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55–222 PDF 2010

ENFORCEMENT OF THE CRIMINAL LAWS AGAINST

MEDICARE AND MEDICAID FRAUD

HEARING

BEFORE THE

SUBCOMMITTEE ON CRIME, TERRORISM, 

AND HOMELAND SECURITY

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

SECOND SESSION

MARCH 4, 2010

Serial No. 111–113

Printed for the use of the Committee on the Judiciary

(

Available via the World Wide Web: http://judiciary.house.gov 

(II)

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

WILLIAM D. DELAHUNT, Massachusetts 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR.,

Georgia 

PEDRO PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

LUIS V. GUTIERREZ, Illinois 

TAMMY BALDWIN, Wisconsin 

CHARLES A. GONZALEZ, Texas 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California 

DEBBIE WASSERMAN SCHULTZ, Florida 

DANIEL MAFFEI, New York 

[Vacant] 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM ROONEY, Florida 

GREGG HARPER, Mississippi

PERRY APELBAUM, Staff Director and Chief Counsel 

SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel 

SUBCOMMITTEE ON CRIME, TERRORISM, AND HOMELAND SECURITY

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia, Chairman

PEDRO PIERLUISI, Puerto Rico 

JERROLD NADLER, New York 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

STEVE COHEN, Tennessee 

ANTHONY D. WEINER, New York 

DEBBIE WASSERMAN SCHULTZ, Florida 

MIKE QUIGLEY, Illinois 

LOUIE GOHMERT, Texas 

TED POE, Texas 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

J. RANDY FORBES, Virginia 

TOM ROONEY, Florida

BOBBY VASSAR, Chief Counsel 

CAROLINE LYNCH, Minority Counsel 

(III)

C O N T E N T S 

MARCH 4, 2010

Page 

OPENING STATEMENTS 

The Honorable Robert C. ‘‘Bobby’’ Scott, a Representative in Congress from 

the State of Virginia, and Chairman, Subcommittee on Crime, Terrorism, 

and Homeland Security ....................................................................................... 1

The Honorable Louie Gohmert, a Representative in Congress from the State 

of Texas, and Ranking Member, Subcommittee on Crime, Terrorism, and 

Homeland Security ............................................................................................... 3

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, and Chairman, Committee on the Judiciar ....................... 5

WITNESSES 

Mr. Greg Andres, Acting Deputy Assistant Attorney General, Criminal Division, U.S. Department of Justice, Washington, DC 

Oral Testimony ..................................................................................................... 7

Prepared Statement ............................................................................................. 9

Mr. Timothy J. Menke, Deputy Inspector General for Investigations, U.S. 

Department of Health and Human Services, Washington, DC 

Oral Testimony ..................................................................................................... 20

Prepared Statement ............................................................................................. 22

Mr. D. Mark Collins, Assistant Attorney General, Director of Nebraska Medicaid Fraud Control Unit, President of the National Association of Medicaid 

Fraud Control Units, Lincoln, NE 

Oral Testimony ..................................................................................................... 30

Prepared Statement ............................................................................................. 33

Mr. James Frogue, Vice President and Director of State Policy, Center for 

Health Transformation, Washington, DC 

Oral Testimony ..................................................................................................... 50

Prepared Statement ............................................................................................. 53

APPENDIX 

Material Submitted for the Hearing Record .......................................................... 79

(1)

ENFORCEMENT OF THE CRIMINAL LAWS 

AGAINST MEDICARE AND MEDICAID FRAUD 

THURSDAY, MARCH 4, 2010

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON CRIME, TERRORISM, AND HOMELAND SECURITY

COMMITTEE ON THE JUDICIARY, Washington, DC.

The Subcommittee met, pursuant to notice, at 10:05 a.m., in 

room 2141, Rayburn House Office Building, the Honorable Robert 

C. ‘‘Bobby’’ Scott (Chairman of the Subcommittee) presiding. 

Present: Representatives Scott, Conyers, Pierluisi, Jackson Lee, 

Gohmert, Poe, and Goodlatte. 

Staff present: (Majority) Bobby Vassar, Subcommittee Chief 

Counsel; Joe Graupensperger, Counsel; Veronica Eligan, Professional Staff Member; (Minority) Caroline Lynch, Counsel; Art Barker, FBI Detailee; and Kelsey Whitlock, Staff Assistant. 

Mr. SCOTT. The Ranking Member has asked me to go on. He will 

be here in just a moment. 

The Subcommittee will now come to order. I am pleased to welcome you today to the hearing before the Subcommittee on Crime, 

Terrorism, and Homeland Security. Today we will discuss enforcement strategies for fighting criminal fraud against Medicare and 

Medicaid programs. 

These two programs have provided immeasurable benefits to the 

health of our Nation’s citizens, particularly those who are often the 

most in need of assistance. It is the continuing responsibility of 

Congress to examine these programs to ensure that our government is making the best possible effort to reduce fraud, waste and 

abuse related to them. 

Health care fraud, including fraud against Medicare and Medicaid, is a serious problem. It has been estimated that there is more 

than $60 billion of health care fraud against public and private 

plans each year. 

Criminals have devised a number of ways of defrauding these 

programs, such as billing for services that were never rendered either by using genuine patient information, sometimes obtained 

through identity fraud, to fabricate entire claims or padding claims 

with charges for procedures that did not take place; billing for more 

expensive services or procedures than were actually provided or 

performed, commonly known as upcoding; performing medically unnecessary services solely for the purpose of generating insurance 

payments. 

2

Now, we have been advised by some that that is a result of defensive medicine, but I think we are going to hear perhaps that 

some of these unnecessary services are just for the purposes of generating insurance payments. 

Another is billing each step of the procedure as if it were a separate procedure, known as unbundling. In recent years, many of 

these schemes have been perpetrated in connection with the sale 

of durable medical equipment, the provision of home health, and 

infusion of certain expensive drugs for HIV therapy. 

Federal law provides statutes that prosecutors use to bring 

charges against those who commit fraud against the Federal health 

care programs. Some are specific to health care fraud. Some are 

statutes with more general application such as the prohibition 

against false statements to the government, which are used by 

prosecutors to pursue many types of crimes. 

I want to hear today how these statutory tools are being used as 

a basis for investigating and prosecuting those who defraud Medicare and Medicaid and how the statutes complement Federal civil 

remedies for these frauds. 

And we also need to know whether or not there is a need for new 

laws—new criminal laws or whether the—we just need more resources to enforce the laws that are on the books. Frequently, our 

response to these kinds of situations are to increase the penalties. 

Now, that obviously is irrelevant if there has been no investigation, no prosecution and no conviction. That is when the penalties 

would kick in. Sometimes if you just had the resources for the investigations and the prosecution, you could pursue these crimes 

much more efficiently, and that increased penalties would be irrelevant unless you would have done the investigation. 

Federal effort against these crimes has evolved over the years in 

an effort to keep pace with the volume of these crimes and the increasing sophistication of the criminals committing them. For instance, irregularities in billing are more easily detectable now with 

the ability to examine billing records maintained in computer databases. 

The Justice Department and HHS have increased monitoring of 

this information to detect suspicious patterns in claims data and 

adjust enforcement efforts accordingly. At the same time, these 

agencies have been able to better identify and focus on regional hot 

spots for this type of crime. 

In 2007, DOJ and HHS established a Medicare strike force team 

in Miami-Dade County in Florida. Next year, the strike force—the 

next year, the strike force was established in Los Angeles. And 

over the past year, these two agencies under the HEAT program 

have expanded the use of task forces in Detroit, Houston, Tampa, 

Brooklyn and Baton Rouge. 

I understand that further expansion of the strike task force concept is planned for later this year. 

The pursuit of those who commit Medicaid—who defraud the 

Medicaid program involves both State and Federal law enforcement. 

In 1977, Congress created a State Medicaid Fraud Control Units, 

which are usually located in the offices of the State attorneys general. They investigate and prosecute a variety of types of fraud 

3

crimes primarily in connection with Medicaid programs. We will 

hear from the director of one of those control units today. 

I hope this hearing will serve to highlight the continuing need 

to examine and adjust our efforts to combat fraud against Medicare 

and Medicaid. I look forward to hearing from all of our witnesses 

today concerning how we can better prevent, investigate and prosecute this time—this kind of fraud. 

It is now my pleasure to recognize the Ranking Member of the 

Subcommittee, the gentleman from Texas, Judge Gohmert. 

Mr. GOHMERT. Thank you. And I do appreciate us having this 

hearing. I appreciate your leadership on this, Chairman Scott. And 

appreciate the witnesses being here today. 

One of the most famous bank robbers in history was William 

‘‘Willie’’ Sutton. It is estimated Sutton robbed over 100 banks beginning in the late 1920’s, stealing an estimated $2 million. He was 

one of the early faces on the FBI’s Ten Most Wanted list, and when 

he was asked, famously, why he robbed banks, he said, ‘‘Because 

that is where the money is.’’

Well, whether Sutton really said that or not, if Sutton were in 

this room today he would likely agree Medicare or Medicaid systems are defrauded because that is where the money is—and, I 

would submit, apparently from what I have been reading of the testimony, easy money. 

One individual convicted of health care fraud commented, ‘‘Wow. 

I just won the lottery.’’ From making $20,000 to $40,000 a day 

cheating Medicare. 

In fact, in some areas of the country, the Medicare fraud business is reported to have replaced the drug trade as the biggest 

crime problem. With little effort and with the odds of getting 

caught relatively low, the risk is—that criminal investigations and 

prosecutions are not serious enough deterrents to counter the relatively easy way that millions of taxpayer dollars are stolen. 

There are witnesses here today from the Department of Justice, 

Department of Health and Human Services and Medicaid Fraud 

Control Unit, all who have success stories to tell. 

I also want to thank my friend Jim Frogue for being here. And 

I appreciated getting and reading a copy of his book, ‘‘Stop Paying 

the Crooks: Solutions to End the Fraud that Threatens Your 

Healthcare.’’ Newt Gingrich had a good forward in that book. But 

I appreciate his efforts and appreciate him being here today with 

the other witnesses. 

In his testimony before the U.S. Senate on the topic of health 

care fraud deterrence, Professor Malcolm Sparrow of Harvard, the 

John Kennedy School of Government, identified the rule for criminals as it relates to these frauds. ‘‘If you want to steal from Medicare, Medicaid or any other health care insurance program, learn 

to bill your lies correctly. Then, for the most part, your claims will 

be paid in full and on time without a hiccup by a computer with 

no human involvement at all.’’

While the agencies represented by the witnesses before us today 

have implemented enforcement and prosecution strategies targeting regions that have been identified as high-risk areas for these 

types of frauds, one representative from an investigating agency 

4

was quoted as saying that his ‘‘office finds fraud everywhere it 

looks.’’

