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Medicare Trust Funds Actuarial Estimates: Efforts Have Been Made to Improve Internal Control over Projection Process but Some Weaknesses Remain

GAO-03-247R Published: Mar 04, 2003. Publicly Released: Mar 04, 2003.
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Highlights

Medicare spending growth remains one of the most pressing and complex issues facing the Congress and the nation. During calendar year 2001, the most recent year for which complete data were available at the time of our review, over 40 million Medicare enrollees received $240.9 billion in benefits from the trust funds maintained for Hospital Insurance and Supplementary Medical Insurance, Medicare's two components. The Boards of Trustees of the trust funds are required to report annually on the current and projected financial status of the Medicare program to the Congress and the American people. The Centers for Medicare and Medicaid Services' (CMS) Office of the Actuary (OACT) provides estimates to the boards to assist them in setting certain assumptions about HI and SMI future performance that are needed to prepare long-range and short-range projections of the financial status of the trust funds for the Trustees' reports. Based on the boards' assumptions, OACT then prepares the projections and the Trustees' reports for the boards. In its 2002 annual report, the Board of Trustees estimated that, under current rules, HI expenditures would begin to exceed tax revenue in calendar year 2016, causing the trust fund to be exhausted in 2030. Our specific objectives were to identify and evaluate the adequacy of OACT's (1) control activities over the projection process, (2) human capital practices related to workforce planning, and (3) tracking and resolution process to address recommendations from technical panels and other reviewers.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Centers for Medicare & Medicaid Services To address the internal control weaknesses GAO identified related to documentation, workforce management, and monitoring follow-up of external review recommendations, the Administrator of CMS should direct the Chief Actuary to fully implement plans to document the current procedures needed to prepare the projections, including acceptable criteria for reasonableness tests.
Closed – Implemented
OACT has developed detailed checklists for both its HI and SMI programs and has prepared documentation detailing the long-range and short-range assumptions used in the Trustees' Report, and how these assumptions were determined. In addition, OACT has developed a file listing anomalies found during preparation of the 2004 Trustees' Report, and has begun analyses of expected versus actual results.
Centers for Medicare & Medicaid Services To address the internal control weaknesses GAO identified related to documentation, workforce management, and monitoring follow-up of external review recommendations, the Administrator of CMS should direct the Chief Actuary to fully implement plans to document the work performed by staff to prepare projections.
Closed – Implemented
OACT has improved its documentation of the work performed by staff as it enhanced the description of the step-by-step process used to run the projection model included in checklists designed for both the HI and SMI programs. The steps listed in the checklists are initialed and dated when completed, indicating that the work has been performed. In addition, each table and figure included in the Trustees Report is initialed by the preparer to indicate that it has been completed.
Centers for Medicare & Medicaid Services To address the internal control weaknesses GAO identified related to documentation, workforce management, and monitoring follow-up of external review recommendations, the Administrator of CMS should direct the Chief Actuary to fully implement plans to document the supervisory and management reviews.
Closed – Implemented
OACT has developed checklists which include a step-by-step description of the process used to run the projection model. The steps listed in the checklists are initialed by the reviewer and dated, indicating that the work has been reviewed. In addition, each table and figure included in the Trustees Report is initialed by a reviewer to indicate that it was reviewed.
Centers for Medicare & Medicaid Services To address the internal control weaknesses GAO identified related to documentation, workforce management, and monitoring follow-up of external review recommendations, the Administrator of CMS should direct the Chief Actuary to fully implement the professional development program and develop a formal training curriculum that includes identification of appropriate training opportunities linked to key competencies.
Closed – Implemented
OACT's professional development program has been fully implemented. As part of this program, OACT has implemented a leadership development program, developed a master list of training opportunities for staff linked to its key competencies, and met with staff to discuss targeted training opportunities.
Centers for Medicare & Medicaid Services To address the internal control weaknesses GAO identified related to documentation, workforce management, and monitoring follow-up of external review recommendations, the Administrator of CMS should direct the Chief Actuary to develop and implement a formal policy to track, follow-up, and resolve findings and recommendations of external audits and reviews.
Closed – Implemented
To implement this recommendation, OACT expanded its tracking document to include the "cost/feasibility" of recommendations it had received, an "action/date" for each recommendation, a "responsible" official to oversee each recommendation's implementation, and a "risk/priority." In addition, the updated tracking document OACT provided now includes recommendations from the KPMG study and from the GAO report.
Centers for Medicare & Medicaid Services In addition, to overcome the challenge of limited resources, the Administrator of CMS should, in consultation with the Chief Actuary, consider use of alternative approaches, such as additional contractor assistance, to address the above recommendations.
Closed – Implemented
The Office of the Actuary (OACT) continues to consider the use of contractors for several initiatives and, in the past year, used two contractors.

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Topics

Future budget projectionsHealth care cost controlInternal controlsMedicarePersonnel managementStaff utilizationTrust fundsAccounting standardsLabor forceWorkforce management