Good afternoon. I want to begin this hearing by welcoming our guests, who are here to join a very important discussion about health care fraud. For our first panel, we welcome Dr. Peter Budetti, who serves as a Deputy Administrator of the Centers for Medicare and Medicaid Services, and is Director of its Center for Program Integrity. We also welcome Lewis Morris. Mr. Morris serves as the Chief Counsel to the Department of Health and Human Services’ Office of Inspector General, an organization that is on the front lines of the fight against health care fraud.
On our second panel, we’ll hear from Karen Ignagni from America’s Health Insurance Plans and Lou Saccoccio from the National Health Care Antifraud Association. Both of these witnesses will be able to provide insight into how the public and private sectors work together to fight health care fraud, and where we might be able to improve antifraud efforts. I thank them for coming today.
We’ll also have the chance to hear from “Ike” Odelugo. Through a variety of schemes involving durable medical equipment, Mr. Odelugo defrauded the Medicare program of an estimated $9 million dollars. Since his days of committing health care fraud, he’s assisted law enforcement efforts to track down those engaged in similar activities. Today, he’ll describe both how he went about defrauding the Medicare system and, in his experience, just how easy it was.
This promises to be an eye-opening hearing on a very critical topic. This isn’t simply about those committing fraud, it’s about the patients and health care providers that are hurt by it. I come from a family line of physicians, and as a cardiothoracic surgeon, I understand that every dollar lost to health care fraud is a dollar not spent on patient care.
And we’re not talking about small sums of money. Health care spending accounts for one-sixth of our nation’s economy, and within this spending is an incredible amount of money lost to fraudsters. Professor Malcolm Sparrow of the Harvard Kennedy School said before the Senate Judiciary Committee in 2009, “The units of measure for losses due to health care fraud and abuse in this country are hundreds of billions of dollars per year. We just don’t know the first digit.”
The Federal Bureau of Investigations estimates that between three and ten percent of all health care spending is fraudulent – as much as $250 billion each and every year. As much as $50 billion of this yearly fraud is in the Medicare program. To put it another way, that’s over $135 million per day in the Medicare system alone.
Medicare crooks are robbing the American taxpayer each and every year of the same amount it took Bernie Madoff decades to rob from his private investors. Medicare fraud has become such an attractive target for criminals that the FBI and OIG have seen an increasing number of foreign criminal groups coming to America to exploit the program because it’s less risky, and a lot more lucrative, than other illegal ventures.
Without action, the problem is only going to get worse. The Medicare program alone had estimated outlays of $509 billion in 2010, and that number is expected to grow at a rapid pace as 7,000 Baby Boomers become eligible for Medicare every single day in 2011. CMS expects annual Medicare spending to approach nearly $900 billion in 2019. As this spending goes up, so will the amount of taxpayer money lost to fraud.
While the Affordable Care Act included some new anti-fraud provisions, it left a lot of suggestions by the Office of Inspector General, Government Accountability Office, and Members of Congress from both parties on the cutting room floor.
At the same time, the law created a host of new health care spending programs. The Congressional Budget Office estimates these new programs will cost $940 billion over the next ten years, and much more after that. CBO has estimated the Act’s anti-fraud provisions would save about $5.8 billion over the next ten years. That’s less than 1% of the expected fraud against federal health care programs during the same period.
But there’s also good news on this subject. Just last month a joint effort by the Departments of Justice and Health and Human Services resulted in charges against 111 defendants for allegedly defrauding the Medicare program of over $225 million. This was the largest crackdown we’ve seen yet and we look forward to hearing about these and other efforts.
There is also a lot to explore regarding potential public-private collaborations. As private health insurers develop new methods and technologies to prevent fraud, it’s important that the public and private sectors work together in what should be a mutually beneficial collaboration.
With important reforms, new technology, better use of data, and increased cooperation between the public and private sector, it is my hope we can put a substantial dent in the problem of health care fraud. This hearing seeks to begin that process.
I am now pleased to yield to our Ranking Member, Mr. Lewis.
1. Malcolm K. Sparrow, “Criminal Prosecution as a Deterrent to Health Care Fraud,” Testimony to Senate Committee on the Judiciary: Subcommittee on Crime and Drugs, May 20, 2009.
2. FBI Financial Crimes Report to the Public Fiscal Year 2009.
3. Government Accountability Office, GAO-11-278, “High-Risk Series: An Update.”
4. Center for Medicare and Medicaid Services, “National Health Expenditure Projections 2009-2019.”
5. HHS Office of Inspector General, “FY 2010 Top Management and Performance Challenges Identified by Office of Inspector General.”