<DOC>
[110th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:38015.wais]
MEDICARE PROGRAM EFFICIENCY AND INTEGRITY
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
APRIL 18, 2007
__________
Serial No. 110-30
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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COMMITTEE ON ENERGY AND COMMERCE
JOHN D. DINGELL, Michigan, JOE BARTON, Texas
Chairman Ranking Member
HENRY A. WAXMAN, California RALPH M. HALL, Texas
EDWARD J. MARKEY, Massachusetts J. DENNIS HASTERT, Illinois
RICK BOUCHER, Virginia FRED UPTON, Michigan
EDOLPHUS TOWNS, New York CLIFF STEARNS, Florida
FRANK PALLONE, Jr., New Jersey NATHAN DEAL, Georgia
BART GORDON, Tennessee ED WHITFIELD, Kentucky
BOBBY L. RUSH, Illinois BARBARA CUBIN, Wyoming
ANNA G. ESHOO, California JOHN SHIMKUS, Illinois
BART STUPAK, Michigan HEATHER WILSON, New Mexico
ELIOT L. ENGEL, New York JOHN B. SHADEGG, Arizona
ALBERT R. WYNN, Maryland CHARLES W. ``CHIP'' PICKERING,
GENE GREEN, Texas Mississippi
DIANA DeGETTE, Colorado VITO FOSSELLA, New York
Vice Chairman STEVE BUYER, Indiana
LOIS CAPPS, California GEORGE RADANOVICH, California
MIKE DOYLE, Pennsylvania JOSEPH R. PITTS, Pennsylvania
JANE HARMAN, California MARY BONO, California
TOM ALLEN, Maine GREG WALDEN, Oregon
JAN SCHAKOWSKY, Illinois LEE TERRY, Nebraska
HILDA L. SOLIS, California MIKE FERGUSON, New Jersey
CHARLES A. GONZALEZ, Texas MIKE ROGERS, Michigan
JAY INSLEE, Washington SUE WILKINS MYRICK, North Carolina
TAMMY BALDWIN, Wisconsin JOHN SULLIVAN, Oklahoma
MIKE ROSS, Arkansas TIM MURPHY, Pennsylvania
DARLENE HOOLEY, Oregon MICHAEL C. BURGESS, Texas
ANTHONY D. WEINER, New York MARSHA BLACKBURN, Tennessee
JIM MATHESON, Utah
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
<RULE>_________________________________________________________________
Dennis B. Fitzgibbons, Chief of
Staff
Gregg A. Rothschild, Chief Counsel
Sharon E. Davis, Chief Clerk
Bud Albright, Minority Staff
Director
(ii)
Subcommittee on Health
FRANK PALLONE, Jr., New Jersey, Chairman
HENRY A. WAXMAN, California NATHAN DEAL, Georgia,
EDOLPHUS TOWNS, New York Ranking Member
BART GORDON, Tennessee RALPH M. HALL, Texas
ANNA G. ESHOO, California BARBARA CUBIN, Wyoming
GENE GREEN, Texas HEATHER WILSON, New Mexico
Vice Chairman JOHN B. SHADEGG, Arizona
DIANA DeGETTE, Colorado STEVE BUYER, Indiana
LOIS CAPPS, California JOSEPH R. PITTS, Pennsylvania
TOM ALLEN, Maine MIKE FERGUSON, New Jersey
TAMMY BALDWIN, Wisconsin MIKE ROGERS, Michigan
ELIOT L. ENGEL, New York SUE WILKINS MYRICK, North Carolina
JAN SCHAKOWSKY, Illinois JOHN SULLIVAN, Oklahoma
HILDA L. SOLIS, California TIM MURPHY, Pennsylvania
MIKE ROSS, Arkansas MICHAEL C. BURGESS, Texas
DARLENE HOOLEY, Oregon MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York JOE BARTON, Texas (ex officio)
JIM MATHESON, Utah
JOHN D. DINGELL, Michigan (ex
officio)
C O N T E N T S
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Page
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 1
Hon. Nathan Deal, a Representative in Congress from the State of
Georgia, opening statement..................................... 3
Hon. Gene Green, a Representative in Congress from the State of
Texas, opening statement....................................... 4
Hon. Joe Barton, a Representative in Congress from the State of
Texas, opening statement....................................... 5
Hon. Lois Capps, a Representative in Congress from the State of
California, opening statement.................................. 7
Hon. Tim Murphy, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 8
Hon. Tom Allen, a Representative in Congress from the State of
Maine, opening statement....................................... 9
Hon. Hilda L. Solis, a Representative in Congress from the State
of California, opening statement............................... 10
Hon. Jim Matheson, a Representative in Congress from the State of
Utah, prepared statement....................................... 11
Hon. Darlene Hooley, a Representative in Congress from the State
of Oregon, opening statement................................... 11
Hon. Jan Schakowsky, a Representative in Congress from the State
of Illinois, opening statement................................. 12
Hon. Barbara Cubin, a Representative in Congress from the State
of Wyoming, opening statement.................................. 13
Hon. John D. Dingell, a Representative in Congress from the State
of Michigan, prepared statement................................ 14
Witnesses
Leslie V. Norwalk, Acting Administrator, Centers for Medicare and
Medicaid Services.............................................. 15
Prepared statement........................................... 19
Answers to submitted questions............................... 111
Mark E. Miller, executive director, Medicare Payment Advisory
Commission..................................................... 30
Prepared statement........................................... 32
Answers to submitted questions............................... 115
Stuart E. Wright, Deputy Inspector General for Evaluation and
Inspections, Office of Inspector General, Department of Health
and Human Services............................................. 66
Prepared statement........................................... 69
Answers to submitted questions............................... 123
Daniel S. Fridman, Senior Counsel to the Deputy Attorney General
and Special Counsel for Health Care Fraud, Department of
Justice........................................................ 80
Prepared statement........................................... 82
Answers to submitted questions............................... 118
Submitted Material
Eric Sokol, director, and Stephen Azia, counsel, Power Mobility
Corporation, statement......................................... 158
MEDICARE PROGRAM EFFICIENCY AND INTEGRITY
----------
WEDNESDAY, APRIL 18, 2007
House of Representatives,
Subcommittee on Health,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 2:35 p.m., in
room 2123 of the Rayburn House Office Building, Hon. Frank
Pallone, Jr. (chairman) presiding.
Members present: Representatives Green, DeGette, Capps,
Allen, Schakowsky, Solis, Hooley, Matheson, Deal, Cubin, Pitts,
Murphy, Burgess, Blackburn and Barton.
Staff present: Erin Bzymek, Yvette Fontenot, Brin Frazier,
Amy Hall, Christie Houlihan, Bridgett Taylor, Robert Clark, and
Kristine Blackwood.
OPENING STATEMENT OF HON. FRANK PALLONE, JR, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. I want to call this meeting to order.
Today we are having a hearing on ``Medicare Program
Efficiency and Integrity.'' I will recognize myself for an
opening statement initially.
Since it was enacted, the Medicare Program has been a
reliable source of health care for our Nation's seniors and
disabled and it goes without saying that if it were not for the
Medicare Program, some of our most vulnerable populations would
have little, if any, way to access important medical care.
Accordingly, we must make every effort to ensure that the
Medicare Program remains intact and available for future
generations who will undoubtedly come to rely upon its
services, and part of our efforts must focus on ensuring that
all of Medicare's payment policies are both fair and efficient.
Currently, I don't believe that is the case. It should come as
no surprise to anyone that many of us in Congress have strong
concerns about payments to Medicare Advantage plans.
I have to admit, I am perplexed by the disparity in
payments between these private plans and traditional Medicare.
It makes little sense to me why Medicare payments for Medicare
Advantage enrollees are on average 12 percent higher than what
Medicare pays for beneficiaries enrolled in traditional
Medicare. It flies in the face of the intent behind the program
as I believe MedPAC, which has done substantial work in this
area, will attest to later today. These excessive payments are
wasteful and result in unnecessary costs for the program as
well as for its beneficiaries and the American taxpayers, and
some of my good friends I assume on the other side of the aisle
are going to argue that the Medicare Advantage Program provides
value to the Medicare Program in the form of greater savings
and enhanced benefits for enrollees but it seems to me that no
matter how you try to sell it, it is just lipstick on a pig.
The evidence just isn't there to back up these assertions.
The Medicare Advantage program is not the only area in
which we would likely achieve greater value out of Medicare
dollars we spend. I am looking forward to hearing from our
witnesses today on what other areas we should focus our
attention on improving payment efficiency within the Medicare
Program.
But I do believe that eliminating overpayments and improper
payments will only go so far. There is another side to this
coin that involves ensuring the integrity of the Medicare
Program. I admit my concern about ensuring Medicare Program
integrity is somewhat parochial. This past year there were a
couple of instances in my home State of New Jersey where
providers were accused of improper billing which may have cost
the Medicare and Medicaid programs hundreds of millions of
dollars. In the first instance, the University of Medicine and
Dentistry of New Jersey, UMDNJ, which is the Nation's largest
health science university, overcharged Medicare and Medicaid to
the tune of at least $4.9 million. Millions more could be owed.
It was revealed by a Federal probe that the university was
improperly billing for services at its outpatient clinics. As a
result, the university could have been prosecuted, which would
have made it ineligible for Federal funding and would have
effectively shut down one of the largest health care providers
in the State. Now, fortunately, this did not happen. In another
instance last year, it was revealed that St. Barnabas Health
Systems, which is the largest health care provider in the State
of New Jersey, settled allegations that it inflated charges
under the Medicare outlier payment system, which reimburses
providers for patients whose costs are unusually high due to
serious illnesses. Under this agreement, St. Barnabas has
agreed to pay back $265 million.
It is important to note that the improper behavior is not
all about the monetary cost to Medicare, it is about access as
well. I think it is clear that when the integrity of the
Medicare Program or participating providers are called into
question, beneficiaries' access to care in jeopardized. In New
Jersey, for example, if UMDNJ were forced to close, many low-
income and elderly who rely upon the university for treatment
services would have had nowhere else to turn.
That is why I think it is so important that we take the
issue of Medicare Program integrity seriously. I will be
interested to hear from our witnesses from both the Department
of Health and Human Services Office of the Inspector General
and the Department of Justice as to what steps they are taking
to prevent similar circumstances from happening again. Needless
to say, today's hearing is very critical. We have a
responsibility to ensure the preservation of the Medicare
Program for our Nation's seniors and disabled.
I would like to thank all of our witnesses for being here
today. I look forward to your testimony. Obviously what you say
is going to be very important to what we do in the next few
weeks, and thank you again for being here.
I now recognize our ranking member, Mr. Deal.
Mr. Deal. Thank you.
OPENING STATEMENT OF HON. NATHAN DEAL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF GEORGIA
I think we all know that Medicare is a program that
services about 44 million beneficiaries and costs about $450
billion. In a program of this size and importance, it is
obviously vital that this committee maintain vigilant oversight
to ensure that beneficiaries are being provided with high-
quality health services and that the taxpayers are protected
from funding fraud or abuse. During my tenure in Congress, we
have certainly found areas in the program in need of reform and
also tried to make changes to the program to help contain the
exponential cost growth. Without reform, the projected growth
of the program threatens Medicare solvency into the future
absent a significant cost increase to the taxpayers. The
efficiency of Medicare is important to ensure beneficiaries
receive appropriate high-quality health care and that taxpayers
and beneficiaries receive the maximum benefit from their
dollars.
One area of inefficiency which has always been a concern
for me is the area of imaging. MedPAC's March payment policy
report summarized the problem well by stating, and I quote,
``We have observed rapid and sustained growth in the volume of
imaging services for Medicare beneficiaries which has led to
concerns about quality and patient safety and potential overuse
of imaging services.'' The volume of imaging services per
Medicare beneficiary experienced a dramatic 9 percent growth in
2005. In a 2006 survey, 19 percent of physicians reported that
their practice expanded imaging services in the last year.
Additionally, MedPAC reports that the average annual growth and
the volume of imaging services per beneficiary between 2000 and
2004 was 10.3 percent with the most dramatic growth occurring
in MRI services. This kind of growth has been coupled with
mounting concern about overutilization of imaging services and
self-referrals.
A case being prosecuted by the Illinois attorney general
highlights this very well. The attorney general contends that
more than 20 Chicago-area radiology centers engaged in a
widespread scheme to win referrals for MRIs by paying illegal
kickbacks to doctors. Cases like this highlight the need for
close scrutiny into the area of imaging to ensure fraud and
abuse are not one of the contributing factors to volume growth.
It is my belief that the payment reductions made in the
Deficit Reduction Act were a blunt instrument to address the
imaging issue, and I hope the committee will take a more
thorough look at this area to craft an imaging policy that
prevents both overutilization and protects patients from
receiving needless and potentially harmful scans.
I am sure today's witnesses will call attention to other
areas within the Medicare Program in need of reform to ensure
the program's effectiveness into the future. It is important
that we continue to reform the Medicare Programs and ways to
focus on providing beneficiaries with continued high-quality
health services.
Hearings like this also highlight that despite our best
efforts, there are some inherent weaknesses in Government-
provided health care. Recognizing this, I hope the committee
will look beyond Government provision of health care to broad-
based patient-focused reforms which would improve health care
delivery in both the public and he private markets.
I thank our witnesses for appearing today and I look
forward to your testimony.
I yield back the balance of my time.
Mr. Pallone. Thank you.
Next I would recognize our vice chair, Mr. Green, for 5
minutes.
OPENNIG STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Green. Thank you, Mr. Chairman, for holding this
hearing on efficiency and integrity of the Medicare Program. I
know the subcommittee is working hard to determine the best way
to reform the physician payment under Medicare, and this
hearing will provide us with important information on how we
seek to accomplish that goal. The harsh budget realities
dictate that any effort to reform this would have to be
accompanied by increased efficiency within the Medicare Program
and continued commitment to ensuring the integrity of the
program.
I am pleased to see that MedPAC continues to press for care
coordination and increased efficiency within Medicare. There is
no question that care coordination would facilitate better
health care outcomes for Medicare beneficiaries. A study
published last year by Health Affairs concluded that nearly 20
million Medicare beneficiaries, or 50 percent of the
beneficiary population, have five or more required medical
treatments. We also know that 20 percent of the Medicare
population has five or more chronic conditions and these
beneficiaries account for two-thirds of all Medicare spending.
Care coordination for these beneficiaries with multiple chronic
conditions would improve efficiency within the Medicare Program
and improve health outcomes for those beneficiaries who too
often receive conflicting information and duplicative services
from providers addressing different health care needs.
To address this issue, we are putting finishing touches on
legislation that would provide a geriatric assessment and
chronic care coordination benefit under Medicare part B. Under
the bill, the high cost Medicare beneficiaries with multiple
chronic conditions will be eligible to participate in a new
voluntary care coordination benefit. A chronic care manager of
the beneficiary's choosing would implement a care coordination
plan with the beneficiary's other providers who would utilize
clinical decision support, health information technology,
medication management techniques and beneficiary education to
ensure that the most appropriate health care is delivered with
consideration given to the full range of the beneficiary's
health condition. This legislation offers us a good start to
begin addressing the structural problems of the current
Medicare payment system and that has kept the Medicare Program
from adapting to the chronic needs of our seniors.
To increase efficiency, we also have to take a look at the
Medicare Advantage program. MedPAC's most recent report
confirmed that Medicare Advantage are paid on average 12
percent more than traditional Medicare with private fee-for-
service plans under Medicare part C receiving 19 percent more
than traditional Medicare payments. To be sure, MA plans are
quick to point out that they offer additional benefits to their
enrollees and that is true, but I remember vividly the deal we
struck with the Medicare Advantage plans. All along Medicare
Advantage plans claimed that they would provide additional
benefits and increase efficiency at the same or lower cost than
traditional Medicare. It was never meant to be part of the deal
to pay them more for these services. All Medicare beneficiaries
end up paying for these overpayments due to ever-increasing
part B premiums. On behalf of all Medicare beneficiaries and
the American taxpayer, I think it is high time we hold Medicare
Advantage to the deal they made with us back years ago.
I thank our witnesses for being here, and I will yield back
my time, Mr. Chairman.
Mr. Pallone. Thank you.
I recognize our ranking member of the full committee, Mr.
Barton.
OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Barton. Thank you, Mr. Chairman. I sincerely want to
compliment you on holding this hearing. This is the type of
work that is not sexy, it is not seeking publicity, it is just
doing the nitty-gritty nuts-and-bolts oversight and review of
the ongoing programs of our Government and I want to honestly
and sincerely commend you and Ranking Member Deal for doing
this. It is very, very important.
As we go through today's hearing, I am going to be
especially interested in hearing what the witnesses have to say
about something that I have been promoting in Medicare for a
number of years, that is, competitive bidding of durable
medical equipment, prosthetics, orthotics and supplies. Price
competition is almost always a good thing. There are some times
that decisions have to be made in a crisis and once in a while
there is something that is only by a single vendor but those
times are rare. That is why I was the author of the competitive
bidding proposal during consideration of the Medicare
Modernization Act several years ago. I am pleased that the
Centers for Medicare and Medicaid Services have just
implemented this provision in a final rule. With the new rules
come important accreditation and quality standards for
suppliers, something that I think has been long overdue.
The Office of Inspector General will testify later this
afternoon of its recent work reviewing suppliers in south
Florida. According to the OIG, 45 percent of suppliers in three
counties in south Florida did not meet one or more of five
Medicare enrollment requirements. The accreditation and quality
standards of the competitive bidding program will hopefully
reduce such potential fraud and abuse, making suppliers more
accountable and saving money for all our taxpayers.