In any event, to illustrate some of the topics that we will discuss 

here today, I would ask permission to have a brief—and it is actually cut down substantially from where ‘‘60 Minutes’’ played it, but 

with your permission, we would ask unanimous consent to view a 

small segment of the program that was produced by ‘‘60 Minutes’’ 

called ‘‘Medicare Fraud: A $60 Billion Crime.’’

Mr. SCOTT. All right. This ‘‘60 Minutes’’ story that provoked—it 

was partly responsible for provoking this hearing, so we would be, 

without objection, delighted to roll the tape. 

[Begin videotape.] 

Mr. KROFT. [‘‘60 Minutes’’ Correspondent] FBI Special Agent 

Brian Waterman, who we rode with for several days, told us the 

only visible evidence of the crimes are the thousands of tiny clinics 

and pharmacies that dot the low-rent strip malls. You don’t even 

know they are there because there is never anyone inside—no doctors, no nurses, and no patients. 

Mr. WATERMAN. [FBI Special Agent] This office number should 

be manned and answered 24 hours a day. 

Mr. KROFT. This tiny medical supply company billed Medicare almost $2 million in July and a half a million dollars while we were 

there in August. But we never found anybody in, and our phone 

calls were never returned. 

Mr. WATERMAN. Say they are currently on the other line. Oh. 

Well, do they want you to hold? 

Mr. KROFT. Sometimes they don’t even have offices. We went 

looking for a pharmacy at 7511 Northwest 73rd Street that billed 

Medicare $300,000 in charges. It turned out to be in the middle of 

a public warehouse storage area. 

Mr. WATERMAN. They have already told us that there is no offices here, there are no businesses here. In fact, they are not even 

allowed to have a business here. 

Mr. KROFT. Waterman is the senior agent in the Miami office in 

charge of Medicare fraud. And Kirk Ogrosky, a top Justice Department prosecutor, oversees half a dozen Medicare Fraud Strike 

Forces that have been set up across the country. 

This one operates out of a warehouse at a secret location in 

South Florida and includes investigators from the FBI, Health and 

Human Services and the IRS. 

Mr. OGROSKY. [DOJ Prosecutor and Healthcare Fraud Strike 

Force Leader] There is a health care fraud industry where people 

do nothing but recruit patients, get patient lists, find doctors, look 

on the Internet, find different scams. 

There are entire groups and entire organizations of people that 

are dedicated to nothing but committing fraud, finding a better 

way to steal from Medicare. 

Mr. KROFT. Is the Medicare fraud business bigger than the drug 

business in Miami now? 

Mr. OGROSKY. I think it is way bigger. 

Mr. KROFT. What changed? 

Mr. OGROSKY. The criminals changed. 

Mr. WATERMAN. Sophistication. 

5

Mr. OGROSKY. They figured out that rather than stealing $100,000 or $200,000, they can steal $100 million. We have seen 

cases in the last 6, 8 months that involve a couple of guys that, 

if they weren’t stealing from Medicare, might be stealing your car. 

TONY. You are waking up every day making $20,000, $30,000, $40,000, every day, almost literally, and you are like, ‘‘Wow, I 

mean, I just won the lottery.’’

Mr. KROFT. Let’s call this guy ‘‘Tony.’’ That is not his real name 

and obviously not his real face. But before he was ratted out by a 

friend and brought down by the FBI, he was making Wall Street 

money running a string of phony medical supply companies out of 

this building that were theoretically providing wheelchairs and 

other expensive equipment to Medicare patients. 

How much money did you steal from Medicare? 

TONY. About $20 million. 

Mr. KROFT. $20 million? 

TONY. Yes. 

Mr. KROFT. Was it easy? 

TONY. Real easy. 

Mr. KROFT. And you are not exactly a criminal mastermind. 

TONY. No. No, not really. It is more like common sense. That is 

all you need here. 

Mr. KROFT. Did you actually ever sell any medical equipment? 

TONY. No. No. Just have somebody in an office answering the 

phone like we are open for business, and wake up in the morning, 

check your bank account and see how much money you made 

today. 

Mr. KROFT. So you didn’t have any medical equipment. You 

didn’t really have any clients either, did you? 

TONY. No. 

Mr. KROFT. All of it was fake. 

TONY. All of it was fake, yes. 

Mr. KROFT. And you would just fill out some invoices and some 

forms and send them to Medicare and——

TONY. Yeah, that is it. And 15 to 30 days you will have a direct 

deposit in your bank account. I mean, it is—it was ridiculous. It 

is more like taking candy from a baby. 

[End videotape.] 

Mr. GOHMERT. Thank you, Mr. Chairman. And again, appreciate 

the opportunity to have this hearing. Appreciate your calling it. 

Mr. SCOTT. Thank you. 

The Chairman of the full Committee is with us, the gentleman 

from Michigan. 

Do you have a statement, comment? 

Mr. CONYERS. Thanks, Chairman Scott, Judge Gohmert. 

Now, this is an issue that everybody of every persuasion can 

come together on. And I congratulate you for having the hearing. 

And I would like to find out where the next step from the ‘‘60 Minutes’’ clip goes. 

I mean, to whom did this enterprising young man send invoices 

to get the money? I mean, who sent the money to him? And they 

are the ones that ought to be sitting at the second panel here today 

to explain that, or removed from office, or at least discontinuing 

what they are doing. 

6

That is the back story to this hearing. 

Mr. SCOTT. Well, we have one inspector general from the HHS 

who might comment. 

Mr. CONYERS. Well, he better make more than a comment. 

[Laughter.] 

I will tell you that. No. No, this is simple. I mean, this is not 

complex crime. It is not international drug smuggling. This isn’t 

undercover operations. I mean, this is just ordinary household 

criminal law violations. 

And it is a little bit shocking it takes two Federal agencies at the 

top to combine to bust little guys like this who just say it is really 

just simple, you send in the invoices and then you check your bank 

account to see where the money comes from. 

I mean, I want to ask the witnesses this in advance. Could you 

suggest a simpler crime that could be committed in the United 

States than what this young fellow just told ‘‘60 Minutes’’ and everybody in America? 

To be honest, the one thing we have got to worry about is how 

many more people did he incentivize. I mean, people that are sitting at home that just got laid off, or their company moved out of 

the States, or their home is in foreclosure, and they see this program—I mean, he doesn’t need a wake-up call. 

They just told him what he might do, and that it might work, 

and that it—and it is working so successfully that we have two 

agencies at the Federal level—can I ask you why the Department 

of Justice can’t get enough money from the Congress to bust this 

simple, ordinary kind of racket? 

The second question that I am going to ask is what about the 

corporate crime that goes on here. We are talking about the little 

guys—if there is an element of corporate activity in—that we have 

to know about. 

So I thank you, Mr. Chairman. 

Mr. SCOTT. Thank you. And I thank you for your comments, Mr. 

Chairman. 

And thank you, Mr. Gohmert, for bringing that piece to our attention. 

Our first witness on the panel will be Mr. Greg Andres. He is appointed acting deputy assistant attorney general in the Criminal 

Division. 

He is joined in the division on detail from the United States—

U.S. Attorney’s Office in the Eastern District of New York, where 

he has been an assistant U.S. attorney since 1999 and has served 

as chief of the Criminal Division since 2006. He has been involved 

in several high-profile prosecutions involving organized crime, terrorism and securities fraud offenses. 

Our second witness will be Mr. Timothy Menke. He is the Department of Health and Human Services deputy inspector general 

for investigations. He has over 20 years of Federal law enforcement 

experience and has been with the Office of Inspector General since 

1996. 

Our third witness will be Mr. Mark Collins. He joined the Nebraska Attorney General’s Office in September 2005 as director of 

the Nebraska Medicaid Fraud Control Unit which had just been 

created a year earlier. He also serves as the special assistant U.S. 

7

attorney for the District of Nebraska for health care fraud matters 

and is president of the National Association of Medicaid Fraud 

Control Units. 

And our final witness is Mr. Jim Frogue—did I pronounce that 

right? 

Mr. FROGUE. Frogue. 

Mr. SCOTT. Frogue, thank you—Mr. Jim Frogue, who is the vice 

president and director of State policy for the Center for Health 

Transformation. He is the center’s chief liaison to the State policy 

projects—the primary areas of focus—including Medicare, Medicaid 

and fraud. 

Previously, he was the director of Health and Human Services 

task force at the American Legislative Exchange Council, where he 

coordinated the development of market-oriented health policies 

among State legislators. 

Now, each of our witnesses’ written statements will be entered 

in the record in its entirety. 

I would ask each of our witnesses to summarize your testimony 

in 5 minutes or less. To help stay within the time, there is a timing 

device at the table which will begin green and go to yellow when 

you have 1 minute left. And when it turns red, that signals that 

your 5 minutes has expired. 

Mr. Andres. 

TESTIMONY OF GREG ANDRES, ACTING DEPUTY ASSISTANT 

ATTORNEY GENERAL, CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE, WASHINGTON, DC 

Mr. ANDRES. Thank you, Chairman Conyers, Chairman Scott, 

Ranking Member Gohmert and distinguished Members of the Subcommittee. 

Thank you for the invitation to be here today. Thank you for the 

opportunity to outline the Department of Justice’s efforts to root 

out, prosecute and prevent health care fraud. 

Every year the Federal Government devotes billions of dollars to 

provide health care services for our citizens, young and old alike. 

Sadly, between 3 and 10 percent of that money may be lost to 

waste, fraud or abuse. 

We in the Department of Justice have a duty to protect against 

fraud and the obligation to make sure that money allocated for 

health care is not siphoned away by criminals. This is a responsibility that we embrace. 

And the Department of Justice has used criminal and civil enforcement tools to prosecute health care fraud for more than a decade. Today we are doing it better. Most importantly, we are coordinating more effectively with our partners at the Department of 

Health and Human Services. 

The Health Care Fraud Prevention and Enforcement Action 

Team, or HEAT initiative, is guiding this partnership in a smart, 

strategic and targeted way and it is producing results. 

On the criminal side, we are identifying hot spots with unexplained billing patterns, and we are placing Medicare Fraud Strike 

Forces in those cities to catch the most egregious offenders. 

We started in Miami and Los Angeles and expanded to Detroit 

and Houston. And later we expanded further, this time to BrookVerDate 0ct 09 2002 18:29 Nov 04, 2010 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6601 H:\WORK\CRIME\030410\55222.000 HJUD1 PsN: 55222
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lyn, Baton Rouge and Tampa. Our strike force prosecutors and 

agents have made arrests and earned convictions in a wide variety 

of fraud schemes involving claims for services that were unnecessary or that were never provided. 

