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                                                      Calendar No. 183
114th Congress     }                                    {       Report
                                 SENATE
 1st Session       }                                    {      114-104

======================================================================



 
  PREVENTING AND REDUCING IMPROPER MEDICARE AND MEDICAID EXPENDITURES 
                          (PRIME) ACT OF 2015

                                _______
                                

                 July 30, 2015.--Ordered to be printed

                                _______
                                

               Mr. Hatch, from the Committee on Finance, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 861]

    The Committee on Finance, to which was referred the bill 
(S. 861) to amend titles XVIII and XIX of the Social Security 
Act to curb waste, fraud, and abuse in the Medicare and 
Medicaid programs, having considered the same, reports 
favorably thereon with an amendment and recommends that the 
bill, as amended, do pass.

                       I. LEGISLATIVE BACKGROUND

    The Committee on Finance, to which was referred the bill 
(S. 861) to amend titles XVIII and XIX of the Social Security 
Act to curb waste, fraud, and abuse in the Medicare and 
Medicaid programs, reports favorably thereon with an amendment 
and recommends that the bill, as amended, do pass.

Background and need for legislative action

    The Medicaid Integrity Program (MIP) was established by the 
Deficit Reduction Act of 2005 to support and enhance program 
integrity efforts, by sustaining and expanding national 
oversight activities such as provider audits, overpayment 
identification and payment integrity and quality of care 
education. This bill enhances MIP by providing the Secretary of 
Health and Human Services (HHS) the flexibility to 
appropriately resource oversight activities; improving 
financial incentives for oversight contractors to encourage 
appropriate activities and goals; imposing stronger penalties 
against individuals who commit fraud; and strengthening data-
sharing initiatives in the Medicare and Medicaid programs to 
better identify patterns of fraud, waste, and abuse.

