional Questions lor the Record 

GAO routinely posts all Anti-Deficiency Act letters, government-wide, at: 

http://www.gao.gov/adalantideficiencyrpts.htm . 

6. What corrective actions has HHS taken to safeguard against future ADA violations? 

Answer: As noted previously, the Department has modified policies and procedures. HHS has 

trained over 12,700 staff on appropriations law, updated the HHS Acquisition Regulation and 

internal HHS acquisition guidance, developed an appropriation law decision tree, and updated 

our Acquisition Plan template to ensure that program, contracting, and budget officials fund our 

acquisitions properly. The Department's updated corrective action plan is enclosed. 

7. At a March 6, 2012 appropriations hearing, the Subcommittee chairman asked the 

HHS Secretary to provide within 30 days a detailed 3-year corrective action initiative to 

rectify the HHS financial system and prevent ADA violations. Has this been done? Please 

provide a copy for the record. 

Answer: The Secretary submitted HHS's Anti-Deficiency Act Corrective Action plan to the 

House Labor, Health and Human Services, Education, and Related Agencies Appropriations 

Subcommittee on March 22, 2012. A copy of the plan is enclosed (see Enclosure 1). 

8. HHS recently requested $1 billion in additional funding for implementation of 

PPACA - beyond tbe SI billion already appropriated for implementation when the law was 

enacted in March 2010. Has HHS used funding from other parts of the HHS budget, such 

as programmatic funding for the administration of Medicare at CMS, to implement 

PPACA? 

Answer: In FY 2011. CMS obligated discretionary funds transferred from the Office of the 

Secretary to support ACA implementation. In addition, HHS has used. and plans to use CMS 

Program Management funding for some ACA activities in FY 2011 and FY 2012. Funds support 

a wide variety of activities that are integrated into daily CMS operations, including FTEs, 

Medicare and Medicaid provisions, and market reform activities. 

9. Section 1311 of PPACA requires the Secretary to award grants to states to establish 

health insurance exchanges. The law also provides the Secretary the authority to draw 

from the Treasury, as necessary. 

a. As you formulate the FY 2014 budget proposal- what is the anticipated 

spending amount for exchange grants'? How is this amount determined? No 

grants may be awarded after January 1,2015. Do you have some sense of 

what may be required in the first quarter ofFY 2015? 

Answer: Our current baseline for Exchange Planning and Establishment Grants estimates that 

we will obligate approximately $2.5 billion from when the law was enacted until FY 2014 and 

2 
86 


78988.038

Subcommittee on OYersight and Investigations 

"Budget and Spending Concerns at HHS" 

May 9. 2012 

Additional Questions for the Record 

that we will outlay $2.0 billion during that timeframe. As Exchanges are established we will 

continue to refine our estimates. 

b. How does the HHS budget office track these grants? Does HHS expect some of 

these grants to be recovered - unused? Are there progress reports submitted to HHS by the 

states? 

Answer: HHS relies on the standard grants tracking process required of all grants and the 

review and monitoring conducted by the CMS State Exchange office. States are required to 

submit a work plan at the time of application as well as progress reports which include changes 

to their work plan, regular public reporting, the Federal Financial Report, and other standard 

grant reports. As with any grant, the projected need for funding during the project period of 

performance is an estimate and unused grant amounts will be recovered. 

10. Please detail what the Budget Office is doing to prepare for automatic spending cuts 

to non-defense discretionary appropriations of approximately 8% as of January 2, 2013. 

Answer: The Administration believes that Congress should prevent sequestration by enacting 

the balanced framework proposed in the President's Budget. In the event that Congress fails to 

pass bipartisan balanced deficit reduction legislation, the Congressional Budget Office estimates 

that automatic sequestration would reduce non-defense discretionary spending by 7.8 percent 

beginning in January 2013. 

11. If unobligated balances carried forward from previous fiscal years are exempt from 

sequestration, after January 2013, how much, if any, of HHS's carryover unobligated 

balances will be reallocated to fill funding gaps created by sequestration? 