For example, in June of 2009 Federal prosecutors charged 53 defendants in Detroit relating to fraudulent billing schemes involving 

physical, occupational and infusion therapy services. These scheme 

involved $50 million. 

Days later, Federal prosecutors indicted eight Miami-area residents in connection with a $22 million scheme to submit false 

claims to Medicare for home health services. 

And about a month after that, July of 2009, Federal prosecutors 

in Houston charged 32 defendants in schemes involving more than 

$16 million in fraudulent Medicare billing. Similar prosecutions 

have been brought in Los Angeles and Brooklyn alike. 

In all, since its inception, strike force prosecutors and agents 

have charged more than 500 defendants who collectively billed the 

Medicare program for more than a billion dollars. 

They have secured more than 260 guilty pleas to date, obtained 

prison sentences for 94 percent of defendants convicted. These efforts have a tangible result in terms of savings. 

In the first year after strike force operations in Miami, there is 

an estimated reduction of $1.75 billion in durable medical equipment claims submitted. 

The HEAT initiative also has a civil fraud enforcement component. Using the False Claims Act and the Anti-Kickback Act and 

Food, Drug and Cosmetic Act during fiscal year 2009, DOJ civil 

lawyers have secured $1.6 billion in civil settlements and judgments. They have opened 886 new civil health care fraud matters 

and filed complaints or intervened in 283 civil health care fraud 

matters. 

The Civil Division’s Office of Consumer Litigation prosecutes 

drug and device manufacturers and responsible individuals believed to be illegally promoting and distributing misbranded and 

adulterated drugs or devices in violation of the Food, Drug and 

Cosmetic Act. 

The Civil Division also houses the Elder Justice and Nursing 

Home Initiative to coordinate and support law enforcement efforts 

to combat elder abuse, neglect and financial exploitation. 

Finally, the Special Litigation Section of the Civil Rights Division 

ensures that the civil rights of persons who reside in public, State 

or locally run institutions are fully protected. 

In conclusion, the Department of Justice has made the prosecution of health care fraud a priority. Resources are dedicated to 

these activities and the President’s budget seeks additional funding 

to expand our enforcement efforts. 

We look forward to working with Congress as we continue our 

important mission to prevent, deter and prosecute health care 

fraud. Thank you. 

[The prepared statement of Mr. Andres follows:]

9

PREPARED STATEMENT OF GREG ANDRES


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Mr. SCOTT. Thank you. 

Mr. Menke. 


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TESTIMONY OF TIMOTHY J. MENKE, DEPUTY INSPECTOR GENERAL FOR INVESTIGATIONS, U.S. DEPARTMENT OF HEALTH 

AND HUMAN SERVICES, WASHINGTON, DC 

Mr. MENKE. Good morning, Chairman Conyers, Chairman Scott, 

Ranking Member Gohmert and distinguished Members of the Subcommittee. I am Timothy Menke. I am the deputy inspector general for investigations at the Department of Health and Human 

Services Office of Inspector General. 

I thank you for the opportunity to discuss OIG’s health care antifraud strategy, primarily focusing our law enforcement activities to 

combat Medicare and Medicaid fraud. 

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

HHS. 

OIG employs more than 1,500 dedicated professionals, including 

a cadre of nearly 400 highly skilled criminal investigators trained 

to conduct criminal, civil and administrative investigations. 

Thanks to the hard work of our employees in fiscal year 2009, 

OIG’s enforcement efforts resulted in 670 criminal actions, 362 civil 

actions and nearly $4 billion in monetary recoveries. 

We work closely with the Department of Justice, our Federal, 

State and local law enforcement partners, to include State Medicaid Fraud Control Units with whom we are working over 980 

joint investigations. 

OIG’s partnerships extend to one of the Administration’s signature initiatives, the Health Care Fraud Prevention and Enforcement Action Team, known as HEAT. 

The HEAT initiative, established by Secretary Sebelius and Attorney General Holder in 2009, brings together senior officials from 

both HHS and DOJ with the goals of sharing information, spotting 

fraud trends, coordinating prevention and enforcement strategies, 

and developing new fraud prevention tools. 

OIG contributes its experience to HEAT by analyzing data for 

patterns of fraud, conducting investigations, supporting Federal 

prosecutions, as well as making recommendations to HHS to remedy program vulnerabilities. 

One of the investigative strategies promulgated by HEAT is the 

Medicare Fraud Strike Force. The Medicare Fraud Strike Force has 

changed the way health care fraud cases are investigated and prosecuted. 

Strike force cases focus on the development and implementation 

of a technologically sophisticated and collaborative approach. Strike 

force cases are data driven, using technology to pinpoint fraud hot 

spots through the identification of unexplainable billing patterns as 

they occur. 

The majority of subjects in strike force cases are engaging in 100 

percent fraudulent activity, not providing any legitimate services to 

program beneficiaries whatsoever. 

Real-time access to data is critical to the success of the HEAT 

strike force initiative. Over the last several months, representatives from OIG, CMS and DOJ have explored ways to improve access to CMS claims data. 

Much of our attention has been focused on obtaining real-time 

data. To date, we have established limited access to real-time 

21

claims data, but we are continuing to work to improve our access 

to this data. 

It is also important that we expand our access to CMS systems 

offering advanced analysis and query tools that can be employed in 

mining a comprehensive national Medicare claims database. 

In addition to using data more efficiently, OIG is also using data 

to take a more strategic approach in identifying fraud. In 2009, 

OIG organized a cross-component data analysis team to support 

work of HEAT. The data team includes OIG special agents, statisticians, programmers and auditors. 

Together, the team brings a wealth of experience in utilizing sophisticated data analysis tools combined with criminal intelligence 

gathered from special agents to more quickly identify ongoing fraud 

schemes and trends. 

OIG is also capitalizing on cutting-edge electronic discovery tools 

to maximize investigative efficiency in the processing and review of 

voluminous electronic evidence obtained during the course of our 

health care fraud investigations. 

This technology is Web-based and has been made available to 

OIG investigators to increase investigative efficiency and effectiveness. OIG was the first Federal law enforcement agency to implement this technology. It enables OIG to analyze large quantities of 

mail or other electronic documents more efficiently and to associate 

or link e-mails contained in multiple accounts based on content or 

metadata. 

Recently, OIG has expanded the use of this technology by making it available to our external law enforcement partners for use 

in joint investigations. This effort strengthens OIG’s relationships 

with partner law enforcement agencies and allows for much greater 

collaboration. 

Because the technology is Web-based and can be accessed securely over the Internet, investigators can use this tool from anywhere in the country. 

By attacking fraud vigorously wherever it exists, we all stand to 

benefit. Medicare trust fund resources will be protected and remain 

available for their intended purposes. 

Medicare dollars that have gone to fraudulent suppliers will instead be available for legitimate businesses whose purpose is to 

serve the critical health care needs of our program beneficiaries. 

And most importantly, we can assure that seniors and persons 

with disabilities receive the necessary supplies and care they need 

to stay healthy so as to enjoy enhanced well-being and quality of 

life. 

Thank you for the opportunity to discuss our law enforcement efforts and strategies to protect the integrity of Federal health programs. 

And, Mr. Chairman, I would just like to add I brought a couple 

of exhibits along that may assist in our discussion a little bit later 

regarding fraud schemes. Thank you. 

[The prepared statement of Mr. Menke follows:]

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PREPARED STATEMENT OF TIMOTHY J. MENKE


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Mr. SCOTT. Thank you. 

Mr. Collins. 

TESTIMONY OF D. MARK COLLINS, ASSISTANT ATTORNEY 

GENERAL, DIRECTOR OF NEBRASKA MEDICAID FRAUD CONTROL UNIT, PRESIDENT OF THE NATIONAL ASSOCIATION OF 

MEDICAID FRAUD CONTROL UNITS, LINCOLN, NE 

Mr. COLLINS. Thank you, Chairman Scott, Chairman Conyers, 

Ranking Member Gohmert, Members of the Committee. I am Mark 


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Collins. I am director of the Nebraska Medicaid Fraud Control Unit 

in the Nebraska Attorney General’s Office and also president of the 

National Association of Medicaid Fraud Control Units. 

As you all know, Medicaid is financed by both Federal and State 

funds and administered by each State. And although most taxpayer 

dollars go directly toward providing essential medical care to the 

intended beneficiaries of the program, there is a tremendous 

amount of money that is lost to fraud, waste and abuse. 

The Medicare and Medicaid antifraud and abuse amendments 

enacted by Congress in the 1970’s established the State Medicaid 

Fraud Control Unit program and provided the States with the incentive funding to investigate and prosecute Medicaid provider 

fraud, and also to prosecute abuse and neglect of patients in Medicaid-funded residential health facilities, and to investigate fraud in 

the administration of the Medicaid program. 

Medicaid Fraud Control Units are law enforcement agencies, and 

they are primarily responsible for monitoring each State’s Medicaid 

program. MFCUs have investigated and prosecuted some of the 

largest and most sophisticated frauds ever committed against the 

program. 

And they also work to identify and implement systemic reform 

initiatives in the administration of the Medicaid program by advocating for legislation, exposing emerging trends of abusive practices, and collaborating on technological solutions and safeguards 

against fraud. 

Since the inception of the National MFCU program in 1978, the 

50 Medicaid Fraud Control Units have obtained thousands of criminal convictions and recovered hundreds of millions of dollars in restitution. 

Perhaps even more importantly, and more important than any 

specific prosecution, these units have demonstrably deterred the 

loss of many more hundreds of millions of dollars in Medicaid overpayment. 

The National Association of Medicaid Fraud Control Units, which 

we call NAMFCU, was established in 1978 to provide a forum for 

nationwide sharing of information concerning the challenges of 

Medicaid fraud control. 

NAMFCU fosters interstate cooperation on law enforcement and 

Federal issues regarding MFCUs, conducts training programs to 

improve the quality of Medicaid fraud investigations and prosecutions, gives technical assistance to our association members, and 

provides the public with information about the MFCU program. 

Beginning with the first global settlement case in 1992, 

NAMFCU has effectively coordinated State-Federal investigations 

of settlements, primarily involving pharmaceutical companies. 

In the past decade, State MFCUs have seen a rapid increase in 

both the number of fraudulent schemes targeting Medicaid dollars 

and the degree of sophistication with which they are perpetrated. 

Typical fraud schemes included—will include billing for services 

never rendered, double billing, misrepresenting the nature of services provide, providing unnecessary services, submitting false cost 

reports, and paying illegal kickbacks. 

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MFCUs continually adapt their investigative and prosecutorial 

techniques to curtail and to anticipate new and innovative methods 

of thievery. 

