Medicare Secondary Payer: Improvements Needed to Enhance Debt
Recovery Process (20-AUG-04, GAO-04-783).
Last year, employer-sponsored group health plans (EGHP) were
responsible for most of the nearly $183 million in outstanding
Medicare secondary payer (MSP) debt. MSP debts arise when
Medicare inadvertently pays for services that are subsequently
determined to be the financial responsibility of another. The
Centers for Medicare & Medicaid Services (CMS) administers
Medicare with the assistance of about 50 contractors that, as
part of their duties, are required to recover MSP debt. GAO was
asked to determine whether Medicare contractors are appropriately
recovering MSP debt. GAO (1) assessed the cost-effectiveness of
the current debt recovery system and (2) identified CMS's plans
to enhance the recovery process. GAO analyzed workload and budget
information and assessed plans to develop a new debt recovery
system--the Recovery Management and Accounting System (ReMAS).
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-04-783
ACCNO: A11733
TITLE: Medicare Secondary Payer: Improvements Needed to Enhance
Debt Recovery Process
DATE: 08/20/2004
SUBJECT: Contractors
Cost effectiveness analysis
Debt
Debt collection
Erroneous payments
Health care programs
Health insurance
CMS Contractor Administrative-Budget and
Financial Management System
CMS Mistaken Payment and Recovery
Tracking System
HCFA Common Working File
HCFA Recovery Management Accounting
System
Medicare Program
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GAO-04-783
United States Government Accountability Office
GAO Report to the Ranking Minority Member, Subcommittee on Health, Committee on
Ways and Means, House of Representatives
August 2004
MEDICARE SECONDARY PAYER
Improvements Needed to Enhance Debt Recovery Process
GAO-04-783
Highlights of GAO-04-783, a report to the Ranking Minority Member,
Subcommittee on Health, Committee on Ways and Means, House of
Representatives
Last year, employer-sponsored group health plans (EGHP) were responsible
for most of the nearly $183 million in outstanding Medicare secondary
payer (MSP) debt. MSP debts arise when Medicare inadvertently pays for
services that are subsequently determined to be the financial
responsibility of another. The Centers for Medicare & Medicaid Services
(CMS) administers Medicare with the assistance of about 50 contractors
that, as part of their duties, are required to recover MSP debt.
GAO was asked to determine whether Medicare contractors are appropriately
recovering MSP debt. GAO (1) assessed the costeffectiveness of the current
debt recovery system and (2) identified CMS's plans to enhance the
recovery process. GAO analyzed workload and budget information and
assessed plans to develop a new debt recovery system-the Recovery
Management and Accounting System (ReMAS).
August 2004
MEDICARE SECONDARY PAYER
Improvements Needed to Enhance Debt Recovery Process
Medicare's system for recovering MSP debt from EGHPs is no longer
costeffective, with CMS recovering only 38 cents for every dollar it spent
on recovery activities in fiscal year 2003. This is largely due to
workload and budgetary factors. While the number of new debt cases
referred to contractors has declined by more than 80 percent since fiscal
year 2000, CMS's budget for contractor recovery activities has remained
relatively unchanged. As a result, contractors were funded at a level that
exceeded their workload. Almost half of the contractors that CMS funded to
process the 7,634 cases associated with the fiscal year 2003 workload were
assigned fewer than 50 cases-and eight were not assigned any. The current
system is also constrained by procedures that prevent contractors from
maximizing recoveries. For example, CMS has instructed contractors not to
pursue cases in which the amount of mistaken payments made on behalf of
the same beneficiary is less than $1,000. In addition, CMS neglected to
transmit more than 2,000 cases to the contractors-which depend on these
transmittals to initiate recoveries-during fiscal years 2000, 2001, and
2003.
CMS is developing a new recovery system-ReMAS-to enhance the MSP recovery
process. This system has the potential to help increase savings, provide
CMS with greater flexibility in distributing the workload, and simplify
the collection of MSP debt. ReMAS is designed to identify relevant
mistaken payments and will generate a case that can be assigned to any
contractor for recovery-not only the contractor that processed the
mistakenly paid claims. However, ReMAS has been under development for over
6 years and is currently only being used for liability and workers'
compensation recoveries by a fraction of the contractors. Pilot testing of
ReMAS on EGHP cases will not begin until October 2004.
We are recommending that the administrator of CMS (1) improve the
efficiency of MSP payment recovery activities by consolidating efforts
under a smaller number of contractors and ensuring that contractor budgets
for EGHP recovery activities more closely reflect their actual workloads
and (2) expedite implementation of the EGHP component of ReMAS. CMS agreed
with our recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-04-783.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Leslie G. Aronovitz at (312)
220-7600.
Cost-Effectiveness of MSP Debt Recovery Activities by Contractors Has
Declined
Note: Savings data for each fiscal year relate to new EGHP cases opened in
that year. CMS did not assign new EGHP debt cases to contractors in fiscal
year 2002 to allow them time to reduce their backlog of old cases.
Contents
Letter
Results in Brief
Background
EGHP Debt Recovery Process No Longer Cost-Effective
Contractors' Performance in Recovering EGHP Debt Is
Inconclusive Efforts to Improve MSP Management Have Not Focused on EGHP
Debt Cases Conclusions Recommendations for Executive Action Agency
Comments 1
3 5 8
15
18 20 20 21
Appendix I Scope and Methodology
Appendix II Comparison of Current System for Recovering EGHP Debt with
ReMAS 24
Appendix III Comments from the Centers for Medicare & Medicaid Services
25
Appendix IV GAO Contact and Staff Acknowledgments 27
GAO Contact 27 Acknowledgments 27
Tables
Table 1: Information on EGHP Debt Recoveries, Fiscal Years 2000,
2001, and 2003 10 Table 2: EGHP Workload and Budget Information, Fiscal
Year 2003 12 Table 3: Comparison of Current Recovery System to ReMAS 24
Figure
Figure 1: EGHP Debt Cases, Fiscal Years 2000, 2001, and 2003 11
Abbreviations
CAFM Contractor Administrative-Budget and Financial
Management System CMS Centers for Medicare & Medicaid Services COBC
Coordination of Benefits Contractor CWF Common Working File EGHP
Employer-Sponsored Group Health Plan MMA Medicare Prescription Drug,
Improvement, and
Modernization Act of 2003 MPaRTS Mistaken Payment Recovery Tracking System
MSP Medicare Secondary Payer ReMAS Recovery Management and Accounting
System
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separately.