Answer: Appropriations that provide HHS with funding that are available for obligation for 

multiple years, or available until expended, are usually targeted in law to very specific purposes 

and thus cannot be reprogrammed beyond the confines of the original appropriating language. 

As a result, those balances would generally not be available to provide additional funding to 

other programs. 

12. Please provide a list ofHHS programs exempt from automatic spending cuts under 

sequestration. 

Answer: The Administration is reviewing the potential impact of sequestration including which 

programs would be exempt. The Administration believes that Congress should pass balanced 

deficit reduction legislation consistent with the President's Budget to avoid sequestration. 
87 


78988.039

Subcommittee on O\\:'rsight and Im estigations 

"Budget and Spending Concerns at HilS" 

May 9. 2012 

Additional Questions fol' the Record 

13. Your authority to pay providers under Medieare and Medicaid may evaporate July 

1st, according to some recent AP reports. I Please provide the contingency plans, including 

all documents and communications related to HHS's efforts to keep the Nation's doctors 

paid for their services after July lst should the US Supreme Court strike down the 

Affordable Care Act, or any portion of it. 

The Administration is focused on implementing the law. 

The Honorable Joe Barton 

1. What is Secretary Sebelius's travel budget? 

Answer: The Immediate Office of the Secretary budget supports travel by the Secretary of 

Health and Human Services (HHS) as an official representative of the United State Government 

and in support of the HHS mission. In fiscal year (FY) 2011 approximately $57,000 was spent on 

travel and total year-to-date support for travel in FY 2012 as of May 9 is just under $46,000. 

2. How many HHS employees have credit cards? 

Answer. The HHS Charge Card Program is organized into three distinct areas: travel, purchase 

and fleet. Each area has a designated Program Manager who is responsible for the overall 

management of the Program; as well as an Agency/Organization Program Coordinator assigned 

to each of the HHS Operating and Staff Divisions who is responsible for the implementation of 

the Program. 

The Department of Health and Human Services nIHS) Charge Card Management Plan outlines 

the policies, procedures, and internal controls that are in place within HHS to manage its Charge 

Card Program. The Plan complies with Office of Managemcnt and Budget (OMB) Circular 

A-123, Appendix B; which consolidates and updates current government-wide charge card 

program requirements and guidance issued by OMS, the General Services Administration, and 

the Department of the Treasury. 

Government Charge Cards Issued to HHS Employees include: 

Travel Card 30.990 

Purchase Card 4.818 

Fleet Services Card II 

I A limited number of Fleet Services cards arc issued to HHS employees in the Officc of the Assistant Secretary for 

Preparedness and Response and at the National Institutes of Health to support the maintenance ofvchicles and 

equipment used in supp0!1 of the agency mission. 

I Alonso-Zaldi\ar. Ricardo. "Medicare disruptions seen if health law is struck down:' Washington Times. May 3. 

20 l2. http:' \\ \\ \\ .\\:lshim:!.tontimes.com/nc\\s/""O 121mu\ "3/mcdicurc-Jisruptinns-seen-if .. health-!U\\-strucki '.\13Qe:::-:al! 

4 
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78988.040

The Honorable Michael C. Burgess 

Subcommittee on (hersight and Investigations 

"Budget and Spending Concerns at ! IHS" 

May 9. 2012 

Additional Questions for the Record 

1. The topic today before us is - how is HHS spending their budget and is this 

spending watched to ensure it is not duplicative, wasteful or fraudulent. I have two 

questions that point to the duplicative aspect: 

a. On March 29, 2012, CMS published an "announcement" in the Federal 

Register regarding CMS' intent to establish a Federally-funded research 

center. And while we can differ over policy matters, I think we would both 

agree that transparency and candor should be our minimum standard. 

i. In that spirit, is the White House, HHS and or CMS creating a Federallyfunded research center whose primary purpose is the implementation of the 

Affordable Care Act? And if so, can you please explain to all of us here 

today where those monies are coming from? Is Oak Ridge National 

Laboratory one of the entities - who the Administration itself says 

(according to the OFR citation) knows little about healthcare - that the 

Administration is relying upon to be at the center of this new cloaked 

research center? 

