It might just be an unfortunate fact: More government will lead to taxpayer dollars stolen through fraud. However, it also means more money is needed to combat that fraud. For example, the Health and Human Services Department has more programs than ever, resulting in the agency’s Inspector General to ask for an increase in its 2024 Congressional Budget Justification. To learn more about some of the details, Federal Drive with Tom Temin got the chance to speak with Julie Hodgkins, Principal Deputy Inspector General at HHS Office of Inspector General.

Interview Transcript: 

Julie Hodgkins So just by way of background, in fiscal 22, HHS had the largest spending of all federal agencies. That’s including the Department of Defense, a $2.5 trillion. Now, with that, HHS operates over 100 separate programs. So by comparison, in the same fiscal year, that is 22, OIG spent 455 million to oversee those programs. Now, those are pretty big numbers. So to translate that into some dollars that we can all appreciate, OIG has $0.02 for every $100 of HHS spending to oversee programs and to prevent, detect and deter fraud, waste and abuse in those programs. Putting it another way. HHS has 0.021% of what is spent by HHS for oversight. I also kind of want to put this in context for you amongst the IG community. So by comparison to our OIG colleagues, HHS OIG is amongst the lowest funded by percentage of the, looking at the overall agency expenditure to the IG budget. But with this small amount of money, we are quite mighty in what we do. So OIG recoveries and expected recoveries, comparing those to the money that we are given every year for every dollar that we get, we return $11 to the federal government. So I guess what I want to leave you with at the beginning here is we are a good investment to protect federal programs. So in the president’s fiscal 24 budget, HHS is seeking a total increase of $82.3 million. 52.5 million of that is for Medicaid and Medicare oversight, and 29.8 million of that is for our oversight of HHS, Public Health and Human Services programs. With the 52.5 million for Medicare and Medicaid oversight. That increase is largely through our request for a legislative change that would increase the amounts available to DOJ, to HHS and to HHS OIG from the Health Care Fraud and Abuse Control account. So over ten years, the proposal would actually increase by 20%, the amounts available to each or to all of these enforcement partners for fraud fighting.

Eric White So if you are able to get those funds, what is the strategy for where would that money go necessarily? Would it just be to manpower or just in other areas that costs money to investigate?

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Julie Hodgkins Sure. So I that’s going to be in a variety of areas, Eric. So certainly we need more agents, investigators to be able to go and look at those referrals that we are getting. But in addition to that, we also, of course, need the support that goes around that. Right. We make use of data to identify trends and outliers that point us to potential fraud and certainly to waste and abuse in programs. And so to say that, you know, it’s all going to manpower is not exactly right. Right. We need those data tools, that infrastructure to be able to use the data that we get from Medicare and for Medicaid to be able to identify, you know, the trends and the places that we should go, spend our, you know, spend our money on investigations.

Eric White Gotcha. And so you mentioned all the amount of criminal referrals you get. And I don’t know if you know, this is a improper question for or if you would even know, but where does that stack up with other IG offices? Because I’m just curious about the kind of referrals that you all get tend to be. Well, first off, you mentioned that HHS has so many programs that that means more people involved with those programs, which means more potentially criminal referrals. Is that the reason why you get such a large amount or is it just because of the amount of money being spent? You know, it’s exactly what fraudsters are looking for.

Julie Hodgkins Yeah, I think that’s a great question. And I’ll tell you that I don’t necessarily have statistics on all of the other OIGs, but what I can tell you about is, is HHS and why I think that we get that number of referrals. Number one, we are looking at externally based programs, right? Programs that serve almost every family in the in the United States. Right. We are providing health care services to the age of the population, to the most vulnerable populations. And so, you know, one adage of of oversight and enforcement is follow the money. Where the money goes, that’s where the fraudsters go. And so I think that the fact that we’re talking about the vast amounts of money that are being spent in Medicare and Medicaid, that is what drives those that number of referrals.

Eric White Okay. And so when it comes to enforcement, let’s I want to focus a little bit on the Center for Medicare and Medicaid Services right now, just because that is, I imagine, one of the larger portions of where you see the most referrals to. Can you tell me about the actuary projections and you know, how that helps guide the OIG work, but also the trends that you’re seeing there when it comes to investigations?