United States Government Accountability Office Washington, DC 20548
August 20, 2004
The Honorable Pete Stark Ranking Minority Member Subcommittee on Health
Committee on Ways and Means House of Representatives
Dear Mr. Stark:
Medicare-the federal health insurance program that serves the nation's
elderly and disabled-paid over $271 billion for the health care of
approximately 41 million aged and disabled beneficiaries in fiscal year
2003. The Centers for Medicare & Medicaid Services (CMS)-the federal
agency within the Department of Health and Human Services that administers
the Medicare program-has a strong interest in protecting Medicare's fiscal
integrity. To safeguard funds, CMS must pay only for those services that
are the responsibility of the Medicare program. In some instances,
beneficiaries have other insurance-such as employersponsored group health
plans,1 automobile or other liability insurance plans, or workers'
compensation-that has the primary responsibility to pay their claims. In
these cases, Medicare would be the secondary payer, responsible for
meeting beneficiaries' health care costs not covered by the primary
insurer.
CMS and the contractors that assist the agency in administering the
program are charged with determining whether Medicare beneficiaries have
other health insurance coverage.2 In fiscal year 2000, CMS estimated that
about 8 percent of Medicare beneficiaries had health care claims that
appeared to be the primary responsibility of another insurer. Because
Medicare does not always know whether a beneficiary has other primary
1Although persons age 65 or older are eligible for Medicare coverage, some
are employed and may receive health insurance coverage for themselves and
their spouses through an employer-sponsored group health plan.
2CMS and its contractors are interested in determining whether
beneficiaries have other insurance coverage that is responsible for paying
their claims before Medicare. This insurance differs from Medicare
supplemental insurance, which typically pays for expenses that Medicare
does not pay. For example, supplemental insurance may pay for routine
annual check-ups, an expense that Medicare does not cover.
insurance, it may inadvertently pay for services that are subsequently
determined to be the financial responsibility of another payer. These
mistaken payments represent money owed to Medicare and are known as
Medicare secondary payer (MSP) debt.
Employer-sponsored group health plans (EGHP) are responsible for the
majority of outstanding MSP debt, accounting for about $134 million of the
almost $183 million in outstanding MSP debt in fiscal year 2003.3
Liability insurers, workers' compensation plans, and other types of
coverage accounted for the remaining $49 million. Because of your interest
in protecting the integrity of Medicare funds, you asked that we determine
whether Medicare contractors are appropriately recovering payments from
other health care insurers, specifically from EGHPs.
To evaluate the MSP debt recovery process, we assessed (1) the
costeffectiveness of the current system for recovering MSP debt from
EGHPs, (2) the performance of CMS's contractors in recovering MSP debt
from EGHPs, and (3) the agency's plans to enhance the MSP recovery
process.
To perform our work, we analyzed information from two CMS databases- the
Contractor Administrative-Budget and Financial Management (CAFM) System
and the Mistaken Payment and Recovery Tracking System (MPaRTS)-which
together contain budget, workload, and recovery data related to MSP
claims. We also visited four CMS contractors that processed a high volume
of MSP debt recovery cases in fiscal years 2000 and 2001 and reviewed
supporting documentation for over 100 closed cases at each contractor.
These cases consisted of potentially mistakenly paid claims for
beneficiaries who appeared to be covered by an EGHP. Because contractors
close the majority of cases without making recoveries, we specifically
focused on such cases to determine whether contractors followed
appropriate procedures and made sufficient efforts to recover MSP debt. We
excluded cases involving liability, workers' compensation, and other forms
of coverage from our review.
To further assess contractor performance, we examined whether the
contractors' private health insurance businesses influenced their recovery
efforts. In some EGHP debt recovery cases, the contractor's private health
3The amount of outstanding debt does not include approximately $272
million in debt that is currently classified as "not collectible." CMS's
financial reporting system does not track this debt by type of
debtor-consequently, it is not possible to determine the percentage that
is associated with EGHPs and other types of insurers.
Results in Brief
insurance business sold coverage to the employer that was responsible for
the MSP debt. Because this creates a potential conflict of interest
requiring the contractor to collect funds from the private side of its
business, our examination included an assessment of whether contractors
were diligent in recovering debt in such circumstances. In addition, we
reviewed CMS program guidelines and memoranda, interviewed CMS and
contractor officials, and examined the results of CMS's fiscal years 2001
and 2002 Contractor Performance Evaluations pertaining to contractors' MSP
operations. (See app. I for additional information on our scope and
methodology and an assessment of the reliability of CMS data used in this
report.) We conducted our work from December 2002 through July 2004 in
accordance with generally accepted government auditing standards.
The current system for recovering MSP debt from EGHPs is no longer
cost-effective. Last year, Medicare recovered only 38 cents for every
dollar it spent on recovery activities associated with EGHPs. This lack of
costeffectiveness is due, in part, to a decrease in the number of new debt
cases, which have declined by more than 80 percent since fiscal year 2000.
Despite the fact that almost half of the contractors were assigned fewer
than 50 cases in fiscal year 2003, they were funded to support a much
larger workload. Eight of these contractors collectively received more
than $1.8 million for their anticipated EGHP workload, but were never
assigned any cases to process. Further, operational constraints also
prevent contractors from maximizing their recoveries of mistaken payments.
For example, CMS has instructed contractors not to pursue cases in which
the amount of mistaken payments made on behalf of the same beneficiary is
less than $1,000. In addition, CMS lost an opportunity to recover debt
when it neglected to transmit more than 2,000 cases to the claims
administration contractors-which depend on these transmittals to initiate
recoveries-during fiscal years 2000, 2001, and 2003.
Poor record keeping at three of the four contractors we visited prevented
us from fully evaluating contractor effectiveness in processing MSP debt.
These three contractors were unable to produce supporting documentation
for some of the cases that we requested from them. The percentage of
missing cases at these contractors ranged from 4 to 24 percent. For the
cases that we could examine, we found that contractor decisions were
supported by appropriate documentation. This held true even in those
instances where the private side of a contractor's business was identified
as having responsibility for MSP debt. However, because these files were
not available, we were unable to fully assess whether the contractors made
sufficient efforts to collect MSP debt. Without
supporting documentation, we could not conclusively determine in all cases
that the contractors had followed appropriate recovery procedures,
including diligently attempting to recover funds from the private side of
their business. CMS's own contractor evaluations, conducted in fiscal
years 2001 and 2002, identified similar problems with records and other
problems related to contractors' management of MSP recovery efforts.
CMS has contracted for the development of a new recovery system-the
Recovery Management and Accounting System (ReMAS)-to enhance the MSP
recovery process by automating some tasks now performed manually. Because
ReMAS was designed to use a national claims database to identify mistaken
payments, it will be possible for CMS to assign an EGHP debt case to any
contractor-not only the contractor that processed the mistaken payments,
which is currently CMS's only option. These improvements have the
potential to help increase savings, provide CMS with greater flexibility
in distributing the workload, and simplify the collection of MSP debt.
