jack, his leadership, especially of his patriotism. seeing the outpouring support in pennsylvania and seeing it i4ú1& l tell of their wisdom and the congregation will continue to sing their praise. wouldn't jack murtha's grandmother, tim, wouldn't she

be proud of the difference that jack murtha made, that he would meet that standard? make it -- on this earth to make a difference. others have referenced that. when we traveled with him, whether it was to the theaters of war or to bethesda naval medical center or to walter reed -- as mr. young has referenced -- he was so interested in these soldiers. he could identify to them and speak to them as one who had served in the military. but also his affection for them was as a father. my favorite time was when they knew he was coming they would be excited and this and that. one day the door was closed and me said, patient is not ready yet. and we waited a moment. then the door opened -- they opened the door and there was

the patient standing in full salute of jack murtha wearing a steeler's jersey. [laughter] jack loved that. jack loved that. jack was a man of great courage, recognized so by receiving the prestigious john f. kennedy profiles in courage award. he won that for the courage it took for him, a person committed to our national security, a person who loved every one of our men and women in uniform, the courage it took for him to speak out against the war in iraq. and in doing so he taught us very clearly to make the distinction between the war and the warrior. jack believed that our national strength certainly was measured in our military might and the morale and well-being of our troops but also that it was measured in the well-being of the american people. and so while others have

acknowledged as many how well decorated he was, a war hero, a serviceman, he was also well recognized and decorated and received many awards for measuring the strength of our country again in the well-being of our country by people, by his leadership on investments in breast cancer, prostrate cancer, diabetes, hiv-aids, you name it. jack recognized the role that research played in making america healthier and stronger. jack's model -- the model of marines, which he was very pride -- right, brian? we visited brian in iraq and how proud he was seeing you there. semper fi, that was not only

the model of the ma -- motto of the marines which he was so proud of, it was the motto of his life. always faithful. always faithful to his family. his love of joyce was so palpable. it was so wonderful. it was such a joy to be behold. that's why he was going home every night not socializing with billy young or the rest of us for that matter. i feel quite certain that the caliber of person that he was, the specialness of his personality, the obedience to his grandmother to make a difference, his patriotism to his country, his love of his family, his mastery of the legislative process made jack murtha very special. i am quite certain that we will never see his like again.

i also mention in pennsylvania about jack those of us knew him here knew it was important. he loved this institution. and he loved it as others have acknowledged -- acknowledged. i think that love was inkindled -- is that the word? kindled by his friendship with tipo neil. he loved tip o'neill. tip was his mentor. tip was his friend. tip loved this institution. and together they made progress for our country. they made friends with each other. and it's a special part of who jack murtha was. i, too, have a flag. this flag was flown over the capitol, joyce, the minute that we heard that jack had left us. on behalf of the congress of the united states, i want to

present it to you in recognition of jack's leadership and patriotism. every day that he was here he honored the pledge we took in the morning. with liberty and justice for all. how appropriate that god bless america is the song that was sung today. god truly blessed america with the leadership and the life of jack murtha. thank you. [applause] ded ecleezeasties. [applause] >> ladies and gentlemen, the vice president of the united states, the honorable joseph biden jr. >> joyce, thank you for

allowing me to be here. to the murtha clan, your dad was one hell of a guy. i had a strange way of committing the cardinal sin of going to the united states senate when i was 29 years old, not serving in the house, don't have the day-to-day connection with jack that all these guys had. but i was there at the beginning and at the end. i was a 31-year-old kid, and i was a sitting united states senator for about one year and i got a phone call. i got a phone call from a guy named murtha. well, i didn't know. never heard of him. and he told me that he was

running this special election in johnstown. and he said he knew i was from scranton, thought i understood the ethic of his district a little bit, will i campaign for him. and i did. there may have been others that campaigned but i don't recall. i remember when i went in he was ahead by about five points and won by 122 votes. [laughter] so i know i can't hurt him now. reason i came safely this time i knew there's nothing i could do to hurt him now. my son, hunter's, with me and tells war stories about jack. and the first guy i asked to visit me in the residence i now have, vice president's residence, to talk about iraq and afghanistan was jack. jack came over and spent about two hours sitting on the porch because i wanted his advice.

but my son hunts with me. and, hunt, look around at the congressmen that are here. there's a lot of congressmen here. but every one of the folks that i know whose reputation unwritten, not formal representation is on their gut, their gumption, their ethic. the fact that they're fighters, their sense of personal commitment. you know, it goes from bobby brady. you know, bobby, one of the regrets i had, i used to kid, growing up in casey, hunter, up in scranton, i tell you what, would have been a hell of a neighborhood to grow up in if you and jack lived in the neighborhood because you both could have -- he could have lived in your neighborhood in philly and he could have lived in his.

it's the same ethic. it's about an ethic, chris. the ethic you have. it's more than about character. a lot of people have character. not enough. but few people have that intangible thing. my mom calls it the sixth sense. there's something about some people who just know that will get your back. tell' get your back. i know i'm not supposed to be this informal as vice president , but the jack that i knew, the jack that i love, the jack that i respected, all the things that was said about jack today are all true. and i recognize them. but the part i liked about him the best, the part i liked about him the best is a stand up son of a gun. he knew what it meant to give

it at the office. he was a guy, paul, when he made a deal and his circumstances changed at home and it would hurt him to keep it, like the guys here in this front row, he'd say, i get it, i made a deal. a deal's a deal. it hurts me. i'm keeping the deal. it's a scranton ethic, it's a johnstown ethic. you know, it's the ethic of a lot of you sitting out here. danny, i don't know anybody with more personal courage that you. but jack was kind of like you. jack could stand up when it wasn't popular. he'd stand up and defend individuals when it wasn't popular. you know, you talk about how jack was a great soldier, and he was. and i could remember -- i

remember going out to campaign for him, general, and i did a little bio. i wanted to know about this guy that was running this special election. who had been running the johnstown car wash before this time. what was the deal about this guy? and i learned this guy when he was playing football at washington-jefferson college he got his start the berth because he realized the guy was going to korea and that was the reason he would get the start, he left and enlisted and wanted to go to korea. it's sort of the ethic that, you know, if i'm getting this job because someone else is making the sacrifice, i sure as hell shouldn't benefit from his sacrifice. kind of basic stuff. kind of basic stuff that we don't talk about very much. but it's that special stuff. it's the stuff that makes so

many of you so different from other people. then he didn't get to go to fight in korea. became a drill sergeant and experience served him very well in the house. [laughter] but here he was, comes along later and he decides he, vietnam war, still wants to fight for his country. now, guessing i don't know for a fact, joyce, but guessing i could picture a conversation going like, well, so-and-so's gone and so-and-so's gone and so-and-so's gone and mary lost her husband and mrs. smith lost her son and i'm sitting here. you know, that's the stuff the fables about how people we like

to think of our country, made up of men and women like that, but that was jack. that was jack. i was graduating into vietnam in 196. there weren't a whole lot of people ready to go, and here jack, he decided he wants to go. well, you know, he had to file a petition. he got the petition. and he showed his medal. he's a man that always was fighting but fighting for opportunity. he fought for his country but he never stopped fighting. when he got back here. but it wasn't a fight out of anger and resentfulness. it was a fight about this is just right. wasn't complicated, in my experience of jack, it wasn't complicated stuff. it's right or it's wrong.

if it's right you got to do something about it. i also remember thinking that when i was out there in 1974, if any man reflected his district it was jack. marcy talked about, you all remember the movie diagnosis dear hunter." -- remember the movie "dear hunter." that was jack. he reflected the ethic of his district. like so many of your districts, the people here. i -- he was made of the same stuff of the people he served with and actually grew up with. throughout his career he -- people tried to pigeon hole him. i remember people would say because i have different views of things as chairman of the foreign relations committee, i served longer than jack,

probably most of you here in the united states congress. and they said, how can you be such good friends with jack? this guy's a hawk. this guy's a hawk. remember i almost lost your @@@) called for the marines to investigate what happened because he was such a defender of the marines. i think what people didn't get about jack, it was all about honor and duty and about

protecting his marines, not just protecting them physically, protecting their honor. to jack it was about honor. .

there was one kid, both legs gone, part of one arm, and he had one of those triangles above his bed, and i walked in and he was asleep. so i said to the nurse -- she said no, he wants to see you. he really wants to see you. and the kid pulled himself up on this triangle and said, sir, i'm sorry i can't stand. and then he said to me, do you know congressman murtha? let me tell you something, i think that the ethic of jack murtha exemplified here is the stuff that is most admired by

the american people. and the stuff of which we sort of sing songs about. jack, talk about jack's corner, pennsylvania's corner. like i said i never served here, but the way i kind of looked at it without knowing him except on two occasions being able to come to the corner when i came over here to do some business when you allowed those of us from the upper chamber to traverse into god's country, i always thought about it was not so much who was in jack's corner but whose corner jack was in. you know, 1977, the johnstown flood, i was head of the used to

be called public works committee, chris, before it was the environmental public works. i was in the disaster subcommittee. i flew to johnstown. there was only one man in america who could have gotten any notice, chairman obey, other than dan flood, at that moment, and it was jack murtha. and everybody else was talking about what they were going to do. i was holding hearings there about disaster relief and getting money. and i asked where was congressman murtha? privately. and i was told that he had just commandeered a military helicopter and because he was told he could no longer wade through the water in places he wanted to go, and he was going out spot to spot giving direct aid and trying to pull people out of trouble. the bethlehem steel plant closed , he was the first guy to

convince bethlehem steel to keep the plant opened for another year. fought like the devil to find places for those 10,000 folks who lost their job. because to jack it was more than a steel plant closing. it was a way of life shutting down. it was a ethic that was being lost. it was about dignity. it was about respect. ladies and gentlemen, you-all know and you can tell 1,000 stories about jack more than i could tell, but i didn't have to be around him as much as you were to know the man that he was. i didn't have to be around him as much as you were to know that as nancy said, we are not going to see his like again. i think of jack, there's a civil war poet, guy named richard watson guilder who like jack's

great grandfather fought in the civil war. he wrote something that could have been put on jack's tombstone. he said better than honor and glory than history's iron pen was the thought of duty done and love of his fellow man. i don't know anybody who did his duty better than jack. i don't know anybody who cared about his neighborhood more than jack. because at the end of the day when i needed jack, i think of neighborhood. i think of neighborhood ethic. i think of a guy who asked no quarter, gives none of people's interest to his stake. stood tall. throughout his whole career. my dad were alive, guys, and to you, you beautiful child, he would look at all three of you and say you got good blood, kid.

you got good blood. >> before we adjourn, i hope that we could all join in expressing our gratitude, love, respect, and appreciation to joyce murtha and their family for sharing jack with us.

