Mr. Chairman and Ranking Member, thank you for holding this hearing on Medicare enforcement actions. As you know, I chaired this committee for the last two congresses and appreciate the importance of the work it does.
Since 1986, when Congress passed amendments that I sponsored to toughen the law, more than $4 billion has been recovered through the False Claims Act. Hundreds of billions more in fraud have been saved through the deterrent effect that this law has upon those who would betray the public's interest. In recent years, the False Claims Act has been under attack from industries targeted by the government's anti-fraud efforts. I am pleased that the President's nominee to be Inspector General at the Department of Health and Human Services agrees with me that: "Its use is essential to protect the Federal health care programs from those individuals who knowingly defraud them." Janet Rehnquist also said: "it is vital that those charged with protecting the integrity and longevity of the Federal health programs support the False Claims Act against attempts to weaken it." I'm submitting for the committee record a copy of Ms. Rehnquist's letter in response to a questions from me.
In addition to the recovery of money and the deterrent effect of this law, the False Claims Act is important for another, perhaps, more important reason. The fact is that the False Claims Act is being used, day after day, by prosecutors to maintain the integrity of countless federal programs funded by American taxpayers. For example, the False Claims Act is being used in the health care industry to ensure that nursing home residents receive quality care.
During the early 1980s, our defense budget was rising rapidly to counter the Soviet threat. It rose so rapidly, in fact, that it was beyond our ability to manage the money properly. As one defense official said, it was as if we opened up the money bags at both ends, laid them on the doorstep of the Pentagon, and told the contractors to come and get it.
Not coincidentally, that is the year Congress restored the teeth to the False Claims Act that were removed some 40 years earlier. It was in 1986 that I sponsored, along with Howard Berman of the House of Representatives, amendments to the False Claims Act intended to put the bite back in the statute. Since that time, the law has been a tremendous success. It has recovered more than $4 billion for the taxpayers, and continues to deter fraud in amounts estimated in the hundreds of billions.
Since passage of the 1986 amendments to the False Claims Act, private industry has been plotting to gut the law. Even before the amendments were passed, a major effort was underway by the defense and other industries to undermine passage. Even supporters of my amendments suddenly turned against my bill. In the final analysis, the public's concern about fraud prevailed. My amendments passed and the False Claims Act has demonstrated itself to be one of the most powerful tools in the war against fraud.
Early in 1998, the American Hospital Association began an official and public challenge to the False Claims Act that continues today. The AHA's concerns then were not with the language of the False Claims Act, but with the Justice Department's implementation of that law. The AHA's position was that the Justice Department was heavy-handed in its implementation of the law and was not separating innocent billing errors from actual fraud.
In 1998, the AHA's position was countered by an audit report released by the Office of Inspector General at the Department of Health and Human Services. This report revealed that a staggering $20 billion was improperly paid through Medicare in 1997. That's 20 billion reasons to defend the False Claims Act. The audit is proof of why the False Claims Act is the law of the land and should remain the law of the land. Indeed, the False Claims Act helps maintain the integrity of Medicare for our nation's senior citizens. It helps maintain the standards we want for our seniors with respect to the quality of health care. The False Claims Act is even beginning to be used successfully by U.S. Attorneys to improve the quality of care provided to nursing home residents.
In July of 1998, the Department of Justice issued written guidance on the appropriate use of the False Claims Act in health care matters. This guidance was issued in response to concerns relating to the Justice Department's enforcement strategies in national health care projects. The guidelines were seen as an appropriate non-legislative solution and the attacks on the False Claims Act were quelled. Subsequently, the General Accounting Office performed a review of these guidelines. The GAO found that the guidelines were being properly implemented by the Department of Justice and US Attorneys.
If innocent mistakes are resulting in penalties, it has nothing to do with the Act. It has to do with process issues only. A failure to recognize this could lead to the public misperception that Members are going "soft" on fraud. After visiting with the Iowa Hospital Association and listening to their concerns, it seemed to me that the examples which the AHA has publicized speak more to some isolated problems with the implementation of the law, not problems with the law itself. I approached the Justice Department and began a dialogue between DoJ, the AHA, other Members of Congress, and myself. The goal was to examine the evidence, to see where the problems were occurring and why, and to fix any and all real problems with the implementation of the law.
After much examination and discussion, I, and others, determined that there were some legitimate concerns with the tone of the pre-litigation contacts between DoJ and some hospitals. In response, the Justice Department refined the process by which it initiates and pursues national initiatives under the umbrella of the False Claims Act. In fact, the Justice Department said that it will NOT use demand letters in national projects. In addition, DoJ has created working groups to enhance centralized coordination and to ensure that a sufficient factual and legal basis exists before any matter is pursued. Reason prevailed.
I knew then, that it would only be a matter of time before the medical industry would mount yet another challenge on the False Claims Act. It is for that reason I have come to be ever vigilant. There are many citizen groups around the country that have joined me in this vigil. They have the taxpayers' best interests in mind, because the False Claims Act is the final and most effective line of defense, protecting each taxpayer's hard-earned money. Since my amendments in 1986, the Act has been used to return more than $4 billion, fraudulently taken, back to the taxpayers. Nearly $2 billion of that is from the health care industry. So far, the Act has deterred somewhere between $150 and 300 billion of potential fraud.
The Act is a tool against fraud. It was not designed to be used, and is not used, against innocent mistakes. There is clearly an agenda to remove the taxpayers' most effective weapon in the government's arsenal against fraud. It is being pushed by some in an industry that has been ravaged by those who have committed fraud. Of course, there is no question that the vast majority of hospitals and hospital employees in this country are honest, civic-minded, and true public servants. Many are absolute heroes. But, those in the industry who defraud the government tarnish the industry's upright reputation.
Again, Mr. Chairman and Ranking Member thank you for hold a hearing on this important issue.