~~~
j;
Department of Health and Human Servces 
OFFICE OF

INSPECTOR GENERAL

MEDICARE SECONDARY PAYER: 
EFFECTIVENESS OF CURRENT 
PROCEDURES

V1CE' 
Richard P. Kusserow 
INSPECfOR GENERA 
AUGUST 1  GENRA

OFFICE OF INSPECfOR 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452 
as amended, is to protect the integrity of the Department of Health and Human Servces 
(HHS) programs as well as the health and welfare of beneficiaries served by those programs. 
This statutory mission is carried out through a nationwide network of audits, investigations 
and inspections conducted by three OIG operating components: the Offce of Audit 
Servces, the Offce of Investigations, and the Office of Evaluation and Inspetions. The 
OIG also informs the Secretary of HHS of program, and management problems, and 
recommends courses to correct them. 
OFFCE OF AUDIT SERVICE 
The OIG's Offce of Audit Servces (OAS) provides allliuditing servce for HHS, either by 
conducting audits with its own audit resource or by overseeing audit work done by others. 
Audits examine the performance of HHS programs and/or its grantees and contractors in 
carrng out their respective responsibilities and are intended to provide independent 
assessments of HHS programs and operations in order to reduce waste, abuse, and 
mismanagement and to promote economy and effciency throughout the Department. 
INTIGATIONS 
OFFICE OF 
The OIG's Offce of Investigations (01) conducts criminal, civil, and administrative 
investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of 
unjust enrichment by providers. The investigative efforts of 01 lead to crinal convictions 
administrative sanctions, or civil money penalties. The 01 also oversee State Medicaid fraud 
control units which investigate and prosecute fraud and patient abuse in the Medicaid 
program. 
AN 
OFFICE OF EVALUATION  INSPECfONS 
OIG' s Offce of Evaluation and Inspections (OEI) conducts short-term management and 
prc0gram evaluations (called inspections) that focus on isues of concern to the Department 
the Congress, and the public. The findings and recmmendations contained in these 
inspection reports generate rapid, accurate, and up-to-date information on the effciency, 
vulnerabilty, and effectiveness of departmental programs. 
Perr Seaton, Team Leader  Thomas Noplock, Headquarters 
Julie L. Quirin, Project Leader  W. Mark Krushat, Headquarters 
Hugh Owens

Doris Philips  0: _. 
Deparment of Health and Human Services 
OFFICE 
INSPECTOR GENERAL

MEDICARE SECONDARY PAYER:

EFFECTIVENESS OF CURRENT

PROCEDURES

f.P.VICE$' 
Richard P. Kusserow 
INSPECTOR GENERAL 
+ OEI-
'0 
07-90-00761 
1t\'d:W  ---.
....- --. -
.._-=---.. 
EXECUTIVE SUMMARY

PURPOSE 
To evaluate Medicar contractor procedures for identifying Medicar beneficiares who have 
insurance coverage that is primar to Medicar. 
BACKGROUND 
Unti 1980, Medicar was the primar payer of health car costs for Medcare beneficiares 
progr 
was covere by a worker s compensation  or the Veteran 
except when the beneficiar 
Admnistration. Congress became concerned about significant increases in the cost of the 
Medicare progr. As a result, between 1980 and 1986 Congress passed a series of statutory 
provisions requirng certn private insurers to pay medical clais before Medicar (see 
Appendi A). 
Recent Congrssional hearngs and meda attention have brought the Medicare Seconda Payer 
(MSP) issue to the forefront Despite curnt mechanisms to identify beneficiares who have
priar 
insurance coverage, may primar payers reman unidentified. The OIG has estimated, 
based on a radom samplpe orf Mi edicar beneficiares, that Medicare lost over $600 milion in FY 
1988 due to unidentied  payment soures. The curent HCFA actuar estiate of 
progr  priar 
Medicare  losses, due to the contrctors' faiure to identify  payment sources and 
recover inappropriate Medicare payments, has incrased to $1.3 billon for FY 1991. 
METHODOLOGY 
We solicited medical insurance information from a random sample of 4,371 beneficiares. We 
obtained responses from 3, 185 beneficiares. This represents an overall response rate of 72. 
percent We analyzed the verified cases with unidentified primar payers to determne the 
reasons why the curnt system was unsuccessful in identifying the primar payment source. 
FINDINGS 
Medicare lost at least $120. because contractors are not coordinating with 
0 million in  1988 
their private insurance operations. 
$585.  million because current MSP procedures failed to detect all cases 
Medicare lost over 

when a 1benefic9iary is 8covered8 by a w.ork ing spouse s EGHP. 