                      II. EXPLANATION OF THE BILL


                              PRESENT LAW

    Among other changes, the Deficit Reduction Act of 2005 
(DRA, P.L. 109-171) amended the Social Security Act (SSA) by 
adding Sec. 1936 which established the Medicaid Integrity 
Program (MIP). SSA Sec. 1936 appropriated as much as $75 
million annually in MIP funding to support and enhance state 
program integrity efforts by sustaining and expanding national 
Department of Health and Human Services (HHS) activities such 
as provider audits, overpayment identification, and payment 
integrity and quality of care education. SSA Sec. 1936, as 
originally enacted, restricted how MIP funding could be used 
and required the Secretary of HHS (the Secretary) to hire a 
specified (100) number of full-time equivalent (FTE) staff. SSA 
Sec. 1936 further restricted MIP funding to contractor payments 
and limited the Secretary's ability to use MIP funds for 
equipment, travel, training, and salaries and benefits.
    Medicare law requires participating providers and suppliers 
to comply with Medicare requirements stipulated in the SSA as 
well as the Centers for Medicare and Medicaid Services (CMS) 
regulations. Medicare law also requires the Secretary to 
provide incentives for Medicare Administrative Contractors 
(MACs) to provide quality service and to promote efficiency 
(SSA Sec. 1874A(b)(1)(D)), but does not specifically require 
the Secretary to use incentives for MACs to reduce errors. In 
addition, the Secretary is required to develop contract 
performance requirements for MAC duties and standards for 
measuring MAC's performance in meeting those requirements (SSA 
Sec. 1874A(b)(3)). Moreover, in developing standards for 
measuring performance, the Secretary is required to consult 
with stakeholders and to make the performance standards 
publically available.
    Section 505(a) of the Medicare Access and CHIP 
Reauthorization Act of 2015 (MACRA, P.L. 114-10) required MACs 
to have an improper payment outreach and education program 
which would provide outreach, education, training, and 
technical assistance to providers and suppliers within each 
contractor's geographic service area (SSA Sec. 1874A(a)(4)). In 
addition, MACRA Sec. 509(c) required the Secretary to make MAC 
performance information publically available (SSA 
Sec. 1874A(b)(3)(A)(iv)).
    CMS also requires all Medicare contractors to provide 
outreach and education to providers and suppliers and provides 
guidance to Medicare contractors on communications and 
interactions with providers and suppliers in the Medicare 
Contractor Beneficiary and Provider Communications Manual, 
Chapter 6--Provider Customer Service Program (Rev. 31, 02-13-
2015). This manual identifies a number of Medicare contractor 
requirements to provide education, outreach, and overall 
support through the Provider Customer Service Program (PCSP). 
CMS makes data available on the results of the PCSP on its 
Contractor-Provider Customer Service Program website including 
contractor performance data.
    In July 2014, CMS announced the establishment of a Provider 
Relations Coordinator. CMS indicated that the Provider 
Relations Coordinator was intended to improve communications 
between providers and CMS and to help increase program 
transparency while offering more efficient resolutions to 
providers affected by the medical review process. Providers 
were instructed to raise broader concerns about the medical 
review process with the Provider Relations Coordinator, but to 
continue to interact with MACs and RACs on individual claim 
questions.
    Current law does not provide specific penalties for 
selling, trading, bartering, or otherwise distributing 
beneficiary or identification numbers or billing privileges. 
Beneficiary identification numbers and provider/supplier 
billing privileges could be used to submit fraudulent claims to 
Medicare, Medicaid, or the state Children's Health Insurance 
Program (CHIP) programs.
    CMS initiated the Medicare-Medicaid Data Match Program 
(referred to as (Medi-Medi) as a pilot program in 2001.\1\ 
Medi-Medi was intended to help CMS and states identify 
overpayments and fraud that affected both Medicare and 
Medicaid. Based on comparative Medicare and Medicaid data, CMS 
investigated atypical billing patterns that may not have been 
evident when analyzing the data from each program separately. 
If problems were identified, CMS, through a contractor, 
coordinated with states (for Medicaid) and providers (for 
Medicare) to recover federal overpayments.
---------------------------------------------------------------------------
    \1\CMS founded the California Medicare and Medicaid Data Analysis 
Center (CMMDAC) on September 28, 2001 to show proof of concept for the 
Medicare-Medicaid data analysis and to demonstrate the value of 
comparative Medicare-Medicaid claims data analysis for the detection, 
prosecution, and elimination of aberrant practices.
---------------------------------------------------------------------------
    The Medi-Medi pilot was funded mostly by CMS with some 
addition support from the Federal Bureau of Investigation 
(FBI). California was the only state in the original pilot in 
2001. In 2005, CMS was allocated $19 million from the Health 
Care Fraud and Abuse Control (HCFAC) program to continue the 
California Medi-Medi pilot and expand it to eight other 
states.\2\ In 2006, Section 6034 of the Deficit Reduction Act 
of 2005 (DRA, P.L. 109-171) required the Secretary to expand 
the Medi-Medi program nationwide and established dedicated 
funding ($12 million in FY2006, rising to $60 million annually 
in FY2010 and every year thereafter).
---------------------------------------------------------------------------
    \2\Only Texas, Illinois, Pennsylvania, North Carolina, New Jersey, 
Ohio, and Washington agreed to participate in the Medi-Medi pilot in 
2005.
---------------------------------------------------------------------------
    In a 2012 report, the HHS Office of Inspector General (OIG) 
found that the Medi-Medi program had produced limited results 
and few fraud referrals.\3\ During 2007 and 2008, CMS had Medi-
Medi projects in 10 states, which produced about 66 fraud 
referrals to law enforcement, of which 27 cases were 
accepted.\4\ OIG also found that state Medicaid programs 
received less benefit from the Medi-Medi program than Medicare 
received.
---------------------------------------------------------------------------
    \3\The Department of Health and Human Services Office of Inspector 
General (OIG), The Medicare-Medicaid (Medi-Medi) Data Match Program 
(OEI-09-08-00370), April 2012.
    \4\In 2008, the following 10 states were participating in the Medi-
Medi program: California, Florida, Illinois, New Jersey, New York, 
North Carolina, Ohio, Pennsylvania, Texas, and Washington.
---------------------------------------------------------------------------
    Section 510 of MACRA required the Secretary to study and, 
as appropriate, specify incentives to encourage states to 
participate in the Medi-Medi Data Match program. Also, MACRA 
authorized the Secretary to use the limited waiver authority 
available in the Medi-Medi Data Match program to specify those 
state incentives.\5\
---------------------------------------------------------------------------
    \5\Under the Medi-Medi program, the Secretary has authority to 
waive only such requirements of SSA title XVIII, and titles XI and XIX 
as are necessary to carry out the Medi-Medi program (SSA 
Sec. 1893(g)(2)).
---------------------------------------------------------------------------