However, ReMAS has been under development for 6 years and is currently
only used for liability and workers' compensation recoveries by a fraction
of the contractors. While the agency indicated that it would start pilot
testing ReMAS for recovering debt from EGHPs at two contractors in October
2004, it has not specified when it expects all contractors to implement
ReMAS for EGHP cases.
We are recommending that the administrator of CMS (1) develop detailed
plans and time frames for expanding ReMAS to include EGHP cases, and
expedite implementation of the EGHP component of ReMAS; and (2) improve
the efficiency of MSP payment recovery activities by consolidating MSP
debt recovery efforts under a smaller number of contractors and ensuring
that contractor budgets for EGHP recovery activities more closely reflect
their actual workloads. CMS agreed with these recommendations and said it
has begun taking action to expedite the EGHP component of ReMAS. It also
said that it is considering options for consolidating EGHP recovery
activities.
Background
CMS administers the Medicare program with the assistance of about 50
claims administration contractors.4 As part of their duties, contractors
deny claims that are the responsibility of other insurers. In addition,
they are required to recover mistaken payments that were made before it
could be determined that the beneficiary had other insurance-such as an
EGHP, an automobile or other liability insurance plan, workers'
compensation, or other types of coverage.
To ensure that contractors adequately perform these tasks, CMS
periodically monitors and evaluates their performance. Contractors are
required to record recovery information pertaining to EGHP debt cases in
the MPaRTS database. MPaRTS tracks the status of each EGHP case and
provides CMS with information on the amount of mistaken payments
identified, the amount demanded to be repaid, the amount recovered, and
whether the case is currently open or closed. Although CMS does not have a
database for tracking liability and workers' compensation cases that is
comparable to MPaRTS, CMS requires contractors to submit quarterly
accounts receivable reports for these and other types of cases. These
reports show the aggregate amount of outstanding debt, but do not provide
detail at the individual case level.
To prevent mistaken MSP payments, Medicare claims administration
contractors match beneficiaries' health care claims against information
contained in Medicare's Common Working File (CWF)-a repository of claims
and beneficiary enrollment data-to determine whether Medicare is the
primary or secondary payer. Claims are paid if the CWF indicates that
Medicare is the primary payer. However, the CWF may not always contain
accurate information. The MSP status of some beneficiaries is sometimes in
a state of flux-for example, a retired beneficiary may return to the
workforce and receive coverage under an EGHP for 6 months, and then leave
that job. This information may not be recorded in a timely manner, leading
to mistaken payments. In addition, the CWF can also contain inaccurate
information if beneficiaries do not notify CMS of their insurance status
when they become eligible for Medicare or if they provide incorrect
insurance information. Furthermore, although the CWF is periodically
updated with new insurance information, there is a lag
4The Medicare fee-for-service program is divided into two parts-A and B.
The claims administration contractors that process Part A claims-those
covering inpatient hospital, skilled nursing facility, hospice, and
certain home health services-are known as fiscal intermediaries.
Contractors processing Part B claims-covering physician services,
diagnostic tests, and related services and supplies-are referred to as
carriers.
between the time beneficiaries obtain coverage and when CMS learns of this
coverage. In the interim, contractors may mistakenly pay beneficiaries'
claims.
To identify mistaken MSP payments when an EGHP is the primary payer,
claims administration contractors use information provided by CMS and the
Coordination of Benefits Contractor (COBC). The COBC is a specialized
contractor that does not process Medicare claims. Instead, the COBC is
charged with developing information on beneficiaries who may have other
primary health insurance through a process known as the data match.5 The
purpose of the data match is to identify beneficiaries or their spouses
who are employed and thus may be covered by an EGHP. To facilitate data
matching, the Social Security Administration sends the Internal Revenue
Service a list containing the Social Security numbers of Medicare
beneficiaries. The Internal Revenue Service then matches the list against
beneficiary income tax return data and sends the results to the COBC for
further analysis. For example, if tax records show that an employer paid a
beneficiary at least $10,000 during the previous year, the COBC would
contact the beneficiary's employer to determine whether he was covered by
that employer's group health plan.
CMS compares information developed by the COBC to the national claims
history file, the most comprehensive source of paid claims information.
This comparison allows CMS to determine whether Medicare may have
mistakenly paid claims on behalf of the beneficiary. If the mistakenly
paid claims total at least $1,000, CMS assigns the case to the claims
administration contractor that processed and paid the claims.
Upon receipt of the EGHP debt case, claims administration contractors have
60 days to perform certain tasks to determine whether an attempt should be
made to recover the debt. The contractor must first verify that the
information being used as a basis for recovering the debt is correct and
that it has not already recouped the mistaken payments. If the case passes
this initial validation process, the contractor will initiate recovery by
sending a demand letter to the beneficiary's employer and insurance
5The data match process is one of several ways that CMS, the COBC, and the
claims administration contractors learn that a Medicare beneficiary has
primary insurance coverage through another insurer. The processes include
an initial beneficiary enrollment questionnaire, employer reports, and
voluntary data-sharing agreements with some employers and insurers.
company or third-party administrator, requesting payment within 60 days.6
If there is no response to the demand letter within 60 days, interest
begins to accrue on the debt. Contractors then send a second letter
explaining that if a response or payment is not received within another 60
days, the matter will be referred to the Department of the Treasury for
collection. Responses to these letters can include repayment with interest
or an explanation as to why the employer and associated health insurer are
not responsible for the debt. This explanation may include documentation
indicating that the employee retired and thus discontinued health coverage
or never obtained coverage through the employer.
The procedures followed by contractors to recover mistaken payments from
liability insurers and workers' compensation plans differ from those used
when the primary payer of an MSP debt is an EGHP. In a liability or
workers' compensation case, mistaken payments made on behalf of a
beneficiary are not related to a period of insurance coverage, but to a
particular incident-for example, an automobile accident or workplace
injury. The task of the contractor in such cases is to identify all paid
medical claims related to the incident and to inform the beneficiary or
the beneficiary's attorney of the responsibility to repay Medicare in the
event that they receive an insurance settlement for their medical
expenses. Because beneficiaries may require protracted medical treatment
for their injuries, it may take several years before the total amount of
payments related to the injury is known. In the interim, a contractor may
repeatedly review the beneficiary's claims history to determine whether
Medicare has paid new claims related to the injury.7
We previously reported that CMS maintained a substantial backlog of
uncollected debt in fiscal year 2000.8 Although the Debt Collection
Improvement Act of 1996 required that agencies refer debt delinquent for
more than 180 days to the Department of the Treasury, CMS still had not
6In addition to the demand letter, contractors will also include the
employee's name, insurer, copies of the claims, and the dates on which
services were provided, to assist the responsible party in verifying its
liability for the debt.
7Medicare may conditionally pay a beneficiary's claims if the contractor
is aware that another payer may ultimately be found responsible for them.
