Prepared Statement of Senator Chuck Grassley of Iowa
U.S. Senate Committee on the Judiciary
Effective Strategies for Preventing Health Care Fraud
Wednesday, October 28, 2009
Chairman Leahy, thank you for calling this hearing today on such an important topic. In addition to my position on the Judiciary Committee, I serve as the Ranking Member of the Senate Committee on Finance, which has jurisdiction over the Medicare and Medicaid programs. I have been deeply concerned about health care fraud dating back to my time as the Chairman of the Special Committee on Aging. Working closely with Chairman Baucus on the Finance Committee, over the last eight years we have held almost 20 oversight hearings dealing with Medicare and Medicaid fraud.
Those hearings, and this one today, have highlighted a lot of the failures the federal Government has made in administering these vital programs and have led to some changes from Congress. However, those who seek to defraud the Government are very good at what they do. As we in Congress pass laws to close loopholes, they find another. Congress and the executive branch must work together to cut down on the amount of taxpayer dollars that are susceptible to fraud, waste, or abuse. This hearing is another opportunity to reinforce this and to continue an open dialogue with the executive branch.
As most of my colleagues on the Judiciary Committee know, I’m a big proponent of congressional oversight in all my committee assignments. One thing I’ve learned from conducting oversight is that there we must be vigilant in our oversight efforts. Virtually every federal government program has some level of loss to fraud, waste, and abuse. Medicare and Medicaid are no different, but are even more susceptible to fraud given the sheer volume of claims, the timelines required for payments, and the hundreds of billions of taxpayer dollars the government pays out to support these programs.
Last year alone, Medicare paid out $468 billion in expenditures and Medicaid paid out over $333 billion in claims. At a hearing a few years ago, representatives from CMS stated that they believed that up to 8 percent of these outlays could be lost to fraud, waste, or abuse annually. No one really knows what the total percentage of taxpayer money lost to fraud is and today’s witnesses reaffirm the inability to quantify the amount of fraud choosing to cite a range of 3-10 percent of fraud or abuse in the Medicare and Medicaid programs. If you take a conservative estimate of 5 percent, the potential amount of taxpayer dollars lost to fraud or abuse would be over $64 billion. This is outrageous. Any taxpayer funds lost to fraud, waste, or abuse from these programs represent dollars not available to provide care to others, and ultimately increases healthcare costs for everyone.
Cutting down on fraud, waste, and abuse is critical to cutting health care costs, but it isn’t the cure all. Reforms are needed top to bottom, with an emphasis on stopping bad payments before they go out the door. Simply stated, we will never catch all the criminals who rip off government programs unless we are more careful about those we who receive government checks in the first place. Paying claims and chasing fraudfeasors is not a solution, it’s a band aid. Real reforms need to be made so criminals can’t set up fraudulent companies and bill for phantom patients or receive prescriptions from dead doctors. We’ve seen this problem for years, and it was part of a hearing I held as chairman of the Finance Committee in 2004 on power wheelchair fraud in the Medicare Durable Medical Equipment (DME) program. Criminals set up a fraudulent store front, obtain a Medicare provider number, obtain lists of Medicare eligible patients, and simply start billing Medicare or Medicaid for products that were never ordered or needed.
Unfortunately, this scenario is all too common and is the reason we have witnesses here today talking about the new Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which is designed to hunt down fraudulent operations and put the criminals behind bars. I look forward to hearing of the successes of this initiative and lessons that can be taken away from these prosecutions about how to prevent these schemes from ever starting. I believe that the Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS) need to reform the process for issuing provider numbers to ensure these fake entities aren’t able to bill a single fraudulent charge.
