will be unfolded today and tomorrow. In fact, in some instances they spent money out of their own pockets to avoid interruption of the investigation. These investigators are a credit to those who support responsible and efficient government.

Now to specifics. Recently the Committee on Finance which has legislative jurisdiction over medicare and medicaid held 5 days of hearings on my bill, S. 3205, the Medicare and Medicaid Administrative and Reimbursement Reform Act. That proposal, in which I was pleased to be joined by Senators Moss and Nunn, along with other Senators, contains a number of significant provisions designed to more effectively prevent, detect, and punish fraud under the Federal health financing programs. It was my expectation that we would act early in the next session to move the bill through the Congress. Howver, the situation is urgent.

I, therefore, have taken from S. 3205 the various antifraud sections, adding somewhat to some of them and improving upon others. It is my intention to introduce an antifraud bill by early next week. Senators Moss, Nunn, and others have been consulted during the work on this proposal and will join with me in introducing it. It is my hope that this antifraud measure can be added as an amendment to an appropriate House-passed bill this year.

Quite simply, we believe that we should not wait another 6 months to enact vitally needed antifraud legislation. We intend to do all we can to secure passage of these necessary reforms in this session of the Congress.

Again I want to commend Senator Moss for the fine public service he has rendered with this investigation and for the kind invitation to participate in this hearing with you.

[End of statement.]

Senator Moss. Senator Talmadge will join us tomorrow definitely and if he gets a break in that conference he will come in today.

As I announced earlier, Senator Nunn has joined us this morning. He is chairman of the Oversight Subcommittee of the Senate Government Operations Committee.

Senator Nunn, do you have any opening statement you would like to make?

STATEMENT BY SENATOR SAM NUNN OF GEORGIA

Senator NUNN. Very briefly, Mr. Chairman. I am very pleased to be here this morning. I would ask that my complete statement be put in the record as acting chairman of the Permanent Investigating Subcommittee.

I have had our staff looking into this overall area of medicare and medicaid fraud and abuse. I commend you and your staff for this extraordinary effort. I believe that it will give a major thrust to the Talmadge reform bill which I am cosponsoring. I hope that we will be able to take action on it this year.

Rather than taking more of the committee's time, I do thank you for letting me appear with you. I would ask you to place my full statement in the record.

Senator Moss. Without objection, it will be placed in the record in full.

[The prepared statement by Senator Nunn follows:]

PREPARED STATEMENT BY SENATOR SAM NUNN

I would like to join in commending Senator Moss and this Special Committee on Aging for their extraordinary and continuing oversight investigations into fraud and abuse in the medicare and medicaid programs.

I am acting chairman of the Permanent Subcommittee on Investigations, which is likewise conducting inquiries into fraud and abuse in the health and welfare industries. I know from our current investigations that what will be presented before this committee today and tomorrow are not isolated examples. Indeed, they are part of the actual conditions in the health care services industry.

They are so much a part of the industry that I believe they are major factors behind increasing program costs and the continuing escalation in national health expenditures. But more importantly, fraud and abuse of the health sector does not simply cost money. It can result in injury to and even deaths of patients who are given too many drugs, too many tests, too many surgeries.

The work of Senator Moss and the Special Committee on Aging in the areas of nursing homes, laboratories, and now the medicaid mills points Congress in an obvious direction. We must address the problems of fraud and abuse more specifically and more forcefully. I hope that Senator Talmadge's antifraud bill will clear the Congress this year. I support it and I am pleased to have worked with him on it.

As I said recently to the Senate Finance's Health Subcommittee, if somehow we could legislate that only men and women of good conscience should be involved in receiving and spending Government health and welfare funds, then we would have no need for systems to spot the culprits. But we cannot.

So we must continue to look for schemes and the schemers and respond immediately with legislative reform and encourage regulatory reform. It will require the continuing vigilance of Congress, the kind of vigilance shown by this special committee and its most capable staff to insure that the laws are sufficient to punish the criminals and to assure ourselves that those charged with administering the laws do so effectively.