For example, Medicare may pay the claims of a beneficiary related to an
incident that is the subject of a lawsuit. After a settlement or judgment
is reached, it may then pursue a recovery from the liable party.
8GAO, Debt Collection Improvement Act of 1996: HHS's Centers for Medicare
& Medicaid Services Faces Challenges to Fully Implement Certain Key
Provisions, GAO-02-307 (Washington, D.C.: Feb. 22, 2002).
fully implemented this requirement. Prior to 2000, CMS did not instruct
claims administration contractors to refer delinquent EGHP cases to the
Department of the Treasury for collection. As a result, CMS maintained a
substantial backlog of older cases that remained open, but inactive, for
many years.
CMS's administration of the Medicare program will undergo significant
changes over the next several years as the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (MMA) is implemented. MMA
provides CMS with increased flexibility in contracting with new entities
to assist it in operating the Medicare program.9 While CMS has relied
primarily on the claims administration contractors to perform most of the
key business functions10 of the program, the new law authorizes CMS to
enlist a variety of contractors to perform these tasks. For example, CMS
could use new contractors to process and pay claims and to perform
financial management and payment safeguard activities. CMS is just
beginning to develop plans to implement MMA's contracting reform
provisions. Phase-in of the amendments to contracting reform takes effect
on October 1, 2005. The competitive bidding of all contracts is required
for contract periods that begin on or after October 1, 2011. The agency
expects to issue its implementation plan for contracting by October 1,
2004.
Since fiscal year 2000, the cost-effectiveness of EGHP recovery activities
has significantly declined. The decline in cost-effectiveness occurred
because the volume of EGHP debt cases significantly decreased-in fiscal
year 2003, almost half of the contractors were assigned fewer than 50
cases-while, at the same time, the cost to CMS for maintaining debt
collection capabilities at all claims administration contractors increased
slightly. Moreover, CMS funded eight contractors who were not assigned any
EGHP debt cases. The recovery process is also constrained by procedures
that prevent contractors from maximizing their recoveries of mistaken
payments. Because contractors have access only to claims that they have
paid, they cannot identify, and thus collect, mistaken payments made by
other contractors. In addition to these structural problems, we
EGHP Debt Recovery Process No Longer Cost-Effective
9Pub. L. No. 108-173, S: 911, 117 Stat. 2066, 2378-2386.
10There are nine business functions: claims processing, beneficiary and
provider customer service, appeals, provider education, financial
management, provider enrollment, reimbursement, payment safeguards, and
information systems security.
found that in 3 of the last 4 years CMS did not transmit a substantial
number of EGHP cases to the claims administration contractors, resulting
in missed recoveries.
CMS Contractor Funding Has Not Decreased Despite Declining Workload
EGHP recovery activities are no longer cost-effective. To measure
costeffectiveness, we compared the amount that CMS spent on contractor
recovery activities for a given fiscal year with the amount recovered from
all cases that were opened during the same year-regardless of when the
funds were recovered.11 While Medicare recovered about $2.49 for each
dollar it spent on EGHP recovery activities in fiscal year 2000, this
ratio declined to $1.80 in 2001. Although there are no comparable data for
fiscal year 2002 because CMS did not open any new EGHP cases that year,
thus allowing contractors time to reduce their backlog of old cases,12 the
decline in cost-effectiveness continued in fiscal year 2003 when CMS
resumed opening new EGHP cases. In that year, Medicare lost money on EGHP
recovery activities, recovering only 38 cents for every dollar spent. (See
table 1.)
11We assigned the recovery amount to the year a case was opened because
contractors perform the majority of their work shortly after they receive
a case-that is, contractors must screen the case to determine whether the
amount involved meets the $1,000 threshold and send letters requesting
payment to the responsible party. Although contractors may receive
payments in subsequent years, these recoveries are largely the result of
work performed during the year the case was opened.
12The contractor budget for EGHP debt recovery activities in fiscal year
2002 was $6,237,056. Although no new EGHP debt cases were opened that
year, these funds were used to close old cases, some of which had been
inactive for more than 10 years.
Table 1: Information on EGHP Debt Recoveries, Fiscal Years 2000, 2001, and
2003
Fiscal Savings per dollar
Amount of EGHP debt CMS budget for spent on EGHP
year case EGHP
opened recoveriesa debt recoveries recovery
activities
2000 $21,472,071 $8,612,677 $2.49
2001 15,062,024 8,351,940 1.80
2003 3,719,465b 9,786,510 .38
Source: GAO analysis of CMS's MPaRTS and CAFM data.
Note: CMS did not open any new EGHP cases in 2002.
aThe recovered amount includes interest on the debt. Fiscal year recovery
amounts include funds that were recovered the year the case was opened as
well as any funds recovered in subsequent years.
bBecause 28 percent of cases assigned to contractors in 2003 remain open,
the recovered amount for 2003 was estimated. Using 2000 and 2001 MPaRTS
data, we calculated the total amount recovered as a percentage of all EGHP
debt referred to contractors-which averaged about 7 percent for these 2
years. We then applied this percentage to the total amount referred to
contractors in 2003 to obtain our estimate. In fiscal year 2003, CMS
referred $51,932,106 of debt to contractors. As of March 2004, contractors
had recovered $1,094,176.
The lack of cost-effectiveness of the EGHP recovery process resulted
partly from a declining workload, which limited the potential for
recovery. The number of new MSP EGHP debt cases has decreased by more than
80 percent in recent years, from 49,240 cases in fiscal year 2000 to 7,634
cases in fiscal year 2003.13 CMS officials told us that improvements in
identifying beneficiaries with other insurance before a claim is paid have
reduced the number of mistakenly paid MSP claims. Consequently, according
to CMS officials, this has lessened the need to recover these payments via
the EGHP recoveries.14 These officials also projected that the number of
EGHP cases assigned to contractors could continue to decline.
Not only have the number of EGHP cases declined since fiscal year 2000,
but the complexity of these cases and the resources required to process
many of them have also decreased. Since fiscal year 2000, the claims
13In addition to EGHP debt recoveries initiated by the data match,
contractors may independently initiate recoveries. However, because CMS
does not have a database comparable to MPaRTS for tracking "nondata match"
recoveries, information on the number and amount recovered is not directly
available.
14According to CMS officials, several recent initiatives have enhanced the
ability of contractors to correctly identify Medicare beneficiaries with
other coverage before paying claims. For example, CMS consolidated MSP
case development activities with the COBC. CMS has also encouraged
employers and insurance companies to share health insurance information on
Medicare beneficiaries with CMS on an ongoing basis.
administration contractors closed more than half of the cases during their
initial computer screening process. That is, they often found that the
mistaken payments totaled less than $1,000, another insurer voluntarily
paid the claims, or the COBC updated the CWF to show that the beneficiary
did not have other primary coverage, such as an employersponsored group
health plan, during the time the services were delivered. In such
instances, contractors are not required to correspond with employers and
insurers. It is only a relatively smaller number of cases- those that pass
the initial screening process-that require significant contractor
resources to send demand letters, process the responses, and archive file
materials. As shown in figure 1, of the 49,240 EGHP cases processed by
contractors in fiscal year 2000, 20,487-about 42 percent- were
resource-intensive cases that entailed sending a demand letter. In
contrast, only 1,276 cases-about 17 percent-involved a demand letter in
fiscal year 2003.
