Lf*/ ***** &ar%l I Coyrtp / ftljKc, H.R. 2480, INSPECTOR GENERAL FOR MEDICARE AND MEDIC- AID ACT OF 1995; H.R. 3224, THE HEALTH CARE FRAUD AND ABUSE PREVENTION ACT OF 1996; AND H.R. 1850, HEALTH FRAUD AND ABUSE ACT OF 1995 JOINT HEARING BEFORE THE SUBCOMMITTEE ON HUMAN RESOURCES AND INTERGOVERNMENTAL RELATIONS AND THE SUBCOMMITTEE ON GOVERNMENT MANAGEMENT, INFORMATION, AND TECHNOLOGY OF THE COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT HOUSE OF REPRESENTATIVES ONE HUNDRED FOURTH CONGRESS SECOND SESSION ON H.R. 2480 TO ESTABLISH AN OFFICE OF INSPECTOR GENERAL FOR THE MEDICARE AND MEDICAID PROGRAMS ON H.R. 3224 TO IMPROVE FEDERAL EFFORTS TO COMBAT FRAUD AND ABUSE AGAINST HEALTH CARE PROGRAMS, AND FOR OTHER PURPOSES AND H.R. 1850 TO IMPROVE FEDERAL ENFORCEMENT AGAINST HEALTH CARE FAUD AND ABUSE MAY 2, 1996 Printed for the use of the Committee on Government Reform and Oversight U.S. GOVERNMENT PRINTING OFFICE 42-506CC WASHINGTON : 1997 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-055441-1 COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT WILLIAM F. CLINGER, Jr., Pennsylvania, Chairman BENJAMINA. GILMAN, NewYork CARDISS COLLINS, Illinois DAN BURTON, Indiana HENRYA. WAXMAN, California J. DENNIS HASTERT, Illinois TOM LANTOS, California CONSTANCE A. MORELLA, Maryland ROBERT E. WISE, Jr., WestVirginia CHRISTOPHER SHAYS, Connecticut MAJOR R. OWENS, NewYork STEVEN SCHIFF, New Mexico EDOLPHUS TOWNS, NewYork ILEANA ROS-LEHTINEN, Florida JOHN M. SPRATT, Jr., South Carolina WILLIAM H. ZELIFF, Jr., New Hampshire louise Mcintosh slaughter, New JOHN M. McHUGH, New York York STEPHEN HORN, California PAUL E. KANJORSKI, Pennsylvania JOHN L. MICA, Florida GARYA. CONDIT, California PETER BLUTE, Massachusetts COLLIN C. PETERSON, Minnesota THOMAS M. DAVIS, Virginia KAREN L. THURMAN, Florida DAVID M. MCINTOSH, Indiana CAROLYN B. MALONEY, NewYork JON D. FOX, Pennsylvania THOMAS M. BARRETT, Wisconsin RANDY TATE, Washington BARBARA-ROSE COLLINS, Michigan DICK CHRYSLER, Michigan ELEANOR HOLMES NORTON, District of GIL GUTKNECHT, Minnesota Columbia MARKE. SOUDER, Indiana JAMES P. MORAN, Virginia WILLIAM J. MARTINI, New Jersey GENE GREEN, Texas JOE SCARBOROUGH, Florida CARRIE P. MEEK, Florida JOHN B. SHADEGG, Arizona CHAKA FATTAH, Pennsylvania MICHAEL PATRICK FLANAGAN, Illinois BILL BREWSTER, Oklahoma CHARLES F. BASS, New Hampshire TIM HOLDEN, Pennsylvania STEVEN C. LaTOURETTE, Ohio ELIJAH CUMMINGS, Maryland MARSHALL "MARK" SANFORD, South Carolina BERNARD SANDERS, Vermont ROBERT L. EHRLICH, Jr., Maryland (Independent) James L. Clarke, StaffDirector Kevin Sabo, General Counsel Judith McCoy, ChiefClerk Bud Myers, Minority StaffDirector (ID Subcommittee on Human Resources and Intergovernmental Relations CHRISTOPHER SHAYS, Connecticut, Chairman MARKE. SOUDER, Indiana EDOLPHUS TOWNS, New York STEVEN SCHIFF, New Mexico TOM LANTOS, California CONSTANCE A. MORELLA, Maryland BERNARD SANDERS, Vermont (Ind.) THOMAS M. DAVIS, Virginia THOMAS M. BARRETT, Wisconsin DICK CHRYSLER, Michigan GENE GREEN, Texas WILLIAM J. MARTINI, New Jersey CHAKA FATTAH, Pennsylvania JOE SCARBOROUGH, Florida HENRY A. WAXMAN, California MARSHALL "MARK" SANFORD, South Carolina Ex Officio WILLIAM F. CLINGER, Jr., Pennsylvania CARDISS COLLINS, Illinois Lawrence J. Halloran, StaffDirector Kate Hickey, Professional StaffMember