Answer: The CMS Federally-funded Research Development Ccntcr (FFRDC) will support 

many different activities including ACA implementation. but the primary purpose is not ACA. 

CMS will use the FFRDC to perform strategic and tactical studies. analysis and prototyping of 

policy implications. business architecture. operations models and IT solutions. 

CMS is in the process of a full and open competition to select the IIHS FFRDC contractor. All 

eligible organizations, including Oak Ridge. are invited to submit proposals. 

b. In a similar vein, the CMS Innovations Center is spending half a billion 

dollars on Hospital Engagement Networks that appear to duplicate the work 

of the Medicare Quality Improvement Organizations, an effective program 

in my opinion. I hear this is creating confusion and frustration among the 

providers that are supposed to benefit. Can you explain to me the 

differences? 

Answer: Launched in April 2011. the Partnership for Patients is a nationwide public-private 

partnership that offers support to physicians, nurses and other clinicians working in and out of 

hospitals to make patient care safer and to support effective transitions of patients from hospitals 

to other settings. The Hospital Engagement Networks are a part of the Partnership for Patients 

and are developing highly structured learning collaboratives to support hospitals nationwide in 

mastering the basics of patient safety and to adopt effective interventions. The networks were 

chosen for their expertise in the arcas of hospital-acquired conditions and readmissions with the 

overarching goal of reducing preventable harm. This project will touch approximately 3.800 

hospitals. The focus is on 10 explicit and targeted areas that are the cause of widespread patient 
89 


78988.041

Subcommittee on 0\ crsight and Inyestigations 

"Budget and Spending Concerns at HHS" 

Ma) 9.201l 

Additional Questions for the Record 

complications and deaths every year. These areas are: adverse drug events, central line 

associated blood stream infections, catheter-associated urinary tract infections. injuries from falls 

and immobility. obstetrical adverse events. pressure ulcers. surgical site infections, venous 

thromboembolism. ventilator-associated pneumonia, and reduction of preventable readmissions. 

The Quality Improvement Organizations (QIOs) have also effectively worked on a variety of 

patient safety issues. including surgical safety. pressure ulcers. reduction of methicillin-resistant 

Staphylococcus aureus infections, and drug safety. The patient safety component, however, is 

only one area of many that the QIOs focus on. The QIO responsibilities are broad, and include 

numerous activities. such as general qual ity of care reviews, beneficiary complaint reviews, 

medical necessity reviews. discharge appeal reviews, improvement in prevention services, health 

information technology assistance, assistance in quality measurement programs. care transitions. 

and care interventions for chronic kidney disease. Furthermore. the focus of the QIOs is on 

many different provider types. not just hospitals. 

Although the QIOs have made significant progress, their reach in the area of patient safety each 

year is limited by the required breadth of their responsibilities. In contrast, the premise of the 

Partnership for Patients is to test intervcntions quickly, and engage hospitals in the next three 

years to expeditiously achieve broad, widespread adoption of what are found to be the best 

patient safety techniques. As charged by the Secretary at the launching of the networks in 

December 2011, the QIOs and networks work in close synergy with each other, to reinforce and 

support their work to improve patient safety. In many cases, networks have formal relationships 

with their state QIOs. Each network contract was reviewed for potential overlapping 

responsibilities, and any areas of overlap have bcen addressed on a contract by contract basis. 

c. What is or should the Department of Health and Human Sen'ices be doing to 

prevent and identify such duplication of efforts? 

Answer. The Department is continuously reviewing all programs in order to identify potential 

duplication of effort and/or opportunities for improvcd efficiency. In the case mentioned above, 

while both network contractors and QIOs do important work to improve patient safety, they 

serve separate and well-defined functions. 

2. The Patient Protection alld Affordable Care Act predicts drastic cost savings from 

fraud prevention as well as allocating 10 million annually for fiscal years 2011 through 

2020 to such efforts. The Health Care and Education Reconciliation Act provides an 

additional $250 million for the pcriod FY20Il through FY2016 for the Health Care Fraud 

and Ahuse program. In order to combat fraud and usc the money in the most effective 

manner, do you believe it would be beneficial to hire more federal prosecutors with 

backgrounds in health care fraud to combat this current problem as opposed to hiring 

prosecutors with no previous health care cxperience? 