Figure 1: EGHP Debt Cases, Fiscal Years 2000, 2001, and 2003
Note: Recovery and demand totals are based on the year the cases were
assigned to contractors. CMS did not assign new EGHP cases to contractors
in 2002, to allow them time to reduce their backlog of old cases. The
number of recoveries for 2003 cases may increase, as the period for
recovering debt is still open for about 28 percent of cases.
CMS's payments to contractors for recovery activities have not reflected
the sharp decline in the number of EGHP debt cases that occurred in fiscal
year 2003. For example, in fiscal year 2000, the three contractors with
the
largest workloads received a combined budget of less than $1 million and
processed 7,708 EGHP cases. The workload of those three contractors was
larger than the entire fiscal year 2003 workload, for which CMS spent
almost $10 million on contractors' EGHP debt recovery activities.
This disparity between workload and budget in fiscal year 2003 is even
more apparent at the individual contractor level. As shown in table 2, 8
of the 51 claims administration contractors processed 400 or more EGHP
cases-representing about 52 percent of the total EGHP workload of 7,634
cases.15 However, almost half of the contractors were assigned fewer than
50 cases. Despite their small combined workload-4 percent of all EGHP
cases in fiscal year 2003-CMS allocated to these contractors more than a
quarter of its EGHP budget, about $2.5 million, to support EGHP and
certain other recovery activities.16 Moreover, CMS funded 8 contractors
that were not assigned any EGHP debt cases.
Table 2: EGHP Workload and Budget Information, Fiscal Year 2003
Number of CMS budget Percentage of Number of claims for EGHP total EGHP
budget Percentage of EGHP cases administration recovery for recovery total
EGHP assigned contractors activities activities cases
400 + 8 $3,295,191 34 52
200-399 5 1,379,049 14 21
50-199 14 2,595,844 27 21
1-49 16 648,651 7
0 8 1,867,775 19 0
Total 51 9,786,510 100a 100a
Source: GAO analysis of CMS's MPaRTS and CAFM data.
aColumn percentages do not total to 100 due to rounding.
15Although these eight contractors processed significantly more EGHP cases
than other contractors in fiscal year 2003, their recovery efforts were
still not cost-effective-the estimated recovery amount of $1,331,118 was
significantly less than their budget of $3,295,191.
16EGHP budgets also include funds for contractors to perform certain other
tasks related to MSP debt recovery, such as responding to incoming
correspondence and pursuing recoveries that they have identified
independently of the data match.
CMS's budget process does not efficiently match funding for contractor
recovery activities to contractors' actual workloads. CMS pays each
contractor to maintain an infrastructure to support the recovery of EGHP
debt, regardless of the number of cases the contractor processes during
the year. In order to process EGHP cases forwarded to them by CMS, the
claims administration contractors maintain an infrastructure that results
in costs such as wages, equipment, and records. Typically, this includes a
staff of MSP examiners who review EGHP cases, contact other potential
insurers, evaluate explanations from insurers as to why the MSP debt may
not be valid, make referrals to the Department of the Treasury when a debt
is not paid within 180 days, and archive case files. Each contractor must
also maintain screening software to identify and exclude EGHP debt cases
that do not meet the $1,000 threshold. As a result, some contractors may
receive funding for their infrastructures even though they process few or
no cases during the year, as occurred in fiscal year 2003.
In comparison to other MSP activities performed by contractors-such as
maintaining computer programs that automatically identify and deny MSP
claims-EGHP recoveries are expensive to conduct and no longer provide a
return on investment. In fiscal year 2003, the return on investment for
all types of MSP activities combined was 48 to 1. That is, Medicare
contractors spent an estimated $95.6 million for all MSP activities and
produced identifiable savings of approximately $4.6 billion,17 resulting
in $48 saved for every dollar spent.
Operational Constraints Reduce Potential MSP Savings
We found that several system limitations create barriers to recovering
mistaken payments and reduce program savings. Some mistakenly paid claims
may be missed because beneficiaries received medical services in more than
one state, and thus had their claims processed by more than one
contractor.18 Because contractors have access only to claims records that
they process, they are unable to identify claims processed by other
contractors. In addition, beneficiaries whose total MSP claims exceed
$1,000, but are split among two or more contractors, may not have all of
17There are several sources that contributed to these savings, including
the amount of denied claims, recoveries (from EGHP debt, liability, and
workers' compensation cases), and voluntary repayments from providers.
18The provider's geographic location determines where a beneficiary's
claims are processed. For example, the claims of a beneficiary who
maintains a residence in New York, but who receives medical services while
vacationing in Florida, will be processed by the Florida claims
administration contractor.
their mistaken payments recovered if the payments made by any single
contractor total less than the $1,000 threshold. Although CMS officials
could not quantify the effect of these constraints on recoveries, they
told us that they believe that these limitations have significantly
reduced MSP savings.
For example, a beneficiary who lives in the Midwest but spends the winter
in the South and receives health care services in both locations will have
claims processed by different contractors. If mistaken payments for $2,000
were made for services the beneficiary received during the year-for
example, $1,200 in one location and $800 in the other-only the contractor
with payments exceeding the threshold would pursue a recovery. Therefore,
although the primary payer would be responsible for the entire $2,000 in
services, Medicare would attempt to recover only a portion of the amount
owed.
A similar inefficiency occurs when beneficiaries receive inpatient
services covered by Part A of Medicare and physician services covered by
Part B. Different contractors typically process Part A and Part B claims,
but they are not required to coordinate EGHP recoveries with one another.
This lack of coordination also results in missed savings opportunities
when neither the Part A nor Part B claims individually meet the $1,000
threshold. Even if both the Part A and Part B claims exceed this
threshold, greater administrative costs are incurred by both CMS and
private employers, as two different contractors attempt to recoup payments
from the same payer.
Finally, the success of the current system depends on CMS distributing
EGHP cases to the claims administration contractor that processed the
mistaken payments. Our review of EGHP debt cases revealed that, during
fiscal years 2000, 2001, and 2003, CMS neglected to transmit 2,364 cases
to the contractors, representing more than $28 million in potential
mistaken payments. CMS officials told us that the accurate referral of
EGHP cases has grown more difficult in recent years as some contractors
have left the Medicare program and other contractors subsequently assumed
their existing workload. They explained that they suspected that these
EGHP cases were overlooked when one contractor processing claims for
beneficiaries in several states left the program and the related cases
were never assigned to the replacement contractors. As a result, no
recovery action was ever initiated for these cases. By using the
percentage of potential mistaken payments that are typically recovered-7
percent-we estimate that CMS's failure to transmit these cases to
contractors for potential recovery cost the Medicare program approximately
$2 million.
