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Office of the Press Secretary

For Immediate Release January 24, 1998
                            PRESS BRIEFING BY 

The Briefing Room

5:40 P.M. EST

MR. LOCKHART: Good afternoon, everyone. This is a briefing that is embargoed for the President's radio address, so it's embargoed for 10:06 a.m. tomorrow. The President has recorded his radio address, a few moments ago. That transcript will be available I believe sometime during the course of this briefing. We have passed out one fact sheet; there's another fact sheet on the way.

Joining us today to talk about the President's progress in fighting Medicare fraud and abuse, Secretary Donna Shalala, Health and Human Services; John Bentivoglio, the Special Counsel for Health Care Fraud at the Department of Justice; and the Inspector General at HHS, June Gibbs Brown.

SECRETARY SHALALA: Well, before we start talking about fraud, I would like to make an important announcement. Secretary Federico Pena and I have a bet on the game, the Super Bowl game. I, of course, am supporting the Green Bay Packers, since I come from Wisconsin; and he is supporting the Denver Broncos, since he's a former mayor. The bet is that when he loses, he's going to have to wear a cheesehead. I've already arranged with the Milwaukee Journal to take an appropriate picture. If I lose, I have to wear the cheesehead, which is no problem for me -- I find it very comfortable.

Let me also add that Jack Hartwig, the Deputy Inspector General of the Department of Health and Human Services for Investigations, is also here.

As the President will say in his radio address tomorrow, the Attorney General and I have given him the first annual evaluation of the health care fraud and abuse control program, which was required by the Health Insurance Portability and Accountability Act of 1996, which he signed into law. The point here is that this is the first of annual reports to the President and to the Congress on health fraud.

In that report we have told him that we returned to the Medicare trust fund the largest amount -- close to $1 billion -- ever returned to the trust fund in one year. Since the beginning of this administration, we have been committed, both the Attorney General and I, as our top priority to reduce health care fraud abuse, health care waste in the Medicare and Medicaid system. And this report indicates that we have been the most most successful fraud-busting team in the history of the Medicare program.

How have done it? First, with a strategy of combining the agencies into teams -- the Justice Department, the Inspector General's Office, the Health Care Financing Administration, the FBI, U.S. Attorneys, State's Attorneys General, working as a team to go after health care fraud.

Second, we started to close down and set higher standards for people who participate in providing supplies and drugs for the health care system, particularly for the Medicare system. And by putting those measures in place, we started to eliminate bad-apple providers.

Third, I think our efforts in what we have described as Operation Restore Trust, which is the name for our effort to reduce Medicare fraud, has been this team effort, this extraordinary effort using senior citizens themselves to report in the fraud and do our outreach to reduce fraud in the system.

And third, the President has announced, as part of this radio address, a new 10-step antifraud and abuse legislative package, which will allow us for the first time to get market prices for a whole set of Medicare activities in addition to making it much harder for those that would defraud the system to get into the system, in particular. And that includes people that want to sell us equipment, for example, into the Medicare program.

Our inability to get market prices for Medicare has led to excessive spending in the Medicare system. Both the Defense Department and Veterans Affairs can get market prices; we have not been able to do that. And the recommendations of the President will allow us to do that. The Congress gave us some limited authority last year. We will go after complete authority so we can pay market prices.

This is a very big success story. Our goal is to eliminate all the fraud in the system. And our success so far is we think quite remarkable.

MR. BENTIVOGLIO: Good afternoon. My name is John Bentivoglio. I'm the Special Counsel for Health Care Fraud at the Department of Justice. I appreciate this opportunity to speak about the Department's joint enforcement program with HHS.

In 1993, the Attorney General made fighting health care fraud one of her top priorities. With the support of the President and Congress, we have dramatically increased the number of agents and prosecutors devoted to fighting health care fraud. And as the Secretary said, the report that the President will release dramatically documents this success.

Simply put, we're doing more to combat health care fraud than ever before -- more criminal convictions, more civil enforcement actions, and record fines and settlements.

I want to emphasize our cooperative efforts with the Department of Health and Human Services -- Secretary, Inspector General Brown. They're our partners, and their efforts have played an important role in this success. Thank you.

