December 12, 2024

Ahead of Fiscal Year (FY) 2025 NDAA Vote, Warren Presses Pentagon on Strategy to Prevent Price Gouging, Overpayments to Health Care Companies

Warren Reveals List of Nearly 250 Bad Actors that Overcharged DoD by Almost $46 Million

“It is critically important that DHA properly prevents and mitigates overpayments and price 

gouging in TRICARE.” 

Text of Letter (PDF) | DoD’s January 2024 Response (PDF)

Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.) sent a letter raising continued concerns about the Department of Defense’s (DoD) failure to prevent price gouging and overpayments in the military’s TRICARE health program. DoD’s response to Senator Warren’s July 2023 letter revealed a list of nearly 250 bad actors who have overcharged our military by nearly $46 million, which the Senator released today. In her new letter, Senator Warren requested further information about the department's plans to prevent overcharging. 

DoD relies on “several managed care support organizations to deliver health care entitlements” to servicemembers and veterans in a cost-effective manner. In December 2022, DoD awarded the most recent generation of these contracts, including a $70.9 billion contract to Humana and a $65.1 billion contract to TriWest Healthcare Alliance. DoD’s response does not make clear if DoD is receiving any discount on care and whether any rebates or incentive payments have been made to the managed care support contractors. 

DoD’s response also highlighted potential conflicts of interest among contractors who provide both claims-processing services and serve TRICARE patients. For example, PGBA, a DoD claims processing subcontractor, owns UCI Medical Affiliates, Inc., a health care service provider that services the TRICARE East Region. This dual ownership means that this claims processor could be more likely to “process and accept claims, including potentially improper ones, from [its subsidiaries] because it would benefit their shared parent corporation.”

Senator Warren also pressed DoD to provide more information about ethics concerns regarding former Defense Health Agency (DHA) Director Raquel Bono, a key figure in the failure to address previous overpayments. The DoD Inspector General, after determining that the agency had been overcharged, reported that Bono “disagreed with the recommendations to seek voluntary refunds from TRICARE providers” that had overcharged the program. Bono left government service shortly after and joined the board of Humana, a military health care provider. DoD did not provide an adequate response on this point and redacted critical information in the post-Government employment opinion letters it provided to Bono. 

While DoD provided a list of nearly 250 companies or providers who have overcharged the Pentagon over the past five years, it only listed the “[a]mount of recommended recoupment” – a total of nearly $46 million and failed to provide clarity on the final amounts that DHA recovered. In some of the worst cases, these companies had a history of nefarious behavior, needing to pay to resolve allegations of violating the False Claims Act for “crushing up pills and [including] them in creams used topically for pain treatment,” and submitting false claims to TRICARE to boost profits. 

“It is critical that DoD is taking appropriate steps to prevent repeat overpayment offenders, and I request additional information from you regarding whether DoD continued contracts with any of the providers on this list, including whether it did so even after a company overcharged DoD the first time,” wrote Senator Warren. 

Senator Warren also wrote about her concern with DoD’s “failure to track what [DoD] deem[s] as ‘accidental errors’,” which can be duplicate payments, patient coding errors, or incorrect calculations of amounts to be paid. 

“It is unclear how you determine that these are “accidental errors” and not deliberate, and I am also concerned by your decision to not track these errors to begin with,” said Senator Warren. 

In order to improve transparency around DoD’s efforts to prevent price gouging, Senator Warren requested DoD provide further clarity on their efforts by December 31, 2024. 

Senator Warren has led work to hold giant corporations accountable for price gouging consumers and the government and has urged DoD to crack down on these efforts: 

  • In June 2024, Senators Elizabeth Warren, Mike Rounds (R-S.D.), Peter Welch (D-Vt.), U.S. Representative Buddy Carter (R-Ga.), and 20 other lawmakers sent a letter to Assistant Secretary of Defense for Health Affairs Dr. Lester Martinez-Lopez and Director of the Defense Health Agency (DHA) Lieutenant General Telita Crosland, raising concerns over Express Scripts’ exclusive contract to administer TRICARE’s pharmacy program, the healthcare system for the military, retirees, and their families. 

  • In July 2023, U.S. Senator Elizabeth Warren chaired a hearing of the Senate Armed Services Subcommittee on Personnel. She called out the Department of Defense (DoD) for wasting billions in taxpayers dollars due to price gouging by defense contractors for services and  in health care, and identified opportunities for cost savings when DoD buys personnel-related goods and services. 