>> i want to thank the members of my staff who work here.

people look at the mission statements and wonder who wrote that? i do not know who wrote this one, but it says pretty well what the national institutes of health is. the pursuit of fundamental knowledge about the nature and behavior of living systems and the application of that knowledge to extend a healthy life and reduce the burden of illness and disability. there are two parts to that, the fundamental basic science and the applications. we are very serious about both of those and find ourselves in very exciting times right now.

i hope you have seen a brochure that was distributed. if not, this is what it looks like. there are some copies outside, too. this is a new description of what nih does. let me mention a few of the things in this brochure as far as ways that my local -- ways that biomedical research in the world has made differences in human health. if you look at longevity, for instance, over the last 20 years or 30 years, the average life span has been increasing by about one year every six years. that is pretty impressive. if we got to one year everyone here, we would all live forever. [laughter] but we are not quite there yet. we are worried about the epidemic of obesity, that that might find out and go the other way. but if you look at the

statistics so far, the evidence that our medical research is leading to low -- to longer lives is compelling. you can reach a direct line to those observations. similarly with a disability -- if you go back 30 years, 26% of individuals over 65 were disabled for some major life function. that is down to 20%. this is done at a pretty amazing cost in terms of the investment and the return on that investment. take heart disease, for instance. deaths have fallen by 60%. that has been at the investment of about $4 per american per year in biomedical research. that is the cost of a latte. that is a pretty good deal. [laughter] in fact, you can make some of those arguments about

investments in cancer and diabetes and so on. you can see results in terms of the kinds of advances made. in the last few months, we have seen two major figures in past administrations with heart problems, president clinton and vice president cheney. both of those afflicted with circumstances that, in the past, would add a minimum lead to a hospitalization of many weeks and may not have been survivable. we almost take that for granted. all that comes out of nih research. look at hiv/aids. when i was starting out as assistant professor, the average life span for somebody after a diagnosis of having hiv aids was about 15 months.

today, for someone who is 20 years old and turns up hiv- positive for the first time, the life expectancy for that person, because of anti-retro viral madison, is about 75 years.@ @ that makes it possible if

instituted early for that child to develop normal language. the cost of the implant is about $60,000 per patient. but if you add up the additional cost for education needed by a deaf child, that is about $1 million. so you see the economics as well as the benevolent side of this are strongly in favor of what is now possible. i wanted to say awarded to about economics concerning there is concern about our economy in this nation and world wide. economists agree, looking back over our history since world war ii, that more than half of the economic growth in the u.s. came out of investments in science and technology. i do not know if that is widely appreciated, but that is widely

agreed upon. this would be pretty good place to make those investments today. in fact, that is what has happened. the recovery act, which has been in place for about a year, included $10 billion that went to the national institutes of health to be spent in a two- year. -- in a two-year period. at nih, there was a great chance to figure out how to use that wisely in a short time. the staff rose to the occasion. we put out requests for applications to see who was that there who had some signs that would like to propose. we assembled 15,000 reviewers to look at the grants that came in. over the course of just a few months, we did the reviews and a second level of review and then decided on which grants to fund. the idea was spectacular. when i arrived in august, i have

a chance to read through some of the applications that were likely to get funded but were may be on the cusp of whether we could afford it or not. there were fantastically interesting and innovative. we have a great engine of discovery out there that needs to be revved up. out of that, we funded some 13,000 grants. 2000 of those were people who had never gone a grant from nih before. they're bringing in new disciplines and new investigators. institutions, more than 20 of them, had never been funded by nih. small businesses were also supported by nih grants. in this two-year period, thousands of jobs will be created. this is across the country. and if a% of what nih does is given no -- about 85% of what nih does is given out in grants.

this is part of the engine of economic recovery. science is not a 100 yard dash. it is a marathon. two years is generally too short for a project to get fully explored. as the recovery act time when comes to a close, how will we make sure that we keep that momentum going? we are very fortunate that we have a president who believes in the value of science as it contributes to our nation in solving problems and stimulating the economy. so when the president's budget was rolled up on feb. forcefirs, signs did quite well. -- ruled out on february 1, science did quite well. we will certainly be able to use

that in many exciting ways. i want to tell you what some of those might be. i was initially approached about the possibility of becoming nih director several months before it was announced or confirmed by the senate. there is a long process. the fbi delves into what you really did in fifth grade. [laughter] i told them that my life was pretty boring. i guess they must have agreed. [laughter] all of those weeks of waiting for that, there was an opportunity to think about what would really be a useful way for the nih director' to try to steer this ship with all of its promise and complexity and 325,000 grantees and scientists who work on our grants, ways that we can nurture sites in particular directions? i came up with a series of five themes which i had a chance to

discuss with other big thinkers in the community. i want to mention those, but i also want to mention the fact that just yesterday we funded seven new cost cutting innovative projects in what is called the nih, and find. i wanted to u-haul if this together with those themes. -- i want to tell you how it fits together with those teams. [unintelligible] those institutes and centers are wonderful organizations of talented and visionary scientists, but they have specific missions, like the cancer institute, the diabetes institute, and so on. when you encounter a scientific opportunity that does not easily fit into one of those diseases, how does it get support?

the common fund is the answer to that. i am the beneficiary of its success. the common fund now gives the nih director it chance to do simple things that might otherwise have only been achieved by a lot of tin cup i ping. so the common fund it possible to announce those seven new proposals yesterday. let me talk about the five themes that i see as particularly exciting opportunities that cut across diseases, that cut across basic and applied science. the first of those is the ability to apply new high throughput bold technology to look at a comprehensive way the xcel does what it does, how the

organism does what it does, and how sometimes that goes wrong and disease occurs. the feel that i have had a great deal to working in my previous livfe allows you to look at all of the dna and all of the proteins. it is about imaging approaches. it is about special approaches that require nanotechnology. it is about computational biology. it has reached the point where they're ready to be applied in large scale fashion to disease applications that we could not have done a few years ago . cancer is a disease of dna, but we have not been able to comprehensively see where the glitches are in a cancer cell that makes it go bad. we have had abilities to look at

candidate genes. now we can live at the whole street and have the tools to survey the entire genome in a cancer cell. there are prodigiously exciting things coming out of that. we have already applied this for brain tumors. it is clear that that has completely taken this monolithic idea, that the brain tumors are just one thing, and broken it down into four very distinct sense that -- a distinct subjects. this is the kind of thing you dream of. up until now, all brain tumors were considered the same, treated the same way, and the outlook has been pretty dismal. but only have we learned to break this down into subset, but

we have found new targets for drug therapy that we did not know was possible before. it also gives us new ideas to revolutionize therapeutics in the coming years. it is a great example of how we can take a hike through prput approach. that is going to happen over the next two years. basically, this amounts to doing 20,000 genome project in the next two years, which is pretty breathtaking for me to say with a straight face. after all, i was a bit involved in the first human genome which took about 13 years and cost about $300 million. now i can tell you that we can do one genome for about $3,000. other applications of this kind of high throughput approach can help optimism.

we need to desperately understand the causes -- can help autism. we need to dispel in a stand of the causes of this disease. clearly, there is a mix -- we need to desperately to understand the causes of this disease. clearly, there is a mixed of genetics. if we counted up the number of microbes that live on you and in you and compared to that number of cells to the cells that are actually your own human cells, they have us outnumbered. [laughter] we do not know much about them. we kind of hope that they are there with good purpose and being some biotic and synergistic and not making us sick. but i am sure that we will discover tools. the tools that we have now can

help us discover what is there. most of these microbes cannot be grown in the laboratory. but they have dna. so we can find them by that particular signature. those are a few examples of the high throughput approach. the seven new brands, three of themñr fit into this next theme. trying to understand how turning down one particular gene might have a similar effect to adding one particular drug. it is the idea of taking a collection of cells and hitting them with all kinds of determinationpeturbigens. another program is to develop better protein reagents to be able to sample what particular protein out of hundreds of

thousands or millions. we do not have a good inventory of those that are high quality. we need to generate those and make them available at below cost for investigators who depend on these heavily for research. it is a systematic approach to providing a research tool. a third one that fits in is the knockout efforts. -- bob doubt mouth efforts. -- knockout mouth efforts. you know about this gene. no one knows much about it. çóbut let's make a mouth and see what it looks like. that will be a part of this in a large international cooperation. you can see that high

throughput technologies is right for these. the second theme, the one that is particularly relevant to what is being talked about in washington, is health care reform and the need to supply signs evidence-based ideas. nih has been doing that for a long time. that is what clinical trials are all about. a particular strong area of interest is something called comparative interest research. you know there's more than one approach to a particular kind of problem and you do not know which one is better. so let's do it clinical study and try to figure that out. nih has been supporting those cities for many years. it is now it very much a high priority -- nih has been supporting those studies for many years. it is now very much a high priority.

aid was announced today in at the -- it was announced today at the neurology institute that they tried to assess the right treatment for somebody who has narrowing of the carotid artery in the neck and is therefore at a risk for stroke. it could@@@@ @ @ @ @ @ @ @

there is a little bit of difference betweenñi younger patients and older patients and doctors will have to take that into account. but this is useful information. that is what we're doing to help assist in the health care reform discussions. personalized health care is in there as well health economics is in there, trying to understand what motivates providers in terms of the decisions they make about care. maybe nih can do something more to test at various incentives that might be useful in been in the cost curve. again, the seven new common fund proposals that came out directly relevant to this. ñiit is a new research program n the signs of behavior change. how is it that people make decisions about altering their health behaviors. we mayçó generate all this information about effective prevention, but if we do not know how to convey it, the people absorbent and act on it

and the resources will be wasted. there is some evidence that there is a better way to do that, but we need better research. ñrthe third theme of my five themes is global health. we are at a time where global health research has more potential than it has had perhaps in all of history. we have learned a lot about those pathogens thatçó cause diseases in low-income countries. we have a chance to develop new strategies, new drugs, new vaccines, new diagnostics, and i would like to see nih of that at the bit. perhaps this is a good time to remember that that kind of outreach is a very good and effective means of diplomacy. we can focus not only on tuberculosis and malaria, but on

some of the neglected tropical diseases that have not gone attention. we need to focus on the noncommittal diseases like diabetes and hypertension, the fastest growing cause of morbidity. we have done relatively little to prepare for that. we also need to be sure that we are encouraging the building of capacity in those countries where the problems occurred brother than continue to go forward where we come in the developed world, are providing the tools and just handing them over. this is time to create a surge capacity in the south sahara and others. we decided to contribute to an initiative that comes through the president's emergency plan for aids relief to provide tools for political medical and research education at

institutions in sub-saharan africa. it is not to about eight, tv, and malaria. mitchell also be about noncanonical -- is not just about aids, tb, and malaria. it should also be about nine communicable diseases. there are several components that are at exciting junctures'. one is the ability to discover such plasticity among cell types that we can actually take one of your skin cells and convince it to become a neuron. [unintelligible] i do not think anybody was prepared for this. i remember reading that paper. i was supposed to be on vacation and i snuck off to a corner and

read this paper. i literally got cold chills because of the way this has changed forever our understanding of what you might be able to do it in terms of a change in one cell type into another. it turns out that just for genes inserted into that skin cell can convince it to go back in time and become prepotent. then you can take it end convince it to go down different pathways -- then you can take it and convincing to go down different pathways. and these are your cells. if these were applied, you would not have transplant rejection problems. many steps have to be taken before a these things become a reality. the six concerns are real. but i do not know anybody who is not excited about -- the safety concerns are real.

but i don't know anybody who's not excited about pushing this through. because of the close connection to the clinical center, it should allow us to move things into this kind of transitional opportunity at the earliest phase, as soon as it looks like it is safe. natalie stem cells are exciting to look at, but also on approach -- not only stem cells are exciting to look at, but also an approach to looking at small molecules. what do i mean by that? they are organic chemistry compounds. that is what drugs are, mostly small molecules. but we do not know what kind of a sheep you need in order to treat a disease. there is a science on how to do that which has largely been the province of the private sector. as we look around and see how many diseases are not getting any therapeutic in on them

because they tend to be uncommon and there's not an economic incentive, it seems that it is time to get academic investigators involved. after all, there are 25 million people in this country who suffer from rare diseases. collectively, that is a lot of people. the science is not the point where we can imagine academic investigators playing a useful role. you have to study disease well enough to know what would be the hon. achilles' heel to be able to correct a cell that has gone wrong. that is what a lot of basic science has been doing. was to identify the target, you have to figure out how to take that knowledge and turned into something you can test hundreds of thousands of times in the presence of hundreds of thousands are more different compounds.