                        EXPLANATION OF PROVISION

    S. 861, as modified, would provide the Secretary with 
increased flexibility to spend program integrity funds under 
the Medicaid Integrity Program by (1) allowing for the hiring 
of federal employees to perform program integrity activities 
and (2) increasing the number the number of program integrity 
staff allowed for under current law from 100 to such numbers as 
determined necessary by the Secretary to carry out the program.
    To reduce Medicare payment errors, S. 861, as modified, 
requires the Secretary to establish incentives for Medicare 
Administrative Contractors to reduce improper payment error 
rates and otherwise improve payment accuracy. The incentives 
provided may include a sliding scale of award fee payments to 
either reduce the improper payment rates to certain thresholds 
as determined by the Secretary, or accomplish tasks that 
further improve payment accuracy. Further, the Secretary may 
include substantial reductions in award fee payments for 
Medicare Administrative Contractors that reach an upper end of 
improper payments or fail to accomplish payment accuracy tasks, 
as determined by the Secretary. These changes shall apply to 
contracts established or renewed on or after a date that is 3 
years after the enactment of S. 861, as modified, or in the 
case of existing contracts or those established within 3 years 
of passage, the Secretary shall implement through contract 
modifications.
    S. 861, as modified, amends the Social Security Act to 
establish that whoever without lawful authority knowingly and 
willfully purchases, sells or distributes, or arranges for the 
purchase, sale, or distribution of a beneficiary identification 
number or unique health identifier for a health care provider 
under Medicare, Medicaid or the Children's Health Insurance 
Program (CHIP) shall be imprisoned for not more than 10 years 
or fined not more than $500,000 ($1,000,000 in the case of a 
corporation), or both.
    S. 861, as modified, requires the Secretary to establish a 
plan to encourage and facilitate the participation of States in 
the Medicare and Medicaid Data Match Program. S. 861, as 
modified, also revises the Medicare and Medicaid Data Match 
Program to improve the program by amending the Social Security 
Act in order to further the design, development, installation, 
or enhancement of the use of algorithms and data system to 
collect, integrate, and access data for program integrity, 
oversight, investigative and administration purposes. Further, 
S. 861, as modified, provides states with data on improper 
payments made for items or services provided to dual eligible 
individuals by requiring the Secretary to develop and implement 
a plan that allows each access for state Medicaid agencies to 
relevant data on improper or fraudulent payments made under the 
Medicare program.
    Not later than 18 months after the date of the enactment of 
S. 861, as modified, the Secretary would be required to submit 
to Congress a report on the implementation of S. 861, as 
modified, and sections 506 and 507 of the Medicare Access and 
CHIP Reauthorization Act of 2015 (Public Law 114-10).

                    III. BUDGET EFFECTS OF THE BILL


                         A. Committee Estimates

    In compliance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate, and the Preventing and Reducing 
Improper Medicare and Medicaid Expenditures Act of 2015, the 
following statement is made concerning the estimated budget 
effects of the revenue provisions of the of the ``Preventing 
and Reducing Improper Medicare and Medicaid Expenditures Act of 
2015,'' as reported.
    S. 861 would increase revenues by $20 million over the 
2016-2025 period. Because the legislation would affect 
revenues, pay-as-you-go procedures apply. Enacting the 
legislation would not affect direct spending.

S. 861--Preventing and Reducing Improper Medicare and Medicaid 
        Expenditures Act of 2015

    Summary: S. 861 would aim to reduce improper payments in 
the Medicare and Medicaid programs. CBO estimates that enacting 
the bill would increase revenues by $20 million over the 2016-
2025 period. Because the legislation would affect revenues, 
pay-as-you-go procedures apply. Enacting the legislation would 
not affect direct spending.
    S. 861 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
    Estimated cost to the Federal Government: The estimated 
budgetary effects of S. 861 are shown in the following table.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  By fiscal year, in millions of dollars--
                                                   -----------------------------------------------------------------------------------------------------
                                                     2016    2017    2018    2019    2020    2021    2022    2023    2024    2025   2016-2020  2016-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   CHANGES IN REVENUES
 