  • In July 2023, U.S. Senator Elizabeth Warren (D-Mass.) sent a letter to Secretary of Defense Lloyd J. Austin III and Director of the Defense Health Agency (DHA), Lieutenant General Telita Crosland, regarding a series of DoD Inspector General (IG) reports  finding that the Department of Defense (DoD) is failing to prevent price gouging and overpayments to contractors in the TRICARE health program.

  • In June 2023, Senators Warren and Mike Braun (R-Ind.), alongside Rep. Garamendi, reintroduced the bipartisan Stop Price Gouging the Military Act, which would close loopholes in current acquisition laws, tie financial incentives for contractors to performance, and provide the Department of Defense (DoD) the information necessary to prevent future rip-offs.

  • In May 2023,  Senator Warren and Representative John Garamendi sent letters to DoD, Boeing, and TransDigm on companies’ refusal to provide cost or pricing data.

  • In May 2023, Senators Warren, Sanders, Braun, and Grassley sent a letter to DoD urging an investigation into contractor price gouging.

  • In October 2022, Senator Warren obtained a commitment from DoD not to increase contract prices due to inflation.

  • In October 2022 Senator Warren sent a letter to DoD urging them to insist on receiving certified cost or pricing data to justify any contract adjustments.

  • In June 2022, Senator Warren and Representative Garamendi introduced the bicameral Stop Price Gouging the Military Act, which would enhance DoD’s ability to access certified cost and pricing data. Part of Senator Warren’s legislation was incorporated into the FY 2023 National Defense Authorization Act reported to the Senate.

  • On May 12, 2022, Senators Warren and Tammy Baldwin (D-Wisc.) and Rep. Jan Schakowsky (D-Ill.) introduced the Price Gouging Prevention Act of 2022, which would prohibit the practice of price gouging during all abnormal market disruptions – including the current pandemic – by authorizing the FTC and state attorneys general to enforce a federal ban against unconscionably excessive price increases, regardless of a seller's position in a supply chain. 

  • On March 16, 2022, Senator Warren introduced the Prohibiting Anticompetitive Mergers Act to help stomp out rampant industry consolidation that allows companies to raise consumer prices and mistreat workers. The bill would ban the biggest, most anticompetitive mergers and give the Department of Justice and FTC the teeth to reject deals in the first instance without court orders and to break up harmful mergers. 

  • On March 2, 2022, Senator Warren and her colleagues called out drug manufacturers for squeezing American families with rapid and widespread price hikes on prescription drugs. 

  • In February 2022, at a hearing, Senator Warren called out corporations for abusing their market power to raise consumer prices and boost profits. 

  • That same month, Senator Warren requested the Department of Justice to take aggressive action against corporations violating antitrust laws to hike prices for consumers. 

  • In January 13, 2022, Senator Warren questioned Federal Reserve nominee Lael Brainard about market concentration and price gouging driving inflation.

  • At a hearing in January 2022, Senator Warren pressed Fed Chair Jerome Powell on the role of corporate concentration in driving up prices for consumers during his renomination hearing to be Chair of the Board of Governors of the Federal Reserve System.

  • In December 2021, Senator Warren slammed Hertz's $2 billion dollar buyback plan, which would line the pockets of company executives and the private equity firm Apollo Global Management, while they raised rental car costs for consumers. 

  • In November 2021, Senator Warren identified 11 energy companies for inflating natural gas prices for consumers while reaping record profits. 

  • That same month, she requested the Department of Justice to investigate the poultry industry's anticompetitive behavior as turkey and chicken prices soar.

  • In the past year, Senator Warren has urged the Biden administration to closely scrutinize potential anticompetitive mergers that could lead to higher prices for consumers and accelerate industry consolidation. She has led letters about the proposed mergers of Frontier and Spirit airlines, Sanderson-Wayne, WarnerMedia-Discovery, and Amazon-MGM.

  • In September 2020, Senator Warren and Representative Ro Khanna (D-Calif.) formally requested that the Department of Defense (DoD) Inspector General (IG) investigate reports that the Pentagon redirected hundreds of millions of dollars of funds meant for COVID-19 response via the Defense Production Act (DPA) to defense contractors for "jet engine parts, body armor and dress uniforms.”

  • In May 2020, Senator Warren wrote to the Department requesting clarification on how the Department would prevent profiteering following a recent change to increase payments to contractors in response to the COVID-19 pandemic.

  • In March 2020, Senator Warren joined her colleagues in urging the FTC to use its full authority to prevent abusive price gouging on consumer health products during the COVID-19 pandemic. 

  • In May 2017, Senator Warren sent a letter to the Department of Defense Inspector General asking for an investigation into defense contractor TransDigm’s refusal to provide cost information to the Department of Defense.

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