there is a hole size and kind of an art to that. we have now made that possible. we have also made it possible for academic investigators to actually do that kind of screening, with four centers in the country, in a matter of today's or three days. in the course of the last five years, at n.i.h. investigators have found 128 such compounds directed against more than several dozen targets. after that, you want to take those promising compounds into the next step, which is ominously called the valley of death. that is where projects often go to die. the problem is that they have a very high failure rate. your compound may look good and then you get to an animal and then it goes wrong. once you have reached the point where you have a compound that looks promising in animals, you go to the fda and u.s. for

permission to give them to patients in clinical trial. if all goes well, you go back to the fda and ask them to prove it for general use. that long pipeline, which can stretch out over a decade or more, can be expensive. it is primarily the province of the private sector. but we will lead to progress at the level that we hope to if we leave it only in that area. again, we can come up with a new model for partnership between nih-funded and a sears and pharma. this could be very exciting. - andbetween nih-funded investigators and format. this could be very exciting. ñrif looks like there could be k promising. the company will say that they are interested. they can take it and carry it through. they will have the appropriate profit motive because the economic advantages look pretty

acceptable. similarly, there may be compounds out there that companies have carried pretty far along and abandoned for one reason or another. we could bring them back into the public pipeline and see what we can do it with them, repurchase them for some other application. this pipeline re-engineering is an export -- is an exciting prospect. ñifive years ago, i do nothing e could have done this. now we can. to facilitate that, just two days ago,p, we announced a tigr relationship between the fda and the nih. peggy hamburgerñr and secretary sebelius came out to nih. we announced a leadership council to focus on ways to streamline the process of evaluating new possible therapeutics and agreed to support a new set of scientific

projects for regulatory size to get a handle on exactly how we should be reviewing protocols for rare diseases or unusual applications. that is a very exciting opportunity. i should draw to a close and let you ask questions. let me point out one more theme of my five things. it is really to empower and invigorate the research community. that is their most important resource. you may have great ideas and great size projects, but if nobody does it them, they just sit there. we have to come up with better ways for innovation and there are a lot of ideas -- we have to come up with new and better ways for innovation and there are a lot of ideas out there. we need to be sure that we are supporting early stage investigators because there has been a graying of our research çóñrcommunity and we need to bee that individuals who are just joining us dhs to getñi started

and it's supported -- joining us get a chance to get started and get supported. i think we now have to take this on very seriously. the future of biomedical research is in danger because of something we are not doing. we are not doing a good job of cultivating the next generation of scientists. we're doing a pretty terrible job. let me share with you some depressing statistics. today, 15-year-olds ranked 29th in science achievement from 57 countries. almost half of our 12th graders scored below basic insights. a survey of students found that 84% said they would rather clean their room, eat their vegetables, or go to the dentist than do their math homework. [laughter]

that does not sound like a good thing for our future. 40 years ago, when i was in high school, we had the best high school graduation in the world. by 2006, we had slipped to 18th place. so why does this matter? i am not saying that all of our high school students need to become scientists. but the work force needs people with quantitative skills in science and math. all of us as consumers need to be increasingly able to deal we can do little things and we can do grand things. in april, i am going to do a little thing. i am going to go to national lab day and spend a day in a d.c. public school with high school biology students.

i hope to share with them the wonder of being a scientist. i am going to encourage the scientists out here in bethesda to do the same, to get involved in national lab day. that means just to make themselves available and go to a school and have a relationship with a teacher and a class, not just as a one-day shot, but something that builds over time. after sputnik, our nation became passionate about science innovation and engineering and math. this helped us to win the space race and help to prepare us for attending future in terms of the ability to make the right decisions and it stimulated our economy. but we have released it in that

regard. so how do we do -- but we have really slipped in that regard. so how do we do the big things? there are proper ways to get things turned around. òx rñie example. example. the educate to r%@ @ @ @ @ rbrbb >> they are working together to develop and implement common math and science standards. so as the nih director i guess i wanted to come here today, in my closing moments come and say this is going to be a priority for the national institutes of health. if we're going to capitalize on these phenomenal scientific opportunities that now lie just ahead of us, we have to have a talented, new entries into our scientific workforce that are waiting to get excited the way

that i was. i got excited about science in 10th grade. when i talk to scientists who are currently successful in their area, 90 percent of them say it was that teacher that taught me biology or physics or chemistry, that got me to realize this is something i want to do. and after we don't have enough of those experiences happening, and we have to do something about it and we have to do it quickly. i've got a probably longer than i should have which is a chronic problem for me. you've been very understanding and listened quite faithfully and graciously, and i would now like to stop and take whatever questions our moderator has sorted through, and try to do my best to answer them. thank you very much. [applause] >> thank you very much for your time, and our audience has eaten its vegetables and has no homework when this is done. the first one, doctor arnold

run, the editor of the new england journal of medicine has said if america were to spend money on, it would give every man, woman and child hear the best medical care without causing america a penny more than today. easy right? >> well, let me declare my lack of expertise in healthcare economics, but i suspect he's right, given the way in which our healthcare system reinforces the kind of spending on healthcare that makes not really much sense. you all have followed some of the recent writings on this topic from people, you will see that an awful lot of our expenditures don't actually do that much to improve healthcare, but actually are often counterproductive. he is pretty much of an expert, i think it the nail on the head. >> there are of course many questions about healthcare reform, and several of them took the form of what is your prescription for healthcare

reform? what role if any have you played in crafting the pending legislation? and how important is it to that bill to be passed this year? [laughter] >> well, let me remind you that i'm a member of the executive branch. [laughter] >> appointed by the president and helping to keep my job as long as the president is in place, so i should be careful to remind you that i am therefore not a position to help write bills in the legislative branch. nih does get asked for technical advice when bills are being written, and certainly we have been consulted as the process was going forward by both the senate and the house about some of the specific provisions that affect us, and we think we can be helpful with. one is about comparative effectiveness research that i talk about. that is in the area vendors in both versions. what it will look like we do get our healthcare reform, if we do, is not just possible to

determine. basically, the inspiration to do more of this is to make sure that it is connected with decision making downstream about how medical care is practice makes a lot of sense. i think our role in nih is to be a cheerleader for a better healthcare system that results in better outcomes and lower cost, and also to provide the evidence that makes it possible for decision-makers to know when they're deciding what to do and whether to actually support a particular approach, does it work or not. we're in the business of known whether things work. >> to use a phrase that you taught us all today, as you at times find the progress of healthcare debate to be a part targeted to you? >> well, doesn't everybody? this is been such an amazing ride that it asserted that hard to keep up with in terms of all of the particular provisions of particular versions. i don't ohio many people had a chance to watch the back and

forth yesterday, it was pretty interesting in terms of the positions being taken and certainly again, as the presidential appointee, i'm proud to serve a president who seems of a pretty good command of the details of the healthcare system. so yeah, maybe it is a perturbatent but for a purpose. when we perturb we hope to learn something. i hope we're all learning something by being perturbed. [laughter] >> please rate the effectiveness of the press and disseminating information about health, science and research. how do you believe it could be improved? >> should i talk about specific reporters? no, i won't do that. [laughter] >> you know, i think for the most part of the press does a good job of reporting what science is all about, and obviously particularly now with the stress on the media, my hat is really off to those who write stories in the face of limited

resources, with ridiculously short deadlines and try to convey what has happened in the balanced fashion. i know that reporters are always struggling with pressures that come down on them that indicated something is bad, it's really bad otherwise you don't get into that particular issue. and if it's good, well, you have just cured cancer. and all i think in the scientific community struggle with those same tendencies, what we're trying to talk about into scientific efforts to try to be absolutely clear about what it is and what is not. when it goes well, it can be enormously interesting to the public and enormously compelling to read. and sciences will serve. i will mention one very positive example, if you all read amy harmon's three piece this past week in the "new york times" about the dekoven of a drug for cancer that really brought into that a lot of human stories but a lot of really important sites to get your mind around. that's a great example. of course, it doesn't hurt that she's given enough space to put it on the front page for three days in a row, which i'm sure a

lot of reports would love to have. but when you win the pulitzer prize i guess that does help a bit. there are examples of where everything goes wrong. maybe the science was all too going about what they had discovered. the reporter actually hated science and high school. one of those people who would rather go to the dentist here in the outcome of that kind of interchange can be garbled enough as to be almost unrecognizable. fortunately i don't think that happens all that much. >> in your address you talked about the science of behavior change and we have a question in that area. with research showing that approximate 50 percent of premature deaths in the united states are directly attributed to social and behavioral determinants, such as healthcare despairs, personal life choices were going exercise, alcohol consumption, tobacco smoking to do what jesus opportunist on a riser for nih to leverage social and behavioral basic research findings to reach this percentage? >> what i think there are substantial. let me say what i was directly

of the genome is due the only branch that was founded in the last 10 years and it still was a social and paper research branch that you might wonder what's that doing any genome institute. if you think about it, a clear day that if you're going to make all of these discoveries about information that might help people, know what they're at risk for we have interventions to offer to reduce that risk but you don't have to get people to ask act upon those are not going to get very far. certainly we've i think learned a bit but not know enough about intervention for smoking, about addictions. if we're going to see preventions successful for all of those things, we have to have more data. that was why we include the science of behavior change as part of the seven new initiatives. that's what we have a new program at nih which is a focus on behavioral is a behavioral social science research which is also new at nih. there is an office at nih. they also behave as social science research that reports

directly through one of the division to me, and i think this is an area that's going to be a priority if we really want to understand how to influence health behaviors, we need better data. >> please share some of your insight about some of the benefits of religion and of music and healing and helping improve an individual's health. >> well, i don't know how much rigorous data there's been about music. certainly those who are music lovers and have gone through and tried -- trying medical experts will tell you that's been some sort of comfort to the. whether we have double-blind trials, how would you do that? you're going to get to listen to music and you're going to get to listen to music but it isn't really. there's an issue there in terms of placebo effect. certainly in terms of religion and there's been lots of studies there. it seems that people who do have a religious part of their life. if you look at their overall health status, it seems to be on

the average somewhat better than those who do not. but those are large population averages and certainly don't tell you about the individual in a very explicit way. >> how is your research playing into michelle obama's initiative to end childhood obesity within a generation? >> well, we were delighted to see the first lady stepped out with this priority, and it's a survey much-needed. i think i mentioned that we are all concerned that the improvements in health that happen over the last few decades might be erased if we don't get control of this epidemic of obesity. it's not unusual now for pediatricians to see adult set diabetes. and certainly very much connected with the obesity problem. so this is a public health matter of very extreme importance, and to have a first lady with all of her credibility identified this is something that meets the national program

and national attention is welcome indeed. nih has been working on the obesity problem. we have a trans-nih task force. secretary sebelius has recently embattled a trans-hhs task force that we have a significant role in as well. there's a lot that goes into this in terms of health behaviors again in terms of how to figure how to alter environment in terms of the availability of soft drinks and unhealthy foods at schools. and just in terms of public education, getting things like calorie counts put on menus. all of these things could help, but none of them is a perfect solution. we do also work on whether there are ways in terms of pharmacology to be able to assist in the dealing with obesity, although we would much rather i think a people arrive at healthy weight without the need for the. and are so going to be in cities where that doesn't work and there's a lot of effort being made to understand what are the molecular pathways involved in appetite control, and arthur safe ways to interfere with that

that might assist people who are struggling with obesity that is not yielded to other things. nih has a program called weekend which is to specifically devoted to childhood obesity. the heart lung and blood is as leather and is now more than a thousand community efforts, again, talk about many of the things i just mentioned as far as what one can do in the community. to decrease the risk of obesity. and that is something that we i think can be linked up very nicely with michelle obama's announcement. >> how far can personalize medicines such as gene therapy another approach is go toward relieving and preventing something in the years to come? what limits will it have? >> welcome the death rate will still be one per person, i fear. and what might be able to come up with ways to prevent diseases like cancer and diabetes and heart disease, a lot of the time. but some people will still drive their hard motorcycles into trees and we will have to take

