HEALTH CARE FRAUD AND ABUSE THURSDAY, MAY 7, 1992 HOUSE OF REPRESENTATIVES, HUMAN RESOURCES AND INTERGOVERNMENTAL RELATIONS SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS, Washington, DC. The subcommittee met, pursuant to notice, at 10 a.m., in room 2247, Rayburn House Office Building, Hon. Ted Weiss (chairman of the subcommittee) presiding. Present: Representatives Ted Weiss, Donald M. Payne, Rosa L. DeLauro, Craig Thomas, William H. Zeliff, Jr., and Bernard Sand ers. Also present: James R. Gottlieb, staff director; Marc Smolonsky and Ann Marie Atkins, professional staff members; and Stephen D. McMillan, minority professional staff, Committee on Government Operations. OPENING STATEMENT OF CHAIRMAN WEISS Mr. WEISS. Good morning. The Human Resources and Intergovernmental Relations Subcommittee is now in session. The savings and loan crisis, the worst financial scandal in American history, will cost the taxpayers at least $200 billion. But that will eventually seem like a penny-ante affair compared to the $100 billion a year price tag of health care fraud and abuse. Fraud and abuse are fueling inflation in the health care industry that is beyond belief. By the year 2000, health care costs will reach $1.6 trillion, a 20-year increase of 800 percent. Health care costs threaten to bury us, deepening the national recession and fueling the out-of-control Federal deficit. While all taxpayers are asked to dig deeper into their pockets to pay for health care, the poorest Americans are bearing a price of a different kind. Nearly 40 million people have no health insurance at all, frozen out of the health care system largely because of the outrageously high cost of care. And at a time that fraud and abuse inflate health care costs, the Federal Government is deflating resources to stop runaway ripoffs. In the last 3 years, during a time when Medicare claims increased by 40 percent, the administration cut oversight funds by $33 million. I do not understand how we can be cutting funds to oversee Federal health insurance programs at a time when costs are rising at the speed of light. The private sector is not faring much better. Hampered by a general lack of coordination between companies, the insurance indus (1) try has done little more than pass the costs of fraud and abuse on to consumers. The gouging of our Nation by a small percentage of medical people, the so-called medical entrepreneurs, has to be stopped. Current enforcement efforts are too fragmented, involving various Federal authorities, State agencies, even the Postal Inspector's office. I believe that an important first step toward ending the problem will be the creation of a national intergovernmental commission to map out a coordinated strategy against health care fraud and abuse. At the conclusion of today's hearing, I will be introducing legislation to create such a commission. Before we go to our panel of expert witnesses, and I am grateful for the participation of each and everyone of you, let me call on our distinguished ranking minority member, Mr. Craig Thomas. Mr. THOMAS. Thank you, Mr. Chairman. May I place my statement in the record? Mr. WEISS. Without objection, of course. Mr. THOMAS. Thank you very much for this hearing. I think it is a most important hearing, and certainly a most important issue. There is no issue before us that is more compelling than the business of health insurance and health care delivery. And obviously, access and cost are the two issues that we need to deal with, and this hearing today deals very directly, I think, with cost and cost containment. Nobody favors fraud. There is no question that we need to ferret out fraud and get rid of it, and I am sure that is what we are here to talk about. We also, however, don't need excessive regulation. We don't need more and more regulation piled onto people who are seeking to deliver health care and replace the cost of fraud with the cost of regulation, and that can very easily be done. I hope that as we look at this and find ways to resolve it, that we don't simply pile more on what we have. But if we need to change, go back and start from a clean slate and change what we are doing. Too often I think in this place and in this Government we continue to do what we have been doing in the past and expect things to change, and they don't change. So I am very pleased that you are here. I think the inspector general, from what I have read, has been very active in this matter, and that is good. So, Mr. Chairman, I am delighted that you are having this hearing, and I want to join with you certainly in doing whatever we can effectively accomplish on fraud. But I say again that I am not certain yet that we need another commission. We have things happening now. I am not sure we need to pile on more regulation. We need to cut to the bottom of this thing and start over with some really clean directions to contain fraud. So I appreciate being here, and thank you for this hearing today. [The prepared statement of Mr. Thomas follows:] OPENING STATEMENT OF CONGRESSMAN CRAIG THOMAS (WY-AL) RANKING REPUBLICAN MEMBER, SUBCOMMITTEE on HUMAN RESOURCES and INTERGOVERNMENTAL RELATIONS Oversight Hearing on Health Care Fraud and Abuse May 7, 1992 MR. CHAIRMAN, let me begin by thanking you for holding this We have to ask ourselves how and why this problem has gotten The cost and size of the health care industry in this country has exploded over the past decade. $700 billion this year...another $1 trillion by 1995. New technologies have promised hope and relief where once there was none. Yet, at the same time, old diseases once thought defeated, such as tuberculosis, have come back and strained already strained resources. This has occurred as we continue the fight against diseases such as AIDS, cancer, neuromuscular diseases and Alzheimer's. We have created a bureaucratic system to address just about every aspect of the health care industry. But it is a bureaucracy that is riddled with cracks that allow numerous problems to be trapped