Senator Moss. We do appreciate your sitting with us this morning and the cooperation that we have had with your committee as well as Senator Talmadge's committee. The interaction among the committees has been extraordinarily good.

I would just like to mention that Senator Percy is the ranking Republican member on the Nunn subcommittee as well as this subcommittee.

The Senator from Maryland, Senator Beall.

STATEMENT BY SENATOR J. GLENN BEALL, JR.

Senator BEALL. Yes, Mr. Chairman. I ask unanimous consent that my full prepared statement be included in the record.

I would like to take this opportunity to congratulate you and the staff of the committee and the investigators who cooperated in gathering the information for today's hearing. You have done a great service in helping to expose the shortcomings and the abuses of the present

system. I would point out also that the subcommittee investigators did an outstanding job, earlier this year, in bringing to light the fraud which has infiltrated many of the clinical laboratories which participate in the medicare and medicaid programs. I would note, Mr. Chairman, that those earlier hearings prompted me to offer an amendment to S. 1737-the Clinical Laboratories Improvement Act-which increased the criminal penalties for fraud and abuse in the delivery of laboratory services. The Senate passed S. 1737 on April 29, and I would hope that the House of Representatives would act on this important matter before the Congress terminates its activities early in October. As the ranking minority member on the Labor and Public Welfare Committee's Subcommittee on Aging, I am continually interested in the problem of health care delivery to our senior citizens. Mr. Chairman, you and Senator Domenici, as members of the Budget Committee along with me, have been concerned about and wrestled with the problems of setting national priorities within the constraints of a fiscally responsible Federal budget. Medicare and medicaid are large programs which consume billions of State and Federal dollars each year. They are vital programs that provide medical services to the elderly and the poor who might not otherwise have access to medical care.

I think it is essential that the corruption that exists in these programs must not be tolerated because it drains away vitally needed but necessarily limited resources, thus depriving needy members of our society of the health services they need and deserve. In addition, it rips off the hard pressed American taxpayer, it undermines the public's confidence in the ability of Government to deliver services to our people in an efficient and effective manner, and it will tend to undercut public confidence in the medical profession.

As Senator Percy pointed out, we cannot begin to support a national health insurance plan unless we first have the program structured in such a way as to protect the public from the type of corruption and abuse that you and the subcommittee have turned up in this investigation. I would congratulate you on the work that has been done by the subcommittee and I hope that, as a result of these hearings, we can come up with meaningful legislation that will bring solutions to bear on these very important problems.

Senator Moss. Thank you very much. The full statement will be placed in the record.

[The prepared statement by Senator Beall follows:]

PREPARED STATEMENT BY SENATOR J. GLENN BEALL, JR.

Mr. Chairman, I am pleased to participate in this morning's hearing which will focus much needed attention on the serious problem of fraud in the medicaid/medicare programs. The Long-Term Care Subcommittee has, through its investigations and hearings, done much to expose the shortcomings and abuses of the present system.

The subcommittee's team of investigators did an outstanding job of bringing to light the fraud which has infiltrated many of the clinical laboratories which participate in the medicare/medicaid programs. I would note, Mr. Chairman, that those earlier hearings prompted me to offer an amendment to S. 1737, the Clinical Laboratories Improvement Act, which increased the criminal penalties for fraud and abuse in the delivery of laboratory services. The Senate passed S. 1737 on

April 29 and I would hope that the House of Representatives would act on this important matter before the 94th Congress adjourns.

As the ranking minority member on the Labor and Public Welfare Committee's Subcommittee on Aging, I have continually sought to improve the quality of life of our Nation's 22 million senior citizens. As members of the Senate Budget Committee, Senator Moss, Senator Domenici, and I have wrestled with the problems of setting national priorities within the constraints of a fiscally responsible Federal budget. Medicare and medicaid are large programs which consume billions of State and Federal dollars each year. They are vital programs that provide medical services to the elderly and the poor who might not otherwise have access to medicare care.

Corruption in these programs must not be tolerated because:

(1) It drains away vitally needed but necessarily limited resources, thus depriving needy members of our society of the health services they need and deserve.