The competitive bidding program that is being implemented
will help sure that Medicare is paying the appropriate market-
based price for these products. When fully implemented in 2010,
competitive bidding is projected to save Medicare over $1
billion a year. There will be savings to beneficiaries as well
and it will improve people's access to quality suppliers,
reduce out-of-pocket costs. Since beneficiaries pay a 20
percent co-pay, it is only fair to ensure that the beneficiary
can realize the best price that is available that the market
can offer.
I am also eager to hear the panel's testimony on
improvements to the Medicare Program overall. I am concerned
about a discussion around cutting the Medicare Advantage plans.
Medicare managed care is not new to the Medicare Program. It
has been offered a beneficiary choice in coverage since the
inception of the Medicare Program. Over the past few decades we
have tinkered with the managed-care option, adjusting the
manner in which we reimburse plans in a number of major bills
over the years. Plan participation has fluctuated. At time
participation has been low, then it has been higher, then low
again in the 1990's despite high enrollment numbers.
I remember what we experienced in the late 1990's and early
part of this decade. I remember when our constituents were
disenrolled and their extreme unhappiness at losing that
particular option. You see, most of, if not all, beneficiaries
like Medicare Advantage and they are willing to show it, so I
am somewhat concerned with discussions of cutting over $60
billion out of this part of Medicare, which has such a high
degree of universal satisfaction among the beneficiaries. There
are currently over 8.3 million beneficiaries enrolled in
Medicare Advantage plans and the number of beneficiaries
choosing this option has increased by almost 54 percent in the
last 2 years. So I have to ask, if it is working, why break it.
And I understand that most of the discussion around cutting the
rates is driven by the need to find a magic-bullet offset for
spending on other health care programs, but if it is good
policy, I don't see why we have to disrupt a benefit that is
working well to great satisfaction of those that are enrolled
in that particular option so that if we do that, we won't have
to find an offset because we are going to keep spending the
money where the people want it to be spent. It seems to me that
we should do our jobs so that they can keep their benefits, not
the other way around. If you don't believe the program is
working, just ask the folks that have better access to
enrolling in a plan today than ever before. These plans are an
important option for low-income and minority beneficiaries.
Fifty-seven percent of the enrolled beneficiaries have income
of less than $30,000. These plans can reduce cost-sharing
relative to traditional Medicare. It shows in the satisfaction
numbers. Eighty-six percent of the enrollees have access to a
plan that does not charge them a premium at all--86 percent.
And it is not just the savings. It is about access to care
afforded by these plans and beneficiary choice.
I could go on and on but my basic point is, that these
Medicare Advantage plans are offering better access to care.
More than 80 percent of them provide coverage for hospital
stays beyond the traditional Medicare benefit. More than 75
percent cover routine eye and hearing tests. Over 98 percent of
the beneficiaries can even enroll in a plan that offers
preventive dental benefits.
Mr. Chairman, I share with you and Chairman Dingell and
Ranking Member Deal a commitment to address the physician
payment issue, which is a very costly item in Medicare. We need
to work together, roll up our sleeves and look at that
particular part of Medicare to see if there is not something
that we can do to help our health care providers, all the
various physician groups so that they will stay in the Medicare
plan and give the benefits to our beneficiaries.
With that, Mr. Chairman, I yield back and look forward to
the hearing and working with you and others as we try to come
to solutions to some of the problems that we are going to hear
about today.
Mr. Pallone. Thank you.
I recognize the gentlewoman from California, Mrs. Capps.
OPENING STATEMENT OF HON. LOIS CAPPS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mrs. Capps. Thank you, Mr. Pallone, and I want to thank you
as well for holding this hearing, a hearing which is long
overdue.
Medicare is one of the most important benefits we provide
to the elderly and the disabled. As a society, we have a
responsibility; indeed, I would call it a privilege, to provide
care for those who are most vulnerable. But what level of care
can we provide when the program itself is fraught with wasteful
spending and structural problems? It is my observation that we
are looking for waste, fraud and abuse in all the wrong places.
It is so obvious that priorities are being misplaced. We have a
system that provides disincentives for preventive care, a
system that picks and chooses treatments to cover, often at
reimbursement rates with no clear connection to the actual cost
of providing that care. What am I to say to a constituent who
asks why her Medicare summary notices reflect a reimbursement
to her provider for $2,000 more than the provider charged her
for treatment, or to my constituent who asks why Medicare
continues to pay maintenance fees on rented equipment that has
never required maintenance, and when those fees have already
total to several times more than the cost of purchasing the
equipment outright? I will discuss those situations in more
depth later but they are just two examples of wasteful spending
in the same system that is underlying for primary care services
in my district by as much as 5 percent, or why are certain
private insurance plans receiving up to 12 percent more for the
same services provided at a lower cost by other providers when
there is no clear evidence of increased benefits to the
beneficiaries? Why is Medicare reimbursing providers who
perform certain diagnostic tests in their offices and
ambulatory service centers at rates so low that it is driving
their patients back to hospitals where the costs of providing
these services are so much greater? Cost-saving services from
diagnostic tests provide earlier screening and earlier
intervention and treatment, saving both lives and Medicare
dollars. Why is Medicare paying private contracts per audit
they perform regardless of what the outcome is with no
incentive to target bad actors over law-abiding ones?
As a health professional myself, it is so disturbing to see
a health care program that thinks efficiency means immediately
cost-cutting instead of preventing disease and improving
health. I am very anxious to hear what our witnesses today have
to say about this, Mr. Chairman, and I am eager to work with
our committee to address these pressing problems.
I yield back the balance of my time.
Mr. Pallone. Thank you.
I know Mr. Murphy is just walking in, but you would be next
if you like. I recognize the gentleman.
OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Murphy. Thank you, Mr. Chairman. I appreciate it.
Our health care system is broken and must be reformed, and
fixing the system is not about who is paying, it is about what
we are paying for. A broken system is not fixed by just
shifting additional payments to seniors, families, employers or
taxpayers, but I believe affordability must begin with some
fundamental reforms to quality, accessibility and safety for
patients. Medicare spends about $372 billion annually and it is
estimated that it will be bankrupt by 2019, 7 years earlier
than previously expected, and 23 years earlier than Social
Security, and I believe we need to transform our system to
protect our seniors.
The Medicare Payment Advisory Commission recommends a
number of suggestions from reducing payments to providers and
Medicare managed-care plans to implementing pay for performance
and care coordination programs. I believe care coordination can
significantly reduce health care costs. For example, the
University of Pittsburgh initiated a patient care management
program for diabetes and reduced re-hospitalizations by 75
percent. Washington Hospital in Pennsylvania reduced re-
hospitalizations for patients with heart disease by 50 percent,
all from having folks monitor appointments, medications, diet,
lab tests and treatment. These are real savings.
Recently we passed legislation providing a case manager to
every wounded warrior in our military but we still don't have
incentives for patient care management programs to reduce
health care costs for out patients. I believe we can't continue
to finance a broken health care system and expect different
results, and I believe we need to transform our health care
system and invest patient care management dollars to save
billions of lives and thousands of dollars.
Any time we are faced with talking to folks from the
Medicare Program and talking about efficiency and integrity. I
believe these are the kind of things we need to be doing. After
all, the sad truth of this is, is Medicare will reimburse
doctors for sadly amputating the leg of someone with diabetes
and severe problems but we haven't yet adjusted to the system
of paying a few bucks each time to have a nurse call the
patient and saying have you gotten your lab tests done, you
haven't filled your prescription for insulin, how are you
feeling today. We really need to make some major changes on
that and I am so pleased that this committee is going to review
these issues. I hope that we can review these and make some
changes not only to such things as what I just mentioned but
also providing more allowance for doctors to volunteer at
community health centers and by actively working to also
eliminate infections from hospitals, because one of the sad
truths too is, we also spend an awful lot of money reimbursing
doctors and hospitals for an infection the patient picked up
while they were there. As a matter of fact, some 2 million
people a year contract an infection while in a hospital or
health care center. It claims 90,000 lives and $50 billion a
year. As we look at Medicare efficiency and integrity, I hope
we are looking at these things too so we can look at fixing the
system and not just financing it.
Thank you, Mr. Chairman.
Mr. Pallone. Thank you.
The gentleman from Maine.
OPENING STATEMENT OF HON. TOM ALLEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MAINE
Mr. Allen. Mr. Chairman, thank you for calling this
important hearing to examine efforts to improve the Medicare
Program. Increasing efficiency and eliminating waste, fraud and
abuse will keep the Medicare Program strong. Every dollar that
we recover can provide additional services to beneficiaries.
This committee needs to consider the improper payments recently
reported by CMS in the fee-for-service program including $9.8
billion in overpayments and $1 billion in underpayments. We
also need to examine the overpayments to private Medicare
Advantage plans. They receive 12 percent more on average than
traditional Medicare for treating comparable beneficiaries.
While some Medicare advantage plans provide more services than
traditional Medicare, their administrative costs are estimated
to be 20 percent, much higher than traditional Medicare's 3
percent. If Medicare Advantage payment plans were brought in
line with traditional Medicare, CBO estimates it would save $65
billion over 5 years.
I want to suggest a third issue to consider today:
improving the evidence base for health care decision-making.
Mr. Miller, I know you address this matter in your testimony.
There is broad-based bipartisan agreement that we need to get
better value for our Medicare dollar. Comparative effectiveness
research involves evaluation of the relative safety and
effectiveness of different pharmaceuticals, medical devices or
medical procedures used to treat the same or similar illnesses
or conditions. Comparative effectiveness research has great
potential to improve health care quality and patient outcomes
while ensuring that consumers receive the best care at the best
value. The Effective Health Care program at the Agency for
Healthcare Research and Quality, authorized under MMA, conducts
systematic reviews of existing literature to identify what
treatments work best, for whom, when and at what cost. AHRQ and
its research partners synthesize the science and have built a
meaningful evidence base. Working with a meager budget of $15
million, originally authorized at $50, AHRQ has completed seven
reports on the treatment options for cancer-related anemia, low
bone density, depression and gastroesophageal reflux disorder
disease, among others. Seven additional studies are underway.
The promise of comparative effectiveness research to improve
care, patient outcomes and save Federal funds is significant. I
will soon be introducing legislation to bolster comparative
effectiveness research, and I will be inviting my colleagues to
join me as a cosponsor of the bill.
With that, Mr. Chairman, I thank the witnesses for being
here and yield back the balance of my time.
Mr. Barton. Mr. Chairman, could I just compliment the
gentleman on his pronunciation. He did that very well.
Mr. Pallone. I was listening to that also. I didn't know
whether it was correct or not though.
Mr. Barton. He said it like it is correct.
Mr. Pallone. Gastro--what was it?
Mr. Allen. Gastroesophageal. I do not know if it is right
either.
Mr. Pallone. Very good. I will compliment you too.
I recognize Ms. Solis.
OPENING STATEMENT OF HON. HILDA L. SOLIS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Solis. Thank you, Mr. Chairman, and thank you for
holding the hearing today.
In 1965, Congress created Medicare because seniors had
difficulty obtaining affordable health care insurance. Seniors
were promised that after a lifetime of working and paying into
Medicare, they would have access to health care coverage during
their retirement years regardless of their geographic location,
their age and their income. Today more than 44 million seniors
and people with permanent disabilities depend on Medicare to
meet their health needs. In the coming decades, even more
people will become beneficiaries of the program. I represent
about 70,000 Medicare beneficiaries in my current district.
They have entrusted the Government with their tax dollars and
depend on us to oversee Medicare and to ensure that it runs
efficiently.
In 2006, Medicare comprised 13 percent of the Federal
budget and 19 percent of total health expenditures. Health care
costs, as you know have skyrocketed and part B premiums are
quickly becoming unaffordable. This is particularly
troublesome, given the importance of access to quality
affordable health care in minority communities, which often
encounter greater burdens of disease. Unfortunately, low-income
Medicare beneficiaries tend to be disproportionately Latino.
Although Latinos make up only 6 percent of the Medicare
beneficiaries, more than 14 percent are low-income seniors.
Sixteen percent of Medicare beneficiaries in California alone
are Latino. In 2006, a MedPAC report stated that 7.1 percent of
Latino Medicare beneficiaries delayed getting care due to cost,
proof that people with access to health insurance are not
always able to receive services.
I have heard from my constituents that some California
physicians have stopped taking new Medicare patients because of
inadequate reimbursement. Given this existing reality, I am
concerned about proposed cuts to Medicare providers. Less
access to care will result in a disastrous increase in health
disparities in our community. I am interested to hear MedPAC's
view about payments to Medicare Advantage plans, especially
since the private fee-for-service plans are paid 19 percent
more than traditional Medicare.
I thank the witnesses for coming today and I look forward
to hearing your response.
Mr. Pallone. Thank you.
I recognize the gentleman from Utah.
Mr. Matheson. Mr. Chairman, I have a written statement I
will just submit for the record, and I will yield back.
[The prepared statement of Mr. Matheson follows:]
Prepared Statement of Hon. Jim Matheson, a Representative in Congress
from the State of Utah
Thank you, Chairman Pallone and Ranking Member Deal.
I want to thank you for holding this hearing today on the
Medicare Program efficiency and integrity. This discussion
today is a significant step in examining Medicare policy and
one that requires a thorough review and consideration by
Congress. I am happy that this hearing is being held at a time
where we have the opportunity to improve health care reform for
all Americans.
I also want to thank our distinguished guests. In my review
of the testimony, I am looking forward to learning and
identifying areas from our panel where the Medicare program is
meeting the needs of the beneficiaries and investigating areas
where reform needs to be made.
I am pleased to be a part of this committee and I am
confident that due diligence will be given to the many health
policy issues that continue to have long-term implications for
the Medicare Program, including an issue that I am concerned
with--the Medicare reimbursement for physician services. Having
met with so many Utahns about the inadequacies of the current
formula for determining physician reimbursement, it is my hope
that we can make some progress on this issue during this
session of Congress.
In addition, I am aware that we are looking to programs in
Medicare to help supplement the State Children's Health
Insurance Program. I hope to learn more regarding the options
available to us to fully fund this significant, bipartisan
partnership for children without negatively impacting services
or access to programs that are successfully working for our
Nation's seniors, especially those in rural or underserved
areas. In 2007, 8.3 million beneficiaries chose to receive
their health care benefits through a Medicare Advantage plan.
Across the Nation, 85 percent of these chose a Medicare
Advantage plan with prescription drug coverage. In my district,
we have 19 percent of Medicare beneficiaries who have chosen a
Medicare Advantage plan for their health insurance coverage and
who rely on these programs for--vision, hearing, dental,
fitness, mental health, and alternative health benefits.
I look forward to hearing the panel's views and expertise
on a number of these issues within the Medicare program.
Thank you, Mr. Chairman.
----------
Mr. Pallone. Thank you.
The gentlewoman from Oregon.
OPENING STATEMENT OF HON. DARLENE HOOLEY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Ms. Hooley. Thank you, Mr. Chairman, for holding this
hearing.
I have always firmly believed in the importance of building
voters' faith in Government. Ensuring that Government programs
provide services efficiently without waste, fraud and abuse is
critical to that effort. We have a responsibility to provide
quality health care for our citizens and seniors and an
obligation to be good stewards of taxpayers' money.
As I have said before, Oregon physicians provide services
more efficiently than those in many other parts of the country.
They are so under-reimbursed to the point that many of them
will not take new Medicare patients. As a consequence, I
believe the physicians in Oregon welcome initiatives to improve
efficiency in Medicare because the current system provides the
most benefit to those providers who are least efficient.
The MedPAC recommendations to provide comparative research
utilization measures to physicians would be a step in the right
direction. Letting physicians with high resource use know how
they compare to their fellow physicians would be a start in a
positive conversation that currently does not exist. Another
MedPAC recommendation, pay for performance in Medicare, has the
potential to improve care and provide a better benefit for our
seniors. However, just like with MedPAC's comparative resource
utilization measures, it is critical to have appropriate risk
adjustment measures in pay for performance. We do not want a
pay-for-performance system that punishes physicians who care
for older and sicker patients or those with more complex
conditions. With any pay-for-performance system, we must make
sure that all measures are clinically valid and that physicians
play an integral role in developing and implementing
appropriate standards. Physicians have the expertise in their
area of specialty. We have to rely on that knowledge when
creating a pay-for-performance system so that it works for both
seniors and the providers.
In the area of program integrity, I am glad to see that
progress has been made. A decline in payment error rates from
over 10 percent in fiscal year 2004 to 4.4 percent in 2006 is a
great accomplishment, and I congratulate you on that. The
Department of Justice has similarly done an outstanding job of
collecting $2.2 billion in judgments and settlements in fraud
and abuse cases in 2006. However, the DOJ says in its testimony
today that current funding levels are not sufficient to
eliminate the backlog of fraud and abuse cases. The Office of
the Inspector General, the Department of Health and Human
Services said it recovers an average of $13 for every $1 spent
on that office. We need to make sure that we are investing
sufficient funds to stay aggressive in bringing cases against
the small minority of providers that abuse the public's trust.
We should also not punish those providers who are the most
efficient.
Again, thank you, Mr. Chairman, for holding this hearing,
and I am looking forward to our witnesses. Thank you.
Mr. Pallone. Thank you.
The gentlewoman from Illinois, Ms. Schakowsky.
OPENING STATEMENT OF HON. JAN SCHAKOWSKY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Ms. Schakowsky. Thank you, Mr. Chairman.
