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Medicaid waste, fraud, and abuse : threatening the health care safety net : hearings before the Committee on Finance, United States Senate, One Hundred Ninth Congress, first session, June 28 and 29, 2005 PDF

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Preview Medicaid waste, fraud, and abuse : threatening the health care safety net : hearings before the Committee on Finance, United States Senate, One Hundred Ninth Congress, first session, June 28 and 29, 2005

S. Hrg. 109-544 MEDICAID WASTE, FRAUD, AND ABUSE: THREATENING THE HEALTH CARE SAFETY NET HEARINGS BEFORE THE COMMITTEE ON FINANCE UNITED STATES SENATE ONE HUNDRED NINTH CONGRESS FIKST SESSION JUNE 28 AND 29, 2005 Printed for the use of the Committee on Finance S. Hrg. 109-544 MEDICAID WASTE, FRAUD, AND ABUSE: THREATENING THE HEALTH CARE SAFETY NET HEARINGS BEFORE THE COMMITTEE ON FINANCE UNITED STATES SENATE ONE HUNDRED NINTH CONGRESS FIRST SESSION JUNE 28 AND 29, 2005 C2~07-i3 7500 Security Baltimore, MifVl^fid 21144 Printed for the use of the Committee on Finance U.S. GOVERNMENT PRINTING OFFICE 29-575—PDF WASHINGTON 2005 : ForsalebytheSuperintendentofDocuments,U.S.GovernmentPrintingOffice Internet:bookstore.gpo.gov Phone:tollfree(866)512-1800;DCarea(202)512-1800 Fax:(202)512-2250 Mail:StopSSOP,Washington,DC20402-0001 COMMITTEE ON FINANCE CHARLES E. iiEY, Iowa, Chairman ORRIN G. HATCH, Utah MAX BAUCUS, Montana TRENT LOTT, Mississippi JOHN D. ROCKEFELLER IV, West Virginia OLYMPIA J. SNOWE, Maine KENT CONRAD, North Dakota JON KYL, Arizona JAMES M. JEFFORDS (I), Vermont CRAIG THOMAS, Wyoming JEFF BINGAMAN, New Mexico RICK SANTORUM, Pennsylvania JOHN F. KERRY, Massachusetts BILL FRIST, Tennessee BLANCHE L. LINCOLN, Arkansas GORDON SMITH, Oregon RON WYDEN, Oregon JIM BUNNING, Kentucky CHARLES E. SCHUMER, New York MIKE CRAPO, Idaho KOLAN Davis, StaffDirector and ChiefCounsel Russell Sullivan, Democratic StaffDirector (II) i CONTENTS JUNE 28, 2005 -- . . Opening Statements Page Grassley, Hon. Charles E., a U.S. Senator from Iowa, chairman. Committee on Finance 1 Baucus, Hon. Max, aU.S. Senatorfrom Montana 3 Wyden, Hon. Ron, aU.S. Senatorfrom Oregon 5 Witnesses Levinson, Hon. Daniel, Inspector General, Office of the Inspector General, U.S. Department ofHealth and Human Services, Washington, DC 6 Aronovitz, Leslie, Director, Health Care, Government Accountability Office, Washington, DC 8 Moorman, James, president and CEO, Taxpayers Against Fraud, Washington, DC 10 Messuri, Nicholas, President, National Association ofMedicaid Fraud Control Units, and Assistant Attorney General, Massachusetts Attorney General's MA Office, Boston, 12 Westmoreland, Tim, visiting professor oflaw and research professor ofpublic pohcy, GeorgetownUniversity, Washington, DC 14 AUen, Kathryn, Director, Health Care, Government Accountability Office, Washington, DC 23 Smith, Dennis, Director, Center for Medicaid and State Operations, Centers forMedicare and Medicaid Services, Washington, DC 25 Edwards, Barbara, Medicaid Director, Office ofOhio Health Plans, Columbus, OH 27 Reeb, George M., Assistant Inspector General for the Centers for Medicare and Medicaid Audits, Office of the Inspector General, U.S. Department ofHealth and Human Services, Washington, DC 30 MiUigan, Chuck, executive director, Center for Health Program Development and Management, University of Maryland Baltimore County, Baltimore, MD 31 JUNE 29, 2005 Opening Statements Grassley, Hon. Charles E., a U.S. Senator from Iowa, chairman. Committee on Finance '43 Baucus, Hon. Max, aU.S. Senatorfrom Montana 44 Witnesses Manning, Beatrice, qui tarn relator 46 Coleman, Timothy, Associate Deputy Attorney General, U.S. Department of Justice, Washington, DC 49 Vito, Robert, Regional Inspector General for Evaluations and Inspections, Office of the Inspector