SECRETARY SHALALA: We'll be happy to answer any questions you may have.

Q What are the areas where you can get market prices? Is this just on drugs or on --

SECRETARY SHALALA: No, it's also medical devices, durable medical equipment. This includes everything from wheelchairs to the seat pads, where we've had to pay prices that were inflexible, as opposed to going out to the market.

In my testimony before Congress last year, I held up a seat pad in which we were paying considerably more than buying it out of a catalogue. And that's because when the Medicare program was first put together, people were so nervous that the doctors and the suppliers wouldn't come into the system that they locked in a pricing structure that makes absolutely no sense in this competitive market. Neither the Veterans Administration, nor the Defense Department pay those kinds of prices. And we have been pounding on the table, demanding that we be able to pay appropriate prices for drugs, for durable equipment and for medical devices. For anything we purchase, we want to be able to go out into the market and pay appropriate prices -- market prices.

Q Are you talking about competitive bidding? How would that actually work?

SECRETARY SHALALA: We're talking about competitive bidding. We're now out -- we're putting some demonstrations in the field. We will get the best prices for the highest quality goods, and that's what we ought to be doing. We're moving into making the Medicare program a much more market-oriented program -- choices for Medicare recipients among plans and getting the best prices for what we purchase.

Q How much do you expect to save from these provisions? And if you could break out the competitive bidding one, that would be helpful as well.

SECRETARY SHALALA: We expect over $2 billion over five years for the new legislation the President is sending up. And on the competitive bidding -- well, we actually haven't broken it out.

Q So total savings for these 10 proposals is estimated at $2 billion over five years?

SECRETARY SHALALA: At $2 billion for the ones that have been submitted. We are putting in place some things that were passed as part of the balanced budget agreement right now.

Q Where do you think that you're overpaying for durable medical equipment? Are there some specific items?

SECRETARY SHALALA: We're overpaying for almost everything, because we're locked into a pricing structure and we need to pay market prices. If I can go down to a store and purchase something cheaper than what Medicare is paying, out of a store, which is a retail price for an individual, we're overpaying for almost everything. And my view is that we ought to be getting market prices. We ought to be behaving like the big purchaser that we are and getting the government the best prices. Even if we just ended up paying what Veterans and Defense was paying, we'd be saving considerable money in the system.

Q Where do you plan to expand your audits? Can you talk about this proposal to --

SECRETARY SHALALA: Let me have June Brown get up here and talk about the audits.

MS. BROWN: Yes -- the Health Care Financing Administration regularly audits a lot of the payments that are being made, and they intend to increase the number. We go in periodically and do a different type of audit, but theirs is an ongoing part of their control mechanism.

SECRETARY SHALALA: So it will be hospitals, skilled nursing facilities, home health care -- those will be the major places where we're going to focus our audits. Wherever we have had growth in the system we want to make sure that we have very good information about what's happening.

Other questions? If not, thank you very much.

Q How did the overpayment for the drugs -- why has that happened?

SENIOR ADMINISTRATION OFFICIAL: It's because of the rules of Medicare that don't allow us to go out and bid for the drugs that we pay for. And it's an old-fashioned system that, as I indicated, was put in place for a very specific reason. It was to attract people to the Medicare system.

Remember, Medicare has flipped. When we first came into office, everybody was complaining that we didn't pay enough and that Medicare was underpaying suppliers; doctors were threatening to leave the system. Corporations in this country then went out and negotiated deep discounts with HMOs to get better prices for everything. Medicare turned out, then, to be a much better payer. We didn't get a chance to take advantage of the kind of discounts and competitive market that was taking place out there. And we need to do that now. We are no longer the low payer in the system. We need to take advantage of the fact that the market has changed and get more business-like in our procedures.

Q Could you clarify something on point number 8 about the kickback schemes? I thought there were already civil money penalties under the kickback statute.

SECRETARY SHALALA: I think this is about tests -- do you want to talk about that, one of you?

MR. BENTIVOGLIO: There are some civil money penalties in this area, but we don't have civil enforcement authority in this area. So civil actions fall between criminal and administrative, and this is an important tool.

SECRETARY SHALALA: Thank you very much.

END 5:53 P.M. EST