Robert Newman, Professional StaffMember Thomas M. Costa, Clerk Cheryl Phelps, Minority Professional StaffMember Subcommittee on Government Management, Information, and Technology STEPHEN HORN, California, Chairman MICHAEL PATRICK FLANAGAN, Illinois CAROLYN B. MALONEY, New York PETER BLUTE, Massachusetts MAJOR R. OWENS, New York THOMAS M. DAVIS, Virginia JOHN M. SPRATT, Jr., South Carolina JON D. FOX, Pennsylvania PAUL E. KANJORSKI, Pennsylvania RANDY TATE, Washington COLLIN C. PETERSON, Minnesota JOE SCARBOROUGH, Florida TIM HOLDEN, Pennsylvania CHARLES F. BASS, New Hampshire Ex Officio WILLIAM F. CLINGER, Jr., Pennsylvania CARDISS COLLINS, Illinois J. Russell George, StaffDirector MarkUncapher, Professional StaffMember and Consel Andrew G. Richardson, Clerk David McMillen, Minority Professional StaffMember (in) CONTENTS Page Hearingheld onMay2, 1996 1 TextofH.R. 2480 5 TextofH.R. 3224 9 TextofH.R. 1850 70 Statementof: Foreman, Darrell, Home Health Care Market Group, Health Industry Distributors Association; and Rick Doherty, chair, Legislative Policy Committee, NationalAssociationforMedicalEquipmentServices 148 Mangano, Michael, principal Deputy Inspector General, Department of Health and Human Services 114 Quinn, Hon. Jack, a Representative in Congress from the State ofNew York 102 Letters, statements, etc., submittedfortherecordby: Clinger, Hon. William F. Jr., a Representative in Congress from the StateofPennsylvania, prepared statementof J. 92 Doherty, Rick, chair, Legislative Policy Committee, IsTational Association forMedicalEquipmentServices, prepared statementof 162 Foreman, Darrell, Home Health Care Market Group, Health Industry DistributorsAssociation, prepared statementof...A 151 Green, Hon. Gene, a Representative in Congress from the State ofTexas, prepared statementof 212 Horn, Hon. Stephen, a Representative in Congress from the State of California, prepared statementof 3 Maloney, Hon. Carolyn B., a Representative in Congress from the State ofNewYork, prepared statementof 211 Mangano, Michael, principal Deputy Inspector General, Department of Health and Human Services, prepared statementof 119 Morella, Hon. ConstanceA., a Representative in Congress from the State ofMaryland, prepared statementof 209 Quinn, Hon. Jack, a Representative in Congress from the State ofNew York, prepared statementof 105 Shays, Hon. Christopher, a Representative in Congress from the State ofConnecticut, prepared statementof 89 Towns, Hon. Edolphus, a Representative in Congress from the State ofNewYork, prepared statementof 97 (V) H.R. 2480, INSPECTOR GENERAL FOR MEDI- CARE AND MEDICAID ACT OF 1995; H.R. THE HEALTH CARE FRAUD AND 3224, ABUSE PREVENTION ACT OF 1996; AND H.R. HEALTH FRAUD AND ABUSE ACT OF 1850, 1995 THURSDAY, MAY 2, 1996 House of Representatives, Subcommittee on Human Resources and Intergov- ernmental Relations, joint with the Subcommit- tee on Government Management, Information, and Technology, Committee on Government Re- form and Oversight, Washington, DC. The subcommittees met, pursuant to notice, at 10 a.m., in room 2154, Rayburn House Office Building, Hon. Stephen Horn and Hon. Christopher Shays (chairmen ofthe subcommittees) presiding. Present: Representatives Horn, Shays, SchifF, Davis, and Towns. Ex officio present: Representative Clinger. ,Also present: Representative