Julie Hodgkins So, you know, the actuary projections certainly give us insights into the solvency of the program, and that is that is a primary concern. Right. But I think that there are really a lot of different factors that go, you know, really guide where we go with our work. And it’s all about assessing risk. Right. And we talked a little bit about follow the money. So let’s just talk a little bit about the money that’s spent in these programs. Right. In 2021, HHS spent 521.8 billion in Medicaid dollars and 857.1 billion in Medicare dollars. Now, keeping in mind that more than 50% of those services are now provided through managed care. That’s the place where we want to go look, right, because that’s where those big dollars are being spent. And if I’m being candid, I have to tell you, there’s a layer between the federal government and those services that are being provided in managed care, and that’s namely those insurance companies that are providing that. Providing those policies of insurance and standing between us and the providers, that makes it harder for us to oversee those programs. But that doesn’t mean that we can’t find a way. So let me give you an example. We’ve taken a look at the ways that these managed care plans can game the system using risk adjustment payments. Risk adjustment is a situation where plans can seek increased compensation for treating older, sicker beneficiaries. That increased payment is intended to discourage the plans from giving preferential enrollment to healthier individuals, and if it’s applied correctly, it actually preserves and expands access to medically necessary health care. However, what our work has shown is that those financial incentives actually create risk by allowing the risk adjustment payment to drive up coding of the severity of patient diagnoses. So we’ve seen an increase in the diagnosis. This patient is sicker, therefore we should get more work without proper documentation that there is in fact a need for a higher diagnosis and treatment that follows that.

Eric White All right. And and so in knowing that information, is that going to be part of the increase in funds that you’re asking for? You can further investigate those Medicare claims that, you know, something looks a little off here.

Julie Hodgkins Absolutely. And in doing that we’re going to sort of take a two pronged approach. Number one, we’re going to work those referrals that we get. And number two, we’re going to use the data to to identify those outliers and trends that point us to the providers, to point us to the plans where we need to be focusing our resources. I didn’t mention this earlier, and I do want to mention this as well in terms of  how do we focus our work on on Medicare and Medicaid? We, we take a whole of OIG approach to deciding what kind of work we should do. Executives from each of our disciplines meet every week to discuss potential work products. So many of those, of course, are looking at CMS programs, but those executives assess the potential work and they make resource allocation decisions which help us bring the most value and will best improve HHS programs. So we’re really taking, you know, not just an investigative lens, but a whole of OIG audit evaluation lens to how do we improve these programs. And that’s important because like things like program changes and legislative changes, they also drive what we should be looking at as an example, like the Inflation Reduction Act actually makes some pretty significant changes to the way that prescription drugs are going to be paid for by Medicare and what the cost sharing Medicare enrollees will expect to pay for those drugs. So when we get legislative changes like that, we’ve got to take a look at those. These are big policy changes. And, you know, sometimes we often need to engage our audit and evaluation staff to to take a look at how best how best to implement those programs and how best to oversee those programs.

Eric White Understood. And so getting away from CMS, what are some of the other areas that you may not have mentioned yet that you are all trying to get a bigger hold of what is going on actually? And I imagine veterans benefits may be another place where you’re seeing some overlap. And also Medicaid is probably a big part of this with more states looking to accept more Medicaid dollars.

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Julie Hodgkins Yes, of course, Medicaid is very, very important. But I think to answer your question, I’m going to focus a little bit on the public Health and Human Services side of HHS. The thing I think that beyond the Medicare and Medicaid programs, what we really need to focus on: grants and contracts. HHS is the largest grant making entity in the federal government, and it oscillates between being the third or the fourth largest contracting entity in the federal government. So a tremendous amount of money is being distributed by HHS. In 2022, that’s $740 billion in grants. That, of course includes the Medicaid grants and 38.9 billion in contracts. As we’ve talked about a couple of times already, follow the money. The fraudsters certainly do. And so this is an area we think that is ripe for some expansion of our work. We have work in this area. In fact, we recently released a report looking at the National Institutes of Health and how they monitor and manage their grants. The report findings were consistent with our prior work in NIH struggles to effectively monitor grant awards in particularly struggles when there are foreign entities involved. So that report was looking at grant award that NIH made to EcoHealth Alliance, and then a sub award was made to the Wuhan Institute of Virology. You know, we certainly found some inappropriate expenditures, but I think the most important thing that we found here is that NIH did not effectively monitor the grant award. There were requirements for annual progress reports as a part of the grant, but EcoHealth was late with their year four progress report. And NIH failed to follow up on that for almost two years. That’s important because NIH, when it did receive that report, it contained information that NIH believed would reveal circumstances that could have required the grant to be reviewed by a special HHS committee that was focused on potential pandemic pathogens. We have to get the basics right, right. Know who we’re doing business with, issue the grants and follow up. Similar on the contract side. And you know, the other thing we’re excited about in this area is that we believe that those advanced data analytics tools that we’ve been applying to Medicare and Medicaid oversight can actually enhance our review of grants and contracts as well. They can lead us to see them better, see the risks, understand the trends and outliers on HHS contracts, and ultimately lead us to recover misspent funds and remove bad actors from the government grant and contract programs through suspension and debarment. So that would be my number one area. I think outside of Medicare and Medicaid that we would like to be focused on.