I am so glad that we are holding this hearing on Medicare,
which passed in 1965 and our chairman, Chairman Dingell, was
not only a member of the House at that time, but as I
understand it was actually presiding in the chair when Medicare
passed, and since then it has been one of the most popular and
effective and well-administered programs and most popular among
our citizens, and so today we are here about how we can make
Medicare even better, even more efficient.
I am very glad MedPAC, CMS, the DOJ and the Inspector
General's Office are represented here today and I look forward
to hearing those ideas on the use of comparative effectiveness,
ways to reduce medical errors and inappropriate utilization and
expanded access to preventive services. I also hope that we can
focus on the inefficiencies involved in providing enormous
subsidies to private plans in Medicare.
Marilyn Moon, a former public trustee of Social Security
and Medicare trust funds, states in her recent book, Medicare:
A Policy Primer, ``Over the past 30 years Medicare has been
more successful on a per capita basis of holding down the costs
of health spending growth than has private insurance.''
Medicare also spends less on administrative costs. There are of
course many ways to make Medicare even more efficient but
moving more toward privatization of Medicare is not one of
them. I wasn't here when Congress first created Medicare Plus
Choice, the forerunner of today's Medicare Advantage programs,
but as the executive director at the time of the Illinois State
Council of Senior Citizens, I had many concerns about allowing
private plans to infiltrate Medicare. The argument then was
that Medicare private plans would cost less because of their
greater efficiency, saving Medicare and taxpayers money while
providing better benefits. But today it is clear that the
theoretical promise has not been met. Medicare Advantage
private plans on average cost 12 percent more than traditional
Medicare and some plans are paying 40 percent more. When
beneficiaries move from traditional Medicare to private plans,
it costs us more, not less. We are paying billions of dollars
each year to subsidize private plans that serve less than one
in five beneficiaries while other important health needs are
not being met. I find it hard to argue that that is an
efficient or proper use of limited resources.
I am particularly interested in looking at the role of
private fee-for-service plans, the fastest-growing sector of
the Medicare Advantage market, which also happens to receive
the highest level of excess payments. I believe there is
little, if any, value added with these plans. I hope we will
look into them more closely. The argument simply no longer
stands that private plans will bring efficiency to the Medicare
Program, and I really welcome the chance to investigate what
has gone wrong here.
Thank you, Mr. Chairman.
Mr. Pallone. Thank you.
The gentlewoman from Wyoming.
OPENING STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WYOMING
Mrs. Cubin. Thank you, Mr. Chairman.
Things are just not the same in rural America as they are
in urban America, and our country has decided that there are
certain things that everyone in this country should be allowed
to have access to, whether it is postal delivery or whether it
is public transportation, and it costs different things. We
don't have public transportation in rural America like we do in
urban America, and I think this health care debate will turn
out to demonstrate the differences in why we need to take a
good look at what we are doing here.
Our Nation's Medicare Program is an investment in the
health of our Nation's seniors and we have a responsibility to
the Federal taxpayer to ensure that it is a responsible
investment. The 70,000 seniors in the State of Wyoming are best
served knowing that Congress is doing what it can do to ensure
the $425 billion spent in fiscal year 2007 are dollars well
spent. The shear size of the Medicare Program is mind-boggling.
Though overpayments, fraud, waste and abuse may seem inevitable
in a program this large, we must rise to the challenge and act
to protect the solvency of Medicare. I applaud the
administration's proposal to rein in the growth of the Medicare
Program and achieve a $65.6 billion in savings over 5 years.
The Congressional Budget Office projects Medicare spending
already estimated at $454 billion in fiscal year 2008 to double
over the next 10 years. If we do not, we will face either a tax
increase or rollback in benefits.
As this committee looks to find savings in the Medicare
Program, I know there will be plenty of discussion surrounding
the appropriateness of expenditures under Medicare Advantage
program. Medicare Advantage replaced its predecessor, Medicare
Plus Choice, in the Medicare Modernization Act of 2003. The
program supports private plans that give Medicare beneficiaries
more choices, additional benefits and coordinated care beyond
traditional Medicare coverage. Enrollment in these plans has
increased by almost 54 percent since 2004 but this number does
not tell the whole story in rural areas like Wyoming. In every
county in Wyoming, there is now access to a plan with a maximum
out-of-pocket of $1,000 or less whereas prior to 2003 there was
no access to these plans at all. There are now over 3,000
Medicare Advantage enrollees in Wyoming. Hundreds have written
or e-mailed my office about how much they like their plans.
There is no doubt that we will need to make some difficult
choices to preserve the long-term fiscal soundness of the
Medicare Program. I am personally committed to addressing the
negative physician fee schedule which represents an
unacceptable situation, not just for Wyoming's beneficiaries
but for the physicians they rely on. I would urge my
colleagues, however, to consider the impact of our decisions on
access to quality and affordable health care in rural areas
like Wyoming and other places around the country.
Thank you, Mr. Chairman.
Mr. Pallone. Thank you.
Any other statemets for the record will be accepted at this
time.
[The prepared statement of Mr. Dingell follows:]
Prepared Statement of Hon. John D. Dingell, a Representative in
Congress from the State of Michigan
The Medicare Program is the most successful social program
of our time. It has, in the course of more than 40 years,
reduced unmet health needs among seniors and people with
disabilities and has, together with Social Security, lifted
tens of millions of elderly out of poverty by virtue of helping
with the cost of their medical care. Without question, the
Medicare program is essential to the fabric of our society and
must be protected and preserved.
Part of protecting and preserving Medicare involves
ensuring accuracy and efficiency in its payments. As the
Medicare Payment Advisory Commission notes, the program should
be neutral in its payments to providers--encouraging the right
care at the right time in the right setting. This means
constant oversight on the part of both Congress and the Centers
for Medicare and Medicaid Services (CMS). And that is part of
our goal here today.
In this fiscal year alone, Medicare will spend more than
$425 billion on health care goods and services for its 44
million beneficiaries. Unfortunately, in a program of this size
overpayments are inevitable. At today's hearing we will hear
about fine tuning Medicare's payment systems to improve
efficiency and modifications that can be made to protect the
integrity of the program as well.
Overpayments, or misaligned payments, can have a direct
effect on beneficiary out-of-pocket costs, as well. Whenever
there is an increase in part B spending, it automatically
increases the part B premium beneficiaries pay. Misaligned
payments can also cause beneficiaries to pay more than
necessary in coinsurance. And in the overall context of the
Federal budget, inappropriately spent funding reduces funds
available for other priorities.
Our goal should be to increase the efficiency of the
Medicare program to ensure the future stability of the program.
For example, we now know MedPAC that private plans in Medicare
are paid an average of 12 percent more for every Medicare
beneficiary that chooses to enroll in one of those plans rather
than remaining in traditional Medicare. These excess payments
are funded by taxpayers and all beneficiaries--whether or not
they enroll in private plans--in the form of higher Medicare
part B premiums. These plans should be required to be operating
more efficiently and I look forward to the MedPAC
recommendations on this issue.
Similarly, providers who knowingly defraud the program
should be identified and the Federal Government should work to
recover overpayments from those providers and seek criminal
charges if the case warrants.
Ensuring the efficiency and integrity of all of our public
programs is among the top priorities of this Congress. That is
the only way to ensure the continued existence and success of
these programs. We in Congress want to work closely with those
who advocate for beneficiaries and with those who represent the
provider community, to protect Medicare fee-for-service for
generations to come. I look forward to working with Chairman
Pallone, as well as Ranking Members Barton and Deal, as we
proceed in our efforts to improve Medicare.
----------
Mr. Pallone. We will turn to our witnesses now, and first
of all, welcome. I understand that Ms. Norwalk can only stay
until 3:45, so----
Ms. Norwalk. Yes. We are kicking off a prevention tour that
a number of members of the committee have talked about. I have
asked them to push it back a little bit so I can stay a little
bit longer.
Mr. Pallone. I thank you.
Ms. Norwalk. I will run and catch the bus.
Mr. Pallone. All right. Well, let me quickly introduce you
and also Dr. Miller. Leslie Norwalk is the acting administrator
for the Centers for Medicare and Medicaid Services, and Dr.
Mark Miller is executive director of the Medicare Payment
Advisory Commission, or MedPAC. Thank you both for being here
today. I will just mention that you can submit additional brief
and pertinent statements in writing for inclusion in the
record, and we will start with Ms. Norwalk.
STATEMENT OF LESLIE V. NORWALK, ACTING ADMINISTRATOR, CENTERS
FOR MEDICARE AND MEDICAID SERVICES
Ms. Norwalk. Good afternoon, Chairman Pallone,
Representative Deal and distinguished members of the
subcommittee. Thank you for inviting me here today to address
the Centers for Medicare and Medicaid Services' efforts to
promote efficiency and integrity in the Medicare Program.
The future of the Medicare Program depends in large part
upon our ability to ensure the most efficient use of Medicare
resources and that includes eradicating fraud at every possible
opportunity. As the largest purchaser of health care in the
world, CMS provides coverage to one in every three Americans.
CMS covers 92 million beneficiaries, and the numbers and costs
are growing. Medicare outlays are projected to exceed $464
billion in the coming fiscal year with CMS accounting for
nearly a fifth of the President's budget. National health
spending is expected to average 6.9 percent annual growth over
the next decade, and beginning this year it is projected to
grow an average of 2.1 percentage points faster each year than
gross domestic product. In the absence of fundamental reforms
or unforeseen market changes, this trend will yield a health
care of GDP that tops nearly 20 percent by 2016, going from $2
trillion in health care spending this year to $4 trillion in
2016.
Heeding the call of the Medicare trustees, the Federal
Reserve Chairman, MedPAC and scores of other health and fiscal
policy experts, the administration has proposed a fiscal year
2008 budget that tackles Medicare's long-term financial
challenges and aims to transform it into a sustainable quality-
based payment program. Clearly, the efficient and effective
management of Medicare and its programs and operations is
essential to that goal.
The Medicare trustees agree that prompt, effective and
decisive action is necessary to address the exhaustion of the
part A trust fund, which is currently projected to be depleted
in a little more than a decade. Similarly, the trustees have
urged that we take action to address the anticipated rapid
growth in Medicare expenditures. Specifically, the trustees
warn of a serious mismatch between the benefits and payments
the program currently provides and the financial resources
available for the future. Should these factors remain
unchanged, the trustees note that over time the program would
require major new sources of financing for part A. Medicare
would also automatically require increased shares of general
tax revenues for parts B and D, diverting resources from other
Federal priorities. Projected levels of spending could also
impose a significant financial liability on Medicare
beneficiaries who pay premiums and cost sharing.
The President's budget proposes to build on past successes
to further modernize Medicare, improve its quality and
efficiency and secure its long-term future. On net, the
Medicare proposals would reduce the rate of projected cost
growth just shy of 1 percent over the 5-year window. The
proposals aim to steer providers toward greater efficiency
through payment policies that increase the role of competition
and incentivize the slowing of cost growth through greater
productivity and quality of care. In addition, payments would
be tied in part to medical error reporting and value-based
purchasing for hospitals would be expanded.
CMS recognizes the inherent potential of Medicare's payment
system to encourage and reward quality in hospitals and other
care settings. The Medicare Modernization Act and other recent
legislation directed Medicare to increase payments when
hospitals and other health practitioners report on quality
measures that both empower providers and patients, arm them
with raw materials necessary for informed decision-making and
ultimately lead them to identify and pursue better care
protocols. CMS is working toward greater transparency in
physician and hospital pricing and quality data, providing
consumers with better information about the treatment options
available to them. The budget would take steps to encourage
more appropriate payment for the five most common conditions
treated in post-acute care settings. The prospective payment
system for hospital inpatient care implemented in 1983 slowed
growth in part A spending as intended but it also had the
effect of moving care to post-acute settings funded through a
mix of part A and B and outpatient settings that are funded
solely part B. Even with the criteria to direct patients to the
most appropriate place for care, numerous factors such ad
revisions of patient conditions and diagnoses cause overlap in
the types of patients treated in these different post-acute
settings. Exploring new evidence-based standards, more-accurate
case mix measurements, improving patient assessment, CMS is
working to ensure that patients receive the most appropriate
care at the most appropriate time in most appropriate setting.
But regardless of the setting, CMS remains committed to
improving the integrity of the Medicare Program and efficiency
of its operations and expenditures. Central to our strategy for
maintaining sound financial management, CMS has long used
calculations of improper payments as a tool to preserve
Medicare's fiscal integrity. Data collection and monitoring
have enabled CMS to identify monies that have been
inappropriately paid, to examine the causes of the
inappropriate payment and ultimately strengthen the internal
controls to minimize them as much as possible. Last year the
paid claims error rate for Medicare fee-for-service was 4.4
percent, a sizable drop from the 5.2 percent reported in 2005,
and significantly lower than the 10.1 percent in 2004. Next
month CMS will announce the preliminary error rate for fiscal
year 2007, and it appears that we will reduce the error beyond
our expectation of 4.3 percent, so we continue to move in the
right direction, but it will require continued monitoring and
error-reducing efforts in order to continue this goal, and we
are committed to do so.
CMS's financial management strategy prioritizes the
detection and prevention of improper and fraudulent payments
and to that end we have identified such activities over the
past year. Our satellite offices and program safeguard and
claims processing contractors are testing innovative approaches
to detecting, investigating and prosecuting Medicare fraud. The
Los Angeles Tax Project is a recent and telling example. With
the L.A. County district attorney, our L.A. satellite office is
conducting a unique pilot program to more effectively deal with
health care fraud due to prosecution of providers for State
income tax evasion, sort of the Al Capone approach. Relying on
an elaborate communications network, the L.A. project offers a
new tool for cracking down on health care providers suspected
of committing insurance fraud in California. Over the past year
CMS has seen a marked increase in fraud and abuse activities
tied directly to provider enrollment. These activities are----
Mr. Pallone. Ms. Norwalk, you are about a minute over, plus
I know you want to get out of here, so----
Ms. Norwalk. Well, that is why I decided I will stay a
little bit longer. The point I was making there is simply with
fraud and abuse, we are seeing some specific targeted efforts,
particularly even in organized crime in Los Angeles, Miami and
Houston, and we are working diligently with both the OIG and
DOJ, as I am sure they will testify to later, to go after this
fraud in particular. And as Congressman Barton mentioned
earlier, the DME accreditation standards and the competitive
bidding is yet another prong to go after some of the specific
fraud to save billions of dollars.
Thank you very much. I look forward to working with MedPAC,
the OIG and DOJ, and welcome any questions you may have.
[The prepared statement of Ms. Norwalk follows:]
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Mr. Pallone. Thank you.
Dr. Miller.
STATEMENT OF MARK E. MILLER EXECUTIVE DIRECTOR, MEDICARE
PAYMENT ADVISORY COMMISSION
Mr. Miller. Chairman Pallone, Ranking Member Deal and
subcommittee, distinguished subcommittee members, MedPAC is a
congressional support agency created to advice Congress on
Medicare policy. MedPAC is uniquely structured. There are 17
commissioners that review the work that my staff does and shape
the advice that we forward to the Congress. These commissioners
include physicians, nurses, individuals who run hospitals,
post-acute care facilities and managed-care plans. The
commissioners include former policy officials, individuals
trained as health economists and individuals trained as
actuaries. Our work is largely directed towards improving
efficiency and value of the traditional Medicare Program as
well as managed-care plans. As we consider the advice that we
give Congress, we keep certain principles in mind: assuring
that beneficiaries have access to high-quality care, paying
providers and plans fairly, assuring that each tax dollar is
well spent.
There are other considerations that I know are on the minds
of commissioners when they consider Medicare policy. First,
there is a long-run sustainability problem facing Medicare.
Medicare is growing faster than the budget, faster than the
economy and faster than beneficiary incomes. This increase in
spending, however, is not consistently accompanied by
improvements in coordination or quality of care, and the
commission believes that urgent attention is needed to improve
the payment and delivery system incentives in Medicare. Second,
Medicare policies must evolve to be more sensitive to the
performance of providers. That is, Medicare needs to pay more
to providers who have efficient practice styles and higher-
quality care and less to those who do not.
The testimony I have submitted has a long list of ideas
that the commission has recommended over the last several
years, and I won't go through them but just to highlight a few.
Regarding fee-for-service updates, each year we consider a
range of factors such as supply of services and access to care
for beneficiaries when we make recommendations on payment
updates. If we determine that providers are more than
adequately paid, the commission can make a recommendation to
give the provider less than a full update. A recommendation of
less than a full update usually results in savings to the
Medicare Program if it is adopted. For our March 2007 report,
recommendations would yield savings in Medicare for payments
for home health agencies, skilled nursing facilities, inpatient
rehab facilities and long-term care hospitals. Regarding
Medicare Advantage plans, the commission has long supported the
Medicare managed plans as an option for beneficiaries. The
commission also supports the principle that Medicare payments
should be neutral. That is, we should pay the same for a
beneficiary regardless of which choice they make, fee-for-
service or managed care. The current managed care payment
system is not neutral to beneficiary choice and does not
encourage efficiency. This is because it is based on an
inflated set of administratively determined benchmarks. Under
this system, we estimate that on average plans are paid 12
percent more than fee-for-service, and while it is true that
most of this payment goes for additional benefits for
beneficiaries, it is also important to bear in mind that these
payments come from the trust fund, from general revenue and
from premiums paid by all beneficiaries regardless of whether
they are in managed-care plans or not.