The Office of Inspector General at the U.S. Department of Health 

and Human Services provides oversight to State MFCUs. One important feature of the MFCU oversight program is to cultivate close 

and effective working relationships between State and Federal 

agencies to combat fraud and abuse in the Medicaid programs of 

all the various States. 

All MFCUs work closely with the Offices of the United States Attorney in their respective districts and with Federal law enforcement agencies such as the U.S. Department of Justice, the FBI, 

HHS OIG, the IRS and the Postal Service. 

MFCUs actively participate in State-Federal health care fraud 

task forces and working groups that operate in virtually every 

State in the Nation. 

The Federal False Claims Act contains qui tam provisions that 

provide the authority and financial incentive for private individuals 

or relators to enforce the act on behalf of the government. Qui tam 

relators are often called whistleblowers, and they are generally current or former employees of target entities. 

Twenty-five States currently have false claims statutes with qui 

tam provisions. An increasing number of relators are filing their 

cases with the States as well as with the Federal Government, and 

this development has fostered a significant increase in State-Federal investigative partnerships. 

The National Association of Medicaid Fraud Control Units encourages States to look beyond their individual State perspectives 

and to participate in global cases. NAMFCU coordinates these 

multistate investigations, often appointing NAMFCU investigative 

and settlement teams. 

And if settlements are reached, per NAMFCU protocol, then all 

State recoveries are allocated to each State based upon their actual 

damages. Multistate cases in which the MFCUs have played a role 

have resulted in the recovery of over $5 billion to the Medicaid program. 

In an historic 2009 case against Pfizer, Pfizer and its subsidiaries agreed to pay Medicaid and Medicare and other Federal programs a total of $2.3 billion to resolve civil and criminal allegations 

against kickback and illegal off-label marketing campaigns. 

As we have done for the past 30 years, State Medicaid Fraud 

Control Units continue to play a national leadership role in investigating and prosecuting health care fraud and resident abuse and 

will continue to do so in the future. 

Thank you for your time today and allowing me to testify and 

would look forward to any questions that you may have. 

[The prepared statement of Mr. Collins follows:]

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PREPARED STATEMENT OF D. MARK COLLINS


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Mr. SCOTT. Thank you. 

Mr. Frogue. Thank you. 


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TESTIMONY OF JAMES FROGUE, VICE PRESIDENT AND DIRECTOR OF STATE POLICY, CENTER FOR HEALTH TRANSFORMATION, WASHINGTON, DC 

Mr. FROGUE. Thank you, Chairman Scott, Chairman Conyers 

and Ranking Member Gohmert. My name is Jim Frogue. I am vice 

president of the Center for Health Transformation here in town. 

Chairman Conyers, I would like to associate something you said 

in your opening statement about who should be sitting up here at 

perhaps your next hearing. People with street-level knowledge of 

how easy it is to steal from Medicare and Medicaid would make for 

a fantastic hearing at some point down the road. I think you are 

exactly right with that point. 

President Obama said in his speech to the joint session of Congress on September 9th that there are hundreds of billions of dollars in waste and fraud in our health care system. 

Secretary Sebelius said at the National Summit on Health Care 

Fraud on January 28th, ‘‘We believe the problem of health care 

fraud is bigger than government, law enforcement or private industry can handle alone.’’ And she is certainly right about that. 

Congressman Ron Klein of South Florida, which is a hot spot for 

health care fraud, said at the same summit, ‘‘Constituents come to 

me repeatedly with fake billings and stories of solicitations for 

their Medicare I.D. number.’’

Senator Tom Coburn said at the White House Health Summit 

last week he believes 20 percent of government health programs 

are fraud. Senator Schumer from New York a few minutes later associated himself with those remarks. 

The scope of health care fraud is certainly vast. A Thomson Reu- ters study in October of last year said it could be as much as $175 

billion a year. 

The Government Accountability Office and HHS OIG have literally issued hundreds of reports over the years warning how big 

and how serious the problem is. 

Law enforcement—the HEAT program, for example—does an excellent job, but they are up against an unwinnable battle. They are 

much like the mythical character Sisyphus trying to push the rock 

up to the top of the hill, only to have it collapse at the last minute. 

Law enforcement can’t do it alone. 

James Mehmet, who is the former inspector general of New York 

Medicaid, said in 2005 that he thinks 40 percent—that is four 

zero—40 percent of Medicaid claims in New York State might be 

fraudulent or at least questionable. Now, that would be up to $20 

billion in one State’s Medicaid program in 1 year. Keep in mind that 1 percent of Medicare spending is $5 billion. 

So identification and prosecution of fraud schemes in the tens or 

even hundreds of millions of dollars are very significant and very 

worthy, but they barely scratch the surface of how serious the problem is. 

It should be worth nothing that the credit card industry is a 

great example of pre-screening of payments, something that Medicare and Medicaid don’t do in any significant degree. 

They actually check and make sure the vendor is legitimate and 

the claims are legitimate before they pay the money. That is a 

huge step in the right direction for Medicare and Medicaid, and 

51

adopting that technology would be hugely—would be hugely important. 

One-tenth of credit card spending is fraud—one-tenth of 1 percent, I should say. And for an industry that is over $2 trillion, that 

is more money than Medicare and Medicaid, so that would be an 

industry to learn from. 

A few quick bullet points on what can be done to make the difference. For one, although this sounds a little strange, there is no 

constitutional right to be a Medicare supplier. 

There is this attitude out there that if you fill out the application 

properly you have the right to supply Medicare, whether your services are needed or not. And I think there needs to be significantly 

better screening. 

One very easy solution is add the term—add the phrase ‘‘under 

penalty of perjury’’ to the CMS 855 form, which would give prosecutors a much more important tool to go after people for committing crimes. 

Medicare and Medicaid should use private-sector standards for 

establishing how many suppliers should be in a defined area. California Medicaid has done this for almost a decade now and it has 

worked very well. 

Reduce the administrative red tape and lengthy appeals process 

that suppliers get to exploit. Often supplies can drag out for 

months their appeals process when they are trying to get kicked 

out of the program. 

The OIG identified 15—they did 1,500 unannounced site visits 

back in 2008, found 491 either didn’t have an actual facility or 

were not staffed accordingly, so they revoked billing privileges of 

491. 

Two hundred and forty-three of them appealed. Two hundred 

and twenty-two, or 91 percent, were reinstated. And 111 of those 

had their billing privileges revoked again. 

Authorize demonstration projects whereby authentication of new 

suppliers to Medicare fee-for-service is outsourced by and to an entity not CMS. Perhaps OPM would be a good place to try that. 

Data-sharing across departmental jurisdictions, which has been 

successful with the HEAT program, should be done with the vigor 

that it has been done with the national security agencies post-9/11. 

Another one is open up Medicare claims data to audits conducted 

by contingency-fee-based companies beyond the standard four recovery audit collection companies. I think that would bring a new 

set of eyes, a new set of techniques and some fresh ideas to that 

particular—those series of investigations. 

Create a Web site where payments to all Medicare suppliers are 

posted for public access. We all have a right to know, as taxpayers, 

where these dollars are going. If you are billing Medicare, what you 

bill Medicare should be available to anyone to see as soon as possible. 

Perhaps more radical is consider a way to post claims before they 

are even paid. In the spirit of President Obama’s idea that all legislation should be posted for 72 hours before it is voted on, taxpayers 

should have a right to see what kind of claims are being paid before they are actually paid. 

52

This need not interfere with Medicare’s prompt payment promise 

already for providers, but it would be an interesting way to take 

a look at some of the money being sent out. 

And hold hearings about the governance of CMS and its ability 

to be truly effective in fighting fraud and abuse. And I think 

Chairqman Conyers’ opening statement made a lot of sense. 

And it would be my privilege, Mr. Chairman, to work with you 

and your staff to help identify some people who could testify that 

would give you stories that would be quite shocking. 

With that, thank you very much. I look forward to your questions. 

[The prepared statement of Mr. Frogue follows:]

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PREPARED STATEMENT OF JAMES FROGUE


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Mr. SCOTT. Thank you. Thank you very much. 

And I thank all of our witnesses for their testimony. We will now 

ask questions under the 5-minute rule. And I would like to start 

with Mr. Frogue. 

Is there a difference in the public and private sector in terms of 

processes to prevent fraud? I mean, is Medicaid and Medicare getting ripped off any more than private insurance companies? 

Mr. FROGUE. Yes, they are, and I think when you look at Medicare and Medicaid specifically, I think a really important distinction is the fact that un-managed fee-for-service, particularly in 

Medicare and Medicaid, is much, much worse than it is where 

there is some sort of managed care involved. 

Secretary Sebelius sent a letter to Senator Cornyn just last week 

where they identified that the fraud in managed care was far, far 

less than it is where you have un-managed fee-for-service. I mean, 

it is several times higher. 

But the answer to your question is absolutely yes. Where the 

right incentives are in place, fraud is a lot less. 

Mr. SCOTT. Mr. Menke, one of the problems that—one of the concerns that I have had addressed to me is that when you start going 

after Medicaid fraud, there is a difference between fraud and honest mistakes. 

In the inner city where the doctors have an error rate just the 

same as everybody else but their population is much more likely 

to be Medicaid, they get targeted for audits. And if you audit 

enough, you are going to find something. Many of these are minority physicians, and it has an unfortunate pattern to it. 

Can we be satisfied that when you target looking for Medicaid 

and Medicare fraud that you are not targeting—essentially targeting minority physicians? 

Mr. MENKE. Well, we have a body of work with our office of audit 

that takes a look at error rates across the board. And to my knowledge, they don’t focus in on any particular group or group of physicians——

Mr. SCOTT. And you don’t look at volume? 

Mr. MENKE. Yes, we look at volume. 

Mr. SCOTT. So that would end up disproportionately affecting 

people that practice in the inner cities. 

Mr. MENKE. That could happen, yes. 

Mr. SCOTT. Well, that is not fair. 

Mr. MENKE. Congressman, we have our Office of Audit Services, 

and I am—I have to admit that I am from the investigation side, 

not the audit side, and we would be happy to get you any information from our Office of Audit Services regarding error rates. 

Mr. SCOTT. And following through on that, we have—I have 

heard from this panel that unnecessary—medically unnecessary 

services being performed are performed for the purposes, effectively, of defrauding insurance companies. 

Mr. MENKE. Yes. 

Mr. SCOTT. We have been told that those unnecessary services 

are there for some kind of defensive medicine or something like 

that. Can you comment on that? Is most of this just insurance 

fraud when people say that unnecessary services are being provided? 

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Mr. MENKE. Well, Mr. Chairman, I can give you an example. One 

is regarding wheelchairs. A prescription will be written for a power 

wheelchair for a person who has no need, medically unnecessary. 