Eric White Yeah, when you’re talking about this much data that needs analysis, are you going to be looking for any outside help, maybe contracting out to any vendors to help with that data analysis just because you’re dealing with so many dollars and cents?

Julie Hodgkins Well, Eric, I think this is one of those situations where foresight and planning have have really brought us to a great place. HHS OIG has one of the best data shops in the IG community. We had the first chief data officer in the IG community and we just have a tremendous staff of people that are not only building the infrastructure for us to be able to do this work, but conducting the analysis, working hand in hand with our auditors and with our investigators to identify trends, to make referrals for additional analysis by those groups. So I think we’re in great shape. That’s not to say that we don’t need more talent, we do. But I think that we’re going to focus a lot of our efforts with that staff and the contractors that they have. You know, we do certainly rely on some contractor support there. But yeah, I think we’re in good shape.

Eric White And also just lurking above this whole conversation was just the effect of the pandemic, COVID 19 pandemic had on, you know, NIH, HHS, all those agencies that were pretty much on the front line. What can you tell me about what you saw? Are there any other major trends that you saw that were, you know, direct effects of what was going on in the world?

Julie Hodgkins Well, certainly there were a lot of effects. And, you know, it is, I think, one of the great challenges that HHS faces. If you go take a look, I’ll invite you and your listeners to go take a look at our top management challenges. One of the ones that we have up front is the response to emergencies. And of course, a pandemic falls into that, into that rubric. Tremendous amounts of money came into the department and went out through things like the provider relief funds. Again, as we’ve talked about where we have big dollars flowing, there are opportunities for fraud. And so, you know, we’ve we’ve been trying to work with the department, you know, as they were setting up those programs to talk through things like how do we establish program integrity up front? Again, that concept, know who you’re doing business with. In any event, yes, I think there are just, you know, tremendous impacts within the department. It certainly was a tremendous influx of resources and shift of resources in order to be able to respond to this pandemic. That certainly has impact. We have I think my numbers may be a little dated here, but I think we have 100 products either ongoing or finished at this point, looking at COVID 19, we have a COVID 19 landing page on our website. I invite you to go take a look at that to see more about what we’ve been doing, overseeing HHS’s response to the pandemic, and how they can take lessons learned and move those forward for the future.

Eric White And finishing up here once again, not to compare it to other IG offices, but I’m just curious about HHS OIG’s footprint. I know that you have regional offices all over the country, but you mentioned how HHS is giving out more grants than anyone else in the federal government. You know, when you look at DoD has a whole headquarters for themselves in Virginia. You know, what is your office footprint look like as far as, you know, even just office space and headquarters?

Julie Hodgkins Sure. Well, we certainly have our headquarters located here in Washington, D.C. and Baltimore, because, of course, CMS has their headquarters in Baltimore. We have nine regional offices throughout the United States and then field offices within those divisions, because to your point, we have to cover a lot of ground. And we need folks to be on the ground, particularly our investigators and our auditors, to be able to to go out and interview people, talk to them about what their experiences are, better understand the referrals that we get better develop the facts for cases and for audits that we need. And so, yes, we do have a pretty large footprint across the nation. We are happy to be able to to be close to the work and to be able to lay eyes on and put hands on the situations that we’re investigating and auditing.

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Eric White And I hope I’m not bringing up a massive topic right at the end here. But, you know, you mentioned you have to cover a lot of areas covering rural areas and getting health care out to those areas is hard enough. I’m just curious about some of the challenges of finding fraud in some of those hard to reach places in the country.

Julie Hodgkins Well, you know, we have we are so fortunate to have a great staff and personnel. And I’m just I’m thinking through our staff that’s out in the Midwest and West that are looking at Indian Health Service facilities and the, you know, the health care that is being provided to our American Indian and Alaska Native communities. And those folks are just truly experts. They’ve been on the job for a long time. They have developed a deep expertise in that area. They know the people. They know our law enforcement partners. And we are just so fortunate to be able to leverage that kind of expertise and that kind of commitment, you know, to be able to to identify fraud, waste and abuse in those programs, help the department make them better and just deliver better services to the entire American public.

 

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