General, U.S. Department of Health and Human Services, Philadelphia, PA 51 O'Connell, Patrick, Assistant Attorney General, Office of the Attorney Gen- eral, State ofTexas, Austin, TX 54 Powell, Marjorie E., senior assistant general counsel. Pharmaceutical Re- search Manufacturers ofAmerica (PhRMA), Washington, DC 56 (III) IV Page O'Brien, Daniel K., senior vice president, Erickson Retirement Communities MD Parkville, 74 PuMndDt, Ruth, resident from Erickson Retirement Communities, Parkviiie 75 Stone-Axelrad, Julie, Specialist in Social Legislation, Congressional Research Service (CRS), Washington, DC 77 Pickerell, Paul, Manager, Financial Recoveries Division, Oregon Department ofHuman Services, Eugene, OR 79 , ALPHABETICAL LISTING AND APPENDIX MATERIAL Allen, Kathryn: Testimony 23 Prepared statement 83 Responses to questions from committee members 107 Aronovitz, Leslie: Testimony 8 Prepared statement 112 Responses to questions from committee members 127 Baucus, Hon. Max: Opening statements.. 3, 44 Coleman, Timothy: Testimony 49 Prepared statement 132 Edwards, Barbara: Testimony 27 Prepared statement 143 Feder, Dr. Judy: Prepared statement 146 Grassley, Hon. Charles E.: Opening statements 1, 43 Prepared statementwith attachments 165 Levinson, Hon. Daniel: Testimony 6 Prepared statement 182 Manning, Beatrice: Testimony 46 Prepared statementwith attachments 192 Messuri, Nicholas: Testimony 12 Prepared statement 200 MilHgan, Chuck: Testimony 31 Prepared statement 230 Moorman, James: Testimony 10 Prepared statement 240 O'Brien, Daniel K: Testimony 74 Prepared statement 251 O'Connell, Patrick: Testimony 54 Prepared statement 259 Pickerell, Paul: Testimony 79 Prepared statement 270 Powell, Marjorie E.: Testimony 56 Prepared statement 278 Pundt, Ruth: Testimony 75 Prepared statement 281 Reeb, George M.: Testimony 30 Prepared statement 283 Ruddock, Joyce: Prepared statement 295 V Page Smith, Dennis: Testimony 25 Prepared statement 304 Responses to questions from conmiittee members 329 Stone-Axelrad, Julie: Testimony 77 Prepared statement 461 Vito, Robert: Testimony 51 Prepared statement 488 Westmoreland, Tim: Testimony 14 Prepared statementwith attachments 501 Wyden, Hon. Ron: Opening statement 5 Communications American Pharmacists Association 517 CaremarkRx 522 NationalAssociation ofPublic Hospitals and Health Systems 525 National Citizens' Coalition forNursingHome Reform 529 SandataTechnologies, Incorporated 533 MEDICAID WASTE, FRAUD, AND ABUSE: THREATENING THE HEALTH CARE SAFETY NET TUESDAY, JUNE 28, 2005 U.S. Senate, ComiiTTEE ON Finance, Washington, DC. The hearing was convened, pursuant to notice, at 10:05 a.m., in room SH-216. Hart Senate Office Building, Hon. Charles E. Grass- ley (chairman ofthe committee presiding. ) Also present: Senators Hatch, Baucus, Bingaman, Lincoln, and Wyden. OPENING STATEMENT OF HON. CHARLES E. GRASSLEY, A U.S. SENATOR FROM IOWA, CHAIRMAN, COMMITTEE ON FINANCE The Chairman. I am going to call the hearing to order on the issue of Medicaid waste, fraud, and abuse, a point that is threat- ening the health care safety net. I thank all of you who wdll be joining us today as we take a close look at an issue that threatens both the financial sustainability and the quality ofcare pro\4ded by Medicaid. Over 2 days, we \\i.ll be looking at the fraud, waste, and abuse problems that plague Medicaid. We will also hear some proposed solutions to reign in problems. I take great pride in exposing prob- lems, fleshing them out, and then working to fmd solutions. Tsvo days of hearings present a historic opportunity to address the problems that threaten the long-term sustainability of a very important program. Medicaid, a program that is a safety net for nearly 53 million beneficiaries. We have a duty to sustain Medicaid for low-income Americans, including children, pregnant women, indi\dduals with