And sometimes the wheelchair is delivered. Sometimes a substandard scooter is delivered instead. 

And the bottom line is the beneficiary doesn’t need it because it 

is medically unnecessary, will never use it, and it basically sits in 

their apartment with clothes hanging over it until our agents show 

up and they basically say, ‘‘You can take it.’’

Mr. SCOTT. And limiting attorneys’ fees or capping damages on 

liability suits wouldn’t affect the frequency of that kind of fraud. 

Mr. MENKE. I wouldn’t have expertise in that area, sir. 

Mr. SCOTT. Now, the cost of audits—I mean, it costs money to 

audit and do these investigations. Do you think you save more 

money than you spend on audits by saving money and reducing 

fraud and billing problems? 

Mr. MENKE. Well, Mr. Chairman, I can refer to my specific budget in the Office of Investigations. I have a $92 million budget, and 

last year we recovered $4 billion in recoveries, so our return on investment is pretty high. 

Mr. SCOTT. Now, by recovering this, it seems that you don’t need 

any new laws, no new criminal statutes. You just need new—more 

resources for investigations? 

Mr. MENKE. That is a fair characterization, sir. 

Mr. SCOTT. We have heard practices where people go out and try 

to recruit and get people identification numbers that they can 

fraudulently bill. Is there any reward system for people to snitch 

on people who have made those kinds of contacts? 

Mr. ANDRES. Chairman, there is certainly instances where if 

someone comes forward with respect to information that is used for 

a prosecution there are different—there are certainly different rewards within the criminal justice system for people that come forward, whether it be judicial consideration at the time of sentencing 

or it be some sort of agreement with the prosecuting U.S. Attorney’s Office for working proactively, for wearing a wire, for helping 

us uncover a greater degree of fraud or unveiling the other co-conspirators involved. 

Mr. SCOTT. I mean, with the widespread fraud, it looks like encouraging people to come forward would certainly have an effect. 

Let me just ask a general question to whoever wants to answer 

it. What are we doing now that we weren’t doing before the ‘‘60 

Minutes’’ report? Are we doing anything different now than when 

the ‘‘60 Minutes’’ report was describing widespread fraud where 

people are making tens of thousands of dollars a day without much 

resistance? Are we doing something different? 

Mr. MENKE. Well, Mr. Chairman, if I could answer that, we are 

doing some things, and basically we are working with the Centers 

for Medicare and Medicaid Services to improve upon real-time access for law enforcement. That has improved. We have a long way 

to go in that area. 

In the bottom line, the importance of the real-time data access 

is to get the information pre-payment rather than post-payment, 

which puts us—post-payment puts us behind the crooks. They have 

already been paid. That is the pay and chase method. 

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What we are trying to do is get ahead of the curve. Within 48 

hours after it is submitted to the Medicare administrative contractor, they have about 15 to 30 days, by law, to pay the claim. 

And we are trying to get in 48 hours after that claim is submitted to flag any type of questionable provider numbers or beneficiary numbers, to throw red flags up, to hold payment before the 

money goes out the door. That has improved since the ‘‘60 Minutes’’ 

piece. 

Mr. SCOTT. If you have made a payment, why can’t you chase 

after it? You have got a money trail all the way to whoever is getting the money. 

Mr. MENKE. We do that. 

Mr. SCOTT. I mean, just because you have paid the money doesn’t 

mean—is there a problem—once you have paid the money, you 

can’t track down people who have cheated you out of some money? 

Mr. MENKE. Absolutely not. And we are the best at doing that. 

We are chasing them very well. But it is still a pay and chase. And 

what is important, I think, is prevention on the front side because, 

as Mr. Frogue had mentioned, law enforcement catching up after 

the fact is a daunting task. 

And if we can put preventative measures in on the front side, 

pre-payment, it can really make a difference in the amount of 

money going out the door. 

Mr. SCOTT. Okay. Now, do you have enough in resources to do 

what you need to do to reduce fraud? Or have you asked for money 

that Congress has not provided? 

Mr. MENKE. This afternoon at 2 o’clock my boss, the inspector 

general, will be testifying with the deputy secretary on resource 

needs. There is a request for additional resources to expand strike 

force locations to a total of 20 cities. 

What I can tell you is last year in fiscal year 2009 we referred 

over 1,400 cases elsewhere because I didn’t have the resources or 

the bodies to work them. And that amount of case work could have 

resulted in an additional billion dollars in recoveries. 

Mr. SCOTT. And so it is your testimony that if we give you more 

resources you will be able to save us much more money in—

through fraud reduction than we spend in the resources for your 

office. 

Mr. MENKE. I would have to defer to my boss and chain of command—the inspector general, the secretary and the President’s 

budget. 

Mr. SCOTT. But I mean, I think you have suggested that it is not 

even close. We will save a lot more money. 

Mr. MENKE. We have a very good return on investment, sir. 

Mr. SCOTT. Mr. Gohmert? 

Mr. GOHMERT. Chairman, if I could, Judge Poe has got to go to 

another hearing. With the votes, could I allow him to——

Mr. SCOTT. Judge Poe? 

Mr. GOHMERT [continuing]. Go in my place right now? 

Mr. POE. Appreciate my friend the Ranking Member for yielding 

time. 

Thank you for being here. 

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As Mr. Gohmert has mentioned, I used to be a judge in my other 

life, tried felons for 22 years, saw about 25,000 outlaws work their 

way to the courthouse, or the ‘‘Palace of Perjury,’’ as I refer to it. 

These are just among the worst. And people who steal from people who are sick or people who won’t get medical attention are the 

worst of the lot. And I don’t care whether it is a doctor, a nurse, 

an insurance company or another recipient of Federal aid, either 

Medicare or Medicaid. 

How many recipients illegally have received Medicare and have 

gone to jail for that, Mr. Menke? 

Mr. MENKE. Well, I would actually have to defer to Department 

of Justice on the prosecution stats. 

Mr. ANDRES. I believe in my written testimony I speak about 

that, but there have been more than 500 individuals that have 

been convicted for these schemes. And certainly, there are a number of schemes that involve the beneficiaries themselves. 

Mr. POE. Excuse me, because my time is limited. How many recipients who have claimed they want—they need Medicare—a patient, citizen—and they are lying, they are stealing from the system—how many people went to jail, like, last year? 

Give me a statistic that I can—because we got millions of people 

on the system. How many are going to jail for stealing from it? 

Mr. ANDRES. I can get back to you with a specific number. I 

know 94 percent of the defendants who are being tried are now receiving jail terms. 

Mr. POE. Are you talking about the recipients? I am not talking 

about the providers. I am talking about the person who gets it. 

Mr. ANDRES. Again, I can get back to you, Congressman, with 

the specific numbers about that. 

Mr. POE. Okay. I would appreciate that. 

Mr. Frogue, you mentioned some good ideas on how we could 

make the system better. Two things. What do you think about—

rather than—that we deal with some of these violations with an 

administrative process more than running them through the criminal justice system, that we restructure Medicare, Medicaid—that if 

you are going to come in the system, there are administrative penalties that will be administered to you? 

That would make it, it seems to me, a lot quicker, more effective. 

You are kicked off the list. Whatever. What do you think about 

that? 

Mr. FROGUE. Well, getting in the system is exactly—that is the 

biggest problem. It is too easy to get in the system. And that is 

why it is important for someone other than CMS—maybe a credit 

card company, or a financial institution or insurance company; it 

could be anyone—to do some demonstration projects on authenticating some of these new suppliers, because once you are in the 

system, you can bill and bill and bill, and law enforcement will 

catch up with a couple of them, but the vast majority go undetected. 

But I think you are exactly making the right point. But I think 

the real key—and I think everyone on this panel has mentioned 

this—is it has got to be switched from a system—Medicare and 

Medicaid—from reactive to proactive, where the payments are 

screened before they go out the door. 

65

Trying to capture them after they leave is—the horse is already 

out of the barn. You might be able to get some of it back, but you 

are not going to get all of it. The credit card industry does this extremely well, and we all know this. 

If we went to Fargo, North Dakota tomorrow and tried to buy a 

plasma screen TV, they would ask you for your I.D. It is not a real 

burden on you, but it—they check, and within seconds, if this is a 

legitimate purchase. There is none of that in Medicare fee-for-service. 

Mr. POE. Well, I guess my real question is assuming there are 

violations in the system—somebody cheats—do you think that we 

could restructure Medicare and Medicaid to make the penalties—

not all of them, but some of the penalties administrative, where 

you are cut off a list, you are not allowed to reapply for a period 

of time? 

I mean, not neglect due process, but readapt the whole model of 

Medicare and Medicaid to have administrative penalties where possible. 

Mr. FROGUE. Yes, I think that is a fantastic idea, and I think 

there needs to be much better data-sharing between the agencies 

and the Federal, State and local in order to flag people. 

You know, it is like if a local police officer in Oregon pulls someone over for a speeding violation, they know if they have a criminal 

conviction in Virginia. There is not enough of that in the health 

care space. There needs to be a lot more. 

Mr. POE. Well, I have never heard of anybody with a criminal 

record of Medicare fraud coming through the courthouse charged 

with something else. But there are those thieves out there. 

$60 billion is a lot of money of fraud. And I think if we had people, whether they are a hospital administrator, or an accountant, 

or a doctor or a nurse, or a citizen who applies for Medicare or 

Medicaid, carted off to jail in handcuffs, that might get the attention—because now it is just a cost of doing business. 

Last question, organized crime, how predominant is that in this 

whole system? 

Mr. MENKE. Yes, sir. Organized crime is a problem. We are starting to see an increase in the infiltration because of the ease of getting into it. Why sell drugs and risk getting shot when you can 

click a mouse when you are an organized criminal? 

And we have seen different groups with similar schemes, but different groups, across the country. It is becoming more and more 

viral. And unfortunately, our agents are seeing—we are coming 

across more and more guns at every single search and arrest warrant. So they are bringing the tricks of the trade with them into 

health care fraud. 

We investigate health care fraud, and lo and behold, we come 

across organized crime. We don’t do it the other way around. 

Mr. POE. Thank you very much. 

Appreciate the gentleman for yielding. 

Mr. SCOTT. Thank you. We have just a minute and a half before 

the—run out of time on the floor. But the gentleman from Michigan wanted to ask a brief question. And then we will come back 

after the votes. 

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Mr. CONYERS. And I will try to come back, too, Mr. Chairman. 

Thank you. 

How many of you here know about or have been in touch with 

the Center for Health Transformation, between the Department of 

Justice and HHS? Have you ever heard of them? 

Mr. MENKE. No. 