Contractors' Performance in Recovering EGHP Debt Is Inconclusive
We were unable to fully evaluate the effectiveness of the EGHP debt
recovery efforts of the claims administration contractors we visited
because three of the four contractors were unable to produce all of the
case files we requested. Although the files we examined indicated that
these contractors were appropriately managing their EGHP workload, the
volume of unavailable files precluded us from reaching an overall
conclusion on their performance. CMS's recent contractor performance
evaluations found similar records management deficiencies and raised
additional questions about contractors' effectiveness.
Poor Records Management Results in Inconclusive Assessment of Contractors'
Performance
We found it difficult to thoroughly assess the performance of all of the
contractors we visited. At each contractor, we randomly selected a sample
of cases to review. The number selected varied by contractor and totaled
644 cases for all contractors combined. However, 78 case files could not
be located.19 Although one contractor was able to produce the files and
supporting documentation for all the cases we requested, the other three
contractors poorly managed their records and were unable to provide all of
the files and supporting documentation we had requested in advance of our
visits.20 The percentage of missing cases at these contractors ranged from
4 to 24 percent.21 Because these files were not available, we were unable
to fully assess whether the contractors made sufficient efforts to collect
MSP debt. For example, without supporting documentation for those cases,
we could not conclusively determine that the contractors had followed all
the appropriate recovery procedures.
Of the 566 cases available for review, we found that contractor files were
complete and contained appropriate documentation to support the
19Typically, support for such cases consists of paper files that are
archived in a storage facility, or computer-generated reports from the
contractors' claims systems, which are stored electronically.
20At each of the four contractors we visited, we reviewed from 136 to 207
EGHP cases that were assigned in 2000 and 2001.
21The types of missing case files varied across contractors. For example,
one contractor could not produce support for almost a third of the cases
that were closed during the initial screening. This contractor told us
that it had changed computer systems and the electronic versions of the
reports stored on the previous computer system could no longer be
retrieved. Although some of these reports had apparently also been printed
at one time, the contractor could not locate those documents. Another
contractor was unable to produce case files for about half of the cases
that involved sending a demand letter to the employer. A contractor
official speculated that the records might have been lost when it assumed
the Medicare contract previously held by another insurance company.
contractor's decision to close each case without making a recovery. We
reviewed two types of cases: those that were closed during the initial
screening process after the contractor determined that the $1,000
threshold was not met, and those that were closed after the contractor
sent a demand letter to the employer requesting payment. Together, these
two types of cases constituted about 65 percent of the EGHP workload
during fiscal years 2000 and 2001.22 For cases that were closed because
they did not meet the $1,000 threshold, contractors provided us with
adequate supporting documentation showing that the involved claims totaled
less than this amount. Other cases were properly closed because the
employers provided valid reasons as to why they were not responsible for
the MSP debt. For example, if a beneficiary had retired and was not
covered by the employer's insurance at the time the claims were submitted,
contractor case files contained correspondence from the employer
documenting this fact. In about a third of the MSP cases we selected for
review, the private side of the contractor's business sold insurance to
the employer that was initially identified as having responsibility for
MSP debt. Although this situation creates a potential conflict of interest
for the contractor because it must collect funds from its private business
side, we did not find evidence that contractors closed such cases
inappropriately or treated them differently from others.
Our review also found that one contractor made errors entering information
into CMS's MPaRTS system, which tracks the status of EGHP cases. Although
such errors do not mean that the contractor had inappropriately processed
cases, they make it difficult for CMS to monitor the cases' status. The
tracking system uses different codes to describe the status of MSP cases.
For example, there is a code to indicate that the case was closed after a
demand letter was sent, and another to indicate that the case was closed
because the $1,000 recovery threshold was not met. This contractor did not
correctly apply these two codes and miscoded about 18 percent of the cases
we reviewed.
CMS Contractor CMS's recent contractor performance evaluations of MSP
recovery Evaluations Highlight activities support our finding of poor
records management. CMS evaluated Other Problem Areas the MSP activities
of 12 contractors in fiscal year 2001 and another 12
contractors in fiscal year 2002. During these evaluations, CMS reviewed
22The bulk of the remaining cases included those which remained open,
those resulting in a recovery, and those referred to the Department of the
Treasury for collection.
EGHP case files from contractors. These evaluations are based on a
relatively small number of case files-10 to 20-and therefore do not
provide in-depth assessments of contractors' performance. However, the
evaluations conducted in 2001 and 2002 highlighted contractor performance
problems similar to those we identified. That is, CMS found that several
contractors, which included some that were not part of our review, had
missing case files and entered inaccurate information into the CMS
tracking database. For example, during a review of one contractor, CMS
requested 20 EGHP case files, but the contractor was able to locate only
12 files. In addition, CMS found tracking-system coding errors-in 2001, 5
of the 12 contractors reviewed did not use the correct status code when
entering information into the CMS computer system that tracks the status
of EGHP cases.
CMS evaluations identified additional problems in fiscal years 2001 and
2002, suggesting other weaknesses in contractors' MSP recovery activities,
as illustrated by the following examples:
o Staffing problems. One contractor discontinued processing data match
cases for 3 months when the sole staff member performing this task took an
extended leave of absence. At another contractor, CMS determined that the
number of staff assigned to MSP recoveries was insufficient to process the
contractor's large workload. CMS also noted that a contractor had recently
changed the educational requirements for MSP staff. Because most of the
current staff did not possess a college degree as required by the
contractor's revised standard, the contractor retained an almost entirely
new MSP staff. The new staff told CMS reviewers that their training was
inadequate to prepare them for processing the workload.
o Delays in processing correspondence. In examining documentation at one
contractor, CMS reviewers identified a significant backlog of
correspondence. According to CMS's estimate, there were over 2,400 pieces
of mail awaiting action-including checks and correspondence from
employers, insurers, and other contractors. The oldest correspondence
awaiting action was more than 2 years old-well beyond CMS's requirement
that contractors match incoming mail with established cases and respond to
such correspondence within 45 days.
o Failure to appropriately document case determinations. At one
contractor, CMS reviewers found several case files where the contractor
did not document whether the action was necessary. For example, the
contractor closed a case and indicated that a full recovery was made;
however, the file did not show that a check was received from either an
employer or insurer. At another contractor, CMS reviewers examined cases
that were inappropriately closed without recovery because the contractor
had not promptly notified the EGHP of the debt, as required. In this
instance, CMS
found that once the contractor recognized its own untimeliness, it erred
again by closing these cases without confirming that the health plan's
time limit for accepting claims had, in fact, expired.
o Inadequate security measures. Because the recovery process partially
relies on Internal Revenue Service tax information, contractors are
required to take certain precautions to prevent unauthorized access. At
one contractor, CMS found that the workstation of the person responsible
for processing the EGHP workload was situated next to the workstations of
staff who did not have authorization to access restricted tax information.