Answer: Federal prosecutors work at the Department of Justice. HHS coordinates with DO] 

and HHS does not employ a team of federal prosecutors outside of those employed DOJ. HIlS 

6 
90 


78988.042

Subcommittee on O\'ersight and 1m cstigations 

"Budget and Spending Concerns at HIlS·· 

Ma) 9.2012 

Additional Questions l'lI'the Record 

defers to the Justice Department's Criminal Division and the United States Attorneys' Offices 

around the country in making appropriate hiring decisions when it comes to federal prosecutors 

handling health care fraud cases. Based on the experience of HHS-OIG agents, who work handin-hand with federal prosecutors nationwide, the prosecutors assigned to the Medicare Fraud 

Strike Force and the Assistant United States Attorneys who handle health care fraud cases are 

extremely well qualified and have been achieving record results. For example, in fiscal year 

2011, the Justice Department brought health care fraud charges against 1,430 defendants, more 

than in any previous year. and secured convictions against 743 defendants for health care fraudrelated crimes, also a record. 

3. As health carc fraud schemes become more sophisticated, how do you plan to stay 

ahead of their activities and combat fraud? 

Answer: Since passage of the Atlordable Care Act, CMS has moved away from the old pay-andchase approach to a new. more prevention-focused mission. The Administration has made 

fighting fraud a top priority and has been working with the private sector and experts in 

predictive analy1ics to bring CMS up to speed as quickly as possible. CMS is adapting the 

private sectors' best practices to the Medicare fee for service program. HHS has seen great 

progress in a short amount of time. and CMS is commined to using predictive anal)tics to 

prevent fraud and eliminate systemic vulnerabilities. 

4. I have asked this question in full committee and I would still like to know your 

plans. The House has passed a reconciliation bill, but the Senate has signaled they do not 

have plans to take it up. In order to prevent the sequestration cuts, what is your proposal 

to work with this committee and Congress to avoid the sequestration across-the-board cuts 

to identify those areas of savings and/or cuts that can occur'! 

Answer: The Administration believes that Congress should enact meaningful reforms consistent 

with the FY 2013 President's Budget to avoid sequestration. The FY 2013 President's Budget 

proposes a balanced framework to achieve the savings needed to prevent sequestration. including 

a package of legislative proposals for Medicare and Medicaid that would save over $300 billion 

over 10 years. 

The Honorable Steve Scalise 

1. Please provide to the Committee the number of HHS vehicles that are allowed to be 

taken home by employees. 

Answer: HHS has 685 vehicles participating in the Home to Work program. The positions that 

participate in the program meet the regulatory definition of field work. These field work 

positions include Criminal Investigators from the Office of Inspector General. Medical Officers 

from the Indian Health Service, Consumer Safety Inspectors from the Food and Drug 

Administration, and Police/Canine Handlers from the National Institutes of Health. The number 

of vehicles, broken down by agency. is below: 
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78988.043

• Indian Health Service (IHS): 385 

• Office ofInspector General (OIG): 196 

• Food and Drug Administration (FDA): 74 

Subcommittee on O\'ersight and 1m estigations 

"Budget and Spending Concerns at HHS" 

May 9. 2012 

Additional Questions It" the Record 

• Centers for Disease Control and Prevention (CDC): 15 

• National Institutes of Health (NIH): 14 

• Ccnters for Medicarc and Medicaid Services (CMS): I 

2. How much of the current fiscal ycar travel budget for HHS has been spent on first 

class or business class travel? 