Mr. CONYERS. You? 

Mr. ANDRES. No, sir. 

Mr. CONYERS. How come we haven’t talked about corporate crime 

here? We talked about individuals. Corporate crime sounds more 

serious and more criminal to me than individual hustlers. 

Mr. COLLINS. Mr. Chairman, I did mention in my remarks the—

what had happened with Pfizer as far as the illegal marketing that 

they had engaged in. And that was pursued both civilly and criminally. 

Pfizer paid about a billion dollars in civil penalties and then——

Mr. CONYERS. A billion? 

Mr. COLLINS. Billion. And then $1.3 billion was paid by two—

Pfizer——

Mr. CONYERS. What did they do? 

Mr. COLLINS [continuing]. Subsidiaries. They were engaged in illegal—what we call off-label marketing, where they were marketing drugs for a purpose that had not been approved by the Food 

and Drug Administration. And there was a criminal component to 

that case as well. Pharmacia and Upjohn, which are——

Mr. CONYERS. Okay. 

Mr. COLLINS.—Pfizer subsidiaries——

Mr. CONYERS. What other corporate crime investigations have 

you checked into? 

Mr. ANDRES. Mr. Chairman, the Pfizer case that was referenced 

is one that was handled by the Department of Justice both on the 

civil and criminal fronts. There are other cases as well. 

Mr. CONYERS. Like what? 

Mr. ANDRES. Well, sir, I can provide the specifics—I think there 

are specifics in my written testimony, but I am happy to get back 

to the Committee with——

Mr. CONYERS. Well, what about the names? Name me some nice 

famous pharmaceutical names. 

Mr. COLLINS. Eli Lilly. 

Mr. CONYERS. Right. 

Mr. COLLINS. Merck. 

Mr. CONYERS. Merck? 

Mr. COLLINS. Yes. 

Mr. CONYERS. Okay. 

Mr. COLLINS. And Ely Lilly are a couple more examples. 

Mr. CONYERS. All right. More. 

Mr. ANDRES. There is a medical device manufacturer, Norian 

Corp, that was prosecuted in the Eastern District of Pennsylvania. 

That involved individuals who pled guilty to misdemeanor offenses 

as responsible corporate officers in July, and they are awaiting sentence. 

There is also the Serono Laboratories, a subsidiary of a Swiss 

drug manufacturer. 

67

Purdue Pharma was a case that was handled in the Western District of Virginia. And there are others. 

Mr. CONYERS. Mr. Collins, did that cover what you had in mind? 

Mr. COLLINS. It is. I think if you would look at it, Mr. Chairman, 

most of the pharmaceutical companies in some way or another 

have, at one point or another, run afoul either of the criminal law 

or, more likely, of the Federal False Claims Act and been prosecuted civilly for those types of violations. 

Mr. CONYERS. Please keep our Committee Chair and this Committee advised of these. 

Now, last, why do I keep seeing ads on television that say you 

can get a power wheelchair or scooter free and it will be paid for 

by the government? 

Mr. MENKE. I believe you are talking about The SCOOTER 

Store, and we had a case and entered into a settlement with that 

particular——

Mr. CONYERS. They are still——

Mr. MENKE [continuing]. Company. 

Mr. CONYERS [continuing]. Advertising. 

Mr. MENKE. Yes, they are, sir. 

Mr. CONYERS. Why? 

Mr. SCOTT. The time on the floor has expired some time ago, so 

there—I think we need to recess at this time, and we will come 

back right after the votes, so it will be about 15 minutes. 

[Recess.] 

Mr. PIERLUISI. [Presiding.] So the Subcommittee is back and in 

order, and we will continue with the hearing. 

Chairman Conyers was asking the panelists some questions before we went on our recess, so now it is your turn, Judge Gohmert. 

Mr. GOHMERT. Thank you so much. 

And again, thanks for being here and particularly for your patience. I know the money we pay witnesses is not that good. 

People at home or whoever may not know that you don’t get paid 

anything, so we know it is a sacrifice to be here and especially put 

up with questions from us. But we appreciate that. 

Let me start with my right, Mr. Frogue. And from a personal 

standpoint, I really appreciate all the insights that you had given 

me as I put together a bill and filed for health care reform. 

And I even appreciate the President last week and this week acknowledging that we have some Republican bills out there. 

But it was very clear to me from working with you in trying to 

craft effective health care options that you know your stuff, and 

you have seen and studied where the fraud is, what can be done 

about it, how it could be corrected. 

Let me go to the issue of the Center for Medicare and Medicaid 

Services. It appeared or it occurs to me from things that you have 

said here today and previously that that may be the weakest link 

in the process for detecting and preventing fraud. So would you 

elaborate on that, if that is, indeed, your feeling? 

Mr. FROGUE. Sure, Congressman. Thank you for the nice compliment and the question. 

As I mentioned in one of my bullet points, I think it would be 

a very valuable experiment at the very least to outsource the authentication of new Medicare suppliers to someone other than 

68

CMS, because the weakest point is how easy it is to become a supplier. 

And as I said, there is no constitutional right to become a Medicare supplier, but that is how most people treat it. You fill out the 

application, you get to be a supplier, and you get to start billing 

away. 

And if you said, you know, Miami-Dade County, or Houston or 

Dallas, or Los Angeles or anywhere else—if you just said in this 

particular county, we are going to say, ‘‘All right, someone other 

than CMS is both going to run a bidding process and win the contract,’’ there is no way they could do worse. 

There is no way they could do worse, to see why it is that we 

have, as I said in my opening, 897 home health agencies in South 

Florida when there is fewer than that in the entire State of California. I mean, that kind of stuff is just crazy, and it happens all 

the time. 

The number of HIV infusion therapy centers in South Florida 

was just way disproportionate to the rest of the country. And these 

kind of things just aren’t detected very often until well, well after 

the fact. 

Mr. GOHMERT. Well, and you bring up infusion therapy. 

Mr. Menke, my understanding was that infusion therapy is not 

that widely used anymore, but from the information seen historically it has been a significant item for which Medicare still gets 

billed. 

Can you comment on that and how you deal with—how we 

should go about dealing with treatments that possibly should not 

be very frequently paid for? 

Mr. MENKE. Thank you, Congressman. We have seen a reduction 

in the Medicare billing, in Part B billing, for HIV infusion in 

Miami. But these crimes are viral. We address it in Miami, and 

then all of a sudden HIV infusion starts increasing in Detroit. 

One other disturbing thing that we have seen recently is that 

beneficiaries that were getting HIV infusion which were not getting 

any infusion at all—it was outright fraud—are being de-enrolled 

from the Part B side, slid over to the Part C side in managed care, 

and the same scheme is going on. 

What I could suggest is the private sector has an opportunity to 

work with CMS in order to put appropriate technology so that edits 

can go across the board, from Part A right through Part D, instead 

of targeting one particular part of Medicare, and then only for 

high-volume fraud areas, because we shouldn’t punish the people 

in Wyoming for delayed payments just because there is a hot 

spot—and I am just picking States out here—because there is a hot 

spot in Houston or Los Angeles or Miami. 

Mr. GOHMERT. Well, and Mr. Collins, the shifting that Mr. 

Menke is talking about is something I understood you had seen. 

How do we deal with entities who are caught moving from one 

place to another, setting up shop? What is the best way, in your 

opinion, to deal with that? 

Mr. COLLINS. It can be kind of catch as catch can, especially if 

you have——

Mr. GOHMERT. But we got to get beyond that. 

69

Mr. COLLINS. That is true, and especially—it can be especially 

problematic in towns that straddle a State line, for example—

Omaha, Nebraska, Council Bluffs, Iowa—something like that, 

where you have got a provider who might be excluded on one side 

in Iowa, and we might not know of an exclusion on the other. Now 

there is a national exclusion database that takes care of those 

issues. 

But as far as being involved in fraud on the civil side, which is 

handled as a civil matter, it is difficult to track those, except that—

unless there is something put into the provider agreement when 

they first enroll in the State Medicaid program so that they can be 

screened and so that you can check to see what had happened in 

other States where they had operated. 

But what you have to understand is, especially if these are operating as corporations or as shells—you know, you can call it ABC 

Corporation in one place, and 123 Corporation in another, and it 

is run by the same folks who run the same scam, and it can be difficult to catch that way if they have just been pursued civilly. 

So it provides—excuse me—a really difficult situation when they 

move from State to State. 

Now, our national association keeps track of these things. When 

we see a trend where a certain company or a certain group of individuals has been engaging in improper conduct, that is something 

that we can kind of send out amongst all the Medicaid fraud directors in 50 States. 

But that is a more informal process. For example, we have had 

a situation where we had a provider in Colorado who the Colorado 

MFCU had basically run out of town, and it was thought that they 

would be headed to Nebraska. And when that was about to occur, 

the Colorado MFCU called us and said, ‘‘Be on the lookout.’’

And so just like any State law enforcement agency or local law 

enforcement agency does, you cooperate that way and try and 

share information. 

Mr. GOHMERT. Well, it seems like that has been a shortcoming 

when it comes to Medicare fraud. There hasn’t been as much sharing. 

And I appreciate the indulgence of the Chair. My time has expired. But let me just remind the witnesses that they—there is so 

little time in this hearing. You have so much knowledge and information. 

And as the Chair pointed out earlier, this is really a bipartisan 

effort, and we want to get to the bottom in dealing with this widespread fraud. So any thoughts you have that you haven’t been able 

to get out, that is not in your written testimony, things that you 

think of, ‘‘You know what? Congress ought to do this. They ought 

to do that. You know, this might be able to stop this.’’ Please get 

that to us. 

Don’t think when the hearing is over we don’t want to hear from 

you anymore. We need to hear from you. Thank you. 

Thank you, Chair. 

Mr. PIERLUISI. Thank you. 

I will ask some questions myself. Actually, I have to say that the 

timeliness of this hearing is—it couldn’t be better. 

70

At a time when we are all trying to improve the health care system in America, we should be looking at existing programs and 

making sure that there is no abuse, there is no waste, no fraud. 

And that is precisely what you all are doing. And I commend you 

for that and for appearing here before us. 

I want to ask a couple of questions about the statistics. I saw that Chairman Scott gave an estimate of about $60 billion being 

lost to fraud in both the public and private health sector. 

And then I believe Mr. Frogue mentioned—or used the figure of $70 billion at some point. I might get that wrong. Could you help 

me in understanding the size of this problem? 

I know that we are talking about estimates. But still, what is the 

size, maybe splitting it between or among Medicaid, Medicare and 

the private health plans? 

Mr. FROGUE. Sure, Congressman. It is a great question, and the 

scope of it is bigger than most people can get their head around. 