Hastert. Staff present: J. Russell George, staff director and counsel; Mark Uncapher, professional staff member and counsel; and Andrew G. Richardson, clerk, Subcommittee on Government Management, In- formation, and Technology; Lawrence J. Halloran, staff director and counsel; Kate Hickey, and Robert Newman, professional staff members; and Thomas M. Costa, clerk, Subcommittee on Human Resources and Intergovernmental Relations; and David McMillen, Cheryl Phelps, and Mark Stephenson, minority professional staff members. Mr. Horn. A quorum being present, this joint session ofthe Sub- committee on Government Management, Information, and Tech- nology and the Subcommittee on Human Resources and Intergov- ernmental Relations will come to order. This morning's hearing will consider several legislative proposals designed to combat waste, fraud, and abuse in the Medicare and Medicaid programs. In November 1995, our subcommittees held a joint hearing that considered, among other matters, how existing information technology processes could be incorporated into the Medicare claims system to more effectively identify fraud. As part of our subcommittee's oversight responsibilities under the Inspectors General Act, the Government Management Sub- committee has also previously received testimony from the Inspec- (1) 2 tor General for the Department ofthe Health and Human Services concerning health care fraud. The General Accounting Office has estimated that, as a result of fraud and waste, the losses to the Federal Government amount to approximately 10 percent ofthe over $34 billion spent each year on Medicare and Medicaid programs. These losses, over $34 billion each year, are a truly staggering sum. Despite the efforts of many agencies whose goal is uncovering these abuses, we all know that far too much remains undetected. In that regard, this hearing will consider three legislative propos- als: H.R. 3224, the Health Care Fraud and Abuse Prevention Act of 1996, was introduced on March 29 by Representative Steven Schiff and Human Resources Subcommittee Chairman Chris Shays, who will preside over much ofthis morning's hearing. Their bill modifies legislation that they previously introduced which would have expanded law enforcement tools for combating health care fraud. H.R. 1850, the Health Care Fraud and Abuse Act, was intro- duced last summer by the ranking member of the Human Re- sources Subcommittee, Representative Ed Towns of New York. It is intended to improve coordination among agencies with fraud de- tection responsibility. H.R. 2480 was introduced by Representative Jack Quinn, who is on his way here, and that was introduced last October. It would establish a new Inspector General for Medicare and Medicaid programs. Each ofthese bills seeks to enhance the effectiveness ofthe man- agement of the Medicare and Medicaid programs. They would pro- vide new deterrence weapons to the Department of Health and Human Services and the Department of Justice in their fight against fraud. With a problem this serious, we are very receptive to good ideas. Our witnesses include Representative Quinn of New York; Mi- chael Mangano, the Deputy Inspector General of the Department of Health and Human Services; Darrell Foreman, the representa- tive ofthe Home Health Care Market Group ofthe Health Industry Distributors