Answer: From October 20 II to the beginning of March 2012. HHS has spent approximately $2 

million on premium class travel via commercial airfare. This represents less than four percent of 

HHS's estimated total travel expenses over that time period. Premium class travel is 

accommodations that are not coach. including first class and business class. HHS premium class 

travel is extremely limited and is consistent with Federal Travel Regulations (FTR). An agency 

may authorize business class accommodations where there is a medical disability or special 

needs. where there are exceptional security matters. where there is an urgent matter but coach 

accommodations are not available. or where flight time (including stopovers and change of 

planes) exceeds 14 hours and the origin/destination is from/to the continental United States. 
92 


78988.044

ENCLOSURE I 

HHS ADA Corrective Actions - Past and Future 

I. Corrective Actions HHS lias Alreadv Taken 

• Revised the IIHS Acquisition Regulation (HHSAR) 

http://www.hhs.gov/policies/hhsarlsubpart332.html#S ubpart3 3:2.7 --ContractFund i ng 

coverage in November 2009 and April 2010 on contract funding. based on consultation 

with OGC and the acquisition community. to make it consistent with applicable laws and 

regulations and easier to understand. 

• Issued an Acquisition Policy Mcmorandum http://dhhs.go\/asfr/ogapaiacguisitioniapm20) 0-06.html on June 28. 20 I 0 regarding funding of contracts exceeding one year of 

performance. which provided detailed guidance regarding pertinent HHSAR coverage. In 

doing so: 

o Improved the process for review and approval of appropriation-related acquisition 

regulations and guidance. including closer consultation with OGC and 

budgetlfinance officials. 

o Conducted continuous education and outreach sessions across the Department. 

o Identified, tailored and adopted bcst practices from other Federal agencies. 

• Developed and implemented an appropriation law decision trce in June 20 10 for use by 

the HHS budget, program. acquisition. and finance communities. A web-enable decisiontree with links to relevant resources will be available on-line for HHS personnel in the 

near future. 

• Developed an on-line Appropriation Law course tailored to the HHS environment. which 

serves as the basis for future instructor-led training. 

• Provided technical assistance to Heads of Contracting Activity and their statTon an asneeded basis. 

• Shared pertinent legal advice with the acquisition community. 

• Reorganized our management structure to more closely align acquisition and 

budget/finance management activities. 

2. Additional OPDlY specific actions taken or under way 

At the agency level, our Hcads of Contracting Activity have mirrored the Department's crossfunctional risk 111 itigation approach by: 

• Issuing local procedural guidelines to implement our expanded acquisition guidance. 
93 


78988.045

• Conducting or arranging for local appropriation law training. 

• Working closely with their agency budget. program and finance communities (0 align 

business practices with appropriation laws and regulations. 

Highlights of additional actions taken or to be taken by HHS' agencies include: 

• The Program Support Center's (PSC) Strategic Acquisition Service (SAS), which 

provides contracting support to HHS' Office of Secretary, Administration for Children 

and Families, and Administration on Aging as well as other HHS agencies and non-HHS 

customers, uses its Division of Quality Assurance to review solicitations for new awards 

to ensure prospective contracts are properly structured. They also conduct town-halls to 

provide up to date training for its contracting staff and maintain a Contracting Officer 

Technical Representatives list to promulgate information to project and program officials 

responsible for acquisition planning and administration. 

• As an initial step, the Centers for Disease Control and Prevention (CDC) developed an 

internal CDC guidance document to summarize how to properly fund both severable and 

non-severable service contracts. This was subsequently superseded by the HBS 

Acquisition Policy Memo APM-2010-1 (June 28, 2010). CDC's processes include: 

documentation of the severability determination for each contact or task order for 

services; the use ofHHS' Acquisition Plan template for all acquisitions exceeding 

$ISOK, rather than $500K; a monthly QA/QC review offunding actions, accomplished 

with an independent random sampling of contract actions by three different offices 

(procurement, finance, and budget to ensure compliance; a secondary higher level review 

of all contract actions; and a review all funding actions that exceed $S Million by the 

Acquisition Policy Office and the Head of Contracting Activity (HCA). An updated 

quality policy has been developed that also creates a contract review board for select high 

dollar, complex acquisitions. As an added control. the CDC's HCA is notified of all 

acquisitions and IAAs that exceed $1 M. and any service contracts that add or retain 

contractor staff in CDC facilities. 

CDC also formed a multi-organization workgroup consisting of Contracting. Finance and 

program personnel and a sub-workgroup to review business processes and internal 

controls processes that have an impact 011 contract funding. This resulted in changes to 

CDC's contract writing system (ICE) and business processcs to allow for a more 

complete fund certification process by certifying officers. This effort is ongoing. 

