Health Care Fraud Investigations

Comments for the Record

United States House of Representatives

Committee on Ways and Means

Health Subcommittee

Hearing on Health Care Fraud Investigations

Wednesday, September 28, 2016, 10:00 AM

By Michael G. Bindner

Center for Fiscal Equity

Chairman Roskam and Ranking Member McDermott, thank you for the opportunity to submit comments on this topic. I will leave it to the Administration and CBO’s witnesses to explain the current state of these investigations and will address how to make such investigations unnecessary.  As usual, our comments are based on our four-part tax reform plan, which is as follows:

·         A Value Added Tax (VAT) to fund domestic military spending and domestic discretionary spending with a rate between 10% and 13%, which makes sure very American pays something.

·         Personal income surtaxes on joint and widowed filers with net annual incomes of $100,000 and single filers earning $50,000 per year to fund net interest payments, debt retirement and overseas and strategic military spending and other international spending, with graduated rates between 5% and 25% in either 5% or 10% increments.  Heirs would also pay taxes on distributions from estates, but not the assets themselves, with distributions from sales to a qualified ESOP continuing to be exempt.

·         Employee contributions to Old Age and Survivors Insurance (OASI) with a lower income cap, which allows for lower payment levels to wealthier retirees without making bend points more progressive.

·         A VAT-like Net Business Receipts Tax (NBRT), essentially a subtraction VAT with additional tax expenditures for family support,  health care and the private delivery of governmental services, to fund entitlement spending and replace income tax filing for most people (including people who file without paying), the corporate income tax, business tax filing through individual income taxes and the employer contribution to OASI, all payroll taxes for hospital insurance, disability insurance, unemployment insurance and survivors under age sixty.

The relevant part of our proposal is the net business receipts tax, which is a value added tax with exclusions for such items as employee and retiree health care.  This provision may also fund a single-payer plan – again with exemptions for firms which provide direct medical services to their employees with no third party payment, except for purchased hospital services.

In these cases, the onus for preventing fraud would be the tax paying employers (or social service providers) and the scale would likely be small enough to make professional scams unlikely – save for the biggest employers, like the auto unions served by the UAW, who already have experience in fraud prevention and could probably teach the United States Government a thing or two – unless of course we adopt that employer-based model.  Such a model is also in use by the Veterans Administration and the military itself.  Of course, there is likely fraud in the system, but it is not the wholesale fraud experienced by Medicare and Medicaid.  Employer based health care puts the responsible tax payer in charge of preventing fraud.  Their incentive is greater than any government agency who acts based on the priorities given to it by the Administration and Congress.  As successful as Obamacare has been in reducing fraud, employer-funders will be that much more successful.

Thank you for the opportunity to address the committee.  We are, of course, available for direct testimony or to answer questions by members and staff.