Reviewers found that files were stored in unlocked file cabinets and that
sensitive printed materials were left in plain view in a general work
area, rendering the information easily accessible to anyone in the
facility.
Recognizing the need to improve the coordination of its MSP recovery
efforts, CMS contracted for the development of a new recovery system- the
Recovery Management and Accounting System (ReMAS)-in 1998. The purpose of
ReMAS is to improve the identification, tracking, and recovery of mistaken
payments. ReMAS was designed to enhance the MSP recovery process by
automating some tasks performed manually and by reducing the time required
to collect MSP debt. As of May 2004, CMS has deployed the liability
insurance and workers' compensation component of ReMAS to nine
contractors.
Efforts to Improve MSP Management Have Not Focused on EGHP Debt Cases
Designed to Enhance MSP Recoveries, ReMAS Offers Promising Features
ReMAS is designed to receive and evaluate leads from CWF electronically, a
function that is now performed in separate steps by CMS staff and
individual claims administration contractors. These leads consist of
information suggesting that a beneficiary has other coverage that should
be primary. CMS officials claim that ReMAS will streamline other functions
as well. For example, when new information on a beneficiary's MSP status
is added to CWF, ReMAS is expected to determine, on a daily basis, whether
mistaken payments were made on his or her behalf. Currently, the
contractors review the occurrence of mistaken payments at varying
intervals ranging from quarterly to semiannually. Once ReMAS determines
that Medicare has paid claims that were the primary responsibility of
another insurer, it will generate a case that can be assigned to any
contractor for recovery. It will no longer be necessary for the contractor
that processed the mistakenly paid claims to perform recovery activities.
CMS officials told us that they believe that ReMAS will have several
advantages over the current process. First, efficiencies gained through
ReMAS would enable contractors to pursue MSP debt that involves amounts
less than the current $1,000 threshold, resulting in additional
recoveries. Second, ReMAS could facilitate the consolidation of MSP debt
recovery efforts among a handful of contractors, as each contractor would
have access to all paid claims. CMS officials indicated that ReMAS would
enable them to reduce administrative costs, provide contractors with a
more consistent and predictable workload, and simplify contractor
oversight activities. (See app. II for more information comparing ReMAS to
the present recovery system).
Implementation of ReMAS for EGHP Debt Cases Is Uncertain
Although CMS has spent $7 million on the development of this system, which
has now spanned 6 years, ReMAS's implementation is progressing slowly. It
remains in the early implementation stages-testing on EGHP cases started
in June 2004. Several critical tasks related to ReMAS's implementation
have taken several years to complete. To date, only the initial software
testing and validation for the liability and workers' compensation
components have been completed.
CMS's initial plans for implementing ReMAS have focused on recovering
liability insurance and workers' compensation debt. Thus far, 17
contractors have received training in the use of ReMAS. CMS officials told
us that as of May 2004, the liability and workers' compensation components
of ReMAS have been deployed to nine contractors. The remaining contractors
that process MSP liability cases are scheduled to implement ReMAS by
October 2004. ReMAS also has the potential to recover mistaken payments
associated with EGHPs-currently handled through the data match process.
CMS recently expanded the scope of ReMAS to include employer-sponsored
group health plans, but details related to incorporating EGHP cases in the
system are unclear. Unlike liability and workers' compensation cases,
which are related to specific accidents or injuries, EGHP cases are based
on a beneficiary's dates of employer-sponsored coverage. This distinction
requires enhancements to the ReMAS system, to ensure that it can address
and process this key difference. According to CMS's timetable, preliminary
tasks such as computer testing, validation, and documentation of the EGHP
component of ReMAS will be completed in September 2004. While CMS expects
to pilot test the EGHP component with two contractors in October 2004, it
has not specified when it will implement ReMAS for EGHP cases at all
contractors.
Conclusions
As Medicare's primary steward, CMS should make a concerted effort to
recoup funds owed the program. However, recovery efforts should be planned
and executed with cost-effectiveness in mind. CMS's efforts to recover MSP
debt from cases that involve EGHPs were cost-effective as recently as a
few years ago, but CMS is now operating a recovery system that is losing
money. Although funding for contractors' EGHP debt recovery activities has
slightly increased since fiscal year 2000, contractor workloads have
decreased by 80 percent. In addition, funding for these activities is not
always related to contractors' workloads-in fiscal year 2003, almost half
of the contractors received fewer than 50 cases to process while 8 of
these, which had a collective budget of more than $1.8 million, received
no cases at all. As recently as fiscal year 2000, three contractors
collectively processed a workload that exceeded the entire EGHP workload
of all contractors in fiscal year 2003, suggesting that consolidation of
debt recovery activities among a smaller number of contractors is
feasible. The current system, with over 50 contractors involved in EGHP
recovery activities, is cumbersome to administer, and poor record-keeping
makes it difficult to determine whether contractors are doing all they can
to recover debt.
One of the keys to improving the cost-effectiveness of MSP debt recoveries
may rest with CMS's new ReMAS system. Plans to expand the scope of ReMAS
to recover debt associated with employer-sponsored group health plans
could ultimately address current operational weaknesses, such as an
inefficient distribution of workload and limited coordination among
contractors. Now that CMS has been given new authority to contract with a
variety of entities to assist it with managing the Medicare program, it
should take advantage of ReMAS's capability to consolidate debt recovery
efforts with a smaller number of contractors and thereby improve the
efficiency of the program.
Recommendations for We recommend that the administrator of CMS:
Executive Action o develop detailed plans and time frames for expanding
ReMAS to include EGHP cases, and expedite implementation of the EGHP
component of ReMAS and
o improve the efficiency of MSP payment recovery activities by
consolidating the EGHP workload under a smaller number of contractors and
ensuring that contractor budgets for EGHP recovery activities more closely
reflect their actual workloads.
Agency Comments In written comments on a draft of this report, CMS agreed
with our recommendations. CMS said it recognizes the importance of
improving the cost-effectiveness of its debt collection process and has
taken steps to expedite implementation of the EGHP component of ReMAS. CMS
stated that operational efficiencies gained through the implementation of
ReMAS make it feasible to consolidate recovery activities. CMS's comments
are reprinted in appendix III. CMS also provided us with technical
comments, which we incorporated as appropriate.
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If you or your staff have any questions about this report, please call me
at
(312) 220-7600. An additional GAO contact and other staff who made
contributions to this report are listed in appendix IV.