Training will be conducted to educate the acquisition community on the systems and 

business process changes. 

CDC also developed a classroom training course to educate acquisition personnel 

regarding the proper funding of severable and non-severable service contracts. The 

training was jointly presented by CDC Procurement and Finance senior staff. With 

approximately 1800 students being trained, the course was considered mandatory for 

procurement and finance personnel and strongly encouraged for program personnel. 

CDC has also converted the classroom severability training to an on-line training course. 
94 


78988.046

• The Health Resources Services Administration (HRSA) had already implemented a 

requirement for appropriation law training of its acquisition-related staff beginning in 

2006. HRSA has since also created a checklist to revicw prospective contracts for 

severability vs. non-severability and ensure that the planned funding source and amount 

is in compliance with the contract type. Additionally, HRSA will launch an initiative to 

improve its statements of work to more clearly indicate whether the requirements are 

severable or non-severable. 

• The National Institutes of Health (NIH) has promoted the use of the lIIulti-year 

contracting mechanism. codified at 41 U.S.C. 254c, which authorizes agencies to 

structure contracts using flexible funding methods and developed an instructor-led course 

on multi-year contracting tailored to the NIH environment to train and familiarize staff 

with how to award and administer a multi-year contract. NIH also established classroombased training on appropriation law (based on HHS' on-line course) to enhance the 

available training. NIH will continue to deliver this class this fiscal year. NIH 

continuously shares successful appropriations-related business practices and its Office of 

Acquisition and Logistics Management provides technical assistance across NIH to 

ensure full compliance with appropriations law and HIlS policy. Additionally. NIH 

conducts acquisition management and internal control reviews to validate full compliance 

with appropriations law and HHS policy. 

• At the Agency for Health Research Quality (AHRQ), the Head ofCol1tracting Activity 

has been proactively engaged by providing briefings on funding rules for contract actions 

presented to: AHRQ senior leadership, AERQ contract staff, and each AHRQ 

Office/Center. She has also conducted numerous discussions/meeting with program 

staftiCOTRs and contractors on appropriate contract funding, on an as needed basis to recducate thcm on appropriate funding applications. Additionally, AHRQ has changed its 

processes to ensure that as contract modifications are processed, contracts are restmctured if necessary to ensure tlmding compliance from that point fonvard. Also, from 

the earliest possible point in the requirements development phase of the acquisition 

process (concept development), AHRQ's contracting. program. and budget professionals 

review the requirements to discuss the nature of the requirement (severable/nonseverable) and identify appropriatc funding strategylbudgeting. The requirement's 

severability/non-severability, and the rationale for which, is then addressed in written 

acquisition plans and included in contract file documentation. To date. AHRQ has also 

achieved near 100% compl iance with appropriations law training. 

• At the Food and Drug Administration, all contract actions are subject to a second level 

review to ensure compliance with FAR, HHSAR and acquisition guidance. FDA's 

Office of Acquisitions and Grants Scrvices (OAGS) Policy and Procedure Memorandum 

(P&PM) requires that a review be conducted at a level above the Contracting Officer for 

actions (and decision-making documents) over $500K. Division Directors typically serve 

as the reviewing and approving authority at this level. Actions expected to exceed $1 M 

undergo a formal Revicw Board process which may include Directors. Team Leaders, 

Contracting OfJiccrs and Contract Specialists. Actions valued at $IOM or more are 
95 


78988.047

reviewed in what is described as a "face to face'" review process between the HCA and 

senior leadership. 

• To prevent future problems. the Substance Abuse and Mental Health Services 

Administration (SAMHSA) SAMHSA will review the workflow for contract funding 

decisions, identif)klariJY roles and responsibilities, determine what control gaps exist. 

and design controls to fill control gaps. SAMHSA also plans to review the Interagency 

Agreement processes. in coordination with OGC. especially as they relate to preparation 

of documents that commit SAMHSA to action to identifY and will address any control 

gaps. Further. SAMHSA will ensure that both program and contracting officials are 

tiuniliar with and held accountable for complying with appropriation law and the HHS 

funding guidelines. To ensure that contracting activities comply with the current 

HHSAR requirements. SAMHSA evaluated a sample of open contracts from all Offices 

and Centers as part of the fiscal year 20 II A -123 assessment. 

