HEW OFFICE OF INSPECTOR GENERAL

SEPTEMBER 10.-Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Mr. BROOKS, from the Committee on Government Operations, submitted the following

REPORT

together with

SUPPLEMENTAL VIEWS

[Including cost estimate of the Congressional Budget Office]

[To accompany H.R. 15390]

The Committee on Government Operations, to whom was referred the bill (H.R. 15390) to establish an Office of Inspector General within the Department of Health, Education, and Welfare, and for other purposes, having considered the same, report favorably thereon with a technical amendment and recommend that the bill as amended do pass.

The amendment is as follows:

Page 12, line 17, strike out "Executive" and insert "General".

EXPLANATION OF AMENDMENT

The original language of H.R. 15390 contained an inadvertent reference to the "Executive Schedule" for compensation of Federal officials where a reference to the "General Schedule" for compensation. of civil service employees had been intended. The amendment corrects

this error.

PURPOSE AND SUMMARY

H.R. 15390 would establish a new office in the Department of Health, Education, and Welfare with no program responsibilities which would conduct and supervise audits and investigations relating to programs and operations of the Department.

The office would also provide leadership and coordination and recommend policies for activities designed to promote economy and efficiency in the administration of, and to prevent and detect fraud and abuse in, such programs and operations.

57-006 O

In addition, the office would provide a means for keeping the Secretary and the Congress fully and currently informed about problems and deficiencies relating to the administration of the Department's programs and operations and the necessity for and progress of corrective action.

The office would be headed by an Inspector General appointed by the President, by and with the advice and consent of the Senate, solely on the basis of integrity and demonstrated ability and without regard to political affiliation. The Inspector General would report to and be under the general supervision of the Secretary or the Under Secretary, but would not be under the control of or subject to supervision by any other officer of the Department.

A Deputy Inspector General, appointed in the same manner as the Inspector General, would assist the Inspector General and serve as Inspector General during a vacancy or the absence or temporary incapacity of the Inspector General.

The Inspector General or the Deputy could be removed from office by the President. The President would be required to communicate the reasons for any such removal to both Houses of Congress.

The Inspector General would have responsibility for conducting audits and investigations and for coordinating other activities designed to promote economy and efficiency and to prevent and detect fraud and abuse, including relationships between the Department and other Federal agencies, State and local governmental agencies, and nongovernmental entities with respect to such matters.

The Inspector General would have specific responsibility for recommending corrective action concerning fraud and other serious problems, abuses, and deficiencies and for reporting to the Secretary and the Congress on the progress made in implementing such corrective action.

In addition to an annual report to the Secretary and the Congress on activities of the office, the Inspector General would make quarterly reports identifying recommended corrective actions on which adequate progress is not being made. The Inspector General would report immediately to the Secretary and appropriate Congressional committees whenever the office became aware of particularly serious or flagrant problems, abuses, or deficiencies.

In order to prevent lengthy delays resulting from HEW "clearance" procedures, reports or information would be submitted by the Inspector General to the Secretary and the Congress without further clearance or approval. Copies of annual and quarterly reports would, insofar as practicable, be submitted by the Inspector General to the Secretary sufficiently in advance of the due date for submission to Congress to provide a reasonable opportunity for comments of the Secretary to be appended to the reports when submitted to Congress.

In carrying out provisions of H.R. 15390, the Inspector General is specifically authorized to obtain necessary information by subpena and to request necessary information or assistance from any Federal, State, or local governmental agency or unit thereof.

H.R. 15390 further provides for the Inspector General to have direct and prompt access to the Secretary when necessary for the performance of the duties of the office.

Two existing HEW units the Audit Agency and the Office of Investigations would become component parts of the Office of Inspec

tor General. Additional HEW units or functions related to the duties of the Office of Inspector General could be transferred to the Office with the consent of the Inspector General, but no program operating responsibilities could be so transferred.

COMMITTEE INVESTIGATION

H.R. 15390, a bill to establish an Office of Inspector General for the Department of Health, Education, and Welfare, is based upon information obtained during more than eighteen months of study and investigation by the committee's Intergovernmental Relations and Human Resources Subcommittee.

After preliminary work beginning in late 1974, the subcommittee held hearings on HEW procedures and resources for prevention and detection of fraud and program abuse in April, May and June 1975.1 A comprehensive report on the subcommittee's continuing investigation was approved by the full committee in January 1976.2

Hearings relating directly to establishment of an HEW Office of Inspector General were held during May 1976.3 During the hearings, consideration was given to the overall concept of an Office of Inspector General, as well as to specific provisions of pending bills.

MAGNITUDE OF HEW FRAUD AND ABUSE PROBLEM

5

HEW's operations present, in the words of one of its Assistant Secretaries, "a vast potential for fraud and program abuse." + HEW administers around 300 separate programs, with expenditures estimated to total about $145 billion during fiscal year 1977-more than one-third of the entire Federal budget. A substantial percentage of the huge amount is not under the direct control of HEW, but is disbursed by non-Federal entities such as States, localities, educational institutions, fiscal agents, intermediaries, carriers and grantees. Although evidence presented at the subcommittee's 1975 hearings made it abundantly clear that tremendous losses are being incurred through fraud and abuse in HEW programs, witnesses from the Department were unable to provide reliable information on which a specific estimate of losses could be based."

6

Since that time, the Secretary has estimated that losses totaling $750 million annually from fraud and abuse are being incurred under the Medicaid program alone. Other estimates are substantially higher; for example, the New York State Welfare Inspector General has estimated Medicaid losses in that single State at more than $500 million per year.

1 Hearings before a subcommittee of the Committee on Government Operations, HEW Procedures and Resources for Prevention and Detection of Fraud and Program Abuse, April 22, 30; May 15, 22; June 24, 1975; hereafter cited as "1975 hearings."