Like I said in my opening, the Thompson Reuters study said up to 

$175 billion is just flat-out fraud, across the system. 

‘‘60 Minutes’’ had asserted $60 billion a year just in Medicare 

fraud. 

And New York Medicaid—if 40 percent of all claims are questionable, that is $20 billion a year in one State’s Medicaid program 

that might be going to places where it shouldn’t go. 

But the biggest problem is that nobody actually knows, because 

the data collection is so non-transparent. I think that is the biggest 

issue. 

And I will let the other witnesses speak from their points of 

view, but all the data is out there but just not shared with the 

right agencies. It is just not shared with the general public. 

And it is shared with academics in some regard, like the Dartmouth Health Atlas and a bunch of others, so it can be shared in 

a way that protects patient privacy, which is very, very, very important. 

But the data is siloed between Medicare Part A and Part B and 

Part D, between Medicare and Medicaid. You can’t get full pictures. 

And the fact that—I mean, this is actually stuff that really 

shouldn’t cost very much, if anything at all, to solve. 

Just let CMS—force them to share data better so that you are 

not paying people that bill, you know, 500 wheelchairs in an area 

where there is not even 500 people who need wheelchairs. 

Mr. PIERLUISI. Yes? Mr. Menke, yes. 

Mr. MENKE. Thank you. Looking at some of the midrange estimates out there—and I know the $60 billion figure came from the 

National Health Care Anti-Fraud Association. 

If we take that midrange number and we take a look at Hurricane Katrina, we have had three Hurricane Katrinas in health care 

fraud in the past 5 years, looking at the payouts, if that puts it into 

perspective. 

And I know the numbers are all over the place. I think what I 

have seen personally, if you want to cut to the chase here, the biggest impact I have seen recently is cabinet-level attention to the 

fraud effort that has really brought CMS around to start focusing 

in on antifraud efforts and program integrity more than they have 

done so in the past. 

71

They are paid to cut checks. And if I am a legitimate provider, 

I would like to be paid on time, between 15 and 30 days. What I 

have seen with Secretary Sebelius and Attorney General Holder 

making this a cabinet-level priority, we have seen people basically 

fall into line and change their attitude about how they look at 

fraud. 

I have seen much more cooperation from CMS in the past 9 

months than in all the previous time I have dealt with CMS. That 

is making a difference. 

Mr. ANDRES. If I——

Mr. PIERLUISI. That is good to hear. 

Mr. ANDRES. If I could just follow up on that because we are seeing that many of the fraud schemes are, in fact, viral: they moved 

from an area in Miami to an area in Detroit when enforcement in 

Miami was ramped up. This is one of the reasons why it is important that we continue the strike force model and why we have 

asked for additional money so that we can increase the number of 

strike forces up to 20, so that when a group of fraudsters moves 

from one area of the country to another and are, in effect, perpetrating the exact same fraud scheme—whether it is the HIV infusion, or it is the DMEs—we are ahead of the game. We have 

learned that is an issue, that is an area that is going to be exploited within the system, and we need be prepared to move forward with prosecution. 

Mr. PIERLUISI. Yes. On the enforcement side of this, I am intrigued about—how are you picking these new 20 cities in which 

you will have this strike force working? 

Mr. MENKE. We have put together a data analysis team, and 

they take a look at trends nationwide. They do mapping on—we 

see spikes in some areas of the country where it is 2,000 percent 

above the national average. We call that a clue. 

And what we start doing then is narrowing down the region, the 

city and even a zip code, and we do mapping, and we work with 

our partners at the Department of Justice who are also involved in 

this process, as well as analysts from Centers for Medicare and 

Medicaid Services. 

And we can narrow down hot spots not only regionally but also 

in particular billing areas. And that helps us in our conversations 

in the HEAT operations subcommittee on identifying future cities 

to put strike forces in. 

Mr. PIERLUISI. And on the prevention side, Mr. Frogue came up 

with a good list of ideas, initiatives. I particularly like the prescreening of claims and adding the ‘‘under penalty of perjury’’ to a 

lot of this paperwork that is submitted by the suppliers. 

I wonder, though, whether any of you, the other three panelists, 

can add to that conversation—prevention side. What can we do better prevention-wise? 

Mr. MENKE. Thank you, Congressman. Vetting on the front end 

is absolutely essential for prevention to keep the crooks out from 

getting in. 

Even though it doesn’t specifically address perjury, I have got an 

enrollment claim form here that I would be happy to provide to the 

Subcommittee. In section 14, it doesn’t address perjury, but it has 

72

multiple different areas where the person, if they are committing 

false statements on the form, is subject to criminal penalty. 

But prevention is absolutely key, in vetting with CMS’ implementing surety bonds as well as accreditation processes on the 

front end to keep the crooks out. 

We have two different types of patterns here. We have the outright 100 percent fraud. Crooks come into health care because it is 

easy. And then we have legitimate providers who cross over the 

line and put their hand in the cookie jar type of a deal. Those are 

the two different types that we are seeing. 

We need to keep the outright crooks out from the beginning, and 

that is—that is what the strike force is addressing. 

Mr. PIERLUISI. Well, I have exceeded my time, and I am afraid 

Judge Gohmert will start overruling me. So I will let you take over, 

Judge—or, I am sorry, Mr. Goodlatte, if you would like to question 

the witnesses, you are welcome. 

Mr. GOODLATTE. Well, thank you, Mr. Chairman. 

Mr. Menke, I would like to follow up with your conversation with 

Chairman Scott about the wheelchairs and the scooters. Can you 

tell me some more about that? 

Are you actively investigating fraud? Are you taking any measures? Have you recommended to CMS that they take any measures 

to tighten up their screening process for who gets those? 

Mr. MENKE. Yes, Congressman, we have. We entered into a civil 

settlement with The SCOOTER Store specifically regarding the 

scooters and wheelchairs. 

Mr. GOODLATTE. Is The SCOOTER Store a manufacturer or do 

they sell a variety of products manufactured by other entities? 

Mr. MENKE. I am not sure. We can get back to you on that, sir. 

Mr. GOODLATTE. All right. 

Mr. MENKE. The SCOOTER Store did enter into a corporate integrity agreement for establishing a compliance monitoring within 

as well as training, and our Office of Counsel at the Office of Inspector General worked on that corporate integrity agreement. 

The commercials continue. And I think sophistication with language and how they say certain things in the commercials—sometimes you can dance around corporate integrity agreements and 

still be in compliance. So we are monitoring the situation very 

closely. 

Mr. GOODLATTE. And how do they get people who are not eligible 

medically for these devices to get them? Don’t they have to have 

the cooperation of some physicians, or——

Mr. MENKE. Yes, sir. We see a combination, either forged prescriptions through identity theft, where someone purports to be a 

physician, or they pay a physician kickbacks in order to write prescriptions for medically unnecessary equipment such as a power 

wheelchair. 

A power wheelchair runs around $5,000. The scooter runs around 

$1,900. But the power wheelchair is almost like a car. You can get 

a stripped-down version of it, and then they add all the extras, the 

balancing equipment, inflatable chair—inflatable seat, all kinds of 

extra things that they can bill on top of the basic model. 

73

And their profit margin—if they do deliver something, their profit margin, even if they deliver the power wheelchair, sometimes 

$2,500. Some areas——

Mr. GOODLATTE. Do you get involved in that aspect of it at all, 

the pricing of it, or is that strictly something made by regulators 

at CMS, the decisions about what is Medicare going to pay for 

these devices? 

Mr. MENKE. Those are decisions made by CMS. 

Mr. GOODLATTE. All right. And what about the repairs? I had a 

constituent dealing with the Hoveround Corporation who was 

charged $2,114 for repairs, which were mostly related to, like, replacing an arm and fixing the seat. It wasn’t even the mechanical 

aspects of it. 

And the breakdown of these charges were astonishing—several 

hundred dollars to replace the arm or fix the—one of the arms on 

the chair, almost half the price of the device, based upon what you 

just told me. 

And we are getting kind of vague responses from CMS on that. 

Have you looked into that area at all, what the companies are 

charging? Some of these people have had these chairs for a long 

time now. Obviously, they are going to wear. They are going to 

need repairs. 

But in this instance, $2,114 was charged. Medicare approved 

$1,553 of that and paid $1,227. My constituent was billed $306 of 

that. 

And we have written letters—Congressman Camp, who is the 

Ranking Member of the Ways and Means Committee, has written 

letters—and not gotten really any definitive response on anybody 

looking into whether these repair items are not a scam in themselves. 

Mr. MENKE. I am not familiar with the repair angle. We may 

have ongoing cases in that area. We have about 5,000 open cases 

a year. But once again, I would suggest to the American public, if 

it doesn’t pass the smell test, let us know about it. 

Mr. GOODLATTE. Yes. 

Mr. MENKE. There is common sense involved with this. 

Mr. GOODLATTE. We will let you know, but I think we are writing 

to CMS. But I will send you this information as well. If you could 

look into it, and if you would let the Committee know not about 

this specific case, but about what your experience is in general, I 

would appreciate it. 

And then, Mr. Chairman, with a little forbearance, if I might ask 

each of the other panelists if they have any experience with this 

issue of fraud either in the purchase, in the approval process, or 

in the repair of these devices. 

Mr. Andres? 

Mr. ANDRES. Sadly, we are more often dealing with the people 

that are given wheelchairs that have no medical necessity for them, 

so most of the fraud schemes either involve cases where the beneficiaries and the doctors are themselves complicit in the fraud and 

the devices are simply not medically necessary, or the instances 

where there is identity fraud, where individuals’ and doctors’ information is being stolen for a different scam. 

74

And obviously, in those cases as well, the services are never rendered. 

Mr. GOODLATTE. And you are prosecuting people for that type of 

fraud? 

Mr. ANDRES. Absolutely. 

Mr. GOODLATTE. Is a physician getting a kickback? Is that 

the——

Mr. ANDRES. That is correct. Those individuals, the physicians, 

the nurses, are being prosecuted for those crimes. 

Mr. GOODLATTE. And when you answer your questions to Congressman Poe, who asked you earlier about those who had receive 

jail time, would you let us know if there are any who have actually 

been imprisoned for fraud related to these power devices? 

Mr. ANDRES. To the repair or to the——

Mr. GOODLATTE. Either one. 

Mr. ANDRES. Okay. 

Mr. GOODLATTE. I am as interested in the sale as in the repair, 

but I just wondered whether there was anything being done about 

these repair charges. 

Mr. ANDRES. Certainly. 

Mr. GOODLATTE. Mr. Collins? Mr. Frogue? 

Mr. COLLINS. I do know that in the District of Nebraska that one 

of the scooter stores was the subject of a criminal prosecution federally in the last couple of years. 