Since 2002, the commission has recommended several changes
to make Medicare payments more equitable between fee-for-
service and managed-care plans as well as changes to make it
more equitable among the managed-care plans because we think
that certain types of managed-care plans are competitively
advantaged over others. We believe that these recommendations
will result in reduced Medicare expenditures, greater
efficiency in care coordination for plans, and better
information for beneficiaries in choosing their care options.
Regarding physician payment, the commission has made
several recommendations to improve the value of physician
services in Medicare. Again, I cannot go through all of the
ideas. However, a couple to note, there is evidence that some
physician services are unnecessary. In our March 2005 report,
we recommended measuring physician practice styles, comparing
them to their peers so that physicians could see how their
practice styles differ significantly from the norm. Since that
report, we have provided the Congress with detailed analysis on
how to pursue this objective in a manner that is fair to the
physicians. In its March 2006 report, the commission made
recommendations that would improve the methods of establishing
Medicare fees to make them more accurate and in so doing remove
perverse incentives to over-provide certain services.
Regarding comparative clinical effectiveness, the
commission believes that such information is critical to all
health care in this country including Medicare because it will
help us determine what works in health care and what does not
work in health care. In its meeting last week, the commission
called for the establishment of an independent entity to
sponsor and disseminate such information to beneficiaries,
providers and insurers.
I look forward to your questions.
[The prepared statement of Mr. Miller follows:]
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Mr. Pallone. Thank you, thank you both, and I will now
start with the questions and I will recognize myself for 5
minutes initially.
I wanted to ask Dr. Miller, if the recommendations made by
MedPAC regarding payments to Medicare private plans were
enacted, do you believe that there are plans that can provide
additional benefits to beneficiaries?
Mr. Miller. Yes, and the 12 percent gets cited a lot but
there is other work that we have done that shows that there are
differences among the plans and their efficiencies. So for
example, HMOs, which have more coordinated care and network
types of approaches to care, actually can provide the
traditional fee-for-service benefit more efficiently than the
traditional Medicare Program. Those types of plans, the
original intent of managed care was that plans like that would
take those savings, use the additional savings to provide
additional benefits and in turn attract beneficiaries to those
plans. So yes, we do believe that there are plans who can
provide--who are efficient enough to provide additional
benefits to beneficiaries.
Mr. Pallone. Obviously the private plans were introduced to
save money through efficiencies and your recommendations--well,
you can tell me. Do you think the current payment system for
Medicare Advantage plans reward efficiency and would your
recommendations still allow the most efficient plans to compete
for Medicare beneficiaries by offering additional benefits and
low premium? That is what I assume competition is all about.
Mr. Miller. I think that is the intent of our
recommendation is that right now, and I think the chairman said
this in another hearing, that he feels that we are sending a
signal that invites inefficient plans to come into the program,
and I think our recommendations are directed toward encouraging
efficiency among plans and encouraging those plans who can
achieve those efficiencies to stay in the program, provide the
extra benefit. Right now the way the payment system works is,
it encourages plans that are not more efficient than the
traditional Medicare Program and then when additional benefits
are offered on top of that through the subsidies, obviously
beneficiaries are attracted to those plans but not because of
the efficiencies and the additional benefits through those but
because of the additional benefits that are paid through the
subsidy.
Mr. Pallone. OK. Thank you. I have been bombarded recently
with insurers who argue that low-income and minority
beneficiaries disproportionately rely on Medicare Advantage
plans for supplemental coverage, and you recently testified,
however, that the best and most targeted approach for helping
this population would be to strengthen the Medicare savings
program within Medicaid that helps low-income beneficiaries pay
for their premiums and cost sharing. Is that still your
position?
Mr. Miller. What we said in that hearing when we got this
question was, this is an inefficient way of providing subsidies
for low-income populations, and just think about it for a
second. The way this work is, it is only available to someone
who enrolls in a plan and whoever enrolls in that plan, whether
they are low income or not, receives the benefit and so if we
are spending dollars and our intent is to subsidize low-income
beneficiaries, it is kind of a messy way of doing it. There are
a couple other examples out there of much more targeted ways to
get at low-income beneficiaries and provide them subsidies.
Inside the part D benefit, low-income subsidies are paid to the
plan on the basis of the beneficiary qualifying through their
income and assets, and so the plan doesn't get additional
payments for everybody, they get additional payments for those
beneficiaries that are low income. Additionally, the point that
you made is in the traditional fee-for-service program under
Medicaid, again if you qualify income and assets, Medicaid will
assist you on your premium and depending, on your co-payment as
well, and again, that is only available to people who are
qualified and again a more targeted approach to that.
Mr. Pallone. Thank you.
Ms. Norwalk, there are advocates and constituents who have
complained of questionable marketing practices by prescription
drug plans, especially certain Medicare Advantage prescription
drug plans, and I would like to better understand what CMS is
doing to address this matter. How many Medicare Advantage or
Medicare Advantage prescription drug plans have been sanctioned
for inappropriate marketing last year or this year and how many
have been assessed a civil monetary penalty for violating
marketing rules last year or this year, and then how many have
been prohibited from enrolling new beneficiaries as a result of
violations of marketing requirements, again last year or this
year?
Ms. Norwalk. I don't have the numbers specifically at my
fingertips but we will get them back to you for the committee
for the record. I would say this, that in terms of marketing
violations, one of the issues that we are dealing with is that
marketing agents and brokers are regulated by the State. We
recently have been working with the National Association of
Insurance Commissioners and have signed MOUs with 17 States and
Puerto Rico to ensure that when we see marketing violations,
that we can report it to the State and the State can sanction
the agent and broker, often who are independent. They may be an
independent agent that is working on their own and actually
marketing on behalf of a number of different plans. We are
working with the plans to ensure that they are doing the
appropriate training, and if they are employed by the plan
would be able to sanction the plan for having had that agent or
broker, but we think it is critical to work with the State
insurance commissioners so that they can take the appropriate
actions at the State level against the individual at the same
time that we take action with the Medicare Advantage plan to
ensure that the marketing that they are doing is appropriate.
We also want to be careful of the beneficiary, ensuring that
whatever happens that the beneficiary can have an open
enrollment period and that beneficiary can change plans so if
they have been put in a plan where they didn't understand,
where they were fooled, if you will, we will let them change
back with no financial penalty to them.
Mr. Pallone. And if you can get back to me with the
details. I appreciate it.
Mr. Deal.
Mr. Deal. Thank you.
Ms. Norwalk, I understand that CMS has just recently issued
its final rule on the competitive bidding provisions for
durable medical equipment. That provision had requirements for
certification and accreditation in it. My understanding though
is that CMS has granted a grace period for providers who are
not accredited, a grace period in which they can get
accredited, but will allow them to go ahead and participate in
competitive bidding. My concern is that since the cost of
accreditation is a rather sizable cost in some instances, will
those unaccredited providers who are allowed to bid have an
unfair advantage over accredited providers and what is CMS
doing to try to make sure that doesn't happen?
Ms. Norwalk. You do have to be accredited in order to bid
for the first 10 competitive bidding areas under our rules, so
what we have done is, we have directed those who will be
accrediting the suppliers to ensure that they start with the
suppliers that work in these 10 areas to make sure that they
have an ability or the time in which they can become
accredited. All competitive bidders must be accredited by the
end of the year and then all competitive bidders in the next 80
MSAs or the next 70 which need to be accredited by the end of
next year so there should be no unfair advantage. Even
physicians who don't have to bid must be accredited in order to
provide DME supplies to Medicare beneficiaries. It is going to
be done across the board.
Mr. Deal. But if they are pending accreditation, they are
still allowed to bid. Is that not true?
Ms. Norwalk. Well, the way that it will work is that you
need to be accredited before the program is going to start. The
program won't start until April 1, 2008, so we would actually
not award anyone the ability to be a provider until that time,
there is a quarter lag, if you will, between the time they need
to be accredited by and the time we actually start competitive
bidding so that we can make sure that no one has an unfair
advantage.
Mr. Deal. As my opening statement indicated, I have an
interest in trying to monitor what we have done in the imaging
area. Under the rules we put in place under the Deficit
Reduction Act, we of course tried to equalize reimbursements
for settings other than the outpatient hospital setting with
equalization on a portion of the technical component of the
reimbursement. Now, that has been in place for about 3 months
now. Can you tell us if you have determined any effects of that
and if so what they might be?
Ms. Norwalk. We are just starting to get in the quarterly
data and I am happy to report back to you when we have a chance
to analyze it in greater detail since the first quarter just
ended. I get screen shots on my computer of what is happening
with imaging. I took a look at it on the way over here. It is
inevitable that when there are payment changes, it doesn't
matter what the change is, it does impact utilization. The
question is, is that impact in utilization appropriate, are we
seeing a downturn simply because the payments are less or are
we seeing a downturn because the payments are less and the
services weren't necessary. So we will be taking a very close
look at the interaction between both the quality and the
utilization and I will be happy to brief you in greater detail.
Mr. Deal. I think that would be critical for us to know
what the next step might be. One of the concerns that I heard
expressed in the imaging area is that overutilization of
imaging might result in some risk and harm to patients due to
the iodizing radiation that occurs. Is CMS looking at that
question of maybe a health concern for overutilization rather
than just the purely economic overutilization? Is there a
health risk and are you looking at that?
Ms. Norwalk. Well, I will certainly ensure that if we
haven't been, I will ask my doctors to take a closer look. How
is that?
Mr. Deal. All right. That sounds good to me. I also made
reference to the situation in Chicago about the sham lease
arrangements and my understanding is that there were basically
kickbacks being done by the providers of the services, billing
it to the doctors, the doctors in turn seeking reimbursements.
Have you all looked at that from the CMS level and are you
working with the attorney generals in various States to look at
that?
Ms. Norwalk. We spend a lot of time with our colleagues
both in the OIG who implement the kickback statute for the
Department as well as DOJ generally. I think there are a couple
of things that I would point out here. A lot of what we are
seeing are physicians buying this equipment and we may be well
served in making sure that if they purchase the equipment, that
the beneficiaries know that if they are getting a scan, part of
the reason may be because they want to amortize the value of
the equipment. Now, lots of physicians do the right thing all
the time. The point is, let us get the right imaging service
done whatever it happens to be without regard to the dollars in
the provider's pocket.
Mr. Deal. Very quickly, Dr. Miller, has your office looked
at fraudulent or abusive behavior on these advanced imaging
procedures as it relates to Medicare or Medicaid?
Mr. Miller. Not so much at the fraud. We made a set of
recommendations in trying to increase the standards for both
the providers who are billing Medicare and the equipment to
your point on the radiation, making sure that the equipment and
the technicians that are running the equipment are as good as
they can be. We did make some recommendations to reduce
excessive billing through some billing code recommendations
that we made and also made recommendations on some of the
treatment of things under the star clause, that there were some
loopholes that we felt existed in the star clause, and that is
all detailed in our reports but we haven't done specific
pursuit of fraud, that type of thing.
Mr. Deal. Thank you, Mr. Chairman.
Mr. Pallone. Thank you.
Mr. Green.
Mr. Green. Thank you, Mr. Chairman.
Ms. Norwalk, we just heard Mr. Miller testify that
Medicare's payment system doesn't necessarily encourage primary
or preventive care even though we know that primary and
preventive care improves health outcomes and catches health
care problems before they become costly emergencies. When our
committee marked up the Medicare Modernization Act, our former
colleague, Ernie Fletcher, and I included in the bill a
diabetes screening benefit under part B. In our view, it didn't
make a whole lot of sense for Medicare to pay for diabetes
treatment but not pay for the beneficiaries to get screened for
the disease. Since then we have heard CMS has done very little
to promote the benefit and that take-up rates linger in the
single digits. This is an alarming summation, especially since
60 percent of all Medicare beneficiaries have diabetes or pre-
diabetes and could greatly benefit from the early detection. I
know the American Diabetes Association has been unsuccessful in
obtaining official utilization numbers from CMS and you and
Secretary Leavitt will probably get a letter from me this
coming week asking for that information. But in this venue, can
you explain what steps CMS has taken for providers and
beneficiaries to promote utilization of diabetes screening
benefit and do you agree that the screening benefit for a
disease is so prevalent among Medicare beneficiaries if
implemented correctly could contribute increased efficiency in
delivery of that health care under the Medicare Program?
Ms. Norwalk. You raise a terrific point. Without question,
it is critical that we do more in terms of prevention. In fact,
I am going to be missing the bus today but the reason I was
going to leave early was to start a nationwide bus tour to
focus with our partners including those in diabetes to go
around the country, get people to sit down at the table to
promote just this type of benefit. All of our prevention
benefits but without question, the diabetes screening
prevention benefit, is included in that. We have been working
with all of our partners to make sure that we have the
appropriate data so we can determine, have we been successful.
But the focus of this bus tour--and the Secretary and I are
doing a kickoff along with Julie Gerberding and others at HHS
on Friday. We would love you to come down if you want to come
and talk to us about prevention and its importance. We would
love to have you there. But the whole point is to focus the
attention on this benefit and how important it is, work with
our partners but even people who aren't traditional partners
including employers and others so we can get the prevention
benefit out long before people ever get to the Medicare
Program. I appreciate your highlighting the issue and can
assure you that we are turning to it as soon as today to get
this information out to make sure that we can increase those
rates, and we will be happy to share the utilization data. We
are hoping to make it better. I am a little concerned that what
we have in-house is probably not sufficient. That is why we
have been working with our partners.
Mr. Green. And that is what we need to know, is there a
better way we can get that information out because it will save
us Medicare dollars with that pre-screening. And again, that
was one of the things we did in the Medicare Modernization Act
that was bipartisan in hindsight.
Mr. Miller, I would like to explore MedPAC's
recommendations on care coordination and there are a number of
care coordination demonstration projects conducted by CMS in
recent years. Last month an interim report was issued by the
Medicare Coordinated Care Demonstration Project reporting
limited benefits of the project. I would like to point out,
however, that two of the 15 program hosts included Alzheimer's
or dementia care in the benefit. By and large, they also failed
to include the small and solo practitioners who we know provide
the bulk of the care for our Medicare beneficiaries. We can
imagine the importance of coordinating care for beneficiaries
with dementia but we have numbers to back up that need.
According to the Alzheimer's Association, the average Medicare
cost per beneficiary with dementia is $13,207 compared with
$4,450 to the average annual cost in beneficiaries without
dementia. Alzheimer's ranks up there with congestive heart
failure and COPD in cost for the Medicare Program. Can you
speak to what we have learned about care coordination from the
various care coordination demos, specifically the importance of
including proper populations and providers in that care
coordination in a broader benefit?
Mr. Miller. I can really speak to what MedPAC has talked
about and care coordination, not so much the demonstrations and
the findings there, although the commission has monitored and
does think that there are some good ideas that are going on
through the demonstrations. But to your point specifically, the
two models that we have discussed in the commission about care
coordination are the notion that you could give payments to
groups of physicians who demonstrate a capacity to provide
disease management and care coordination for chronic
conditions, have some risk arrangement for it, not on the
benefit, just the fee for administering it, and encourage
groups that have that capacity, the IT the ability to make
contact with patients and help them plan out their care and
encourage it that way. For the solo practice, which you also
raised, the other model that we talked about, they may not have
the capacity to do that. They may not have the IT, they may not
have the staff to contact the patients. The way you could think
about a situation like that is, have a contract with a larger
disease management entity with the solo practice so Medicare
would make payments to the larger entity and then some payment
to, say, perhaps on a per-month basis to the solo practice
physician to manage the care for that patient. Just two other
questions. We have also tried to look very hard at the prices
and the fees that are being paid in the fee schedule to make
sure that we are not discouraging primary care services and we
have made some recommendations along those lines, and then
finally we have been most recently talking about clinical
comparative effectiveness as another way of trying to get
information about what services help chronic care
beneficiaries.
Mr. Pallone. We are going to have to move on because we
have six votes. There is only 10 minutes left and Ms. Norwalk
is going to leave so I am going to recognize Mr. Barton and
then we will see if we can get in Mrs. Capps.
Mr. Barton. I will ask one question and then submit the
rest for the record, Mr. Chairman.
Ms. Norwalk, can you talk, in the competitive bidding rule
that just was announced, the protections are in place for small
suppliers, the set-aside program to make sure that some of the
competition goes to the mom-and-pop suppliers?
Ms. Norwalk. Absolutely. One of the concerns that was
raised in doing this rule was that we might be putting a lot of
small businesses out of business. Consequently, in each of the
10 competitive bidding areas, we set aside 30 percent of them
to take into account small suppliers. Now, we define small
suppliers as having $3.5 million in revenue, which is a smaller
amount of revenue than the Small Business Administration, but
wanting to be really focused on this area. Moreover, we heard a
lot from the retail drugstores about the ability of providing
diabetic supplies so we focused initially on mail order. We
have 60 percent of the diabetic supplies provided to Medicare
beneficiaries through mail order so we still think we will get
a pretty significant savings in that particular area.
Mr. Barton. Thank you, Mr. Chairman. I will submit the rest
of my questions for the record.
Mr. Pallone. Thank you.
Mrs. Capps.
Mrs. Capps. Thank you, Mr. Chairman, Ranking Member, and
thank you both for your testimony today.
Ms. Norwalk, in my district, I want to get out some issues
that really important to some of my constituents and to me. In
my district, we are fortunate to have an excellent facility
called the Rehabilitation Institute of Santa Barbara and they
have brought to my attention the burdensome auditing process
being carried on by Medicare. Just for some historical context,
briefly this is nonprofit institution, the only freestanding
rehabilitation institution between Los Angeles and the Bay
area. Speaking to the integrity of the institute, you should
know that as a result of a probe audit, eight out of nine
appeals by the Rehabilitation Institute were ruled in the
institute's favor and several more are waiting final decisions.