disabilities, and the elderly. Coupled wdth this duty, then, is a duty to all tax- payers to ensure that monies spent on Medicaid are actually spent on patient care, not lost to fraud, waste, and abuse. This hearing is about finding solutions just as much as it is about exposing prob- lems. We have serious work to do, and I hope that everyone w^ll really dig in and do that work. Medicaid is at risk. In 2003, the Government Accountability Of- fice designated Medicaid a high-risk program because of growing concerns about the quality of Federal oversight and its sheer size: Medicaid spending was nearly $274 billion in fiscal year 2003. To put that into perspective, that is nearly enough money to cover the entire budget of my State of Iowa for the rest of this cen- (1) 2 tury. Making matters more difficult is that spending in Medicaid is expected to double over the next decade. Based on these numbers alone, if we save even 1 percent of the annual budget of Medicaid, billions in taxpayers' dollars will be saved. Funds then can be reinvested to provide more care to more people. Fraud, waste, and abuse are not new to government programs, especially health care programs. Because the Medicare and Med- icaid programs are so big, even a small amount of fraud, waste, and abuse is a big deal. In fact, I have been informed that it is virtually impossible to put a number on exactly how much fraud, waste, and abuse occurs in Medicaid. This is an unacceptable condition to be in when we are worried about spending money wisely. Just as we receive an improper pa3niient rate for Medicare, then I believe we must have an improper payment rate for Medicaid. Some members may not be aware of the volume and size of settle- ments in cases involving Medicaid scams. Settlements involving tens, or even hundreds, of millions of dol- lars are not uncommon. Some companies billing Medicaid are noth- ing more than phantom stores delivering phantom services and goods, all paid for by Medicaid dollars. At the end ofthe day, we are incapable ofputting a solid number on how much is actually lost. Given what we do know, the amount lost to fraud, waste, and abuse is staggering. Today, we will begin to assess what we do know, and then call for immediate action. That call should be loud and clear. Over the next 2 days, we will hear from a number ofindividuals who have worked hard to document the problems plaguing Med- icaid programs. Today, we have two panels. The first will outline the many different players who audit, detect, investigate, prevent, and prosecute fraud, waste, and mismanagement and abuse in Medicaid. The second panel will start our discussion into areas where abuse occurs, particularly State governments' efforts to maximize the Federal share ofMedicaid dollars. Tomorrow's panel will focus on problems with drug pricing, as well as the issue of shifting assets in order to qualify for Medicaid. Each one of these topics represents real problems, and problems that need to be fixed. Our first panel includes a new Inspector General for the Depart- ment of Health and Human Services; a representative of the Gov- ernment Accountability Office; a nonprofit organization, Taxpayers Against Fraud; the President of the National Association of Med- icaid Fraud Control Units; and a professor at Georgetown who served as Medicaid Director of CMS during the previous adminis- tration. Our second panel today will address various mechanisms that are available to States to increase their Federal share of Medicaid dollars; intergovernmental transfers and Medicaid-maximizing models are going to be discussed. While States' efforts to provide more services is a noble goal, the Government Accountability Office will note that, in some cases. State consultants may use questionable methods to increase Fed-

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