for long periods in a cobweb of rules and regulations; or to walk through unnoticed and free of responsibility; or to fall through with little care or concern. It is within this setting that we will always find folks who feel they can beat the system because a system this big simply doesn't have time to ferret them out. Who will notice a double or triple billing spread among several insurance carriers? What federal bureaucracy has the time or manpower to come down on a back-alley physician dispensing drugs of dubious safety and efficacy? Why not schedule tests and procedures to protect from liability, especially when they don't "cost" anybody anything? But they do have a "cost"....sometimes deadly. They cost us when hesitant insurance carriers begin to drop coverage and specialists begin to get out of the system. They cost us when government resources are diverted from the process of getting safe and effective drugs into the market in a timely fashion to help millions of sick and dying people. They cost us when millions of people live in this country without the availability of competent medical care or the means to pay for it. They cost us when a child dies simply because his or her parents couldn't afford to see a doctor and receive the necessary shots because the system has ganged up on them. The representatives from the Department of Health and Human Services and the Department of Justice will detail the success they've had in detecting and prosecuting cases of fraud and abuse. It is evident from looking at the reports of the Inspector General that thousands of individuals, organizations and corporations have been successfully investigated and prosecuted. Recoveries have totaled in the billions of dollars. But much of this has been accomplished with limited or diminishing resources. We congratulate these agencies on their efforts to date, and hope that we can provide them with the necessary tools to continue their fight. But it is evident that they have only touched the tip of the iceberg. In a way its discouraging to find out how successful they've been at their jobs. That means there is too much of this activity going on in the first place. The parties in the health care system...the doctors, hospitals, insurance carriers, pharmaceutical companies, the lawyers, and the public advocate groups...all have a role to play. And a responsibility. It is time to openly and honestly address the root causes of the problem before us today. It is also time to join in a partnership with the government to become the active agents of reform, even when that means taking the hard but necessary steps of policing and punishing your own members who have created the problem. Once again, Mr. Chairman, I thank you for holding this hearing today and look forward to the testimony of all our witnesses. Mr. WEISS. Thank you very much, Mr. Thomas. The buzzer has gone off, there is a vote on the floor, and so rather than start and then interrupt our panel of witnesses, we are going to take a recess to cast our votes and we will be back. The hearing will resume in approximately 10 minutes. [Recess taken.] Mr. WEISS. The subcommittee is now back in session. Before we proceed to the witnesses, let me call on our distinguished Member from Connecticut, Ms. DeLauro. Ms. DELAURO. Thank you, Mr. Chairman. I want to commend you, Mr. Chairman, for requesting this eye-opening report on health care fraud and for calling this hearing today. The cost of health care is one of the issues, quite honestly, that I hear most about from my constituents. It is the single issue that I hear most about when I am back home, which is every weekend. And in my view, one of the significant factors contributing to the exorbitant cost is the whole issue of fraud and abuse. Our skyrocketing national health care is expected to pass $800 billion this year. No American family is immune from the pain that these rising costs are causing. One out of two working households have already had their benefits cut by their employer or been required to contribute more for coverage. We are all bearing the burden of rising costs in the form of increased deductibles, copayments, and premiums. These costs are undermining Medicare and forcing seniors to eat into their fixed incomes to cover doctor bills or prescription drugs. Health care fraud and abuse are taking money out of the pockets of working families, food out of the mouths of seniors, and forcing small businesses to close their doors or to drop their health care plans altogether. Health care criminals are getting rich, while average Americans are paying the price. The report that the General Accounting Office has prepared for us for today's hearing presents a number of shocking facts about health care fraud and abuse. Fraud and abuse consume an incredible percentage of our health care dollars, approximately 10 cents out of every dollar we spend. If these health care costs are allowed to rise unchecked, then health care will soon become a luxury that only the wealthy can afford. This should not be the case in this Nation. Health care is a basic right that all Americans are entitled to. American consumers must be protected from those unscrupulous health care providers who are determined to milk the system. The financial and the social costs of this behavior are devastating. Unfortunately, as the report demonstrates, the health care sector is a vulnerable target for fraud. The health care consumer does not generally pay for the services provided directly, but rather through public or private third-party payers. This, combined with the complexity of health care billing and the lack of any universally accepted measures of appropriate treatment, makes it extremely difficult to pinpoint and to eliminate fraud. While there have been some strides taken in the detection of fraud, the number of prosecutions won and the dollars recovered by public and private payers represent a minuscule fraction of the total scale of the problem. Health care criminals are getting away |