Meanwhile, Medicare is expanding the RAC process which rewards
private contractors for identifying incorrect payments. When I
heard about the way it is designed, I am sorry but I couldn't
help but think of bounty hunters. I learned that yesterday
alone, this nonprofit institution received 15 RAC requests. In
fact, they have been asked for 116 claims for fiscal year 2003,
2004 and 2005. This institute has filed appeals on many of
these but no decisions have yet been made. Each of these
appeals though is required to be filed separately, which takes
valuable time away from patients and costs extra money. This is
not what they tell me, they would not be so bold--but I would
say that this process is driving them to the brink of collapse.
This is my question. Will you tell me, please, what will
happen if those appeals, all of these 116 claims and the
appeals on them, are ruled in the institute's favor? Will
Medicare recover the fees paid to the private auditors for each
claim that they have incorrectly identified?
Ms. Norwalk. I don't expect the program works that way but
I am more than happy to get the details from staff and sit down
with your staff and talk about how the RAC program is
constructed. Currently, what it is intended to do, and perhaps
talk to the contractor more specifically about how they are
paying for--what is going on with the rehab payments and I
think the concern that ensuring that the--this is something
that we mentioned earlier in terms of post-acute care services,
making sure that the patient is provided right place, right
time----
Mrs. Capps. But they have asked for all kind of guidance
and information. There is a lot of integrity, and they wouldn't
survive if it weren't for tremendous generosity of our local
community in supporting them.
Mr. Chairman, I think we have identified what should be one
of our first targets for eliminating wasteful spending, and let
me follow up with you. I want to ask if providers are able to
recover the costs of filing these appeals. After all, it seems
like the fees associated with filing appeals are deterrents
from recovering payment for legitimate expenses. It is going to
keep them from making appeals, finding out what is wrong. It is
going to end up costing Medicare more money because they are
going to avoid this whole process. It is so costly to them in
time and energy, and in the meantime patients and their health
providers suffer from these consequences while the private
auditors are awarded in every case, even when they haven't
found anything wrong at all.
Ms. Norwalk. My understanding in terms of how the RAC works
is that they actually get a small portion of what recoveries
they make and so the appeal would have to be denied by the
provider in order for them to get increased payments. So in a
sense, you are right in terms of how that works so if they are
going after claims that are valid claims, then RAC itself would
be penalized. So the intention is to sync those up.
Mrs. Capps. I know, but I can't tell you how demoralizing
this process is to the providers in my district. I picked out
one institution because I know it well. My husband was a
patient there and they have done remarkable work in a multi-
disciplinary way. But nursing homes have told me this, all
kinds of facilities that receive Federal reimbursement, that
they are going through this process, it is taking away from
quality care to patients and they see it as the people coming
in as very cynical, being not well versed in the nuances of the
institution. I would just call them bounty hunters. We have got
to find a better way to do this.
Ms. Norwalk. Well, I will take a look at it for you and we
will report back.
Mrs. Capps. Thank you very much. Sorry for the diatribe,
but I wanted to get that out on the record, because frankly, I
know that you desire to do it to save money but in the end, I
think it has really got some downsides that we should explore.
Thank you.
Mr. Pallone. Thank you. Thank you, Ms. Norwalk, for being
with us here.
Now, Mr. Miller, we are going to come back. You are able to
stay, right?
Mr. Miller. Yes.
Mr. Pallone. All right. We probably will be 45 minutes to
an hour because there are six votes, so thank you.
[Recess]
Mr. Pallone. I am not sure if other Members are going to
come back so I am going to go back and ask Mr. Miller a couple
of questions myself and then if we get other members, we will
recognize them as well.
I am just going back to some of the questions I asked you
before, some additional follow-up. Some of the private plans
have disputed MedPAC estimates that Medicare Advantage plans
cost 12 percent more on average than fee-for-service in 2006
and have claimed that their own estimates show little or no
overpayments. I just wanted you to tell me what you think of
these alternative estimates, if you would.
Mr. Miller. And with all respect on that, I don't know
exactly what you have seen but I have seen a piece of paper put
together by Blue Cross/Blue Shield and it has a little chart at
the bottom that kind of goes six, one, three, two, that type of
thing, and I have got to tell you, very little of that do we
think is correct, and just to kind of walk you through it for
just a second, they have 6 percent at the top and they are
saying half of it accounts for this phase-out of the hold
harmless. First of all, I think that number is wrong. I think
it is smaller than that. And two, what they are conceptually
saying is, what we are saying is, you are getting that money,
and if you ask them pointblank, that is true, but they are
saying it is going to go down in the future and so you
shouldn't count it now, OK? So that is the first problem with
their reasoning. The second problem is, if that is all that was
going on, it might go down in the future but actually because
enrollment has been moving so aggressively into the high
benchmark counties, actually the 12, we are not clear whether
it will go down or up in the future, so for that first piece,
we just think it is wrong, and conceptually we are measuring
what money they get and they are getting that money now. They
are arguing it will go down in the future. We are not so sure.
The second piece of it is a 1 percent that they say it should
be--we didn't take into account the increased payments on the
fee-for-service side for the physician fix that the Congress
put in, and on that one it is almost but not quite. It is true
that when we did the estimate, Congress had not acted, but when
you do that you actually go back and you revisit the entire
baseline, not just that component of it, and actually parts of
the baseline went up and down. In the end, that is a wash, so
the 1 percent we would also say is not correct. Then underneath
that is 3 percent for IME, if I am not mistaken. We have been
over this time and time again with the analysts who put this
together. They know our methodology for doing this and I just
don't know how to say it any differently. We do it correctly.
We count it the same way on both sides. They are asserting that
we are taking it out of one side and leaving it in the other
and therefore creating a ratio that isn't true, and that is
just not true. Then the very last thing at the bottom is, is
they say OK, but the Congress wants these floors in place and
these floors account for 2 percent. Here again there is a real
dispute over the number. We think the floors probably account
for 6 percent or so like half of this figure and of course,
what we are recommending to the Congress is that we ought to be
taking these benchmarks down and so they are saying but
Congress has this payment system in place and we are saying
right, we think that that payment system should change. So the
last part of it is a philosophical difference.
Mr. Pallone. All right. Well, thanks a lot. I have one more
question and that is about the overpayments again to private
plans. It is fair to say that overpayments to Medicare private
plans advance the date when the Medicare part A trust fund
becomes insolvent, and that curbing these overpayments would
move back the date of insolvency?
Mr. Miller. Yes, it does. Any time you are overpaying
whether it is managed-care plans or anywhere else, and to the
extent it comes out of part A it is going to affect the trust
fund date. We believe it does affect the date. A very rough
estimate is that if you implemented CBO's proposal where they
estimated savings of $65 billion and then a different number
over 10 which I can't remember off the top of my head, it would
move the trust fund date back a couple of years.
Mr. Pallone. OK. And do you think that these overpayments
actually threaten the fiscal sustainability of the program?
Mr. Miller. CBO is projecting very aggressive enrollment
into managed-care plans over time and to the extent that every
one of those enrollees means that Medicare pays more than it
otherwise would have, it affects the long-run sustainability of
the program.
Mr. Pallone. Is there any way you can quantify the impact
that overpayments would have on every Medicare beneficiary like
every month or maybe get back to us?
Mr. Miller. Actually I think I can quantify it for every
month. Again, this is back the envelope, the actuaries are much
more precise about it but we estimated about $2 per month in
extra premium payments for all beneficiaries for the 12 percent
overpayment.
Mr. Pallone. OK. Thanks a lot. I appreciate it.
Dr. Burgess, do you want to ask questions of Mr. Miller?
Mr. Burgess. Actually, I would prefer----
Mr. Pallone. Oh, here comes Jan.
Ms. Schakowsky. I was mostly interested in how do we
justify that we are paying the Medicare Advantage programs this
higher price? How can that be sensible at all if we are talking
about how we are going to save money?
Mr. Miller. There is not a lot of disagreement here between
you and the commission. The commission has looked at this
problem and we have looked at it from a payer perspective and
the dollars that leave the Treasury and arrive at the plans. We
have calculated that they are more than 12 percent above
average and we have noted that this comes out of the trust
fund, general revenues and premiums for all beneficiaries
whether they are in the plans or not.
Ms. Schakowsky. Right. And only one out of five is actually
in one of these plans.
Mr. Miller. Yes I think the enrollment is up to 18 percent,
around there, but that is about right, one in five. So our
posture is, if you are looking at this purely as a payer and an
efficiency issue, efficiency and dollars leaving the treasury,
there is not a lot of argument for doing this. Now, the
counterargument by the industry is, but I give additional
benefits to beneficiaries with this extra money, and I would
just point out a couple things about that. They do get
additional benefits but also in that extra money is
administrative costs, marketing costs and profits to the plan
and then I would just come back to the original argument. They
are getting additional benefits with that money but those are
benefits that are subsidized by all beneficiaries and going
only to some beneficiaries who happen to be in those plans.
Ms. Schakowsky. And what about the private fee-for-service?
That is even more.
Mr. Miller. Yes, and that is actually a good question, and
a clarification that I want to make for people because this
gets misunderstood sometimes. It is not that private fee-for-
service plans are paid more, it is that private fee-for-service
plans locate in counties where the payment rates are higher so
that when you look at them, they are being paid more. Do you
see what I mean?
Ms. Schakowsky. Yes.
Mr. Miller. It is not that we pay private fee-for-service
more, it is that where they are drawing their enrollment, the
Medicare Program pays more. We pay about 19 percent more there.
And the interesting thing about private fee-for-service plans
is, it actually costs them 9 percent more to offer the standard
benefit, the standard A-B benefit.
Ms. Schakowsky. Meaning if it were the Medicare fee-for-
service?
Mr. Miller. You got it, 9 percent more. Then the additional
10 percent is given to the beneficiaries in benefits. So there
are two things to take away from private fee-for-service plans.
As a group, and I am not saying every plan but as a group, they
are much less efficient than standard Medicare fee-for-service
and all of the extra benefits on average that go to
beneficiaries are from extra money, are from subsidized
dollars. No efficiency gains. Because remember, the basic
argument, and you may have even said this, is, if they have
efficiencies, they use that money to offer extra benefits.
These private fee-for-service plans again as a group, not every
private fee-for-service plan but as a group are not more
efficient than fee-for-service and the extra benefits----
Ms. Schakowsky. So what is the justification for even
allowing those to exist?
Mr. Miller. Well, I am not sure I can tell you that. Let me
try and answer the question this way. The private fee-for-
service plans were actually conceived of in their original
state--what was going on is, there was a big move in the
country towards managed care and lots of increases in
enrollment Medicare managed care and there was a concern on the
part of Congress that some people might not want to be in
managed-care plans and have potentially their care dictated by
a coordinated care entity, so the thought behind private fee-
for-service plans was, let us create plans where if they have
an additional cost because they don't coordinate care, it is
born entirely by the beneficiary. That was the thought behind
them so that I have an uncoordinated plan, it is more extensive
but the bennie pays the difference, but it hasn't worked out
that way. Under the new payment system, the Federal--well, the
Medicare Program and all bennies whether they are in the plan
or not are paying that difference.
Ms. Schakowsky. And what is the rationale for allowing a
Medicare Plus plan if we are paying those 12 percent more than
Medicare fee-for-service and most beneficiaries end up
subsidizing those plans?
Mr. Miller. It just hit me again, what is the----
Ms. Schakowsky. I asked what is the justification for
having the private fee-for-service? What is the justification
for the Medicare Plus plans if they are being paid more and
that money is coming out of beneficiaries and taxpayers?
Mr. Miller. At the commission, we don't see a lot of
justification. The counterarguments that people will ring to
the table are, people are getting extra benefits from it, and
then you have heard some of the other counterarguments that--
and we have already had this exchange, I think you were in the
room for it, where it is well, low-income beneficiaries tend to
be in these plans but of course our response to that is, there
are more-efficient ways to help low-income beneficiaries.
Ms. Schakowsky. Right.
Mr. Miller. I can't offer you a justification here. We are
sort of raising that question ourselves.
Ms. Schakowsky. OK. Thank you. I appreciate it.
Mr. Miller. No problem.
Mr. Pallone. Thank you, and thanks, Mr. Miller, for staying
here an extra hour, but we do appreciate it because we did want
to ask you some additional questions. Thanks a lot.
Mr. Miller. No problem.
Mr. Pallone. And I am going to ask the second panel to come
forward.
Thank you both for being here. Let me introduce you. First
we have Stuart Wright, who is Deputy Inspector General for
Evaluation and Inspections from the U.S. Department of Health
and Human Services, and next to him is Daniel Fridman, who is
Senior Counsel to the Deputy Attorney General and Special
Counsel for Health Care Fraud within the Department of Justice.
Thank you both for being here and we will start with Mr.
Wright.
STATEMENT OF STUART E. WRIGHT, DEPUTY INSPECTOR GENERAL,
EVALUATION AND INSPECTIONS, OFFICE OF INSPECTOR GENERAL,
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Mr. Wright. Thank you. Chairman Pallone, Ranking Member
Deal and members of the subcommittee, I am Stuart Wright,
Deputy Inspector General for Evaluation and Inspections at the
Department of Health and Human Services. I appreciate the
opportunity to appear before you today to discuss our efforts
to protect the integrity of the Medicare Program. My written
statement provides an overview of our efforts to assess the
appropriateness of Medicare payments and prices and our efforts
to address quality of care and access issues for beneficiaries.
In the interest of time, I will focus my remarks on our recent
work related to durable medical equipment as a specific
illustration of some of the program vulnerabilities we have
identified and our recommendations to strengthen Medicare
safeguards.
We have consistently found that the Medicare DME benefit is
vulnerable to fraud and abuse. We have conducted numerous
studies reviewing the appropriateness of payments and the
prices Medicare pays. With respect to the pricing of medical
equipment and supplies, we issued a report in September 2006 on
the cost and servicing of oxygen equipment used in the home. In
this review, we found that Medicare will allow $7,215 for a
concentrator that costs about $600 to purchase new.
Additionally, beneficiaries will incur $1,443 in coinsurance
over a 36-month rental period. We noted that if Medicare
payments were capped at 13 months as certain other DME items
are capped, Medicare and its beneficiaries would save $3.2
billion over 5 years.
With respect to our investigative activities, from 2002
through 2006 we excluded 121 suppliers and 457 individuals
associated with suppliers, obtained 289 successful criminal
convictions and achieved 76 civil settlements or judgments.
Together, these criminal convictions and civil adjudications
resulted in more than $796 million in restitution, fines and
penalties. To help combat medical equipment fraud, OIG in
conjunction with the U.S. Attorney's Office for the Southern
District of Florida, the FBI and the Department of Justice
launched an initiative designed to identify suspicious
suppliers and review questionable financial activities. Since
its inception, the initiative has recovered more than $10
million from entities which closed abruptly and abandoned their
bank accounts.
Over the past decade OIG has also identified and reported
on weaknesses in Medicare's enrollment process for suppliers.
In our most recent work, we found that 45 percent of the
suppliers in three south Florida counties did not meet one or
more of the selected Medicare standards we reviewed. Working in
collaboration with CMS and the National Supplier Clearinghouse,
we conducted unannounced site visits to 1,581 suppliers in
Miami-Dade, Broward and Palm Beach counties in late 2006. We
focused on three supplier standards that could be verified
quickly through direct observation and desk review. These three
standards include five specific requirements which state that a
supplier must maintain a physical facility, be open and staffed
during business hours, have a visible sign, post hours of
operation and maintain listed telephone numbers. During the
site visits, we found that 31 percent of suppliers did not
comply with the first two requirements of maintaining a
facility at the business address that they had provided to
Medicare. Specifically, 6 percent of the suppliers did not
maintain physical facilities. In some cases, instead of finding
operational facilities, we found vacant buildings or facilities
in which another type of business was operating including a
florist, a rental car company, a real estate office and an
accountant's office. Twenty-five percent of suppliers were not
accessible during reasonable business hours. We identified an
additional 14 percent of suppliers that were open and staffed
but failed to meet at least one of the three remaining
requirements that we reviewed. For the period January through
November 2006, Medicare allowed payments of over $97 million to
the 491 suppliers who we identified as not maintaining a
physical facility or were not open and staffed. We referred
these suppliers to CMS for potential revocation of their
Medicare billing numbers.
Our south Florida report and my written statement contained
the recommendations we have made to strengthen Medicare
enrollment standards including conducting more unannounced site
visits and out-of-cycle inspections, requiring all suppliers to
post a surety bond, and performing more-rigorous background
checks of applicants. In response, CMS described several
actions it has taken to implement our recommendations including
revisiting contract requirements to increase the number of
unannounced supplier site visits, drafting a proposed
regulation requiring suppliers to post surety bonds, and
considering targeted background checks of supplier applicants.
In addition, CMS is also in the process of implementing
accreditation standards and competitive bidding in selected
parts of the country.
In conclusion, the OIG remains committed to protecting the
integrity of the Medicare Program and ensuring that
beneficiaries receive high-quality care. Within the DME benefit
alone, we have identified numerous integrity problems and
program inefficiencies. And in our most current work, we have
also found that the Medicare supplier enrollment process is
inadequate to prevent abuses such as those we found in south
Florida.
I appreciate the opportunity to share with the subcommittee
our efforts and would be happy to answer any questions.
[The prepared statement of Mr. Wright follows:]
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Mr. Pallone. Thank you, Mr. Wright.