care of them. thinking about my own risks here as i'm saying that. personalized medicine have great promise in terms of getting people individualized information to enable them to practice prevention and more effective way. right now the one size fits all approach hasn't worked very well. part that is because we don't reverse for it but a lot of it is because people just ignore. it doesn't sound like it's relevant to the. given information about yourself, and i've gone through the expense of having my dna tested to see what the results were, and it was interesting. and it did have an impact that i am 20 pounds lighter than it was last summer after fun at my diabetes risk. this is the way i think to give people a chance to have information and all of us might wonder if it's something you could do something about. recognizing that is an important part of the dignity most people aren't so interested about things they can do something for. gene therapy for its part is making strides after 20 years of a roller coaster experience with some real success stories. but i think we're quite a ways

away. clearly as we talk about these advances, you can point individuals were personalized medicine or jeans every have had dramatic consequences, but most of us aren't there yet and the question is what's the trajectory going to be to get there. a lot of that will depend on the robustness of the research that we do and the willingness of the public to participate in it. if we have a medical care system where once we know what the right answers are, we can actually implement it. >> how do you feel about the patenting of genes, especially in a respective of the impact on in new drug development? >> well nih has a long-standing and i think very thoughtful policy about patenting of genes that it's a set of guidelines that let me be clear about that. obviously the made it possible for investigators at tranfourteen support at university if they make a discovery, the university can apply for a patent and university becomes the patent holder. then nih gives out that

opportunity. but we did i think many years ago began to worry about whether our patenting system was doing what he was supposed to in some instances which is to benefit the public. that's what we have patents. that's why benjamin franklin came up with this plan, was not to make inventors rich but to try to provide an incentive for an inventor to develop their invention to the point of making a product that the public could use. and not, therefore, have some other competitor come in and take the market awaits the second day it was out there. our genes in a good category for that? a gene that has been discovered as a means for developing a therapeutic might fit that pretty well because you do have a long path as we talked about to get to the point of having a product. and to have a limited monopoly is probably a fair trade for getting that product out there. for diagnostics, on the other hand, the cases in the view of most of us much less compelling. diagnostic test do not require the same level of investment over many years and hundreds of

millions of dollars. and so nih position is that while patents on genes for diagnostics are legal, and that's somewhat under question with the suit that's been brought by the aclu about the one gene but as long as they are legal, nih would say you ought to not license them exclusively for diagnostics because then you have created an unnecessary monopoly. but for therapeutics, if the case is good you might go along with a license that x. exquisite that i hope you get the censor its part about patenting but its part about licensing and the two are not the same and you need to think about both. >> aluminum recently announced a 10,000 or one week genome and the also announced the sale of 100 i100 as was the genome centr intended are you concerned about losing the lead in that knowledge? >> that announcement did cause some ripples across the scientific community, because this powerful new instrument which brought down the cost and increase the throughput by another significant factor was

certainly greeted by many people with excitement and yes, china announced they had bought 128 of these machines making their total capacity for dna sequencing now higher than the united states or any other country. if this is going to be applied for discoveries that are then made broadly available, everybody will cheer. if on the other hand there is intention to try to take what has been up until now general ethic that dna sequencing information on to be made immediately accessible in the public domain and bring it more behind a curtain, then that might be a cause of some concern. that is still not entirely clear. what are they going to do with all these machines? you could sequence a lot of people's dna and other species. i have good friends in china. they assure me that we should not be alarmed about this. and that in fact the wonderful partnership that has existed in the international community around dna sequencing will continue and will be i think a very good influence on what happens next.

>> we're almost ready for our last question, but there are just a couple items we need to take care of here. first of all, a note on our future speakers. on friday, we have former massachusetts governor mitt romney who will be talking about the case for american greatness. on monday we're going to have the head of the epa, lisa jackson, speaking on environmental issues. on tuesday we're going to have the u.s. trade representative to talk about those issues. so with that, we are going to also have the second very important part of this program, which is the presentation of the national press club mug. [laughter] [applause] >> would also like to thank you all for coming here today. for more information about getting a transcript of today's

program, or more information about doing the national press club, please go to www.press.org. would also like to thank the staff from its budget our library and catering offices for working with this program today. thank you for a much late getting this luncheon at the national press club. our meeting is adjourned. [applause] >> m1 last question. we have someone from the nih was a question for you, are you going to the nih philharmonic this weekend? second question, is are you still playing in a band and if so, what role can therapy does it play in your life? [laughter] >> i'm going to boston this weekend for scientific presentations i'm afraid i will miss the philharmonic, but i'm sure it will be wonderful. i hope i said that right. and yes, i am still in a rock 'n roll band. we are called the directors because there are so directors

involved. we do 60s rock 'n roll, and we sometimes we write the lyrics to make them more scientifically relevant. [laughter] >> and we always make sure to lock the doors before we start so nobody can leave. and jack, our phone doesn't ring very often, if you have a bar mitzvah, you know,. [laughter] >> a wedding whereeopl are having lots to drink would probably be just right for you. [laughter] >> thank you, doctor collins. [applause] [inaudible conversations] [inaudible conversations]

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>> now a senate hearing on alleged waste, fraud and abuse in the medicare prescription drug program. tom carper of delaware chairs the governmental affairs subcommittee on federal financial management. >> call this hearing to order. welcome one and all, especially to our witnesses who have joined us, and those who went to high school in delaware and those who did not. to those whose last names rhymes with the word that legislators fear, that veto. and where congress and our state legislators, to those that are in our audience, welcome, glad you're here. today we're going to hear from several witnesses about the medicare prescription drug

program. something i voted for to create and we want to hear about not just the good that it's doing, and i understand it is a program that roughly 85 percent of the folks who use it think it's a good program and it's a program that is, at or under budget i think for the last four years and that's all well and good. it's not a perfect program. at a certain vulnerability to waste, fraud and abuse as do other programs of this nature. the witnesses today will tell an important story. i was surprised when i first heard about the gao an inspector general report showing that the critical and basic and i thought safeguards for the medicare prescription drug program were not in place. at least not yet. putting the program at a high risk to waste and fraud. let me just say, one of the interesting things about being on this committee, is the opportunity to delve into literally every corner of the federal government to look at programs where we're doing

especially good jobs, for our taxpayers and people we work for. but put a spotlight on those. and to look for programs or we can do a better job. and sometimes look at programs without and because not serving the purpose for which we're paying for. them to serve. and this is a program that will talk about today, the medicare prescript and drug program helps keep a lot of people out of hospitals, saves lives, and is a very good thing for our citizens. is also a program as i said earlier that's susceptible to ways. but we don't want to diminish the positive aspects of the program, we want to focus on what we can do better. as my staff yours for the state at that time again, everything i do i know i can do better, and one of my favorite sayings is if it isn't perfect, make it better. as good as his program is it's not perfect and we can make it better and we want to do the. it's especially important that we have that kind of focused in a day and age we are as a

patient just in the last eight years, we basically doubled our nation's debt. think about that. in eight years we increase our debt by as much as we did in the first roughly 208 years of our nations history. it's pretty amazing. and we're on track to do that again in less than eight years. so it's important for us to do a variety of things. call for a freeze on discretionary spending on october 1. has called for appointing folks to serve in a bipartisan basis. and support we look at other spending that's going on to see how we can provide benefits and do something maybe for not much more money or even for even less money. the safeguards that we have in place are important, the safeguards may be that we need to have in place are not only important to protect taxpayer money, but they are important for us to avoid a version in

prescription drugs for criminal activity and to support drug addiction. medicare as you know is a critical component of the healthcare of our nation. i'm told it's almost 45 million seniors participating in medicare. think about that. 45 million folks in this country participate in medicare. prescription drug program, which we know as medicare part d, began in january 2006. were now into our fifth year. the overall review of the program have been positive roughly 85 percent of the people in the program like the program. 27 million seniors participate. as i said before no program is perfect. during the first years the prescription drug program which is in serious growing pains. there's so many seniors that experience problems. however, medicare part b is here to stay. congress must ensure that the 49 almost $50 billion a year that we're spending works effectively. and cost effectively. as we are all aware, congress

and the american people have a conversation about our nation's healthcare system. there's been some disagreement about exactly what needs to be done. wasn't that a nice way to understate, there's been some disagreement about exactly what needs to be done. but all steadily decrease the costs of our system must get under control. i met with a bunch of students, high school students from across the world or in dover, delaware, the other day and i had time to discuss sometime within. several were from japan. what is the question they asked was how did your healthcare system get so screwed up? by that they meant what you say you spend roughly twice as much of the rest of the world yet get worse results and help all these people uncovered. i thought there was a good question. in japan they spend half of what we do for healthcare coverage. they get better results. and they cover everybody. and we don't think i'd like to think they can be that smart and we can be that dumb. we've got to figure out how to do this and how to compete better against them. globally and here at home.

there's been a lot of talk around here about trying to be and the cost curve of healthcare. i've used that term want to talk was of a growing number of reasons for the rise healthcare costs over past two decades. it's clear that prescription drugs one of the drivers of that increase, benefits of modern pharmaceuticals are evident. but so are the costs. 1985 until the average american spent about $90 a year, $90 a year, for prescription medicines. today we spent over $700 a year. that's an increase of about 740%. a lot of medicines we can take to date that save lives, keep people out of hospitals, key people from having to be included on a regular basis. so those whose fate is the cost really worth it? i think we can argue we say in many cases it is. but in course of a limiting fraud is an important and straightforward way of lowering costs for prescription drugs. unfortunately, healthcare is too often the focus of criminals who

wish to take advantage of our system. and whether they care is provided through government programs or through the private sector, a chance to defraud the system are unfortunately on the rise. u.s. attorney general eric holder estimates that medicare fraud totals around $60 billion a year, an estimate at about others in law enforcement, fraud and medicare. $60 billion a year. that's not all in the prescription drug program. some of it is. second estimate of waste and fraud in the federal program is the level of improper payments. each year the federal government lists the estimates of overpayments come underpayments, undocumented expenditures and other kinds of mistakes in fraud experienced by each agency. the told for the last fiscal year, fiscal year 2009, was almost $100 billion in improper payments. 100 billion. medicare has the largest reported share of that total of

about 36 billion, roughly one-third of the improper payments come from medicare. unfortunately, department of health and human services has not been able to determine the level of the prescription drug program. to the amount wasted in part d is still largely unknown. that's something we're anxious to do, to get under control. why the rise in medicare fraud? well, as would really suck, and into his 20 century bank robber was asked why he robbed banks them yelled replied because that's where the money is. and there's a lot of money in medicare. and fortune a fair amount of criminal activity. however, there's another reason, and the drugs themselves. the growing problem of addiction to over-the-counter medications. the problem of medicare prescription drug fraud is more than just a loss of taxpayer money. it's also about harm to our systems when fraud result in drugs converted to an illegal

use. where the charger to demonstrate the impact. senator mccaskill, welcome. it's good to see a. you're just in time to see this chart. our first chart. our first chart of the day. looking here at growth from 1994 to 2004. and a prescription drug increased time when the use of drugs, looks like about 68%. our population is growing by 16%. it's growing by about 12%. that's a good picture for us to keep in mind. the only thing that is, as i think the only thing that is not based is the goal that 80%. the fact more americans abuse prescription drugs than the number, listen to this, more people come senator klobuchar. i get to start my day with you and come close to any my day with you. it's a good day. in fact, more americans abuse prescription drugs than the

number who abuse cocaine, the number who abuse heroin, ecstasy, combined. combined. in fact one of five teenage and america have abuse or is abusing a prescription drug. one out of five. aside from our financial responsibility that we have a social responsibility to ensure that our public healthcare system isn't used to further intensify and subsidized a public health crisis. in a previous report focus on a similar problem with medicaid, the gao reported to the subcommittee some major sources of fraud and abuse involving controlled substances. and i understand some of the same techniques are used with medicare. the first of fraud technique include beneficiaries, a practice, known as doctor shopping in which recipients go to six or more doctors for the same type of drug.