House Report 94-786, hereafter cited as "report."

'Hearings before a subcommittee of the Committee on Government Operations, EstabHishment of an Office of Inspector General in the Department of Health, Education, and Welfare, May 25 and 27, 1976; hereafter cited as "1976 hearings."

1975 Hearings, p. 7.

$ Report, p. 13; 1977 expenditure estimate obtained from HEW.

1975 Hearings, pp. 14-15.

Report, pp. 8, 15-17.

* Statement at March 26, 1976, news conference, based on data supplied by the Medical Services Administration.

Testimony before the Subcommittee on Oversight and Investigations, House Committee on Interstate and Foreign Commerce, February 13, 1976, pp. 85–86.

DEFICIENCIES DISCLOSED BY SUBCOMMITTEE INVESTIGATION

As outlined below, the subcommittee investigation disclosed serious deficiencies in the organizational structure, procedures and resources being used by HEW to combat fraud and abuse and promote economy and efficiency in its programs:

Fragmented organizational structure.-The subcommittee found that units responsible for combating fraud and abuses and for promoting economy and efficiency were scattered throughout HEW in a haphazard, fragmented and confusing pattern, with no single unit having the overall responsibility and authority necessary to provide effective leadership. Personnel of most such units lacked independence because they reported to and were hired and fired by officials directly responsible for the programs involved."

10

The subcommittee also found that HEW Audit Agency and the central Office of Investigations reported to different Assistant Secretaries, with no high-level departmental official having overall responsibility for coordination and leadership of audit and investigative activities.11

Until recently, HEW officials did not even know how many different units within the Department were engaged in activities specifically related to the promotion of economy and efficiency. A study performed at the request of the subcommittee indicated there are 63 such units, with a total of 3,642 employees directly engaged in such activities.12 Lack of information. The subcommittee found that information needed by both HEW and Congress for effective action against fraud and abuse was simply not available. There was no central source of data concerning fraud and abuse nor, evidently, had any meaningful attempt been made to evaluate the overall fraud and abuse problem.13 Even when information was-or should have been-readily available, it was sometimes subject to lengthy delay in being provided to Congressional committees requesting it because of HEW's "clearance" processes. For example, a four-page report repeatedly requested by the subcommittee was not provided for more than 11 months, for reasons even the Under Secretary could not explain. Moreover, on at least one occasion, admittedly inaccurate information was provided to a Congressional committee concerning the adequacy of HEW's investigative resources.15

Inadequate resources.-The subcommittee found that HEW's investigative resources were ridiculously inadequate. Although HEW had more than 129,000 full-time employees, its central investigative unit had only 10 investigators, with a 10-year backlog of uninvestigated cases. Only one individual was assigned to guard against fraud and abuse in the Medicaid program, which accounted for nearly $7 billion in Federal expenditures alone during fiscal year 1975.16

10 Report, pp. 8-9, 27-30.

11 Report, pp. 8-9. 21-22.

12 1976 Hearings, pp. 47-48, 81-99.

13 Report, pp. 8, 15-16.

14 1975 Hearings, pp. 2-3, 379; 1976 hearings, pp. 24–25, 115.

15 Report, p. 36; 1976 hearings, p. 38.

16 Report, pp. 9-10, 34-35.

Testimony on the HEW appropriation for 1977 indicates that the Department's audit manpower falls about 500 man-years short of meeting its workload requirements.17

The subcommittee found that HEW, at least partially because of its fragmented organizational structure, had failed to make effective use of the limited resources it had."

Failure to take prompt corrective action.-The subcommittee found that even when serious deficiencies did become known to responsible HEW officials, corrective action was sometimes not taken until literally years alter, if taken at all. For example, although HEW officials testified that much program abase comes back because of badly designed legislation, the Department was unable to find a single instance in which it had clearly taken the initaitive to call such a situation to the attention of the appropriate Congressional committees.19

The subcommittee found evidence of inexcusable delays in taking clearly needed administrative remedial action. During May 1975, for example, its investigation disclosed that two separate sets of investigators looking into fraud and abuse in the Medicare and Medicaid. programs were not allowed to tell each other which providers they were investigating, even though the same providers might be suspected of fraud under both programs. Despite assurances of prompt corrective action, hearings in May 1976-more than a year later-disclosed that HEW regulations still did not permit such exchange of information.20 The HEW Audit Agency, as a result of its audits, makes many recommendations for badly needed improvements in HEW procedures. However, program officials often fail to take timely action to implement such recommendations. At the end of 1975, according to testimony at subcommittee hearings, there were 490 outstanding audit reports on which timely action had not been taken.21

EFFECT OF H.R. 15390

In its January 1976 report, the Committee on Government Operations unanimously recommended that action be taken to place overall responsibility for coordination and leadership of HEW auditing and investigative activities in a single individual with no program responsibilities who would report directly to the Secretary. The committee further recommended that this official should be held directly responsible for informing the Secretary of serious problems disclosed by audits and investigations and of the progress or lack of progress in correcting such problems.22

H.R. 15390 would accomplish this objective by providing for a highlevel official with no program responsibilities, reporting directly to the Secretary, who would be responsible for giving undivided attention. to the prevention and detection of fraud and abuse and the promotion of economy and efficiency in HEW's programs and operations.

"Hearings before a subcommittee of the Committee on Appropriations, House of Representatives, Departments of Labor, Health, Education, and Welfare Appropriations for 1977, Part 6, p. 854.

1 Report, pp. 9, 36-37.

Report, pp. 10, 40; 1976 Hearings, pp. 49–50, 63.

1975 Hearings, pp. 113-116, 175–177; 1976 Hearings,pp. 50-51.

1976 Hearings, p. 71.

Report, p. 11.