Mr. Fridman.
STATEMENT OF DANIEL S. FRIDMAN, SENIOR COUNSEL TO THE DEPUTY
ATTORNEY GENERAL AND SPECIAL COUNSEL FOR HEALTH CARE FRAUD,
DEPARTMENT OF JUSTICE
Mr. Fridman. Thank you. Mr. Chairman, Congressman Deal,
members of the subcommittee, thank you for inviting the
Department of Justice to discuss its work in an area of law
enforcement that is of vital importance to our Nation's seniors
and disabled persons, fraud in the Medicare Program. I am
Assistant United States Attorney for Miami, a district which
has made fighting health care fraud one of its top priorities.
Presently I am on detail to main Justice, where I advise the
Deputy Attorney General on health care fraud enforcement
policy. In that capacity, I have a bird's eye view of what the
Department's different components are doing to recover monies
wrongfully taken from the Medicare Program and to prosecute
those who defraud it. Within DOJ, health care fraud enforcement
involves each of our 93 U.S. Attorneys Offices, the criminal
division fraud section, the civil division, the civil rights
division and the FBI.
Since the start of the Health Care Fraud and Abuse Control
Program in 1997, the Department of Justice has recovered and
returned a total of $10.4 billion to the Medicare trust fund
with additional amounts going to other programs such as
Medicaid and Tri-Care. We can conservatively say that for every
$1 the Government spends on health care fraud enforcement in
the HCFAC program, the Medicare trust fund gets at least $4
back in recoveries from civil litigation and criminal fines and
forfeitures. This figure does not even capture the deterrent
effect of our criminal prosecutions, which are harder to
quantify but nevertheless save taxpayer money.
Mr. Chairman, this is good, basic good Government work, and
as our record demonstrates, the department is committed to
doing it. Over the last 10 years since the HCFAC program was
created, we have significantly increased the number of civil
cases we file and criminal convictions we obtain. In the last
fiscal year 2006, we had 547 defendants convicted of health
care fraud expenses, the highest number to date. Last year we
filed or intervened in 217 new civil health care fraud cases,
which represents an increase of 144 percent since the program
started. Last year was also a record year for civil recoveries.
Our civil division working with the U.S. Attorneys Offices
obtained judgments and settlements totaling over $3.2 billion
in fraud recoveries. Of that amount, $2.2 billion came from
health care fraud cases.
Let me give you a couple of concrete real-world examples of
the kinds of fraud schemes we are seeing today in our cases.
Let met tell you about infusion fraud. In my home district, we
have found that clinics pay recruiters to bring HIV or AIDS
patients to the clinics to receive this infusion therapy. They
pay each patient kickbacks of $100 to $200 per visit and the
patients are given diluted drugs or simply no medication at all
but Medicare is billed for the full price of the drugs. These
schemes can harm patients because they are not getting proper
treatments. In a recent case in my home district, an individual
was convicted of this scam with estimated Medicare losses of $5
million.
Let me tell you about power wheelchairs. We found a DME
supply company that billed Medicare for expensive motorized
wheelchairs that were not needed and not delivered. Medicare
reimburses wheelchairs at about $7,000 each but the company
actually delivered a less-expensive scooter that cost $1,000.
Total loss to Medicare was about $1 million. We convicted the
company's owner and also obtained convictions in separate cases
of the physicians who signed the prescriptions for these
motorized wheelchairs, people that did not actually need them.
Let us turn to pharmaceuticals. Serono was involved in off-
label marketing violations. As the market for Serono's drug
Serostim shrank, Serono resorted to trying to market its drug
for unapproved purposes and paying doctors kickbacks in the
forms of trips to France in exchange for the physicians writing
up to 30 new prescriptions at about $21,000 a treatment. As a
result of the Department's efforts, Serono paid $704 million to
resolve criminal and civil liabilities.
The Department is committed to fighting fraud and abuse in
the Medicare Program and devotes the necessary resources for
this purpose. One of the most important sources of funding for
the Department are the funds provided by the HCFAC program.
Since 1997, these funds have helped the Department maintain
dedicated prosecutors, litigators and FBI investigators who
focus on health care fraud cases. In 2003, the Department
received $49.5 million from the HCFAC program to support its
litigators and prosecutors and the FBI received $114 million.
However, those funds remained constant and without inflationary
adjustment until this year when Congress passed and the
President signed an inflationary cap adjustment to these funds
each until 2010. The President's fiscal year 2008 budget
requests $17.5 million to supplement DOJ's HCFAC funding
allocation. We would appreciate this committee's support for
full funding of the President's request so that we can continue
pursuing these important cases.
In conclusion, I want to say a little something about the
prosecutors and litigators who pursue these cases. Our
attorneys are very dedicated to the work they do. They believe
in it. They put in long hours to achieve justice for the
beneficiaries and the taxpayers. I hope this testimony helps
the subcommittee understand the kinds of fraud schemes the
Department is seeing across the country and the role that the
Department plays in fighting them. Working closely with our
colleagues at HHS OIG and CMS, we will continue to build on our
accomplishments and our resources and adjust our strategies as
new fraud schemes develop.
Thank you, and I would be happy to answer any questions.
[The prepared statement of Mr. Fridman follows:]
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Mr. Pallone. Thank you, thank you both, and let me yield
myself 5 minutes or recognize myself for 5 minutes for
questions, and I will start with Mr. Fridman. Let me say first
of all that I certainly would support the full funding of what
the President has proposed and I guess I can't speak for the
others, I will just speak for myself.
I am concerned about oversight with some of the marketing
with these Medicare private plans. We have been informed of a
number of scams by agents working for Medicare private plans
that they have recently victimized Medicare beneficiaries
through false marketing practice. These agents provide
misleading information to beneficiaries and have them sign
false documents in order to get them enrolled in private plans.
For example, I have a copy here, and I could show it to you, if
you like, a recent press release from the Mississippi Insurance
Department noting a number of scams in that State along these
lines. We are told by the State that their ability to enforce
the marketing guidelines that CMS has released does not exist
because of the Federal nature of those guidelines. I would like
to know, does the DOJ have any knowledge of these kinds of
marketing abuses? Have you been involved in investigating any
cases of wrongdoing by private insurance plans in Medicare and
how many cases and what is the nature of the complaint?
Mr. Fridman. Well, thank you for the question. Your staff
was kind enough to share that press release with us and we are
reaching out to the Mississippi Department of Insurance to find
out more information about their allegations of fraud. I will
say generally we have seen similar schemes such as the ones you
have described in other contexts. For example, in part D
enforcement, we have started to receive cases that show a
scheme we call the 299 scam. Basically telemarketers are
calling up senior citizens and offering to enroll them in a
part D plan. They say it only costs $299, the typical scheme.
They get their bank account information, their credit card
information and then they just steal their money and they don't
get enrolled in any plan. So we have seen things like this. We
are keeping a close eye on these and we will pursue appropriate
cases where there is Federal jurisdiction to pursue them.
Mr. Pallone. It says in the Mississippi release, now that I
know you have it, I am glad. It says companies offering
Medicare plans are subject under Federal regulations to strict
marketing guidelines for such plans which include prior
approval of marketing material. So does that literally mean
that if somebody takes out an ad on a radio or a newspaper that
it has to be approved? Do you know?
Mr. Fridman. Well, as Ms. Norwalk observed in her
testimony, some of this is the purview of State insurance
commissioners, there is no Federal jurisdiction there. I would
defer to my colleagues at HHS OIG and CMS. They are more
familiar with these kinds of regulations.
Mr. Pallone. If you would, I know this sounds absurd but I
always use an example when the HMOs started out that I would
see these ads in my local newspapers where you go get a free
lobster dinner if you came one night and they had these huge
ads in the local papers in my district offering free lobster
dinners. I don't know, maybe that sounds absurd but I am just
wondering what kind of things can they do?
Mr. Wright. CMS does have marketing guidelines that apply
to Medicare Advantage plans and we actually issued a report in
August of 2006 in which we reviewed 36 plans' marketing
material for calendar year 2005. For those 36 plans, we
collected all advertisements, summary of benefit forms,
enrollment forms and reviewed them to determine whether or not
they met the requirements that CMS has imposed, and we did find
some small problems associated with those marketing materials.
I don't know that CMS reviews every single marketing piece
issued by a Medicare Advantage plan, but there are guidelines
and there is some review of those materials.
Mr. Pallone. Now, I will go back to you because I only have
15 seconds. If DOJ, Mr. Fridman, were to find a large-scale
organized attempt to defraud Medicare and Medicare
beneficiaries by these private insurance plans, what type of
remedies do we have against such actions and are they being
used by CMS?
Mr. Fridman. Well, we would evaluate each case for Federal
jurisdiction and violations of Federal law and if we see those
violations, we would certainly pursue them. I have an example
of a case where we pursued a private insurer. It was called
Employers Mutual. It was a recent case. They had established a
similar kind of scheme in all 50 States where they fraudulently
induced people to enroll in their insurance plan, called it an
ERISA plan so they wouldn't be subject to regulation by State
insurance commissioners and people wound up paying for premiums
and getting stuck with the medical bills because the insurance
company didn't actually cover anything. We prosecuted them and
the owner of the company was convicted and sentenced to 25
years in prison. So we are serious about these kinds of fraud
schemes and we will pursue them.
Mr. Pallone. OK. Thank you.
Mr. Deal.
Mr. Deal. Out of curiosity, in the south Florida examples
that both of you have alluded to, what percentage of those were
traditional Medicare plans as opposed to managed-care plans? Do
you have any idea?
Mr. Wright. With regard specifically to the suppliers and
the site visits that we undertook, these were durable medical
equipment suppliers on the fee-for-service side of Medicare so
they didn't have anything to do with the Medicare Advantage.
Mr. Deal. What about, Mr. Fridman, the examples other than
the one that you have already alluded to? Were they traditional
fee-for-service traditional Medicare situations?
Mr. Fridman. Yes, I believe the durable medical equipment
ones would be part B traditional fee-for-service.
Mr. Deal. Here again, I guess the question becomes on the
durable medical equipment, if these are basically nonexistent
and 31 percent of them didn't meet the basic criteria, you
said, how are people getting to these folks? There has got to
be some linkage between a doctor saying you need a wheelchair
or you need some other form of durable medical equipment. What
was the linkage of a patient to get to those nonexistence
folks?
Mr. Wright. Well, that is the concern that we have, that
there weren't patients getting to those entities because when
we showed up on multiple site visits, they did not appear to be
open for business as required.
Mr. Deal. Well, was the fraud the fact that they weren't
supplying anything and billing for it or that they were
actually supplying something to folks but didn't meet the other
criteria?
Mr. Wright. The failure to comply with the supplier
standards can result in the revocation of the billing number
for those suppliers. As I mentioned in my oral statement, these
entities billed $97 million. It is of concern to us whether or
not the $97 million was for legitimate services to legitimate
beneficiaries. We did not pull a sample of those claims so I
cannot tell you that those claims were fraudulent, but given
that the entities when we visited did not appear to be open and
doing business, we are concerned.
Mr. Deal. Mr. Fridman, you mentioned one case in which in
the power wheelchairs that you say you convicted a physician
who was part of this scheme, it appears.
Mr. Fridman. Correct.
Mr. Deal. How cooperative is the medical community in going
after the doctors or those who are leading people in these
directions who are complicit in it? How cooperative are they in
working with you?
Mr. Fridman. You mean in terms of giving us tips or leads?
Mr. Deal. Yes.
Mr. Fridman. I think that the medical community is a source
of tips or leads for the Department. No profession wants bad
apples ruining their reputations, and we expected them to be
cooperative and give us information when they have it.
Mr. Deal. But in the illustration that we have all heard
about in Chicago with the State attorney general who I guess is
under a Medicaid investigation he is conducting----
Mr. Pallone. She.
Mr. Deal. Beg your pardon?
Mr. Pallone. She.
Mr. Deal. She. I am sorry. Yes let us get it right. She.
There the doctors were the ones who were all involved in the
schemes. To what extent is the Department of Justice working
with other attorney generals in looking at similar things,
because if they do it in the Medicaid, they are bound to be
doing it in Medicare, I would think as well.
Mr. Fridman. The Department works very closely with the
Medicare fraud control units in the different States to
identify fraud. Many times there is overlap between the fraud
committed in Medicare and it is also being committed in
Medicaid in the same case so we often work very closely with
them on the same cases, recover some share for the Medicare
Program and recover some share for the Medicaid program as
well.
Mr. Deal. The imaging issue is one that has been of concern
to me. Are you aware of any further investigations that are
going on with regard to imaging overbillings, misbillings,
fraudulent activities with regard to any investigations you can
maybe tell us about?
Mr. Wright. Not that I know of off the top of my head but I
am happy to check with staff and report back to you in terms of
the investigative activities. We do have a couple of ongoing
studies related to imaging services. I would be happy to tell
you about them if that would be useful.
Mr. Deal. Will these studies hopefully have recommendations
as to any corrective action that we might need to take here?
Mr. Wright. Yes, I hope that they do. I don't know that
they will actually uncover inappropriate payments but they will
look at some of the billing arrangements that exist with the
provision of CAT scans, MRI and PET scans and they will present
the data in terms of the trends. We have seen a dramatic
increase in payments in that area in the recent past.
Mr. Deal. Thank you both.
Mr. Pallone. Thank you.
The gentlewoman from Illinois.
Ms. Schakowsky. Thank you, Mr. Chairman. I wanted to
connect something I asked earlier of Mr. Miller and something
then that Mr. Pallone was asking about in terms of the
marketing of these Medicare Advantage plans. Mr. Miller
responded that one of the rationales for keeping these Medicare
Advantage programs even though they are more expensive is
because low-income beneficiaries use them despite the fact that
they may not be the most efficient way to serve low-income
people. So I am wondering if there is not a connection to
marketing schemes that actually target low-income people who
themselves might do better, because they are dual-eligible or
whatever, to get more coverage, and if there has been a
systematic review of who might be targeted by these kinds of
advertising programs that aren't good for taxpayers or even the
beneficiaries. Either one. I don't know where that would fall.
Mr. Wright. It is my understanding that Medicare Advantage
plans can't target on a specific population. I can't tell you
anything in terms of the marketing material that we collected
in terms of whether or not we saw anything geared towards
specific cohorts of beneficiaries but in general plans are not
supposed to market themselves to certain segments of
beneficiaries. There are some things called special-need plans
which are allowed to market and focus on discrete populations
such as the disabled, low income, and that isn't something that
we specifically looked at but we are thinking in terms of work
planning on doing a study specifically on the special-need
plans.
Ms. Schakowsky. Though they can't target special
populations, are they allowed to target particular geographic
areas or--I am just wondering how is it that--it sounded as if
a disproportionate number of people who have these might be
low-income people and so I am just wondering if there some
way--they are often targeted in terms of predatory loans and
all kinds of things. Well, I am glad that there is going to be
some kind of investigation. I am wondering to what extent
whistleblowers play a role in this at all and if there is a way
that we could encourage that more, Mr. Fridman?
Mr. Fridman. Well, I think the False Claims Act which
Congress passed is one of the ways that we get case referrals.
They are encouraged to file their cases and we pursue them.
That is one of the ways, especially in the civil context, that
we get our large dollar recoveries. We have whistleblowers
inside the different companies that file a complaint under
seal. The Department of Justice then engages in a process to
review the complaint, investigate it, see if there is evidence
of a violation of Federal law and then we resolve--we decide
whether or not to intervene.
Ms. Schakowsky. Are there protections for those
whistleblowers?
Mr. Fridman. Like retaliation kinds of things?
Ms. Schakowsky. Yes.
Mr. Fridman. I believe there are. Yes, there are.
Ms. Schakowsky. OK. Good. You looked at the Florida--this
is pretty amazing what you found in Florida, and they are the
No. 1 supplier of durable medical equipment, I understand,
right? They have the most number of outlets or whatever. But
there is a No. 2 and a No. 3 and a No. 4. Have you followed up
with some of these other places? It seems like a pretty
lucrative thing to look at.
Mr. Wright. Yes. The three counties that we reviewed in
south Florida bill for 5 percent of the durable medical
equipment nationally. Miami-Dade, one of the counties, has the
highest concentration of suppliers of any county in the Nation.
So we are now very much looking at other geographic areas to
determine whether or not there might be similarly inappropriate
businesses operating.
Ms. Schakowsky. And finally, you said you have adequate
resources to do this job. It seems, if I could be so crude as
to say profit centers in a way for the Government because we
are doing well by doing good, and so are there enough
resources? You are asking for more.
Mr. Fridman. Correct.
Ms. Schakowsky. And is there enough staff to do this, Mr.
Wright?
Mr. Wright. I think there is. I think the additional
resources will be very welcome. The President's budget, as
previously mentioned, requests $183 million in a discretionary
cap adjustment. We have had our HCFAC account frozen for 3
years and for the next couple of years it will be increased by
inflation. In addition to that, the Congress did provide to our
office $25 million a year until 2010 to specifically do
Medicaid fraud work so we do have those added resources. But
clearly we can use the additional resources and we similarly
expect to continue the return on investment that, as I
mentioned in my testimony, is about 13 to 1 over the last 3
years.
Ms. Schakowsky. And I am assuming you go after the big-
ticket items here primarily in prioritizing where you do your
investigations?
Mr. Fridman. For the Department, I would like to address
the resource issue as well, if I may?
Ms. Schakowsky. Sure.