Due to, you know, the rural nature of our State, that is the only 

case that I am aware of that we have had to deal with the scooter 

issue. 

Mr. FROGUE. Congressman Goodlatte, I would just make two 

broader points. One is this article that someone sent me this morning from the South Florida Business Journal. It says, ‘‘Like bugs 

scurrying out from under an overturned rock, the perpetrators of 

health care fraud in South Florida are finding new schemes to hide 

behind to siphon off public dollars.’’

So even if you ended all fraud in wheelchairs tomorrow, they 

would be off to something else before you even know it. And I am 

happy to give this to anyone who wants to see it. But it was HIV 

infusion therapy, which is still a problem, but home health now is 

a huge, huge issue. 

The other quick comment I would like to make is so much of this 

flies under the radar screen. You hear about the large, you know, 

pharmaceutical settlements and all that, and that is very significant. 

But as long as it is under a certain threshold, whether it is a few 

hundred thousand dollars or a few million dollars, law enforcement 

just doesn’t have the resources and time to go after the small guys. 

And so if you are—as long as you keep your crimes to $50,000, 

$80,000 a year, you are probably going to get left alone. 

So the signal to criminals is just don’t get too greedy and you 

won’t have a problem. And ‘‘Tony’’ in the ‘‘60 Minutes’’ piece made 

the point, ‘‘There are thousands of people like me.’’ He just got a 

little too greedy and a little bit unlucky. But if you keep it under 

a certain level, you can—these things will go on forever. 

75

And that multiplied by all the people doing it across the country 

is actually much, much bigger that the marquee settlements you 

hear about. 

Mr. GOODLATTE. What is the solution to that? 

Mr. FROGUE. The solution is to have the data out there—the biggest solution of all, and I think I speak for everyone on the panel, 

but please correct me if I don’t. The biggest solution is to prescreen the payments before they go out the door. 

And that is what the credit card industry does. And the credit 

card industry is bigger and arguably as complex as Medicare and 

Medicaid, and they do it, because we all know it. If you travel 

somewhere and make a big purchase, they ask you for I.D. There 

is nothing like that in Medicare fee-for-service. That is the biggest 

problem. 

It is very simple. We all understand it, because it has all happened to us, and it is not a big deal. If we would add that to Medicare, the potential savings are easily into the billions. 

Mr. GOODLATTE. I agree, and I would just add that I also agree 

with Congressman Poe that we would like to see some of these 

folks, large and small, serving some jail time and a lot of other people hearing about the fact that they are in prison for these outrageous ripoffs of the public. 

Mr. PIERLUISI. Okay. Chairman——

Mr. GOODLATTE. Thank you, Mr. Chairman. 

Mr. PIERLUISI.—Chairman Scott is back with us, so he will probably want to continue his line of questions. 

Mr. SCOTT. [Presiding.] Let me just ask a question on recommendations. We have had a lot—what we would like to hear 

from you are specific recommendations on how to do audits, policies 

and procedures, fraud detection, and whether or not we need legislation to do that or whether it can be done administratively, and 

also what—whether or not we are providing the Administration 

sufficient resources for investigations and prosecutions. 

And if the ball is in our court, put the specifics in our court so 

we know what we are dealing with. And I think the testimony is 

clear that if we put more money into investigations and prosecutions, we would get more back than we are spending. 

So we should not be shy—with the level of fraud and crime going 

on, we should not be shy in going after it and curing the problem. 

Mr. ANDRES. The Department of Justice is asking for additional 

resources so that we can increase the number of strike forces in different cities. 

As I explained, since some of these schemes are viral and they 

move from one city to another, we need to be in a position to anticipate that and to be in the areas where they are—where the fraud 

will occur so that we can deal with those prosecutions and have the 

deterrent effect of these people going to jail and serving significant 

jail sentences. 

That in and of itself will serve some deterrent effect after the 

fraud has happened. 

Mr. SCOTT. And if there is some procedures we can go through, 

research or best practices that we can disseminate in the private 

sector that could apply to the Medicaid and Medicare, if you could 

help—if any of the panelists can help us on that—and if it costs 

76

money to try to implement them that Medicare and Medicaid presently doesn’t have, perhaps we need to authorize expenditures in 

those areas. 

But whatever we need to do. I think after the Ranking Member 

showed the clip from ‘‘60 Minutes,’’ obviously, we are in an embarrassing situation that we want to cure. 

Mr. COLLINS. Well, one thing, Congressman, that is an issue on 

the Medicaid side of the house and provides an obstacle to Medicaid fraud units being able to pursue some of these providers is 

Federal regulation that prohibits Medicaid fraud units from engaging in data mining. 

We have been in discussion with folks from the U.S. Department 

of Health and Human Services and with the Justice Department 

concerning this prohibition. But the current rules break down the 

process so that data mining is to be done by the program integrity 

unit of each State’s Medicaid program, which is kind of the State 

equivalent of CMS. 

But a lot of times, those program integrity units in State Medicaid programs are understaffed and don’t have the time and the 

resources to do the data mining. Medicaid fraud units would love 

to be involved in data mining, but the the Code of Federal Regulations——

Mr. SCOTT. Who funds the——

Mr. COLLINS [continuing]. Prohibits us from doing that. 

Mr. SCOTT [continuing]. State offices—fraud detection offices? 

Who funds these State fraud detection—you are in Nebraska, 

right? 

Mr. COLLINS. Yes, sir. 

Mr. SCOTT. Who funds your office? 

Mr. COLLINS. In the MFCUs? 

Mr. SCOTT. Yes. 

Mr. COLLINS. Okay. Medicaid fraud units across the country are 

funded 75 percent with Federal dollars and 25 percent with State 

dollars throughout the duration of their operation. 

Mr. SCOTT. And I suspect that with the budgets that States have, 

there is not going to be much increase in the 25 percent. 

Mr. COLLINS. I would be surprised, sir. 

Mr. SCOTT. So if we want to do something, we might have to do 

it with no match or a better match than that. And Medicaid will 

do—would save more money than we spend in that area. 

Mr. COLLINS. I think so, Congressman, but I don’t even know 

that it is necessarily an issue where resources have to be expended. 

But I think it is—if we were—if we would be allowed to engage 

in data mining ourselves rather than relying upon Medicaid agencies doing the data mining for us, I think that we would reap the 

benefits of that for both the State governments and the Federal 

Government. 

Mr. SCOTT. Wait, wait a minute. The data mining that you are 

talking about is being done but by doing—somebody else, so we are 

not talking about new invasions of privacy. That is not the issue? 

Mr. COLLINS. No. 

Mr. SCOTT. It is who does it. 

Mr. COLLINS. It is who does it. The way the rules are written 

now, the folks in the Medicaid program have a program integrity 

77

unit that does the data mining. Medicaid Fraud Control Units are 

not inside of the Medicaid program. Most of us who have an MFCU 

operate within a State attorney general’s office. 

The rules do not allow us to be involved in data mining, in what 

they call random statistical analysis. If we were able to do that 

ourselves, we would have more cases that we could pursue. 

Mr. FROGUE. Mr. Chairman, if I might just emphasize his point 

even more, that is exactly right. That wouldn’t necessarily cost a 

penny to let them do data mining. 

And I talked to one State attorney general who said, ‘‘I would go 

even one better than that—is allow for contingency-fee-based outsiders to come in at, say, 20 percent and also look at the data,’’ 

with full protections for patient privacy, of course, which can absolutely be built in, and should be. 

But the more eyes that are looking at this, the better. No one 

program integrity unit is going to be as good as all the other people 

who could look at this and find better ideas. 

Mr. PIERLUISI. [Presiding.] I believe Ranking Member Gohmert 

has a couple of questions. 

You may proceed. 

Mr. GOHMERT. Thank you. 

And it really is just a follow up of what Chairman Scott was talking about, what you have each been alluding to, but this discussion 

about CMS sharing information—I was staggered to find out by 

virtue of this hearing that CMS just has not been good about sharing information. 

And I understand, as Mr. Frogue was just saying, we have to ensure patient confidentiality so that someone’s medical records are 

not just all over the place. But that can surely be done—that information could be protected. We do that—DOJ does—I mean, that is 

done in so many areas. It doesn’t seem like it would be a problem. 

For Mr. Menke to find out that HHS I.G. has trouble getting information from CMS in the past is just staggering to me. If there 

is anybody that should have been able to just say, ‘‘We need to see 

this,’’ have adequate protection for patient protection and get it, my 

goodness, it ought to be you. 

So we need to know what we need to do to help you do your job. 

And of course, I think people on both sides of the aisle, when it 

comes to DOJ, we recognize the balance that there is between protecting society and not being too much—too invasive into society, 

like—was thinking about—while there was talk here about, you 

know, if we can anticipate. 

You don’t want to get to the point that that Tom Cruise movie 

did, where you arrest people because you figure they are going to 

commit a crime in the future, so arrest them now. We don’t want 

to get there. 

But it seems that if CMS could share information with HHS I.G., 

and then when you see these patterns, man, that stuff ought to be 

going to DOJ. We don’t want you out there actively recruiting, you 

know, in case somebody might commit a crime. 

But when there is patterns that could just be provided—and of 

course, that is what we have seen from a law enforcement standpoint when it comes to the courts having said that a pen register, 

78

for example, is not protected and you don’t necessarily have to get 

a warrant for a pen register. 

But for any information that goes with it, whose it is, you know, 

all that kind of stuff, that is when we require a warrant. But it 

seems like there ought to be a way to data mine without getting 

into personal information that picks up when you have got somebody that is, you know, billing for five chairs out of the same 

house, or whatever it is. 

Those things ought to be able to be picked up. So any thoughts 

you may have—you will think about it after the hearing—ways 

that we can effectively pass not regulation, but just a law saying, 

‘‘This is what you got to do.’’

We are going to protect personal data, but we have got to do a 

better job of sharing information with the people that can use it 

and do something about it. So please keep that in mind. Forward 

us any information you have. 

I know Chairman Scott—I know all of us would like to see that 

and try to craft something to make your job not only easier but far 

more effective than you—it just seems like you got your hands tied. 

And we have got to unburden you so that you can do your jobs. 

So thank you very much. 

Mr. PIERLUISI. On behalf of Chairman Scott and all the Members 

of the Committee or the Subcommittee, I would like to thank the 

witnesses for their testimony today. 

Members may have additional written questions which we will 

forward to you and ask that you answer as promptly as you can 

so that they may be made part of the hearing record. 

The record will remain open for 1 week for submission of additional material. 

Without objection, the Subcommittee stands adjourned. Thank 

you. 

[Whereupon, at 12:24 p.m., the Subcommittee was adjourned.] 

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