these cases beneficiaries are you feeding the addiction or selling the extra pills on the street. drug dealers make a profit while the federal government unfortunate and taxpayers foot the bill. fraud and abuse of prescription drugs also appears to be getting beyond the grave when prescriptions are received by dan beneficiaries or written by dead doctors. the department of health and human services specifically the center for medicare and medicaid services is establish a set of oversized teams to protect the medicare prescription drug program, and its beneficiaries from fraud and abuse. sometimes called government terry protecting the program for fraud and it is a team effort involving federal workers and medicare, involving law-enforcement, at both the state federal and local levels that medicare prescription drug plans are masseuse and doctors and beneficiaries themselves. as a recovery governor, i understand the unique challenges that come along with running a

major program like medicare. on as many of us have heard, including this room, even today if it's not perfect let's make it better. we all share responsibility to do just that with the medicare prescription drug program. and our witnesses before are going to report to us today not only on the current challenges of wastewater and abuse in the medicare prescription drug program that will help us to identify some solutions. before they do that let me yield to senator mccaskill, whatever she would like to say. say thank you very, very much for your commitment to fighting waste, fraud and abuse wherever it occurs, including in the program. >> thank you, mr. chairman. i was particularly interested in your comments about prescription drugs and the abuse of prescription drugs. and has become a common fact that in many communities in this country heroin is now cheaper than oxycontin on the streets. which gives you some idea of what's going on with oxycontin.

it is a serious and significant opiate. that is highly addictive. that has been widely prescribed. i would -- my lay opinion, and are probably describe, prescribed. and right now for kids that are on heroin, it is cheaper for them to get the heroin than oxycontin, which by the way the oxycontin feels very similar to harewood. -- heroine. it is a seriously, problem. it is a wildly expensive program. for this country. by 2018, we're going to be spending $3000 per recipient. 90 percent of all the money that's spent on this money comes right out of the federal treasury. and, of course, there is never been an attempt to pay for that.

with any kind of offsets or pays for spirited was all put on a credit card when it was passed. which is i find highly ironic. some of the righteous indignation from my friends on the other side of the aisle about how do the federal government entered into a new entitlement program run by the government without paying for it him or that's expensive, when that's exactly what medicare d. was. so i think it's time we take a very hard look at this program, and as to whether or not the taxpayers are getting a bank for the buck. whether we're requiring the kind of competition that brings value to the taxpayers for this. and whether if we are doing and aggressive enough job of finding the cheaters as we all know they're out there. are we investing enough to find the cheaters. and the abusers that are taking advantage of this very generous government program. thank you, mr. chairman. >> thank you, senator mccaskill. senator klobuchar, welcome.

>> thank you, mr. chairman. i am very pleased to be here. i am a member of the judiciary committee and have taken a particular interest in medicare and medicaid fraud, just because when dollars are so tight and people can hardly afford to pay their premiums, it's just outrageous that we are losing about $60 billion going out of this system to places that it should never go. >> was this an issue you had some interesting in your previous work back in minnesota? >> i did. as a prosecutor we really beat up our white-collar fraud area, and we did a lot in this kind of medicaid medicare fraud and it was always the most vulnerable people that we're getting ripped off. and the money was going to storefronts with names that don't even provide any services. the other thing i learned since coming to this and ending on the judiciary committee, is an obvious fraud sometimes takes place in certain hotspots they call them, and the department of

justice. certain areas that have the least efficient healthcare systems where, not only is the government not checking on it, but private companies don't work together well enough. so there's just no check on this kind of fraud. they are basically robbing the american taxpayers of money. i've introduced a bill called the improve act, which would require deter fraud by requiring direct deposits. medicare regulations are already required corrective positing or electric fund transfer but these regulations have now been uniformly enforced and and lacks verification requirements at check cashing stores make it easy for scammers to commit fraud and disappear without a trace. so this bill would start it up with medicaid and then codified existing medicare regulations. it's been endorsed by aarp, national association of district attorneys, and the credit union national association. to bury make this healthcare system work with going to have to root out the fraud to deter the fraud from happening in the first place. so thank you for and much for

holding this hearing, and allowing me to sit in. >> we're delighted you are here. thanks for your previous work in these and for bringing that experience to bear here with us today. all right. i'm going to briefly introduce our witnesses. will be joined by other members of our committee. we'll have a service of those that start any minute down. and we will have to vote and what we will do is probably go for about 10 minutes or so. after the votes begin and i will slip out in recess for briefly and i will slip out and come right back here. our first witness today, kathleen king, director healthcare, team at gao where she is responsible for leading various studies of healthcare system. specializing in medicare management and prescription drug coverage. she has over 25 years as experts in health policy administration. we thank her for being here today and i learned just her and her introductions order that she is from, grew up in wilmer delaware. so glad that you're here. our next witness, robert vito,

regional inspector general for evaluations and inspections at the department of health and human services. mr. vito works an inspector general's philadelphia office and under his leadership has been good with identifying billions in savings for the medicare program. thank you for that. our next final witness on this panel is mr. jonathan blum, is that correct? pronounce like plum. should've read the next few worse. director for senator medicare management and acting director of the center for drug and health plan choice. these two centers have the budgets in the hundreds of billions of dollars and are responsible for the regulation and payment of medicare medicare, the for service providers and the medicare prescription drug program. we thank mr. blum for being with us today and look forward to his testimony. ms. king, why don't you go ahead. stick to close to five is. if you go beyond that we may have to leave you. >> i see the light.

mr. chairman, thank you so much for having me up here today to talk about gao's work on medicare part d, especially work on fraud waste and abuse in medicare part d. as you know, medicare part d is a voluntary outpatient prescription drug program that is administered by cms with contracts to private health insurers and pharmacy benefit managers. in 2009 there were over 27 million enrollees, and $51 billion in expenditures. gao has considered medicare to be high risks since 1990, because of its size, scope and complexity. endeavor, it's vulnerable to fraud and abuse. the mma, medicare modernization act, which created part d required all sponsors, those who provide party benefits, but private companies, to have programs in place to prevent fraud waste and abuse from

occurring. and cms, the senator medicare and medicaid services issued regulations requiring sponsors to have compliance plans detailing their plans to prevent and detect fraud waste and abuse to those plans have seven required elements that reflect industry best practices. i'm not going to do all of those elements here today, there in my written statement that include things like having written policies, effective lines of to medication. having a compliance officer that reports to senior management. >> after the publication to medicare part d, we were asked to look at the compliance plans offered by the sponsors and cms's oversight of those plans. and we issued a report in july 2008, that's the basis for my statement today. although we did speak to cms recently to update it. as part of our work, we looked at five sponsors that provided party benefits to more than one-third of beneficiaries.

and we went on site, our team when on site, spoke to individuals, review documents, kicked the tires. if you will put. and what we found in that study that of the five sponsors, that they had and all implemented the seven elements of the required plans. five sponsors had completely implemented three of the element, and from there it buried downward. we also found at that time that cms's oversight of the process was limited. for example, in 2008, we found that oversight was limited to review of the initial plans that sponsors submitted as part of their application. and in 2006, cms issued what's called chapter nine, which is their guidance to plans on how to implement their compliance plans, plans were not required to update their compliance plans after that date. nor were they required to update them for the 2007 and 2008

years. turning to audits, we found that the cms did not do the audits that is specified in its 2005 oversight strategy. there were a number of audits supposed to be done, and by mentors, and i think you'll hear from medics later in 2005-2006, and 35 in 2006-2007. at that point in 2006, cms said that resource constraints due in part to an increase in the number of plans participating in part d did not enable them to do all the audits that they had planned, and to switch some audits from on site audits to desk audits, which involved reviewing documents and papers sent by the part d. plans. to update our report for this presentation today, we spoke to

cms again, and they told us that recently between 2008 and 2009 mathematics had conducted 16 audits, desk odds odds, of the part d's compliance plans. and after that decided that they wanted to do to on site audits. and as part of that they found some deficiencies and cms decided at that point that they should do more on site audits. as of today they haven't decided exactly how many they should do. cms also updated, issued a proposed regulation in 2009, to update its instructions to plans on how to fill out and had to do their compliance plans, because they found that not all the sponsors understood them. and they told us recently that they expect this regulation be made final very shortly. that concludes my prepared statements. i will be happy to answer any

questions. >> mr. vito, please. and again, all of your statements, full statements will be made part of the record. >> good afternoon, mr. chairman, and members of the subcommittee. i am robert vito, regional inspector general for the evaluation and inspections at the department of health and human services office of inspector general. i would like to thank you, mr. chairman, for holding this hearing on the important topic of part d oversight. fraud, waste and abuse has long been recognized as a significant problem in the medicare program resulting in perhaps billions of dollars in losses to taxpayers each year. fraud, waste and abuse also negatively impacts medicare beneficiaries by causing them to pay more for their healthcare through higher premiums and rising copayments. the complexity of the part d program, as well as its a short implementation timeline, makes it vulnerable to fraud, waste and abuse. however, the creation of the part d benefit also provides an opportunity to use the knowledge we gained in also years of fighting fraud in the medicare

and medicaid program. to that end we should use this opportunity to deny a system that prevents fraud and improper payments before they occur. rather than try to recover the funds after the money has been spent. cms plans sponsors and medicare, drug integrity contractors known as medics, all played key roles in this effort. since the inception of the part d benefit, oig has developed the body of work that assesses the program integrity and payment accuracies that each of these groups have in place. in short, we found that while some safeguards have been in place since the benefits in session, others have been employed in a limited capacity in some remain on another that appear to put it simply, there is more work to be done by cms, the plan sponsors and the medics that as the minister of the benefits, semester as a primary role in preventing and detecting fraud, waste and abuse. although cms has developed a safeguards strategy, the strategy did not address the coordination that is the between

the different groups within cms and lack of the details that would deter from a broad strategic concept into a useful management tool. furthermore although cms required part d. plan sponsors to have compliance plans, and have provided guidance under development. the agency has yet to finalize any audits to ensure the plans are comprehensive and effective. this despite the fact that oig found that sponsors compliance plans did not fully addressed all the cms's requirements. specifically, oig found a compliant plans from certain sponsors can they only brought outlines of fraud and abuse strategy. we're missing one more of the cms is required elements come include the developers of internal auditing and monitoring procedures. further although cms required sponsor to initiate corrective ask is where fraud exist within that many plan sponsors that identify potential fraud did not do so. even more disturbing is the fact that 20 percent of the sponsors did not identify a single incident of fraud or abuse. at the route was no fraud, that

would be remarkable. but given our experience it seems highly unlikely. in addition to relying on the plans to target fraud and inappropriate payments, cms has publicly stated that by using state-of-the-art systems and expertise, the agency and the medics would prevent problems before they occur. which is the optimal goal. yet we found that rather than using the advanced data techniques, cms and medics relied largely on complaints. welcome plants have their place in fraud detection efforts, they are, by that definition, reactive rather than proactive. unfortunately, the medics were unable to engage in more proactive measures in large part because they did not gain access to the part d pharmacy data until a second year of the program and did not get the data on the physician services until the third year. furthermore when the medics investigate potential fraud and abuse incidents, they didn't have the authority to directly obtained information such as

prescriptions and related medical information from pharmacies. pharmacy benefit managers, and prescribing physicians. finally, while the medics were prepared to on a sponsors an effort to invite with their compliance plans, the medics were not given the approval to do so. again, it is up to cms to address the issues we found at the sponsors and the medics to a college this task we recommend that cms develop a comprehensive program integrity plan that includes specific action items, target dates and staff assignments. cms also needs to conduct audits of sponsors in a timely manner and established mechanism to hold sponsors accountable for problems identified. it should also address the issues that prevent the medics from directly obtaining information they need from pharmacies, pharmacy benefit managers, and physicians. finally, and perhaps most important, we recommend that all key players perform more innovative data analysis of claims and payment information and embrace proactive methods of