Mr. Fridman. Our HCFAC account has been frozen as well
since 2003 at $49.5 million, the FBI at $114 million, and we
have had some inflationary erosion as a result of that being
frozen for the last 3 years. We are asking the committee to
support the President's 2008 budget request of $17.5 million
because that will allow us to make up for that inflationary
erosion, and also plan for the influx of cases that we expect
to see from anti-fraud funding that HHS has gotten in the area
of part D and so forth. So that will help us build our
resources for the future. In terms of--I am sorry----
Ms. Schakowsky. That you prioritize----
Mr. Fridman. When we are looking at cases to take, when
they come in we kind of triage them. We look at a variety of
factors. We don't just take cases where there is going to be
large monetary outcomes for us. We also look at factors like
patient harm, where physicians are performing unnecessary
surgeries. The dollar loss may be very small but we are going
to pursue those cases because it benefits the public health. We
have got to get those people off the streets so that is another
factor that comes into our analysis.
Ms. Schakowsky. I am out of time so----
Mr. Pallone. Yes, but I do intend to come back again with
another round, so if you want to stay. And I know Dr. Burgess--
I let my colleague go over 2 minutes so I am sure you will pay
attention to that.
Mr. Burgess. I will.
Mr. Pallone. You are recognized.
Mr. Burgess. I will make certain that there is equal
distribution of extra minutes.
Mr. Wright, you alluded to a 13 to 1 return on investment
for Medicare fraud. Can you estimate how much, what is the
total dollar value of fraud within the Medicare system? The
Federal program spends--what--$270 billion a year. Is there a
percentage or a figure that you have in your mind as to what of
that is spent inappropriately?
Mr. Wright. There is no reliable estimate on the amount of
fraud and abuse in the program. It just doesn't exist. We have
no way of systematically measuring it. The Medicare fee-for-
service does have an error rate but that is a payment error
rate and we certainly have seen a dramatic decrease in that
since it started in 1996, but in terms of fraud estimates, we
don't have any reliable mechanism to measure it. So it is just
sort of anecdotal.
Mr. Burgess. The fee-for-service part, was that--I was a
physician in private practice prior to coming to Congress so
was that what we used to see as the compliance plan that we all
to come up with sometime in 2000 or 2001?
Mr. Wright. It is a random sample of claims and then a
medical review of those claims to determine whether or not they
in fact should have been paid.
Mr. Burgess. And that is applied to----
Mr. Wright. The total fee-for-service universe.
Mr. Burgess. For physicians, for hospitals, for everyone?
Mr. Wright. Yes.
Mr. Burgess. A, B, C and D?
Mr. Wright. Correct.
Mr. Burgess. Are there certain segments of the Medicare
Program that are more prone to fraud and abuse?
Mr. Wright. Certainly. I think as we have seen with durable
medical equipment, there are areas that are more problematic
than other areas. That is correct.
Mr. Burgess. And certainly the list you gave which was--or
I guess Mr. Fridman gave that was pretty incredible. Is there--
does this affect every part of Medicare A, B, C and D equally
or is it a bigger problem in the Medicare Advantage plans or is
it a bigger problem in the physician's world or the hospital's
world or the part B drug program?
Mr. Wright. I think we have seen more problems with the
durable medical equipment benefit, with independent diagnostic
testing facilities, and some other ancillary services where
there just aren't as many programmatic controls over provider
entry. We certainly have fraud associated with hospitals but
those are more secure entities and don't set up shop, bilk the
Government for millions of dollars and shut down. So certainly
on some of the ancillary services in part B, I think we have
seen more problems.
Mr. Burgess. And again, could you quantify that for part B?
Mr. Wright. No. All we can do is refer to individual cases
where we have done reviews. We did a specific medical necessary
review of wheelchairs and isolated parts of the program we can
tell you how much Medicare is paying inappropriately.
Mr. Burgess. To what extent is the stage set for fraud by
the way that Medicare is in fact administered, the fact that it
is more lucrative for someone who provides wheelchairs to
handicapped patients, it is more lucrative for that person to
lease rather than just to sell the chair where the chair would
be in the patient's realm for the rest of their life whereas a
lease is something that is going to deliver dollars back to the
business repetitively. Do we set ourselves up for this?
Mr. Wright. I would say especially in the area of durable
medical equipment that we have seen historically two problems.
One is, we are overpaying for the equipment. Medicare should be
an efficient purchaser of health care services.
Mr. Burgess. And let me just stop you there. Whose fault is
that? As legislators, if we want to get our arms around that
part of the problem, where is the beef, where is the bank? How
do we do that?
Mr. Wright. You have to a certain degree--in the MMA a
provision called for competitive bidding associated with
durable medical equipment. The competitive bidding prices that
suppliers submit in the geographic areas where there is
competitive bidding will ultimately be used to set
reimbursement rates nationally. The problem that we have seen
historically in the area of DME is the fee schedules were based
on 1986 charges to the program. Whatever claims suppliers
submitted back in 1986 basically became the fee schedule. There
wasn't a market-based price for the individual pieces of
equipment. The competitive bidding provisions that you have
enacted should in large part provide some kind of market check
so that Medicare can be an efficient purchaser of the
equipment.
Mr. Burgess. And when will that begin to kick in?
Mr. Wright. It begins to start next year.
Mr. Burgess. Next year?
Mr. Wright. Yes, in 2008.
Mr. Burgess. Man, we are slow.
You are going to do a second round?
Mr. Pallone. Yes.
Mr. Burgess. I will yield back.
Mr. Pallone. Thank you.
I was going to ask Mr. Wright a couple of questions here.
Your testimony highlights vulnerabilities in Medicare oversight
of durable medical equipment, prosthetics, orthotics and
suppliers. Durable medical equipment coverage is very important
for millions of Medicare beneficiaries. However, in order to
protect the benefit and protect beneficiaries from excess out-
of-pocket costs as a result of improper payments, obviously it
is an important area. But why is it that this is a continuing
area of vulnerability, Mr. Wright, when the Office of the
Inspector General, CMS, DOJ have all been working on it for
years? Are there changes we can make to the payment system to
reduce the incentives for fraud and abuse in these various
providers?
Mr. Wright. I think again there are two primary reasons why
we have seen the level of abuses that we have seen. As I
mentioned earlier, one is the prices that we are paying for the
equipment. The second area is the ease of enrollment. Prior to
1994, there were no DME supplier standards. At that time 11
standards were created. There are now 21 standards. There are
soon to be 25 when accreditation comes in with the competitive
bidding. Back when I started working for HHS, in order to get a
provider number, all you needed to do was submit a claim and if
you didn't have a provider number, the Government assigned you
one. So we have come a long way, but given the findings that we
have in south Florida, clearly there is still ease of entry and
we are seeing suppliers come into the program, set up
businesses and then, at least when we visited them appear, not
to be operating as normal businesses. So I think some of the
recommendations that are both in my testimony and in the report
need to be visited in terms of tightening up supplier
standards.
Mr. Pallone. OK. Thanks. And the second thing I was going
to ask you is, you gave us this testimony on the Office of the
Inspector General's valued work on drugs that are paid for
under part B and with the help of those reports were able to
change the part B reimbursement system from a system where the
drug costs set the price to a much more reasonable system based
on the average sales price. These changes have been difficult
for some providers to adjust to but the new system is saving
both beneficiaries and taxpayers. But can you remind us of your
findings regarding the adequacy of payments under the new
average sales price plus the 6 percent reimbursement
methodology, and why does the office believe we need to further
refine the average sales price calculation? Do you have any
estimate of how much these changes would save?
Mr. Wright. I would certainly be happy to answer. We
produced a large body of work over the years that showed that
the prior reimbursement system used for Medicare part B drugs
was systematically flawed. It was a system called average
wholesale price and we found that the prices that Medicare paid
based on average wholesale prices did not resemble prices
available to physicians and suppliers in the marketplace. There
was a large body of work produced by our office. In one report
in 2001, we found that for 24 drugs Medicare would have saved
$761 million. The Congress then subsequently in the MMA changed
to average sales price methodology, which is an auditable
number as reported by the manufacturers. We have taken issue
with the way CMS calculates the ASP numbers. In a report that
we issued last year, we said that the methodology that CMS uses
to calculate volume-weighted ASPs was mathematically flawed and
we actually said in that report that the calculation difference
resulted in a Medicare overpayment of $115 million. So we have
taken that as sort of an issue with the way ASP is calculated,
clearly a marked improvement over the prior system, but a
little bit of a disagreement with CMS over the way it is
calculated.
And then additionally, the MMA requires us to do
comparisons between ASP and AMP, average manufacturer price,
and ASP and widely available prices. We have done reports in
both of those areas that have suggested some further savings
could be obtained by implementing the authority Congress gave
CMS to lower these prices when there becomes a big discrepancy
between those two amounts.
Mr. Pallone. OK. Thanks a lot.
Dr. Burgess.
Mr. Burgess. Do you think that then gives any incentive
when someone's reimbursement is based upon the average sales
price plus six, if they have got a drug that has been around
forever like 5-fluorouracil that costs pennies to administer or
a newer drug that is still under patent that may be very
expensive to administer. Is there any sort of bias in selection
as to which drug might be better for that patient based upon
the reimbursement value?
Mr. Wright. I don't think that there is. The dispensing fee
should be uniform and the ASP should be the average price that
the manufacturers pay with some exceptions to calculate an
average, and that is what we say that the Government will
reimburse.
Mr. Burgess. Some pharmacies will tell us that ASP plus six
for medicines that are extremely low cost just simply are not
worth their time to administer. Now we are not talking about
infusion therapy, just something that might be sold off the
shelves in the pharmacy as a prescription. Has that been a
concern at all that there will be some medicines that are just
simply no longer available to Medicare beneficiaries because
the cost of carrying those medicines on the shelves is not fact
made up by ASP plus six?
Mr. Wright. I think that we want to continue to monitor the
situation and to the extent issues are brought to our attention
that there are access problems associated with ASP, we will
want to go in and study that and provide CMS with information
regarding how to structure the program so that in fact
beneficiaries are able to get the prescription drugs needed.
Mr. Burgess. OK. I have got to ask you this. I don't want
to. What about the issue of upcoding? Has that been an issue in
your investigations? I am briefly talking about physician
practices.
Mr. Wright. Certainly, upcoding is one of the fraud schemes
that we see.
Mr. Burgess. Well, wait a minute. It is sometimes in the
eye of the beholder.
Mr. Wright. Yes, that is where I was just about to go and--
--
Mr. Burgess. Because we always feel like you guys downcode.
Mr. Wright. Yes, and to the extent we have done the fee-
for-service error rate, we have both reported--when we used to
do that error report--we have reported both on upcoding and
downcoding and netted the two out in terms of reporting any
overpayments that the Government has made, and I believe that
that is the way that CMS continues to do that. So in terms of
upcoding, it is more of an issue that we have seen when we have
done medical necessity reviews and we have just said that
certain procedures or services didn't meet the code that was
billed and suggested that the Government overpaid the
difference between the lesser code. But that is different from
fraud where you have to demonstrate a pattern andmeet a
different standard.
Mr. Burgess. Well, an office, for example, that bought
coding software, would that be evidence that they intended to
defraud Medicare?
Mr. Wright. Only if it is set in a way where they know
that.
Mr. Burgess. I knew I didn't want to ask that question. Is
Medicare any more prone to this type of activity than, say,
Medicaid, the Federal prison system, the VA, the Indian Health
Service, all of the other ways that the Federal Government
dispenses health care? Or is the same vulnerability present
within other areas?
Mr. Wright. Yes, I think it is probably the same
vulnerability. To the extent the VA provides health care more
directly, it is a different system, but certainly in terms of
OPM and other Government programs, you see the same kinds of
vulnerabilities. It is the shear size of Medicare that gets it
the attention that it gets. We are talking billions of dollars,
and even if fraud stays constant, as the dollars increase, you
are talking about a large magnitude of a problem.
Mr. Burgess. Mr. Fridman, let me just ask you in the
limited time we have left, typically how will a case get
initiated? Does someone bring it to your attention? Do you
figure it out from billing records? Do you have computer flags?
Do you have your own software that you employ?
Mr. Fridman. We don't. We rely on HHS, specifically CMS, to
provide us with data to back up our cases when it involves
Medicare Program data, but to answer your question about where
we get our cases from, basically there is three, maybe four
main sources. One source is the FBI. The HCFAC program spends
$114 million on dedicated FBI agents that are deployed across
the country in task forces to look at health care fraud in
different regions of the country so the FBI is a large source
for case referrals for us. Another source is the HHS Office of
the Inspector General. We get a lot of case referrals from them
as well. Another source is whistleblower cases. Those provide
another source of referrals. And then we also get referrals
working other cases. We could be working a drug case and
someone has information on a Medicare scam and so forth. So we
work all our possible leads to take in cases.
Mr. Burgess. That also worked for electronic media from Los
Alamos as it turns out.
Before we close, can I just ask one question about the
oxygen? Because you brought it up, Mr. Wright. We attempted to
put some parameters, some boundaries around oxygen therapy, the
length of time in the Deficit Reduction Act a couple of years
ago and that was probably one of the most contentious parts of
the conference committee and eventually we came up with a
limit. Previously it was unlimited and we limited it to 36
months, and I get the impression from your testimony that 36
months is not going to do the job, that that type of limitation
is not going to provide the protections that the taxpayer needs
in this regard.
Mr. Wright. Yes. Clearly, based on the data in our report,
we suggested that more than $7,000 over the span of 36 months
for a piece of equipment that costs less than $600 and requires
very minimal servicing is excessive. So we do think that there
is room for the Congress to take further payments reductions
associated with oxygen equipment, and that is what the report
recommended, that CMS work with the Congress to consider
further reducing the payment rate. The other capped rental
categories have a payment rental of 13 months and then the
Medicare payments stop.
Mr. Burgess. Are there other areas that have this type of
return available to them? Are there other areas that you have
looked into besides just the home oxygen therapy?
Mr. Wright. Over the years we have looked at wheelchairs in
terms of the pricing and we did find in a report we issued in
2004 that Medicare was overpaying $284 million based on prices
that were available on the Internet. You just go on the
Internet and get a better price than Medicare. And going back
further in time, we have looked at hospital beds. So we have
sort of gone piece of equipment by piece of equipment and
suggested that Medicare is paying too much. And hopefully,
again, the competitive bidding will be a fix to get a market-
based price.
Mr. Burgess. What about in the case of nursing homes with
providing services like physical therapy? Is there
overutilization that is occurring there that is costing the
taxpayers money?
Mr. Wright. We have done reviews of physical therapy in
nursing homes. It is a little dated at this point but we have
specifically done random samples of physical therapy,
occupational therapy, speech therapy in nursing homes.
Mr. Burgess. And what type of conclusion did you draw?
Mr. Wright. There were payment errors. I can't tell you off
the top of my head what the numbers were but we were finding
inappropriate physical therapy payments.
Mr. Burgess. Just the last thing, is Medicare Advantage any
more prone to any of these issues of fraud than the other
traditional parts of Medicare, the fee-for-service, part A,
part B, part D?
Mr. Wright. You have different things to be concerned about
because the program is fundamentally different. You don't have
to worry as much about the payment side of things because in
general Medicare is paying a capitated payment rate but you do
have to worry about other abuses such as marketing and
enrollment and underutilization because there is an incentive
to underutilize.
Mr. Burgess. I see. And you also talked about quality
assurance. Is your office involved in the implementation of the
quality assurance measures, the PVRP or whatever the heck we
are going to call it when it comes out in June? Do you keep an
eye on that as well?
Mr. Wright. We do lots of work associated with the quality
of care both in nursing homes, hospital quality oversight, ESRD
quality oversight. We have looked into a number of areas
looking at whether or not the oversight mechanisms are in place
to ensure that beneficiaries get the care that we all want them
to get.
Mr. Burgess. And have you come to any conclusions about
that?
Mr. Wright. On the various systems that we have looked at,
we have reported certain weaknesses.
Mr. Burgess. Thank you, Mr. Chairman.
Mr. Pallone. Thank you. We are having such a good time
here, we will just keep going.
Let me mention too, the members know that you can submit
additional questions for the record and so you may get
additional questions from us, and they will be submitted to the
clerk within the next 10 days so you may get those additional
questions.
Let me thank both of you again. Really, I think what you do
is so important, and as you said, Mr. Wright, particularly when
you are talking about Medicare, there is just so much money
involved here that it not only gets the media attention but
obviously it gets our attention because that money could be
used for other purposes. So I really appreciate your being here
today and taking our questions. Thanks a lot.
Without objection, the meeting of the subcommittee is
adjourned. Thank you.
[Whereupon, at 6:20 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
[GRAPHIC] [TIFF OMITTED] T8015.066
[GRAPHIC] [TIFF OMITTED] T8015.067
Leslie V. Norwalk Answers to Submitted Questions
The Honorable Hilda Solis
The Private Fee-For-Service (PFFS) plans are paid the most
even though they do not coordinate care for their
beneficiaries. Most of these plans are found in rural areas. In
your testimony, you state that racial and ethnic minorities
represent 27 percent of total Medicare Advantage enrollment.
What added benefit do these PFFS plans bring to patients? How
many minorities are actually enrolled in these plans?
Rural beneficiaries traditionally have not had access to
additional benefits offered via other MA products. On average,
PFFS plans are providing beneficiaries with an added $63 each
month in additional value. For example, PFFS plans use rebate
dollars to offer additional benefits such as vision and dental
care and cost sharing savings. The chart below illustrates some
of the cost sharing savings that are offered to PFFS enrollees.
