Testimony on the nature of fraud and abuse in home health care funded by the Federal Government comes from investigative work performed by the subcommittee staff and the Better Government Association in the three States. The investigations examined the methods and means by which unscrupulous operators of home health care agencies seek to undermine, abuse, and unlawfully profit from the operation of these agencies. The central evidentiary theme of the testimony involves the various mechanisms by which one individual or a small organization can control all aspects of the delivery of home health care services through a tax exempt, nonprofit agency while reaping profits of hundreds of thousands of dollars. The testimony reveals how certain characteristics of the home health care program have not only provided the opportunity for this profiteering, but also ensure that unscrupulous entrepreneurs will continue to abuse the program in the absence of greater internal controls. Recommendations for improvement focus on the cost-reimbursement system and proposed alternatives, intermediary audit coverage, and the oversight and administration of the program. Ten exhibits and five charts are provided.