fraud detection. in closing i can assure you that the part d issues will continue to be a major focus of the oig work. we're currently performing additional reviews, some of which will likely identify improper r&d payments that might have been prevented if there were stronger detection and prevention programs that clearly there is more to be done by cms and its partners to ensure the integrity of the part d program, and we stand ready to assist them in their efforts. i would have attach any questions you may have the. >> will come here going to have to wait just a few minutes because we're going to recess here and come back in about 20 minutes, and ask mr. blum to make his statement that you are on deck. we thank you for your patience. we will be back in 20 minutes. the subcommittee stand in recess. [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] >> that's enough fun. [laughter] >> we conclude at least the first to vote. may have some more later on, but mr. blum, thank you for your patience. you are recognize that. >> thank you very much, chairman

carper. thank you for the opportunity to come here today to talk about cms's efforts to improve the performance to improve the quality, to elevate the overall, they can't build of the d program. the administration as cms is very much committed to ensure that we have the best possible program possible, the strongest program possible. we understand that we have a tremendous responsibility, and jacob and his obligation to ensure that we provide benefits consistent with the law, protect taxpayers dollars, and ensure beneficiaries have a high quality program that they expect. i want to highlight just a few points from my testimony, but be happy to answer any question that you may have. the first one of what to highlight is the part d program is tremendously complex. we have 4000 different contracts that provide part d benefits. these are plans that are standalone drug programs, comprehensive hmos, but the part d benefit is delivered by

4000 different private entities. that requires cms to develop many different strategies, many different ways to oversee the program and to ensure that all 4000 contracts have the same consistent now use, same consistent goals that cms has. the second point i want to emphasize is that cms uses, in order to manage this very large program, delivered by 4000 different contracts, we use a range of different data to ensure that we are monitoring the program, we are understanding issues, we are acting on issues, we're being as proactive as possible. cms collects quality metrics. cms collects and analyzes prescription drug claims. we monitor beneficiary complaints, physician complaints, and cms responds very quickly, very proactively to any issues these different data sources tell us. cms also has a very aggressive,

a very robust audit strategy. on 2009 cms conducted 348 different targeted and routine audits. we ensure that bid submitted to cms are active. we ensure that plans follow our rules. we ensure that plans understand our roles. we ensure that our payments are accurate. we ensure that beneficiaries receive the services they are entitled to. again, given the breadth, given the scope, given the complexity, cms has to dedicate our resources as quickly as possible. we have to target our resources as quickly as possible. but we are committed to overseeing through audits, both a desk audits and on site audits, a strategy to make sure we have the best possible program. cms has shifted to a more performance-based auditing system, meaning that we target our audit resources. to those part d plans that

present the highest probability for vulnerability. we don't just a random audits, but we target those audits to those plans that present the biggest vulnerability to the program. cms had undertaken several new initiatives to further strengthen our ability to oversee the program. as ms. king mentioned, cms in the fall proposed 70 new regulations to improve oversight of the part d program. we expect to finalize those regulars. our goal just to make the part d benefit center for beneficiaries to understand to ensure that cms has more tools, to hold plans more accountable to the part d program, and also to make sure we have the strongest possible compliance strategy, both operated by our party contractors, but also by cms but again, cms intends to finalize these rules this month, to be effective for the 2011 contract

year. we have heard loud and clear the concerns regarding our contractors, the so-called medics. cms has changed the way that we contract with the medics. would have a new strategy. we have a new focus, and i'm confident that we will see even better results from these meta- contractors. lastly, we are working very hard to complete a composite error rate for the part d program. we understand this is a high priority for you, this is a high priority for the congress. we understand this is a high priority for the president. we have completed three components to this five part in composite error rate and we expect to produce all five components to produce a composite part d error rate by the end of next year. lastly the president has made fraud and abuse program integrity one of his highest priorities for the medicare program. he has proposed historic new

resources to root out, to fight medicare fraud and abuse for the fever seethe program. it is true that in the past cms lack the resources to do sufficient oversight, to do sufficient auditing, but i'm confident that with the resources we have, that congress has given cms, that we have sufficient resources to address concerns in the past that cms has more work to do. we have made tremendous progress, but we have more work to do. we have several concerns that we are working very hard to address. we have concerns about marketing practices by our part d plans, and we're working very hard to ensure that our part d plans market, there plans to beneficiaries. those communications are accurate, i responsible, and are appropriate. we have concerns about plans are biting appropriate clinical access to drugs. we also have concerns about

plans that have very -- aggressive growth strategies. those plans that grow the fastest seemed to us to present the highest vulnerability to the part d program. so cms will be targeting more of its resources towards those plans that seem to be growing the fastest. without i will stop and be happy to answer any questions you may have. >> thank you, mr. blum. let me, if i can, throw out a question to you, but i would invite out of the witnesses to respond, too. when i was in as an undergrad later as a graduate student, i studies in economics. i've always been a treat, my professors at ohio state, with a you didn't study enough. but i've only got to hang out, one thing that has always intrigued, how do we harness market forces. i will give you a couple of examples. with a hard time with federal agencies, actually selling the

surplus property that is within their purview. . . pay the utility bills, security costs and find out that for the most part agencies of they go to the trouble fixing of the property, the money goes back to the treasury and it can be hell to >> to keep it down. how do we do that? one of the ideas is to allow the employees who stops smoking and

lose weight to actually see discounts for up to like 30% of the to the right thing for themselves and really for the group? another example has under federal law when, let's say you are a whistle-blower. you work for mr. vito. the work that mr. vito's company does for the federal government, they're crooks. they improperly bill us. they take money that they don't deserve. you are an employee. you know about it. you reported. the blow the whistle. it used to be there would turn around and fire you. that's pretty much it. why don't we at least try to protect them so that they can detect job back and recover lost wages. then we decided to take it a step further and say if you are a whistle-blower not only will

your job protected but if there is a recovery for the federal government you can participate and receive any part of 15 tested% of the recovery for the federal treasury. i am told as recently as this week that the irs may have a similar kind of arrangement where folks who are reporting a tax fraud, tax evasion, money recovered so that some participation, some reward, if you will, can be provided. you know, we can have all of the other stuff we are talking about here in terms of federal agency oversight and so forth and make sure people and doing their job. part of me says one of the ways to make sure that is happening is to actually incentivize folks, if you are aware of fraud, to report it. to acknowledge that if they do that only will they feel good as citizens that they have done the right thing, but there will also actually improve and enhance their on financial or economic

situation by participating in the recovery. man ask you to respond to d to t idea? it is something that might work here. just be thinking have that kind of approach might be implemented with respect to identifying fraud in medicare part b and number one reduce the huge deficits that we face and a number two strengthen the medicare trust fund and number three try to do this in a way where we encourage market forces to do the policing force. >> thank you for the question, senator. >> it was a long question, wasn't it? but a good one. >> a very good one. the greatest challenge that cms has is to ensure that all the contracts that have contracts with the program share a consistent goal and consistent values with cms. those values are to ensure the

beneficiaries receive benefits in the best possible light, but also that taxpayer dollars are used as plainly as possible. cms has more work to do. we have to create a stronger culture of accountability. we have to ensure that our contractors understand that they share the same responsibilities as cms test command we are open to every idea to promote that accountability with our contrac. i understand that you have legislation to require party plans to report fraud. that is a very interesting idea. to our minds that requires congress to give cms that authority. at think any tool that cms can add regulation or that congress can provide to ensure that our contractors who are the front lines with the part de benefit share the same values that you have and also share the same

values that cms as. >> ticket. i'm going to come back to you. i want you to be more specific. >> i believe that is happening in the medicare program already. also in the medicaid program. >> senator, we are having trouble hearing you. [inaudible question] >> test, test, test. >> better. >> and some of our largest settlements have come from -- >> i'm sorry, i don't like acronyms. >> that is when a whistle-blower, someone who works in the company realizes that the company has done something wrong, and then they come in either come to the

government or they submit it to and say that there is a problem here, we would like you, the government to be aware of it and see if you would like to join us in going after this case. some of the largest settlements that we have ever achieved have come from those actions. so what you are suggesting is something that is working and can work very well. >> all right. thank you. >> yes, senator. >> make sure your mic is on, please. >> try it again. >> better? >> i can hear you now. >> thank you. i think one of the most effective strategies on fraud and abuse is to prevent it from occurring in the first place. and so i think that we would really encourage the front and things like having effective compliance plans in place and having cms oversee them

carefully as a sentinel effect. it is much more effective to prevent fraud when it is occurring them than from paying interesting. >> well, maybe we need all of the above. we have been joined by senator mccain. what i am pursuing year, john, is trying to figure out how we incentivize folks to to actually fill out and help us identify the fraud that is occurring. i pointed to what we do with whistle-blowers and retail financial recovery for the government. they did to participate in the recovery. the irs has a similar kind of approach with moneys that have just been recovered because of tax evasion. have some of the programs where we incentivize the sale of government property. it to keep part of the proceeds of of the abandoned properties are excess properties that they don't need. just looking for ways to use financial forces, economic forces to do a better job. we are not doing a great job in

this area, as you probably know. let me yield to you if you have a statement. >> at thank you, mr. chairman. i apologize to the witnesses. as you know, we had a vote. we were interrupted by a vote. "thank you for taking the time your in helping s with this very important issue. i ask that my statement be part of the record, as chairman. as i understand it atlantic care prescription drug improvement and modernization act requires that all parties sponsors have been programmed to detect and prevent fraud, waste, and abuse cms regulations established requirements for comprehensive compliance plans for part de plan sponsors. cms contacted, as you know, with medical drug integrity contractors do from now on medics to audit the complaint

grants. sixteen compliance plan audits were conducted in late 2008 and 2009. cms determine their value in monitoring was limited. cms is now engaging the medics to conduct comprehensive on such compliance plan audits and expects to have 20 or 30 of them completed this year. we are in agreement so far capped. >> yes, senator. >> okay. according to the hhs inspector general of the medics were given task force. >> thank you for the question, senator. it is my understanding that in the past cms through contractors and medics undertook these

audits through desk audits. they focus on reviewing plans, papers, documents, do they have compliance plans in place. cms found those audits to have very limited value. to our minds it is one thing to check documentation, but it is another thing to go on-site to ensure that they have the programs in place, the education process is in place. and so the agency completed 16 of the san the past, but decided not to issue final reports. we have changed that process. we have changed the process to be more on-site. audits to insure that our part de contractors share the same values as cnn's. >> now, when is this going to start? >> the process has started now. we are finalizing our plans to lend for word. i expect us to fulfill our

obligation and also to make sure that our contractors, the medics, also share in that as well. secondly cms is in the process to finalize new regulations to give us more oversight on these compliance plans to further define what plans have to follow. part of our strategy is to have a tighter regulatory process to have stronger processes in place. part de is currently in its fifth year ar of operations. >> i can't speak to the past, but i can speak to the future. it is our we are very much committed to fulfill. >> who does speak for the past? if you don't who does?