Estimated Revenues................................       2       2       2       2       2       2       2       2       2       2        10         20
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Basis of estimate: CBO assumes that S. 861 will be enacted 
by the end of fiscal year 2015.
    S. 861 would direct the Secretary of Health and Human 
Services (HHS) to establish incentives for Medicare 
administrative contractors (MACs), which process and pay 
claims, to reduce the improper payment rate in that program.\6\ 
Funding for MACs is subject to appropriation. The Secretary 
would be allowed to make bonus payments to MACs with low 
improper payment rates and reduce payments to those MACs with 
high improper payment rates. CBO expects the Secretary would 
set the payment reductions and bonus payments so that they 
would leave total spending unchanged. Therefore, CBO estimates 
that implementing this provision would not have a significant 
effect on discretionary costs.
---------------------------------------------------------------------------
    \6\In general, improper payments are any payments in an incorrect 
amount (whether an under- or overpayment) or to the wrong person or 
entity. Some improper payments may be fraudulent, but others arise from 
human error, mistakes in documentation, waste, or abuse. Federal 
agencies are required to calculate improper payment rates for programs 
within their jurisdiction.
---------------------------------------------------------------------------
    The bill also would provide the Secretary with additional 
flexibility to administer the Medicaid Integrity Program by 
removing a limit on the number and type of staff that the 
Secretary may hire to conduct integrity activities under the 
program. In addition, S. 861 would require the Secretary to 
establish a plan to encourage and facilitate the participation 
of states in the Medicare-Medicaid Data Match Program. Funding 
for both the Medicaid Integrity Program and the Data Match 
Program is mandatory, the amounts available ($83 million and 
$60 million, respectively, for fiscal year 2015) are specified 
in statute, and CBO expects those amounts would all be spent 
under current law. CBO estimates that while these provisions 
would increase flexibility, total spending would not change.
    S. 861 would permit HHS to impose financial penalties for 
misuse of personally identifiable data of individuals who 
receive health care through Medicare, Medicaid, or the 
Children's Health Insurance Program. The same penalties could 
be levied on individuals who misuse provider billing 
information. The bill also would allow violators to be 
incarcerated for not more than 10 years for those offenses. 
Based on information about the frequency of such crimes, CBO 
estimates that $2 million in penalties would be assessed 
annually, thus increasing federal revenues by $20 million over 
the 2016-2025 period.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in revenues that are subject to those 
pay-as-you-go procedures are shown in the following table.

                 CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR S. 861 AS ORDERED REPORTED BY THE SENATE COMMITTEE ON FINANCE ON JUNE 24, 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              By fiscal year, in millions of dollars--
                                           -------------------------------------------------------------------------------------------------------------
                                             2015    2016    2017    2018    2019    2020    2021    2022    2023    2024    2025   2015-2020  2015-2025
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               NET DECREASE IN THE DEFICIT
 
Statutory Pay-As-You-Go Impact............       0       2       2       2       2       2       2       2       2       2       2        10         20
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: S. 861 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Estimate prepared by: Federal costs: Lara Robillard and 
Lisa Ramirez-Branum; Impact on state, local, and tribal 
governments: J'nell Blanco Suchy; Impact on the private sector: 
Amy Petz.
    Estimate approved by: Holly Harvey, Deputy Assistant 
Director for Budget Analysis.

                          B. Budget Authority


Budget authority

    In compliance with section 308(a)(1) of the Congressional 
Budget and Impoundment Control Act of 1974 (``Budget Act''),\7\ 
the Committee states that the bill as reported involves 
increased budget authority (see Part A, above).
---------------------------------------------------------------------------
    \7\Pub. L. No 93-344.
---------------------------------------------------------------------------

Tax expenditures

    In compliance with section 308(a)(1) of the Budget Act, the 
Committee states that the bill does not involve increased tax 
expenditures.

            C. Consultation With Congressional Budget Office

    In accordance with section 403 of the Budget Act, the 
Committee advises that the Congressional Budget Office has 
submitted a statement on the bill.

                       IV. VOTES OF THE COMMITTEE

    In compliance with paragraph 7(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee states that, with a 
majority present, ``Preventing and Reducing Improper Medicare 
and Medicaid Expenditures Act'' as modified, was ordered 
favorably reported on June 24, 2015.

                 V. REGULATORY IMPACT AND OTHER MATTERS


                          A. Regulatory Impact

    Pursuant to paragraph 11(b) of rule XXVI of the Standing 
Rules of the Senate, the Committee makes the following 
statement concerning the regulatory impact that might be 
incurred in carrying out the provisions of the bill.

Impact on individuals and businesses, personal privacy and paperwork

    The bill is not expected to impose additional 
administrative requirements or regulatory burdens on 
individuals. The bill is expected to reduce administrative 
requirements and regulatory burdens on some businesses.
    The provisions of the bill do not impact personal privacy.

                     B. Unfunded Mandates Statement

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995.\8\
---------------------------------------------------------------------------
    \8\Pub. L. No. 104-4.
---------------------------------------------------------------------------
    The Committee has determined that the bill does not contain 
any private sector mandates. The Committee has determined that 
the bill contains no intergovernmental mandate.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    In the opinion of the Committee, it is necessary in order 
to expedite the business of the Senate, to dispense with the 
requirements of paragraph 12 of rule XXVI of the Standing Rules 
of the Senate (relating to the showing of changes in existing 
law made by the bill as reported by the Committee).

                                  [all]