Leslie G. Aronovitz
Director, Health Care-Program
Administration and Integrity Issues
Appendix I: Scope and Methodology
To assess the cost-effectiveness of the current system for recovering
Medicare Secondary Payer (MSP) debt, we analyzed information from two CMS
databases-the Contractor Administrative-Budget and Financial Management
(CAFM) system and the Mistaken Payment and Recovery Tracking System
(MPaRTS). CAFM provided information on CMS's budgets for contractors and
MPaRTS provided information on the number of potential MSP recovery cases
processed by contractors and the amount of savings from recovery
activities.
To evaluate contractor performance in recovering MSP debt, we focused on
cases that involved beneficiaries and their spouses who may have been
employed and covered by an employer-sponsored group health plan (EGHP).
These cases consisted of potentially mistakenly paid claims for services a
beneficiary appeared to have received while covered by an EGHP. We
selected 4 geographically dispersed contractors that processed a high
volume of EGHP debt cases-all 4 were among the top 10 contractors that
processed the highest number of such cases in 2000 and 2001. At each
contractor, we randomly selected a sample of cases that were opened in
2000 and 2001 for review-the number of cases selected at each contractor
varied, ranging from 136 to 207.1 Of the 644 cases selected, 566 were
available for review. Contractors were unable to provide documentation for
78 cases. Because contractors close the majority of cases without making
recoveries, we specifically focused on such cases in order to determine
whether contractors made sufficient effort to recover MSP debt and
followed appropriate procedures. Our inspection of these files consisted
of reviewing contractor adherence to CMS's detailed procedures for steps
taken during the recovery process and the sufficiency of the contractor's
documentation for closing data match cases without recovering funds or
referring cases to the Department of the Treasury for collection.2
1We excluded EGHP debt cases that resulted in a recovery, cases that were
currently open, and older cases that were still considered open but,
because of their age, had been referred to the Department of the Treasury
for collection. We also excluded liability, workers' compensation, and
other nondata match cases.
2CMS requires contractors to retain documentation supporting their case
determinations including copies of mistakenly paid claims, demand letters
sent to employers or other insurers requesting payment, letters informing
employers or other insurers that the case will be referred to the
Department of the Treasury for collection if payment is not received,
contractors' reports describing the beneficiary's enrollment and payment
information, a worksheet summarizing the beneficiary's insurance history,
and correspondence with employers and other insurers.
Appendix I: Scope and Methodology
All four of the Medicare contractors we examined sold private health
insurance. Because of the possibility that the private side of their
businesses could have been responsible for reimbursing Medicare for MSP
debt, our examination included an assessment of whether this potential
conflict of interest affected contractors' actions in collecting this
debt. Using insurer information available from MPaRTS and contractor case
files, we identified cases that involved the contractor's private health
insurance business and compared them to the other cases. Our analysis
found little difference between the two types of cases in terms of missing
documentation-12.0 percent of cases that involved the contractor's private
side health insurance business were not documented, compared with 12.1 for
the other cases. To assess CMS efforts to oversee and improve MSP debt
recovery, we reviewed program guidelines and memoranda and interviewed
officials from CMS and Medicare contractors. To identify contractor
performance problems, we also examined the results of CMS's fiscal years
2001 and 2002 contractor performance evaluations pertaining to
contractors' MSP operations.
Although we did not validate CMS's CAFM and MPaRTs information, CMS has
procedures in place to ensure the accuracy of these databases. The MPaRTs
database, which tracks MSP debt recoveries from EGHPs, contains internal
logic checks that prevent contractors from incorrectly entering certain
types of information. In addition, CMS periodically reviews MPaRTs records
as part of its contractor performance evaluations. CAFM is a financial
management system established to enable CMS to control the national budget
for the Medicare contractors. It contains a small number of system checks
that ensure that expenditure information provided by contractors is
totaled correctly. The reliability of the data is ensured through
independent audits. In addition, CMS personnel also review the data
throughout the year.
To identify the agency's efforts to enhance the MSP process, we reviewed
documents and interviewed CMS officials on CMS's planned Recovery,
Management and Accounting System (ReMAS), a new CMS system for MSP debt
recovery activities that is under development. We conducted our work from
December 2002 through July 2004 in accordance with generally accepted
government auditing standards.
Appendix II: Comparison of Current System for Recovering EGHP Debt with ReMAS
The following table highlights differences between the way MSP case
development, validation, and recovery are implemented under the present
data match recovery system and how they will be implemented under ReMAS.
Table 3: Comparison of Current Recovery System to ReMAS
Step Current system ReMAS
MSP Case Development CMS's Coordination of Benefits contractor (COBC)
Same. evaluates information provided by the Internal Revenue Service and
the Social Security Administration to identify instances where
beneficiaries may have primary insurance coverage through an employer. The
COBC updates the Common Working File (CWF) with this information if
responses to the employer data match questionnaire or other analysis
confirms that Medicare is the secondary payer.
Updated CWF information produces computer tapes Updated CWF information
produces leads daily that are transmitted to local contractors-usually and
triggers a search for mistaken payments. quarterly or semiannually.
Because the COBC receives tax and employer
information irregularly, leads will tend to be generated in clusters, but
potentially more frequent than the quarterly or semiannual basis of the
current system.
Case Validation CMS takes MSP leads from the data match. CWF Same.
updates and matches them against a national claims database to determine
whether Medicare has paid claims for those individuals.
Performed quarterly or semiannually. Performed when new leads are
generated.
CMS must send the data match cases to the CMS selects a lead recovery
contractor, regardless contractor that processed those claims. of whether
that contractor processed the mistakenly paid claims.
Contractor validates recovery claim amounts by
comparison with its internal claims history.
No manual validation is done. The recovery claim amount is identified
within ReMAS.
Recovery threshold of a minimum of $1,000 is used No threshold for
recovery. by each contractor for each recovery claim.
Recovery Individual contractors use ReMAS will interface with the
standardized software to CMS accounts
generate demand letters receivable software, which will
requesting payment from automatically
debtors. generate demand letters
requesting payment from
debtors.
An employer or insurer can receive several demand One demand letter is
sent. ReMAS identifies all
letters if more than one contractor processed the claims for which the
debtor is responsible.
mistakenly paid claims or if debt involves more than
one beneficiary.
Source: CMS.
Appendix III: Comments from the Centers for Medicare & Medicaid Services
Appendix III: Comments from the Centers for Medicare & Medicaid Services
Appendix IV: GAO Contact and Staff Acknowledgments
GAO Contact Geraldine Redican-Bigott, (312) 220-7678
Acknowledgments Major contributors to this report were Richard M.
Lipinski, Barbara Mulliken, Enchelle Bolden, Shaunessye Curry, and Kevin
Milne.
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