your predecessor? ms. king, do you have a comment >> senator, i think that we've recommended in 2008 that cms conduct these audits. they have started them. i think we believe that audits and on-site audits as we conducted when we did our work are really helpful and have a strong sentinel effect. >> do you have the confidence that now in the fifth year of operations we will get it right? >> senator, we are and evidence based operation. we don't speculate about the future, but we do look at the evidence before. >> and the evidence before you indicates? >> we have spoken to cnn's about their plans to do on-site audits, and they are in the process of making a final regulation that will clarify

their authority over compliance plans. i have no reason to think they're not going to do what they say there going to do. but we can't make a judgment about its completion or effectiveness until after it has happened. >> can i suggest, mr. chairman, 96 months from now we could get a report from the government accountability office and maybe you can you can tell us what the evidence is then? >> yes, sir. >> do you have a comment? >> yes, sir. i want to tell you that we have been doing this work. we believe that prevention is the best way to make the program run. >> prevention of what? >> fraud, waste, and abuse. the way you prevent it is set of systems that prevent the payments that are problematic from going out before they occur. >> i say with great respect i understand that prevention is

vital. finding out whether the prevention has been carried out. >> we agree with you. we started doing the audits in 2006 to see if they come plan said compliance. >> and what did you find that? >> we found that they did not. they had them, but they have all the elements. we were not certain that they were their protecting the program. we recommended at that time that cms do on its in 2006. we continue to follow up through 2009. >> what did you see? >> we saw that they had not been successful in meeting what we have asked them to do. that is why we continue to follow up. we are interested, just like you. >> mr. chairman, the reason why i am focusing a lot of attention on this is because, as you know, this issue was discussed and

agreed upon by the president and all members who were their. i guess my only point is that i, in the fifth year of operations i think we have the right to expect of little bit, something more than what we are finding out here today. i am not blaming you personally or anyone else, but it seems to be in the fifth year of operation given the acceptance on all sides that there is significant fraud, abuse, and delays that can be eliminated the president's plans talking about eliminating $500 billion. right now i don't have a lot of confidence that we have the procedures in place to really significantly impacted. i hope that i am incorrect in that impression, at least up to date, but i am encouraged by the comments of the witnesses. there are a lot of other areas

to discuss, but i see senator mechanical here also. a thank-you for the time and i think the witnesses. >> at think your idea of asking to come back is a good one. the the idea of as having a hearing commended the with the same witnesses committee with others. in the last for five years what we have made is not enough. how do we incentivize? identify the fraud, reported, and make sure we recover money. i hear the witnesses said that is all well and good, but we need to focus on the front end. he starred on prevention and to the cost recovery. we need everything in between. >> thank you, mr. chairman. i was reading materials for this hearing. you know, i had one of those moments where i read this sentence and went. are you kidding?

twenty-four of the 86 medicare de sponsors, 24 of 86 in 2008 did not report one incidents of fraud. okay. i believe in santa claus and the tooth fairy. if you have that many of these sponsors that are saying there are no incidents of fraud in the auditor in nikko's, okay, there is high risk. we are on that. i know that the ig report is what talk about this. one of the things that i noticed was that we don't even require them. we suggest that the report fraud. are you kidding me? we are giving them 90 percent of the money for this program right

out of the general treasury, and we are not even requiring that these people report fraud? mr. baum, is that a regulation that has been proposed? is there something we need to do to say that they are required to of report every incidence of fraud that they believe is occurring? >> before you respond we have offered legislation. if we end up taking a sidecar approach in terms of adding to the senate health care bill one of the elements of that would be to require that the from the reported. i don't think we have the ability in that legislation to also provide the incentives to the kind of financial incentives to do for whistleblowers. i am very much interested in doing that. and sorry to interrupt. >> i'm just curious if you have the ability to require people we give that much money to to report fraud without a lot.

it seems to me we ought to be able to do that without a lot. if we can't require them to report for remise then we mights well give them a gun. >> senator, our this regulations have voluntary reporting requirements. cms could change regulations to have mandatory reporting requirements. cms would not have the authority to enforce it. to our conclusion congress would have to give us the authority to enforce. that would make this change meaningful. cms could change the regulation, but we could not enforce it, which says to us, congress would have to give us that authority. >> that is something that would take a lot to require people that we are giving money to to tell us that they think that there is fraud and on.

i don't want to argue that went with you, but if we are going to try and get it fixed, that is terrific. we talked a lot about fraud and abuse. i would like to, for a minute, get the reaction of gao and the ig on the issue of waste. we have a mind numbing number of choices out there for seniors. if someone has to take lipitor, maybe plan 42 is the best for them. if they have to take avinox maybe plan 21 is the best for them. there will be a real difference in cost savings. do we have any data systems in

place, and if we don't, shouldn't we, that track whether or not the see years have made the best choice based on what their prescriptions are? let me preface this question, and i look forward to your answers. it is not that i am interested in what seniors are taking, but if they have not made the best choice, guess who is paying for it? we are. so if they are in completely the wrong plan and they could save 50% by switching the plan, 45 percent of that money, up to 45 percent of that money they could save is coming directly out of the united states treasury. what attempts have been made to identify by datapoint that kind of massive amount of waste that has to be in this system that is enriching the profits of this pharmaceutical companies? >> senator, if i may, i would give you a long answer that i hope answers your question. i am not aware of any data system that actually capture

whether seniors are making the best to assist. cms does have something called a plan finder which enables people to go on a website and figure out which drug best meets their needs. we don't know how many do that. there is also a provision in law that has to do with people who are newly eligible for medicare and medicaid. in some cases they are in subsidized plans and not paying the premium. year to year a number of those. >> we are paying 100% of those costs. >> we are basically yes. year to year if those plans still above the average than the people in those plans are randomly assigned to other plans. it is called intelligent assignment. you can figure out what would be the best plan for them, but the

law actually requires random assignments. >> the was saying it is okay if we plays misses jones and the plan destroyed to make your plan twice as expensive because you are required to do it randomly. >> the plan is not twice as expensive because they are reassigned to plans all below a certain level. that person might be reassigned to a plan that does not best meet their trek means. >> but they could be reassigned to a plan that will cost the united states government more than it should because that particular plan has not negotiated ends but could deal with a given drug company.

expect you for allowing me to be here. i continue to be astounded that we lose so much money when budgets are tight. we are losing $60 billion every year on medicare and medicaid fraud. i was thinking, one of my favorite bank stories out of minnesota was when a guy did come in and rob a bank with a gun. the note he wrote on the back was his own check with his address and name. that is what i was thinking. a lot of these people, they are associated with just seven companies. some of this is not just low hanging fruit. it is falling and rolling around on the ground. based on these findings it would appear the resources might be best utilized by focusing on a

few bad apples. this cms have the ability to focus its fraud prevention efforts on companies who appear to have an increased incidence of fraud. >> first of all they don't get the statistics. there would never know. we got you because we wanted to lie down. what we were trying to learn about all we knew that the compliance plans, nobody was doing the reviews. we knew that cms had no idea how well the plans were and how effective they were in detecting fraud, waste commended use. we tried to get that to be done, but that wasn't done. another way of attacking it was to go and get the information from the plan sponsors to find out how much they have detected. when you look and he done know how well the compliance plans a

working and see the statistics it makes you really wonder what needs to be done. how did you focus on was that our reporting to large numbers are the ones that are reporting no numbers? the see what i am trying to say. you get both of those people together. when you see a compliance plan that is not identifying fraud, waste, and abuse and then you see the plan has no reported incidents or investigations you know that is a place to look. >> and are we targeting the now? and now we are trying with this of curable to put tools in place and we wanted it electronically. what are we doing right now? are you aware of any enforcement action being taken? is that's going un? >> that was not in the scope of our work. i can't answer that directly.

>> cms has a range of tools that are used to enforce requirements. we have corrective action plans, and romances benson's, termination, worst-case scenario. i am not personally satisfied with the information that was reported. we need to identify plants that present the highest risk. we are targeting our audit resources toward those plans that have the highest risk. one factor that should be considered is plans not reporting fraud. we are moving to a strategy to apply resources and audit resources toward those plans that present the greatest liability, collect the range of different data to help identify those smaller villages. but a think the scenario cms should explode to do more with

which we are talking about so much money. people would be outraged. have you looked at that for what these hot spots are for certain types, not just plans, but types of provisions services? >> cms agrees that we have geographic areas of the country that seem to be higher fraud areas. we have certain services that tends to be higher fraud services. we are dedicating more of our resources toward those hotspots. there is a whole new partnership. we are working to target those parts of the country that prevents present the greatest or

ability. >> it does in to me if you could get some major people prosecuted and get some major money in it sends a message to the whole system. right now we don't have that. people just think they can rip people off. i know it feels like people are trying to diagnose the symptoms and not treating them yet. >> we agree. the administration, i believe, has taken unprecedented action in the past year to dedicate more resources to request more resources from the congress and take a historic new investment. it has proven successful. we have more convictions. cms in the past did not share information with law enforcement partners. we have broken down this communication barriers. we have been very clear that cms is to work in partnership with the 90's office, department of justice to address the concerns

that you're raising. >> last year an investigation found that medicare claims contain the identification numbers of an estimated 16500-18200 deceased positions involving approximately 385000-572000 grants for medical equipment. in every case study cited these deceased physicians or obvious the unwitting instruments in transactions that meant easy money for unscrupulous crux. what are you doing to combat criminals using the identity of deceased providers? have you seen this type of fraud with medicare part d? >> i'm not aware of this type of fraud with deceased providers in part d. we do acknowledge that it is an issue. again, i think part of our strategy is to use data and to

use data analysis and its different ways. not focusing on the back end, but focusing on the front and. cms needs to do more with crams processing, data sharing. >> and making sure that everything is electronically deposited. >> absolutely. >> cms in the past has had various barriers to a data sharing and data analysis. we are working as hard as we can to break as down and to be as transparent as we can with our data resources. >> thank you. >> again, thanks for joining. i want to stick to this issue, i will return to the notion again. if we want to recover these moneys and prevent the front from occurring and recover moneys that have been defrauded were taken from the medicare trust fund or monies, really, from the taxpayers' pockets we

need to incentivize somebody to help recover the money. one of the things we do in the medicare program, and the last three years are so we have been using it recovery audit contractors. we put them to work in three states. california, texas, florida, to go out and track down fraud and recover money where we can. the first year we did that we recovered almost nothing. the second year recovered about $7 million. i believe the idea is to extend that. can you tell us what kind of timetable we are looking at for the extension of that kind of effort in all 50 states? i would also add that i think the recovery contractors get to keep anywhere from around 10 percent of the money set the key. >> we agreed the program has been very successful. >> that refers to recovery on the. they are contractors that are

allowed to keep a share of recoveries. there right now primarily focused on fee-for-service plans. it is my understanding that we are implementing this program on a nationwide basis. cms agrees the three-year pilot has been successful and it is appropriate to bring the program nationwide. today we have not applied the right contractors to the part d program. that is a very interesting idea and something that should be considered. >> do you need authorization to allow them to work? >> i believe we need authorization to extend the

program. >> your testimony describes 16 audits have been performed during the last two years. i understand 86 sponsors. perry talking about audits are sponsors? you also referred to 4,000 plants. the 16 audits involve 86 sponsors. if we audit everybody there would be 86 audits? help me explain that. >> a think that might be able to help. i am going to give you some numbers that, a dank, right. i can't confirm them for the record. >> sixteen out of 45. sixteen of 86, and trying to get to the bottom. >> the sponsors are at the corporate level. the sponsors have contracts and plants. they are a relatively small number of sponsors. i think that 86 is about the

number. >> that sounds correct. >> thanks. >> but when you get down to juane it is like there are sponsors and then there re are contracts. contracts can have multiple plans. that is how you get down to 4,000. most of the compliance programs, i believe, are at the corporate level. there would be at the spot to level. the right comparison, i believe, would be to the 86. >> sixty-nine of 86. i think this was after at least one false start when the original plan to start of it's never happened. now we're hearing that cms will redo 16 audits. to me the new adminstration is making a stronger and more serious effort. we are, i'd think we are really