Association; and Rick Doherty, a spokesman for the National Association for Medical Equipment Services. We thank each ofyou for joining us and we look forward to your testimony later today. It is my pleasure now to yield to my co-chair ofthis hearing, the distinguished Member from Connecticut, Representative Chris- topher Shays. Mr. Shays. [The prepared statement of Hon. Stephen Horn and the texts of H.R. 2480, H.R. 3224, and H.R. 1850, follow:] 3 ONEHUNDREDFOURTHCONGRESS Congress of tfje Hmteti States eJ.OdOMoUHiBpEUhMvScsP/tNBToAOw"SnfsJKSNLAESUCWXGTH--ToxbEkR• IMcHUOiNEW'Oft* %ouzeoffceprcsentat.be* COMMITTEE21O57NRGaOyVbuErRnNHMoEuNsTeROfEfFiOceRMBuiAlNdiDngOVERSIGHT C•E4ALAVREBOSOAMALNA«OrSABNMJ8->OOSISJAAEARAEHLo5EDa1TM MINNESOTA Washington,DC20515-6143 jU<jMCSAOOITmHJECEM.AtHVN^RtSAEALCES£MECLAh.SaRSP*udBOAMTeEuOTABOHO'RBBA"OBtKE-OSjBCLIBUSNKECAGITHRIHFNSTINLENADZEJAFWEINOBLNAWNFOOHANAOBAAGHJBlMAEOCOPNSASSSHEOI"CRN'EOhIS; MAA*J€°0€NMOTEYN_T2I»:225-50-. OPENINGSTATEMENTBY THEHONORABLESTEPHENHORN,CHAIRMAN SUBCOMMITTEEONGOVERNMENTMANAGEMENT, INFORMATIONANDTECHNOLOGY MAY2,1996 THISMORNING'SHEARINGWILLCONSIDERSEVERALLEGISLATIVEPROPOSALS DESIGNEDTOCOMBATWASTE,FRAUDANDABUSEINTHEMEDICAREANDMEDICAID PROGRAMS. INNOVEMBER1995OURSUBCOMMITTEESHELDAJOINTHEARINGTHAT CONSIDERED,AMONGOTHERMATTERS,HOWEXISTINGINFORMATIONTECHNOLOGY PROCESSESCOULDBEINCORPORATEDINTOTHEMEDICARECLAIMSSYSTEMTOMORE EFFECTIVELYIDENTIFYFRAUD. THEGOVERNMENTMANAGEMENTSUBCOMMITTEEHAS ALSOPREVIOUSLYRECEIVEDTESTIMONYFROMTHEINSPECTORGENERALFORTHE DEPARTMENTOFHEALTHANDHUMANSERVICESCONCERNINGHEALTHCAREFRAUD,AS PARTOFOURSUBCOMMITTEE'SOVERSIGHTRESPONSIBILITIESFORTHEINSPECTOR GENERALACT. THEGENERALACCOUNTINGOFFICEHASESTIMATEDTHATLOSSESTOTHEFEDERAL GOVERNMENT,ASARESULTOFFRAUDANDWASTE,AMOUNTTOAPPROXIMATELY10 PERCENTOFTHEOVER$340BILLIONSPENTEACHYEARONTHEMEDICAREANDMEDICAID PROGRAMS. THOSELOSSES,OVER$34BILLIONEACHYEAR,AREATRULYSTAGGERING SUM. DESPITETHEEFFORTSOFMANYAGENCIESTASKEDWITHUNCOVERINGTHESE ABUSES,WEALLKNOWTHATFARTOOMUCHREMAINSUNDETECTED. 4 INTHATREGARDTHISHEARINGWILLCONSIDERTHREELEGISLATIVEPROPOSALS: H.R.3224,"THEHEALTHCAREFRAUDANDABUSEPREVENTIONACTOF1996," INTRODUCEDONMARCH29THBYREPRESENTATIVESTEVENSCHIFFANDHUMAN RESOURCESSUBCOMMITTEECHAIRMANCHRISSHAYS. THEIRBILLMODIFIES LEGISLATIONTHATTHEYPREVIOUSLYINTRODUCEDWHICHWOULDHAVEEXPANDED LAWENFORCEMENTTOOLSFORCOMBATINGHEALTHCAREFRAUD. H.R.1850,"THEHEALTHCAREFRAUDANDABUSEACT,"WASINTRODUCEDLAST SUMMERBYTHERANKINGMEMBEROFTHEHUMANRESOURCESSUBCOMMITTEE, REP.EDTOWNS. ITISINTENDEDTOIMPROVECO-ORDINATIONAMONGAGENCIES WITHFRAUDDETECTIONRESPONSIBILITY. H.R.2480WASBEENINTRODUCEDBYREP.JACKQUINNLASTOCTOBER,ANDWOULD ESTABLISHANEWINSPECTORGENERALFORTHEMEDICAREANDMEDICAID PROGRAMS. EACHOFTHESEBILLSSEEKSTOENHANCETHEEFFECTIVENESSOFTHE MANAGEMENTOFTHEMEDICAREANDMEDICAIDPROGRAMS. THEYOFFERNEW DETERRENCEWEAPONSTOTHEDEPARTMENTOFHEALTHANDHUMANSERVICESANDTHE DEPARTMENTOFJUSTICEINTHEIRFIGHTAGAINSTFRAUD. WITHAPROBLEMTHISSERIOUS, WEARERECEPTIVETOGOODIDEAS. OURWITNESSESINCLUDEREP.QUINNOFNEWYORK;THEDEPUTY INSPECTOR GENERALOFTHEDEPARTMENTOFHEALTHANDHUMANSERVICES,MICHAELMANGANO;A REPRESENTATIVEOFTHEHOMEHEALTHCAREMARKETGROUPOFTHEHEALTHINDUSTRY DISTRIBUTORSASSOCIATION,DARRELLFOREMANANDASPOKESMANFORTHENATIONAL ASSOCIATIONFORMEDICALEQUIPMENTSERVICES,RICKDOHERTY. WETHANKYOUALLFORJOININGUS,ANDWELOOKFORWARDTOYOURTESTIMONY.