(2) It rips off the hard-pressed American taxpayer.

(3) It undermines the public's confidence in the ability of government to deliver services to our people in an efficient and effective man

ner.

(4) It will tend to undercut public confidence in the medical profession.

I repeat Mr. Chairman, that we must not tolerate this kind of corruption. We must promptly root out any and all corruption from the medicare/medicaid programs and we must devise procedures and administrative structures that will prevent its reoccurrence. This is a difficult challenge but the Congress and the administration must meet and resolve this program before we can seriously consider massive new programs such as national health insurance.

In closing, I would note that I gave this matter a great deal of thought when I was drafting S. 2702, the long-term care amendments of 1975. That bill, which is pending in the Senate Finance Committee, would replace medicaid as the funding vehicle for a whole range of medical and nonmedical services delivered in institutional and noninstitutional settings for senior citizens. The mechanism contained in my bill that would hopefully prevent fraud and abuse is the community long-term care center. The community long-term care centers would have an elected governing board, of which a majority would be older persons. That local board and its professional staff would evaluate and certify the long-term needs of the individuals who reside in their service area. The funds would flow from the Federal Long-Term Care Trust Fund to the community long-term care centers by way of a State plan. The center would actually purchase or provide the needed services, such as home health services, homemaker services, nutrition services, long-term institutional care services, day care services, foster home services, and community mental health center outpatient services. The center would control the funds and carry on a continuous followup relationship with each individual receiving services under this program.

In drafting S. 2702, it was my hope that the creation of community long-term care centers would enable us to structure a responsive program with adequate safeguards against abuse, fraud, and/or misuse. Mr. Chairman, I commend you for undertaking this investigation

and I hope that this series of hearings will help Congress and the executive branch to come to grips with this pressing problem.

Senator Moss. I do appreciate the fine work you have done in cooperating with this subcommittee and the staff as we develop these investigations.

The Senator from New Mexico, Senator Domenici.

STATEMENT BY SENATOR PETE V. DOMENICI

Senator DOMENICI. I will only take a moment if my statement can be made a part of the record. I do want to commend you and the staff, Senator Moss, for an excellent job. I did not personally visit the medicaid mills in New York, only in Chicago. I am delighted that a number of Senators from important committees of our U.S. Senate are actively involved in trying to help with this very serious problem. It is long overdue.

I personally don't know how we are going to solve the problem; it is an incredible new subculture delivery system that has grown up in the medical practice. It is not the average doctor, but rather just a strange new culture that almost ignores everything that we thought was right and needed by way of a delivery system. Whether or not we are going to solve the problem with fraud and abuse statutes, I don't know. I do wholeheartedly support such measures and I will join in trying to expedite their passage.

It is absolutely incredible when you go into a major American city, particularly the slum area, to see what has happened in the years since medicaid. I don't think anyone would have believed that a slum building would now become a storefront, well-advertised delivery system. The most pronounced act in all of them are the green cards. It is as if we are inviting people off the street to come in, promising care. Then when you get in many medicaid mills you find the paraphernalia that advertises what they have there to offer to our poor people is something again. This deception has created a new culture in America's medical delivery system. You would not believe what is imposed on these people.

Now you have yourself participated in that, Mr. Chairman, as have our staff. I assume that thousands of Americans have already experienced it and hundreds of millions of dollars have gone for naught. I have a word of caution or warning. I don't think laws are going to totally solve the nightmare, but I think the medical profession has a grave responsibility. Ninety-nine percent of them are not involved in this. Most of the involved doctors are foreign medical people, as you know, Mr. Chairman.

Somehow or another we need some help in terms of enforcing the standards of excellence that are delivered to most Americans by the medical practitioners. We need their help in seeing that those who deliver medical service to our poor people, basically in our slums, are also held at that standard also. I don't know how we can do that, but that fact is a must. I think this hearing and the others that will follow it must excite this institution, the Senate, but also the medical people, those who are involved in training our doctors, our medical schools. State and local authorities are just going to have to get concerned enough to join in a war of not only stopping it but also in an affirmative approach of finding a better way to do it.