at the starting gate. it sounds to me like we are back at the starting gate. is that a correct characterization? >> at think it is fair to characterize it that we are creating and implementing a new strategy of these compliance plans. i think it is fair to say that in the past cms dedicated a limited resources toward these audits. we have changed that. we have things to the congress ess new resources for part c and part d oversight. we have dedicated added resources for these compliance audits. it is also true that in the past cms conducted these audits through desk reviews. >> desk reviews? >> desk reviews. we found those desk reviews to be a very limited value. through our work with the medics

and criticism and very good suggestions by the gao and ig that cms believes these audits should be conducted on-site. to make sure plans just don't have the documentation in place, but the processes, the systems, the education programs, executives understand these rules, to our minds we have to do these on-site. we have put in place policies and plans to do on site audits. that is our current strategy for these compliance plans. >> one last question. i yield to senator mccain. i understand that health and human services reported about this $6 billion in improper payments. we had a hundred billion dollars reported. agencies are starting to identify it. the next step is go out and

recover the money. that $36 billion figure did not include improper payments for the prescription drug pool. when will the centers for medicare and medicaid services have improper payments from medicare part de? and what i heard before and it totally, 2012. it just seems a long way in the future. i would just say if that is indeed what you are going to tell us i hope he will work with our committee and congress to find a way to speed up the process. his 2012 what you're looking at? >> we are on track to complete the five part composite by the end of next year. the for tom to fall by the end of 2011. we are placing a very high priority to complete the part in the air. we understand that the congress and administration in order to correct issues need to

understand what the issues are. we have completed three of the components and are working very hard to finish the last two components to have the front part composite reported. >> said that means by the end of next calendar year. >> correct. >> and just very simple terms, when you complete the five components will that mean? the improper payments? does it mean we are calling at ending the money? >> well, the way that cms currently is proceeding is a five part error rate. the first part that has completed is an error rate regarding how well cms systems pay the claims. we have a very low error rate for that. the second component is to measure how accurately cms place low-income subsidies. again, that error rate is less than 1%. the third component is to

measure how accurately cms makes payments to eligible beneficiaries. that error rate currently hovers around 1%. relative to fee-for-service those three components have very low error rates. that is not the full picture. the full picture also has to be how accurately the party plans plans pay claims and how accurately the part d plans report rebates they collect from pharmaceutical manufacturers. much more data intensive process. to be frank, again, cms does not dictate the resources in the past to complete this to compound simon. we have dedicated the serious. they are a priority. >> you said dedicated as errors. >> thank you. we have dedicated as resources

to completing this last to compliance. we are very much committed to providing the congress. >> thanks. >> very briefly if i could try to put this in perspective, my information is that in 2009 cms estimated 241 billion in improper payments for medicare fee-for-service and 12 billion for medicare advantage. that is a little over $36 billion. what is the total payment that were made in medicare fee-for-service and medicare advantage? in other words, what is the percentage share of improper state payments to mac. >> currently i believe, and i will keep you accurate figures for the record. medicare spends $450 billion on the traditional fee-for-service program. medicare advantage, cms pays about $130 billion to private

parsee plans. on the part de sad we spent about 50 billion. the fee for service error rate that was reported was 78%. the part see error rate is higher, 156%, i believe. >> why would there be that the disparity between 7.8 and 15.6? >> we use different, because the fee-for-service program and the part c program are so different for fee-for-service to pay on a climbs claims basis says. we pay on a capitated basis. use different processes. the fee-for-service program in essence contractors on a decline to make sure there is documentation to support those claims. the error rate is not a fraud rate, but it is a break of how

accurate, according to cms fee-for-service rules the claims are paid. on the part seaside that that ia capitated payment per member per month. but part c plans report health status. when cms has found is that the health status reported by plans does not match the documentation they provide to support this house test plans. >> and my understanding is that 87 percent of potential fraud and abuse and were identified through external sources is that a little disturbing? 87% should be identified through people who were doing their duty? >> cms has used contractors in the past for the majority of reviews, back and refused to

measure and to identify fraud. we, as an agency, believe that our role is to prevent fraud before it happens. we. >> i want to emphasize again, if there is no one who would disagree with trying to eliminate fraud before it happens, but it is obviously happening. it is obviously not been detected when only in 13% of the detections are done by the agency itself and 87 percent are done by other citizens. there is no one disagrees and whether we should try to prevent it. we know it occurs. judge you think you should be focusing more attention on that side of the equation rather than rely on patriotic citizens to identify this fraud and abuse? >> i agree with you, senator. the agency has the responsibility and role to make

sure that every claim, to the extent possible, is paid accurately. we have dedicated, congress has given cms new resources. the president as requested new resources. we have changed the way that cms and tracks with law enforcement agencies to ensure that they also have access to the same information we have. i agree with you, the agency can do more, has done more, and will continue to do more. >> well, finally, this to king, are you satisfied that we are taking the necessary steps to at least address this problem seriously? >> we will be interested to see what cms revised on the strategy looks like. there are still revising it. we do believe that strong and

effective of the strategies are essential. we are in the trust but verify position. >> thank you very much. thank you, mr. chairman. i think the witnesses. i know that this is very difficult when we are talking about the sums of money the but because we are talking of these sums of money is a reason for us to continue to pursue this effort. thank you. >> a huge budget deficits. reno the trust fund has run out of money. we all try to pass legislation that would extend the life of the medicare trust fund and hopefully we will be able to get that done this year. all of that not withstanding there is work to be done on the prevention side. we have an obligation to help you. make sure you have resources and the encouragement to do the good work that is needed there. there is, i think american work that can be done by the recovery of the contractors.

those resources can be brought to bear here. that is pretty good incentive. the one best to look long and hard at what we are doing with whistle-blowers to compensate them for blowing whistles and take risks. hopefully we are going to pass legislation this year, maybe even this month that says rather, we encourage folks to report fraud. we are going to require them to. we will come back later on this year with some way to incentivize them to do that, not to because it is something they ought to do. one last question i have. if your testament describes the importance of pro-active data.

tasked with proactively analyzing the purchases, cost, and distribution of medications to weed out the waste, fraud, and abuse. so medics did very little. could you comment more on this situation and why this work is critical? i think we are going to hear from them and they will testify that they have increased their pro-active data analysis? does this indicate an improvement? >> well, let's say their efforts of the identifying fraud was based on the complaints which is something that happened already their strategy at cms was to use pro-active data analysis to identify the problems and prevent them before they occurred. that largely did not happen because the medics who are tasked to do that did not have

the data to do the analysis. >> can you tell us why? >> i cannot tell you specifically why. that would be a question for cms. when we went to them and asked them, tell us. >> them, them being cms? >> when we went to the medics we said, you know, that as see the pro-active data analysis. let us see what you're doing to prevent and protect fraud, waste, and abuse. for example, you put that information today about people who are abusing drugs. if you have pro-active data analysis he might be able to find that to be the might be able to see that happening. when you see that happening you can prevent it rather than waiting till after the fact and something that might happen this as just paying the money. there are significant benefits. cms recognized how important it is to do that proactive data analysis and they wanted to get

it done. they just had problems in implementing it and making it happen. now, we are told, that the medics have the data, and they are actually utilizing that data to do proactive data analysis. we are all in the trust, but verification work as well. so our goal will always be to find out if exactly that is happening. what you need now is, you have the data. now you have to start utilizing the data to the best way that they would be able to get the best benefit of the. cms has to be monitoring them to make sure, helping them to make sure that they're able to get that done, and we will, as well. >> last question before we excuse this panel. every now and then i ask witnesses to, as we try to drill down and find out where we can save money. i ask witnesses to say what can the visit to a branch of our government can be doing better? everything we do we can do

better. that is true for me, i suspect it is for all of us. what more or what should the legislative branch be doing, this committee in particular to make sure we are preventing the front, to the extent it is identified and make sure that we stop it and recover as much of it as we can. what more should we be doing? >> oversight hearings such as this draw attention to these issues. >> i hope so. >> point of where improvements can be made. we are always available to do further investigation into issues like this. we would be happy to assist you in that. >> good. thanks. senator mccain alluded to that. >> as it relates specifically to this hearing and this work one of the areas that we saw is that

the medics did not have the opportunity to directly go to the farm, the pdm, the plan benefit managers as well as did not have the opportunity to go to the physicians directly. we see that if you would provide some legislation in that area that would help them accomplish that and help them be able to get their investigations and to better work. >> thanks for that. would you comment on the point that mr. vito just made and add to that whatever you would like? >> i agree that congress can help cms share information, give access to information, but with cms staff and also with the various partners views to help was oversee the program. i think there are some very important provisions spending on what health reform that would give cms more tools to oversee and to strengthen the part d

program. one provision that is pending both in the senate and house passed bills would give cms more authority to reject plan bids. today we have very limited authority. plans have to meet certain screens. they have to meet certain checks. the end of the day cms has few opportunities to reject part de plan d bids altogether. having that tool would give cms more ability to promote the best possible part d contractors. i think that is one area that congress can help cms. >> good. all right. we appreciate your being here. we appreciate your preparation for your testimony. we realize we are making, i think we are making some progress. a degree of making some progress. we are not making enough, as you know. i feel, i feel and i think my

colleagues feel there is a certain passion. from our end and from your end as well. and this is one that we are going to continue to follow up on and see how we are doing and to see if we're making progress, to find out what more y'all need to be doing, in particular cms, find that what we need to be doing to encourage those efforts. did you very much for joining us today. with that we will invite our second panel to the table. >> thank you. [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations] all right. i'll ask the committee to come back to order. the audience. welcome to our second panel. our first witness is mr. howard apple, president of safe guard services. one of the contractors to provide compliant, fraud and waste and abuse services for

medicare and medicaid services. our second witness that the panel today is dr. christian jensen who is a chief executive officer of quality health strategies. another of our contractors that provides fraud, analysis, and oversight. you are both recognized. give us your statement, about five minutes apiece, roughly. if you go much over that i will have to bring you in. meeting at about 5:00 with the plaintiffs committee. we will get right into it. jump right in. >> thank you, senator. i will have the written record for the statement. mr. chairman and the distinguished members, of the subcommittee thank you for the opportunity to discuss safe guard services role in helping cms combat fraud and abuse and the medicare prescription program. my name is howard apple, and i

am the president of safeguard services. for background the enactment of the medicare modernization act of december 8th, 2003, represented the largest change to medicare since its inception by creating a new prescription drug benefit for medicare beneficiaries with his part b. beginning in september of 2006 cms geographically divided the united states and awarded contracts to three medicare part b contractors. there were many north and south and west. each medic is impossible for performing program safeguard functions to detect, deter, and prevent fraud and waste and abuse and to mitigate within there geographic jurisdiction. 24 other states in the northern u.s. the district of columbia and the u.s. virgin islands. in september of 2008 cms reduced the number of contractors

resulting in the reassignment of medic west south. medic north jurisdiction extended 35 states. additionally the medics were tasked with supporting the choices. compliance . the program for these states and territories. under the medical contract for cms sgs responsibilities included the investigation of allegations or suspicion of fraud, waste, and abuse in the part b program within our jurisdiction. complaints were received from a variety of sources. the majority of complaints were received via cms's toll-free hotline and through cms complained tracking module. typically complaints involve telemarketing scams,

inappropriate enrollment, or disenrollment, explanation of benefits errors, and proper marketing practices and drug diversion. additional responsibilities include using innovative data analysis techniques to identify potential fraud, waste, and abuse. of the nine requests for affirmation from law-enforcement agencies and conducting a compliance plan the audits of part b sponsors. in october 2009 sgs contract was modified when cms decided to realign responsibilities of the medics. became the compliance and enforcement. bridge the gap between compliance enforcement menaced by the program compliance and oversight group ncpc and the nationwide from waste and abuse to activities tasked to help integrity and the program integrity group. our responsibilities now include