Percent of PFFS Beneficiaries Enrolled in PFFS Plans with Specific
Attributes
Benefit Structure/Percent of PFFS Beneficiaries Enrolled in
a PFFS Plan of this Type
Catastrophic cap between $1,001 and $5,000: 28 percent
$1,000 or less for a 90-day hospital stay: 81 percent
No premium beyond the Part B premium: 62 percent
Unlimited coverage for inpatient hospital days: 88
percent
No prior hospitalization requirement before a SNF
admission: 89 percent
Primary care physician copayments of $20 or less: 94
percent
Prostate and cervical and cancer screening with no
coinsurance: 99 percent
While the number of minorities enrolled in PFFS plans is
not currently available, we do have data available on the
percent of PFFS enrollees that live in rural areas.
Approximately 31 percent of PFFS service enrollees live in
rural areas. Whereas, only about 4.4 percent of MA enrollees in
coordinated care plans live in rural areas. This difference
highlights the important role that PFFS plans play in providing
rural beneficiaries with choices in their health coverage.
In your testimony, you state that the President's proposed
budget will save money. While I agree that Medicare needs to be
efficient in its use of dollars, program efficiency should not
result in less access to care for our seniors. I'm concerned
about the effect of reduced Medicare payments to our hospitals,
especially since many of our safety-net hospitals are already
struggling to make ends meet. Even worse, many of the same
hospitals are facing reductions in Medicaid payments. What will
be the impact of reduced Medicare payments on our safety-net
hospitals'especially the proposed rule that is supposed to take
place in September will also result in fewer Medicaid dollars?
The Medicare Payment Advisory Commission (MedPAC) has
noted that hospitals have been able to reduce costs under
tighter price pressures. A modest reduction in the update of
0.65 percentage points would encourage efficiency, while
maintaining access to care. It is vital that we do everything
we can to maintain the solvency of the Medicare program and pay
as efficiently as possible.
Since the implementation of the inpatient prospective
payment system for acute care hospitals, the average actual
increase in the market basket has been approximately 1.3
percentage points less than the average projected market basket
increase (or only 66 percent of the average projected market
basket increase). In light of these historical findings, and
given hospitals' ability to adjust to market conditions, an on-
going adjustment for productivity would likely not affect the
ability of hospitals to furnish high quality inpatient services
to Medicare beneficiaries.
We have great faith in the market's ability to adapt
without reducing access. Since 2002, more hospitals have opened
then closed each year, suggesting that while margins may be
low, access to care is still improving.
The Honorable Barbara Cubin
The Medicare Modernization Act of 2003 authorized a two
percent Medicare home payment for ambulance trips in rural
areas, as well as a five percent add-on payment for home health
services in rural areas. Both programs were authorized to
preserve access to care in rural areas, where providers face
unique geographic difficulties in providing these services. In
Wyoming, roughly half a million people are spread out over
almost 100,000 square miles. Both of these provisions have
expired, and were not extended in the President's fiscal year
2008 budget. What is the Center for Medicare and Medicaid
Services' justification for not proposing to extend these
provisions, and do you have concerns about how it will affect
access to care in rural areas?
The Centers for Medicare & Medicaid Services (CMS) has made
a strong commitment to rural health issues and has made many
significant regulatory and departmental reforms to address the
needs of rural America.
The Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) included a number of provisions
to enhance beneficiary access to quality health care services
and improve provider payment in rural areas. The provisions in
the MMA included the continuation of two payment policy trends
that have increased rural provider payment rates in recent
years: (1) an expansion of opportunities for rural hospitals to
receive cost-based payments from Medicare and (2) a number of
PPS payment rate adjustments that benefit rural providers . As
you mentioned in your question, these provisions included a two
percent payment increase for ground ambulance trips that
originate in rural areas and a five percent add-on payment for
home health services furnished in rural areas.
A number of the provisions in the MMA were time limited but
have been extended in later legislation, including the Deficit
Reduction Act of 2005 (DRA) and the Tax Relief and Health Care
Act of 2006 (TRHCA). CMS has worked expeditiously to implement
all of the provisions in recent legislation, recognizing their
importance to rural communities. Although the President's
fiscal year 2008 Budget did not include proposals to extend the
expiring rural provisions you mentioned in your question, CMS
will continue to work with Congress to address disparities in
rural reimbursement and to improve the quality and value of
care delivered to all Medicare beneficiaries.
As always, I welcome your comments and suggestions to
improve the quality of America's health care programs. I remain
committed to ensuring equal access to high-quality, up-to-date
care for Medicare beneficiaries residing in rural areas. You
can be assured that this Administration will continue its
efforts to help address the concerns of rural Americans.
----------
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[GRAPHIC] [TIFF OMITTED] T8015.069
Mark Miller Answers to Submitted Questions
Replies to questions from Congresswoman Hilda Solis
MedPAC is an independent Federal body, and I thank you for
coming today. In your testimony, you stated that Medicare
Advantage plans are overpaid and that not all of these plans
provide better care to their patients. I understand many low-
income, minority populations are actually served by Medicaid.
However, States such as California and Florida tend to have
higher Medicare Advantage plan penetration rates and more
minority populations. I am extremely concerned about any
potential adverse consequences on minority populations. Will
cuts to Medicare Advantage plans harm minority populations in
States with high Medicare Advantage penetration rates?
Even before the 2003 Medicare Prescription Drug Improvement
and Modernization Act introduced the Medicare Advantage (MA)
program, private plans in many markets offered rich benefit
packages. Plans often offered these extra benefits because they
achieved efficiencies in delivering the basic Part A & B
benefit. If payments to MA plans are reduced, we believe that
beneficiaries in many market areas will continue to have MA
plans available that provide coordinated care and extra
benefits to enrollees. However, their benefit packages may be
less generous than they are currently.
As we have pointed out in several of our reports, the
Medicare program pays on average 12 percent more to MA plans
than for FFS and this payment policy discourages efficiency.
Using MA to provide low-income subsidies is unnecessarily
costly. For example, one MA plan option private fee-for-service
plans require 9 percent more in Medicare program payments than
traditional FFS. The extra benefits PFFS plans offer to
beneficiaries are financed entirely through higher Medicare
program payments and beneficiary premiums (paid by all
beneficiaries), rather than through efficiency gains. Moreover,
providing low-income subsidies through MA plans is poorly
targeted--reduced cost-sharing for example, is provided to
everyone who enrolls in the plan, regardless of their income.
In sum, Medicare Advantage plans are not an efficient vehicle
for delivering benefits to low-income Medicare beneficiaries.
Medicare savings programs, for example, may be a more effective
way of targeting assistance to low-income populations.
The Private Fee For Service (PFFS) plans are paid the most
even though they do not coordinate care for their
beneficiaries. Most of these plans are found in rural areas. In
your testimony, you state that racial and ethnic minorities
represent 27 percent of total Medicare Advantage enrollment.
What added benefit do these PFFS plans bring to patients? How
many minorities are actually enrolled in these plans?
MedPAC does not currently have data on the number of
minority enrollees in private fee-for-service (PFFS) Medicare
Advantage (MA) plans. The most recent publicly available data
on minority enrollment in MA overall are from 2004 and 2005--
before the large growth in PFFS enrollment. We do not know
whether PFFS enrollment patterns for minorities are similar to
the patterns of plans that had Medicare contracts in 2004 and
2005.
PFFS plans are less efficient than traditional Medicare in
terms of the cost of providing the Medicare Part A& B benefit
package. PFFS plan bids show that on average their cost of
providing Part A & B Medicare benefits is 109 percent of the
cost in traditional Medicare. However, PFFS plans have been
drawing their enrollment from counties with benchmarks well
above Medicare fee-for-service (FFS) expenditure levels. This
enables PFFS plans to generate ``rebate'' amounts (75 percent
of the difference between plan bids and the county benchmarks)
that are used to provide extra benefits. For example, under the
current payment system and given PFFS plans bids, Medicare pays
the plan 19 percent above FFS amount and 10 percent goes to the
beneficiary in extra benefits. Bear in mind that these are
``fully loaded'' benefits. That is, even though 10 percent is
provided in extra benefits, some percentage of this amount is
consumed in administrative overhead (e.g., salaries); marketing
costs; and plan profits.
The most common extra benefit is the reduction of average
beneficiary cost sharing to levels below the average amount in
Medicare FFS. PFFS plans also provide extra services (such as
hearing aids, and dental and vision care), or reduced premiums.
However, all of these extra benefits stem from plan
overpayments (above Medicare FFS levels), not from PFFS plan
efficiencies. Unlike other MA plan types, PFFS plans are not
required to coordinate care for their enrollees, as noted in
the question, and they do not participate in the quality
improvement activities required of other plans.
Replies to questions from Congresswoman Barbara Cubin
While 28 percent of Medicare beneficiaries live in rural
areas, it is my understanding that just one of the seventeen
Medicare Payment Advisory Committee (MedPac) members has solid
rural credentials. In fact, I am an original cosponsor of
legislation (H.R. 1730) to ensure that rural experts are
represented on MedPac as a percentage equal to their proportion
of Medicare beneficiaries that live in rural areas. Could you
detail how MedPac currently ensures that the unique needs of
rural areas are taken into consideration when formulating
recommendations to Congress?
Many of our Commissioners have solid rural credentials.
Commissioners with specific rural experience and/or that are
from rural areas include: Dr. Nick Wolter, Dr. Karen Borman,
former Senator Dave Durenberger, and Dr. Thomas Dean (4 out of
17 Commissioners). In addition, there are other Commission
members that have raised rural concerns during the Commission
work cycle.
MedPAC staff also have extensive knowledge in rural issues
and have traveled to many rural areas in recent years to study
rural healthcare delivery and payment issues, including visits
to rural areas in Oklahoma, Montana, North Dakota, South
Dakota, Iowa, and Kansas. We have published three reports
devoted to rural issues: Report to the Congress: Rural Payment
Provisions in the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003, December 2006; Report to the
Congress: Issues in a Modernized Medicare Program, Chapter 7:
Critical access hospitals, June 2005; and Report to the
Congress: Medicare in Rural America, June 2001. In addition, we
deal with rural issues regularly in our annual Congressional
reports.
MedPAC has carefully evaluated the concerns of rural
providers over the years and made a number of recommendations
benefiting rural hospitals that Congress or CMS have
implemented. In the MMA, Congress enacted our recommendations
to increase the cap on rural disproportionate share (DSH)
payments and to set the base payment amount for rural hospitals
equal to that of urban hospitals. Between 2001 and 2007, we
made several recommendations to improve the hospital wage index
in ways that would help rural providers, and the Congress and
CMS have implemented some of these. The resulting increase in
payments to rural providers helps explain why rural hospitals
achieved higher Medicare and all-payer margins than urban
hospitals in 2005, and why rural hospital payments increased by
$377 million, or 2.3 percent, in 2006 (MedPAC December 2006).
Given the breadth of our legislative mandate, you can be
assured that rural issues will continue to be a significant
part of MedPAC's agenda.
----------
November 5, 2007
Mr. Daniel S. Fridman
Senior Counsel to the Deputy Attorney General and
Special Counsel for Health Care Fraud
Department of Justice
950 Pennsylvania Avenue
Washington, DC 20530
Dear Mr. Fridman:
Thank you for appearing before the Committee on Energy and
Commerce on Wednesday, April 18, 2007, at the hearing entitled
``Medicare Program Efficiency and Integrity.'' We appreciate
the time and effort you gave as a witness before the
subcommittee.
Under the Rules of the Committee on Energy and Commerce,
the hearing remains open to permit Members to submit additional
questions to the witnesses. Attached are questions directed to
you from certain members of the committee. In preparing your
answers to these questions, please address your response to the
Member who has submitted the question, including showing the
Member's name, and include any text of the Member's question
along with your response. The committee apologizes for the
delay to you in forwarding this request to you, however, we
believe your responses to these questions are important and
they will be included in the hearing record. Your assistance is
appreciated.
To facilitate the printing of the hearing record, we ask
that we receive your responses to these questions by the close
of business on Monday, November 19, 2007. Please have your
written responses delivered to 2125 Rayburn House Office
Building and faxed to (202) 225-2525 to the attention of
Christie Houlihan, Legislative Clerk. Please send, as well, an
electronic version of your responses to Ms. Houlihan at
christie.houlihan @mail.house.gov in a single Word formatted
document.
Thank you for your prompt attention to this request. If you
need additional information or have other questions, please
have your staff contact Ms. Houlihan at the Committee on Energy
and Commerce at (202) 225-2927.
Sincerely,
John D. Dingell
Chairman
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Statement of the Power Mobility Coalition
The Power Mobility Coalition (PMC), a nationwide
association of suppliers and manufacturers of motorized
wheelchairs and power operated vehicles, applauds the House
Energy and Commerce Subcommittee on Health for holding a
hearing examining ways to identify and eradicate fraud within
the Medicare program.
The PMC has long supported efforts aimed at removing
unscrupulous actors from the Medicare program. In fact, it was
several PMC members who first identified pockets of suspicious
activity in the delivery of power mobility devices (PMDs) in
Harris, Country Texas and then brought these concerns to the
attention of the Centers for Medicare and Medicaid Services
(CMS) as early as April, 2003. The PMC, along with other
leaders of the durable medical equipment (DME) industry, then
partnered with CMS in the implementation of the ``Wheeler
Dealer'' program that sought to root out fraudulent activity in
the Medicare PMD benefit.
The PMC was very supportive of anti-fraud initiatives
contained in the Medicare Modernization Act (MMA), including
the requirement that a Medicare beneficiary see a health care
practitioner for a face-to-face examination prior to the
submission of a PMD claim, increased quality standards for PMD
suppliers, and the provision that requires all DME supplies to
be accredited by a nationally recognized accreditation body.
While these are all positive steps in efforts to clean up the
Medicare program, the PMC feels that more could be done and, as
a result, offers the following recommendations to the
subcommittees:
All New DME Suppliers or DME Suppliers Who Are Renewing Their Supplier
Number Must be Accredited
CMS has released the new quality standards for all DME
suppliers and has named the nationally recognized accreditation
bodies that have ``deemed status'' to ensure Medicare quality
standards are being met. Since all the pieces of the
accreditation puzzle are now in place, CMS must insist that all
new DME suppliers become accredited before they can be awarded
a Medicare supplier number. Further, DME suppliers who have to
recertify for a supplier number should also be immediately
subject to the accreditation requirement.
Accreditation Must Happen Prior to Implementation of Competitive
Bidding
Program integrity is paramount to ensure Medicare
beneficiaries receive the highest quality of products and
services from lawful suppliers. Stringent quality standards
coupled with mandated accreditation of suppliers will rid the
Medicare program of unscrupulous actors and reinforce the
integrity of those suppliers who play by the rules.
Implementing competitive bidding and allowing non-
accredited suppliers to participate in the bidding process is
contrary to CMS' priority to safeguard Medicare resources and
beneficiaries. Allowing non-accredited suppliers to bid and be
awarded contracts will cause major disruption if the contracted
supplier cannot obtain accreditation and the contract must then
be terminated and subject to a ``rebid.'' In addition, non-
accredited suppliers would have lower overhead and, as a
result, would be able to submit lower bids which could
artificially lower the single payment amount for accredited
contracted suppliers.
While CMS has recently notified DME suppliers that they
must be accredited by August 31st in order to be considered in
the initial round of competitive bidding, there will still be
many instances and many areas of the country where non-
accredited suppliers could be serving Medicare beneficiaries.
Even in competitive bidding areas (CBAs), non-accredited
suppliers who are ``grandfathered'' and allowed to serve
beneficiaries in CBAs are under no pressing mandate to become
accredited.
Establish a DME Program Integrity Advisory Group
DME manufacturers and suppliers know their business better
than anyone and are constantly monitoring the marketplace.
Lawful DME suppliers and manufacturers are anxious to share
intelligence about potential fraudulent actors with CMS. The
PMC recommends that CMS establish an advisory group comprised
of DME suppliers, manufacturers and beneficiaries to work with
CMS officials on developing proactive solutions to help detect
and eliminate fraud.
Require Physician Certification on Documentation Supporting a PMD
Claim
As part of recent administrative changes to the Medicare
PMD benefit, while a physician must provide a prescription for
PMDs, CMS no longer requires that the physician certify the
need. The PMC recommends that the algorithmic formula contained
in the PMD National Coverage Determination be codified in a
form that will then need to be certified, under penalty of law,
by the physician. Such certification will strengthen the role
of the physician as gatekeeper of the Medicare PMD benefit and
put the physician in a position to ensure that the beneficiary
meets the requirements necessary under the Medicare program to
qualify for PMDs. A physician-certified document will also
provide some much needed objectivity to the PMD claims process.
The PMC appreciates the opportunity to comment on efforts
to strengthen Medicare program integrity and provide
recommendations for additional tools to help identify and
prevent fraud. We, however, must raise caution when Medicare
adopts overly restrictive anti-fraud measures that fail to
distinguish between lawful suppliers and unscrupulous actors.
These measures will only serve to further restrict access to
PMDs, drive up program costs and deny needy beneficiaries high-
quality PMDs.
The Medicare PMD benefit provides thousands of
beneficiaries with freedom, independence and the ability to
live more healthier and active lives. PMDs save the Medicare
program money by keeping beneficiaries with compromised or
limited mobility out of more costly institutional settings and
decreasing the need for hospitalizations. We look forward to
working with the committee to ensure that appropriate program
safeguards are in place to protect both the Medicare trust fund
as well as Medicare beneficiaries.
Respectfully submitted,
Eric Sokol, Director, Power Mobility Coalition
Stephen Azia, Counsel, Power Mobility Coalition
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