Reforms on the front end will help to dramatically cut down on fraud, but that does not mean that we can let our guard down and stop our enforcement efforts. I think the single greatest tool to cut down health care fraud is the federal False Claims Act. Known as Lincoln’s Law, this important tool allows the federal government to collect treble damages for frauds against the U.S. Treasury. It also empowers both the government and qui tam whistleblowers, known as relators, to file suit against the fraudfeasors on behalf of the government. I updated this powerful tool in 1986 with amendments reenergizing the law that had gone dormant for 40 years. Since the enactment of the 1986 amendments to the FCA, the government has recovered over $22 billion that would otherwise be lost to fraud. A good portion of that $22 billion was recovered on behalf of Medicare and Medicaid.
However, the FCA was under attack yet again and recent court decisions threatened the ability to recover taxpayer dollars lost to fraud by subcontractors. To fix this, I authored new amendments to the FCA in the Fraud Enforcement Recovery Act (FERA). Working with Senator Leahy, I drafted new amendments that will restore the original intent of the 1986 amendments and overturn court decisions that had limited the scope of the FCA. As a result of these efforts, the FCA will continue to serve American taxpayers for years to come.
I want to ask the witnesses today about the FERA bill and efforts to implement one of the most important provisions of that bill, the Civil Investigative Demands (CIDs). This powerful tool was part of the amendments to the FCA, but was rendered in effective because the law required the Attorney General to personally sign off on CIDs. As a result, few if any CIDs were ever issued. The FERA bill amended CID requirements and provided delegation authority to the Attorney General for CIDs. I want a status update on CID authority implementation and when this tool will be in use. Further, I want to hear about any problems the Justice Department is having implementing this powerful tool, and efforts to implement the new authority to share information obtained from CIDs with qui tam relators.
I also want to hear from the witnesses about a little known fund at the Department of Justice known as the 3 percent fund. This fund allows the Attorney General to retain 3 percent of all civil debt collections and place those funds in the department’s Working Capital Fund. These funds may be used to further civil debt collection activities in the future and are disbursed by the Civil Recoveries Administrative Board. As civil settlements by the Department of Justice continue to grow in size, especially under the False Claims Act, I’d like to know a little more about the fund and how it is used, and what control are place on the funds. Further, I have concerns about the way the fund interacts with the Medicare Trust Fund in civil debt collections resulting from Health Care Fraud. My understanding is that any recovery in a Medicare or Medicaid fraud is payable to the trust fund, so if 3 percent is withheld for the department, it is coming from the trust fund and not directly from the fraud. I want to hear about whether the department and HHS believe the trust fund should pay 3 percent or whether Congress needs to revisit this authorization for health care fraud cases.
Finally, I’d like to talk about the Health Care Fraud and Abuse Control Program (HCFAC). The HCFAC program was established by the Health Insurance Portability and Accountability Act of 1996 (HIPAA). It is jointly administered by HHS and the department and funds health care fraud enforcement efforts directly from the HCFAC fund within the Medicare Trust Fund. This fund provides allocations that are provided directly to the Office of the Inspector General at HHS, and then provides the Secretary of HHS and the Attorney General the authority to divide other sums between the entities. Further, it provides a direct allocation to the Federal Bureau of Investigation (FBI). HIPAA also requires the Attorney General and Secretary to provide a detailed report of how the program spends funds that are allocated. I have been concerned over the years at the length of time it takes the Attorney General and the Secretary to produce this report. As it stands, the report is almost a year late every year. I have further concerns regarding the amount of time it takes these agencies to negotiate the “wedge” funding between the agencies.
We’ve heard a lot in recent days about how we need to simply throw more resources at the health care fraud problem. I have no problem with providing resources necessary to get the job done, but question whether simply throwing more money and more investigators at the problem will ultimately cut down the amount of fraud. I think we need smart, effective, and targeted investigations that have more bang for the buck. We need to look at all solutions be it payment reforms, making sure CMS gets the payment error rate right, and ending the practice of pay and chase.
There is a lot on our plate for this hearing and with health care reform in general. I thank the witnesses for appearing today and providing testimony on this important topic. I think we can all agree that we need to cut down on health care fraud to ensure the sustainability of Medicare and Medicaid, and to regain the trust of the American taxpayers who have been taken for a ride by these unscrupulous fraudfeasors.
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