3. Things that we are doing. going forward 

The Department is doing everything it can to ensure that all new contracts awarded in FY 20 II 

(and beyond) are properly funded in compliance with laws and regulations. To safeguard against 

future violations, wc are: 

• Requiring all contracts, budget. finance. and program staff across HHS to take 

appropriations law training during the winter and spring of 20 II. As of October, 20 II, 

HHS' training completion by OrDlY is as follows: 

o Intent: Ensures that personnel who each have a role in ensuring compliance with 

appropriation law are all trained and knowledgeable on the proper funding of 

contracts so that. moving forward, there is an alignment between the budgets. 

spend plans, acquisition plans. resulting contracts, and financial controls. 

4 
96 


78988.048

• Sharing successful appropriation-related business practices, adopting quality assurance 

procedures, and providing technical assistance across the Department to ensure full 

compliance with appropriation law. 

o Intent: Provides for the cross-sharing of best practices and of challenges. which 

gives insight into what each OPDIY/contracting office is doing right, and how, 

and what challenges/problems they have overcome/resolved - enabling other 

OPDIYs/contracting offices to avoid or prevent similar issues. 

• Requiring the use ofHHS' new standard Acquisition Plan template for any contract 

expected to be $500K or over to: (a) ensure that program and contracting officials arc 

actively considering appropriation issues as early as possible in the acquisition cycle; and 

(b) reinforce the need for proper, informed funds review and certification. 

o Intent: Provides a documented. internal-control measure and promotes 

accountability of those involved in the acquisition planning/contract structuring 

process. 

• Conducting procurement management and internal control reviews of OPDIY acquisition 

operations to validate full compliance with appropriation laws and rcgulations. 

o Intent: In support of the A-123 Acquisition Assessment/Oversight process and to 

promote sound contracting practices and documentation - teams of contracting 

experts are formcd quarterly (except Q4 of the FY) to review one contracting 

office per quarter to assess the operations, organization structure, workforce, and 

actual contracting practices of the individual contracting offices through a 

structured interviews and file/documentation review process. These Procurement 

Management Reviews (PMRs) identify an office's strengths and areas for 

improvement. One area assessed is compliance with appropriation laws. For 

each PMR. bctween 25 and 30 contract tiles covering a variety of contract types 

- are reviewed. In FY I I. PMRs werc conducted at CMS. IHS, and CDC; the 

reviews found that contracts were being funded in compliance with appropriation 

law. PMRs will be conducted at ASPR, SAMHSA. and NIH in FYI2. 

• We now require - effective October 2012 - Department-level review of designated 

solicitations before issuance. These reviews, conducted by ASFR and OGC, are an 

additional safeguard to ensure the planned acquisitions for HHS' most challenging 

requirements - research and development, studies, and data collection with contract 

performance greater than 12 months - receive the necessary oversight to ensure 

compliance with appropriation laws and regulations. 

o Intent: Establishes a legal sufficiency and acquisition oversight review process 

for large R&D/Studies contracts and ensures that contracts will bc properly 

funded at the outset of the acquisition process. For NIH. as an example, HHS 

conducts compliance reviews of all actions over $10 million and since October 

20 I I has reviewed six contract files; all were found to be compliant with 

appropriations law. 
97 


78988.049

From: 

Sent: 

To: 

Cc: 

Subject: 

Attachments: 

Follow Up Flag: 

Flag Status: 

Barstow, Kevin 

Wednesday, September 19, 2012 2:47 PM 

Spector. Sam 

Abraham, Nick 

RE: QFRs from 5/9/12 0&1 Hearing 

IHS ADA letters to congress 9 12 2012.pdf 

Follow up 

Flagged 

From: Spector, Sam •••••••••••••• 

sent: wednesday~, .se.p.te.m.b.eir 19, 2012 12:44 PM To: Barstow, Kevi~, • Cc: Abraham, Nick 

Subject: RE: QFRs from 5/9/12 0&1 Hearing 

any 

From: Spector, Sam 

sent: Wednesday, 2012 11:46 AM 

To: 'Barstow, 

Cc: Abraham, Nick 

Subject: RE: QFRs from 5{9/12 0&1 Hearing 
98 


78988.050

From: Barstow, Kevin ................ .

