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Medicare Secondary Payer: Additional Steps Are Needed to Improve Program Effectiveness for Non-Group Health Plans

GAO-12-333 Published: Mar 09, 2012. Publicly Released: Apr 03, 2012.
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Highlights

What GAO Found

During the initial implementation of mandatory reporting for non-group health plans (NGHP), the workloads of and Centers for Medicare & Medicaid Services (CMS) payments to Medicare Secondary Payer (MSP) contractors, and Medicare savings, all increased. From 2008 through 2011, the NGHP workloads of all three contractors CMS uses to implement the process for MSP situations—the Coordination of Benefits Contractor (COBC), the Medicare Secondary Payer Recovery Contractor (MSPRC), and the Workers’ Compensation Review Contractor (WCRC)—increased to varying degrees. For example, from 2008 through 2011, the number of NGHP MSP situations voluntarily reported to the COBC increased from about 142,000 to about 392,000, the number of NGHP cases established by the MSPRC increased from about 238,000 to about 480,000, and the number of Medicare set-aside proposals submitted to the WCRC increased from about 20,000 to almost 29,000. From 2008 through 2011, the total CMS payments to the MSP contractors increased by about $21 million, and Medicare savings from known NGHP situations that CMS is able to track—including savings from claims denials and conditional payment recoveries—increased by about $124 million. The total impact of mandatory reporting on Medicare savings could take years to determine for various reasons, including that mandatory reporting is still being phased in.

Within the process for MSP situations involving NGHPs, GAO identified key challenges related to contractor performance, demand amounts, aspects of mandatory reporting, and CMS guidance and communication. CMS has addressed or is taking steps to address some, but not all, of these challenges.

  • Contractor performance. Challenges related to the timeliness of the MSPRC and WCRC were identified, including significant increases in the time required to complete important tasks. CMS reported taking steps to address the challenges with each of these contractors’ performance.
  • Demand and recovery issues. Challenges were identified related to the timing of demand amounts, the cost-effectiveness of recovery efforts, and the amounts of Medicare demands from liability settlements. CMS reported taking steps to address some, but not all, of these challenges.
  • Mandatory reporting. Key challenges were identified with certain aspects of mandatory reporting: determining whether individuals are Medicare beneficiaries, supplying diagnostic codes related to individuals’ injuries, and reporting all liability settlement amounts. CMS reported taking steps to address some, but not all, of these challenges.
  • CMS guidance and communication. Key challenges were identified related to CMS guidance and communication about the MSP process, guidance on Medicare set-aside arrangements, and beneficiary rights and responsibilities. CMS has taken few steps to address these challenges.

While CMS has taken, or reported it is in the process of taking, additional steps to address these key challenges, there are several areas related to the MSP program and process that still need improvement.

Why GAO Did This Study

The Centers for Medicare & Medicaid Services (CMS) is responsible for protecting Medicare’s fiscal integrity. Medicare Secondary Payer (MSP) situations exist when Medicare is a secondary payer to other insurers, including non-group health plans (NGHP), which include auto or other liability insurance, no-fault insurance, and workers’ compensation plans. CMS attempts to recover Medicare payments made that were the responsibility of NGHPs, but CMS has not always been aware of these MSP situations. In 2007, legislation added mandatory reporting requirements for NGHPs that should enable CMS to be aware of these situations. NGHPs reported concerns about the MSP process, and CMS delayed the start of mandatory reporting by NGHPs, in part because of these concerns. This report examines (1) how the initial implementation of mandatory reporting for NGHPs has affected the workload of and payments to MSP contractors, and Medicare savings, and (2) key challenges within the process for MSP situations involving NGHPs and the steps CMS is taking to address those challenges. GAO reviewed relevant MSP-related documents and data on MSP costs, workload, Medicare savings, and contractor performance. GAO also interviewed CMS officials, MSP contractor officials, and NGHP stakeholders.

Recommendations

To improve the MSP program, GAO is making recommendations to improve the cost-effectiveness of recovery, decrease the reporting burden for NGHPs, and improve communications with NGHP stakeholders. CMS agreed with these recommendations.