Sent: Wednesday, September 12, 2012 3: 17 PM 

To: Spector, Sam 

Ce: Abraham, Nick 

Subject: RE: QFRs from 5/9/12 0&1 Hearing 

jet 

From: Spector, Sam.!!!!IIIJ!I!~~!!!!I!!!I! ••••••• 1 

Sent: Monday, August 27, 2012 1:00 PM 

To: Barstow, Kevin_ 

Ce: Abraham, Nick 

Subject: RE: QFRs from 5/9/12 0&1 Hearing 

Good afternoon, Kevin -

Thanks again for passing this last week. 

With regard to the Department's response to Question 5, the GAO weblink provided 

http://www.gao.gov/ada/antideficiencyrpts.htm. does not offer information about recent (post-FY 2010) ADA violations 

as I'm sure you can see. Therefore, would jt be possible for you to check back in with your fo!ks and see jf you can 

provide us with the requested information - ADA violations by HHS. if any, since July 14, 201l? 

Thanks; 

Sam 

Samuel 1. Spector 

Counsel, Majority Staff 

Oversight and Investigations 

Committee on Fnergy and Commerce 

U.S. House of Representatives 
99 


78988.051

THE SECRETARY OF HEALTH AND HUMAN SERVICES 

WASHINGTON, D.C. 20201 

The Honorable Joseph R. Biden, Jr. 

President of the Senate 

Washington, DC 20510 

Dear Mr. President: 

September 12,2012 

This letter is to report three violations of the Antideficiency Act, as required by section 13 51 of 

Title 31, United States Code (U.S.C.). 

Violations of section 1341 occurred in account TAFS 75-10-0390 - Indian Health Services (IHS) 

in the total amount of $1 0,668,285. The violations occurred in April 2010 when fiscal year 2010 

obligations were made that exceeded the amount appropriated for Contract Support Costs (CSC) 

associated with new or expanded self-detemlination contracts, grants, self-governance compacts, 

or annual funding agreements. The violations exceeded the ceiling on new or expanded contracts. 

IHS did not exceed the ceiling on total CSC funding. 

Mr. Ronald Demaray, GS-15, Acting Director of the Office of Direct Service and Contracting 

Tribes, was the officer found responsible for the violation. The individual responsible has 

separated from federal service, so no administrative discipline has been imposed. The primary 

reason the violation occurred is that the individual responsible for the allocation did not apply the 

Congressional limitation on appropriations for CSC funding associated with new or expanded 

contracts correctly. The Department of Health and Human Services review revealed no evidence 

that the violations were committed with willful or knowing intent on the part of the responsible 

party to violate the Antideficiency Act. 

IHS's system of administrative control of funds has been approved by OMB and is available on 

the IHS website. The contracts have been reviewed in light of the Supreme Court's decision in 

Salazar v. Ramah, and that decision has no impact on this violation. 

IHS has taken steps to strengthen internal controls for allocating CSC and prevent future 

violations from occurring. These steps included: 

• Ensuring additional organizational components are involved in all aspects of reviewing, 

validating, and certifying CSC data, and reviewing all proposed CSC allocations, 

including allocations for new and expanded contracts or compacts; 
100 

Æ 


78988.052

The Honorable Joscph R. Bidcn, Jr. 

September 12, 2012 

Page 2 

• Requiring appropriations and contract training for all staff involved in the selfdetermination contracting process; 

• Reviewing IHS's practices and procedures to proactively identify risks that could result in 

future violations and to strengthen the appropriate internal controls necessary to mitigate 

such risks; and, 

• Evaluating the agency's policy for allocating CSC to ensure that application of the policy 

is consistent with appropriations acts. 

Identical reports are being submitted to the President, the Speaker of the House of 

Representatives, and the Comptroller General. 

Kathleen Sebelius