Recommendations for Executive Action

Agency Affected Recommendation Status
Centers for Medicare & Medicaid Services To improve the effectiveness of the MSP program and process for NGHPs, and to ensure cost-effectiveness in the agency's NGHP recovery process, the Acting Administrator of CMS should review recovery thresholds periodically for appropriateness to ensure that the agency's recovery efforts are being conducted in the most cost-effective manner possible, and not require NGHPs to report on cases for which the agency will not seek any recovery.
Closed – Implemented
Consistent with our recommendation, in January 2013 the Strengthening Medicare and Repaying Tax Payers Act of 2012 (SMART Act) was enacted and required CMS to annually calculate and publish a single threshold amount for settlements, judgments, awards, or other payments for obligations arising from liability insurance (including self-insurance) and for alleged physical trauma-based incidents (excluding alleged ingestion, implantation, or exposure). In June 2014, CMS reported that it had performed an analysis of the costs related to collecting data and determining the amount of Medicare's recovery claim for cases involving liability insurance (including self-insurance) settlements and the costs related to collecting data and determining the amount of Medicare's recovery claim. CMS concluded that at a settlement amount of $1,000 the cost of collecting conditional payments would approximate the expected recovery. Based on the analysis performed, on February 28, 2014, CMS set the single threshold amount for physical trauma-based liability insurance settlements (excluding alleged ingestion, implantation or exposure cases) at $1,000. CMS reported that it will continue to review the threshold annually.
Centers for Medicare & Medicaid Services To improve the effectiveness of the MSP program and process for NGHPs, and to potentially decrease the administrative burden of mandatory reporting for NGHPs, the Acting Administrator of CMS should consider making the submission of International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9) codes an optional component of reporting for liability NGHPs.
Closed – Implemented
In June 2013, CMS reported that while it had determined that elimination of all diagnosis reporting requirements was not feasible, the requirement to provide an external cause of injury diagnosis code could be eliminated, which the agency said was the most difficult for reporting entities to obtain. This change was implemented in April 2013. CMS also analyzed other reporting requirements to determine whether reporting burdens could be further reduced, and made requirements to submit claimant and claimant representative information when the beneficiary was deceased optional. This change was also implemented in April 2013.
Centers for Medicare & Medicaid Services To improve the effectiveness of the MSP program and process for NGHPs, and to improve the agency's communication regarding the MSP process for situations involving NGHPs, the Acting Administrator of CMS should develop a centralized MSP program website, to include links to information about the various parts of the MSP process.
Closed – Implemented
In June 2014, CMS reported the centralization of the MSP website had been completed in July 2013. CMS reported that it had redesigned the presentation of the MSP-related web pages to be consistent with its new consolidated contracting strategy. This contracting strategy consolidates MSP program functions under the Coordination of Benefits & Recovery Program; therefore, there is one centralized home web page for the Coordination of Benefits & Recovery Program that includes links and relevant downloads for MSP pre-payment coordination of benefits and post-payment recovery activities. CMS reported that it will continue to monitor the content of the website for future updates.
Centers for Medicare & Medicaid Services To improve the effectiveness of the MSP program and process for NGHPs, and to improve the agency's communication regarding the MSP process for situations involving NGHPs, the Acting Administrator of CMS should develop guidance regarding liability and no-fault set-aside arrangements.
Open
Since April 2012, the month the recommendation was made, CMS officials have reported at various times that the agency was planning to issue either regulatory or sub-regulatory guidance on this topic. In March 2019, officials said that the agency now planned to issue regulatory guidance. In August 2021, CMS officials said that they drafted a Notice of Proposed Rulemaking to address future medical obligations, through a set-aside arrangement for beneficiaries who receive liability insurance as well as workers' compensation settlements. Officials said that this was to be published in the spring of 2020, but was delayed (due to the COVID pandemic and change in administrations). In July 2022, CMS officials said that the proposed rule had been transmitted to the Office of Management and Budget (OMB) for clearance earlier in 2022, and they were awaiting OMB's review and feedback. However, in October 2023 a CMS official told us that the Notice of Proposed Rulemaking was withdrawn at the request of OMB, and CMS was determining next steps. We will continue to update the status of this recommendation as new information is available.
Centers for Medicare & Medicaid Services To improve the effectiveness of the MSP program and process for NGHPs, and to improve the agency's communication regarding the MSP process for situations involving NGHPs, the Acting Administrator of CMS should review and revise the correspondence with beneficiaries, such as letters sent during the recovery process, to ensure that beneficiary rights and responsibilities are more clearly communicated.
Closed – Implemented
CMS agreed with our recommendation, and in fiscal year 2012 reported that it had begun reviewing all MSP correspondence. In June 2013, CMS reported that it had revised beneficiary letters, putting the greatest effort on editing letters written in response to beneficiary appeals to remove redundant and unnecessary information, and to better explain appeals process steps.

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MedicareProgram beneficiariesClaims settlementWorkers' compensationLiability insuranceMedicaidHealth care plansSecondary payerInternal controlsContractor performance