$23.  million loss to Medicare
Intermediaries and carrers lack coordination, resulting in a 

during  Contractors lack the internal coordination and systems information needed to identify all MSP 
situations. 
RECOMMENDATIONS 
The HCFA should propose legislaton to require Medicare contractors to match their health 
insurance daa with Medicare files. 
The HCFA should revise all Medicare claims forms to require spousal insurance information 
pai 
before the claim is 
The HCFA should continue to refine and improve the MSP component of the Common 
Working File (CWF). 
COMMNTS 
The HCFA generally concur with the recommendations presented in this report. With regard to 
the recommendation that HCFA propose legislation requirng Medicare contractors to match 
their health insurce data with Medicar fies, the HCFA has proposed legislation to requir 
such matches in the past, but the Congress has not yet enacted it. In fact, section 6202 of OBRA 
1989 prohibits the Secreta from requirng such matches. The HCFA indicates it wil review 
tae 
the legislative recommendations and  appropriate action as pan of the Deparent 
legislative development (A-19) process. The OIG contiues to believe this is an important step 
in determning the primar payer for many beneficiares. 
This fmal report includes revisions as suggested by HCFA in its "Technical Comments" section 
of their comments on the draft report The HCFA's verbati comments can be found in 
Appendi C.  .-.,-- . ----- ............................................ ........ .................................. ........ .................... ...........
TABLE OF CONTENTS

EXECUTIVE SUMMARY 
INRODUCTION..................................................................................................... .

Purose................................................................................................................ .

Background......................................................................................................... . 
Methodology........................................................................................................ 3 
FIN IN GS .................................................................................................................. 5 
Medicare lost at least $120.0 milion in 1988 because contractors ar not 
coordiatig with their private insurance operations. .........................................

mion  curnt 
Medicare lost over $585.3  because  MSP procedurs 
faied to detect al cases when a beneficiar is covered by a 
workig spouse s EGII.  .......................................... 6 
Intermediares and carers do not coordinate their efforts, 
7 millon loss to Medicar durg 1988...................................

resultig in a $23.
Contractors lack the internal coordiation, systems, and informtion

needed to identify all MSP situations...................................................................

RECO MMEND A TI 0 NS ........................................................................................... 8

AGENCY CO MMENTS ........ 

APPENDIX A ........................................................ .......... .................................... .. A

APPENDIX B ........................................................................................................ .

APPENDIX C ................................................................ ......................................... C
 INTRODUCTION

PURPOSE 
To evaluate Medicar contractor procedures for identiying Medicar beneficiares who have 
priar 
insurance coverage that is  to Medicar. 
BACKGROUND 
This inspection is a par of an initiative to assess the effectiveness of procedurs used to identify 
Medicare Seconda Payer (MSP) situations. The fidings and recommendations presented in 
this repon suppon the Secrta s objective to enhance cost effectiveness of Medicar 
insurce. 
reimbursement by ensurng that Medicare reimbursement is secondar to other 
History of MSP Provisions 
Medicare helps pay medical costs for approximately 28 millon people aged 65 and older and 
approxiately 3 millon disabled people. Medicare Par A covers inpatient hospita services, 
home health services, and other institution-based servces. Physician, outpatient hospita, and 
varous other health services are covered by Medcar Par 
The Health Car Financing Admnistration (HCFA) is responsible for ensurng compliance with 
Medicare legislation and regulations. Prvate insurce companies contrct with HCFA to 
process and pay Medicar claims. These contrctors are known as fiscal intermediares (Par A) 
and caners (par B).

Until 1980, Medicar was the priar payer of health car costs for Medicare beneficiares 
progr 
s compensation  or the Veteran 
except when the beneficiar was covered by a worker 
Admnistration. Congress became concerned about significant increases in the cost of the 
Medicare progr. As a result, between 1980 and 1986 Congress passed a series of statutory 
cert 
provisions requirng  private insurers to pay medical claims before Medicar (See 
Appendi A). 
These provisions requir private insurers to pay medical claims primar to Medicar if the 
health insurce coverage by an employer group health plan (EGHP), a 
beneficiar has other 
disabled beneficiar s large group health plan (LGHP), a spouse s EGHP, or automobile, 
no-fault, or liabilty insurce. If the prima plan does not pay for al covered services, 
Medicare may pay secondar benefits for Medicare covered services. 
Implementation of MSP Provisions 
insurce 
These provisions created a need for a system to coordinate private  benefits with 
Medicare. Curently, Medicar contractors use information from both internal and external  --------
sources to detennne the prima payer for clais submined for reimbursement. In order for the 
system to be effective, the contractors must have insurance information for each beneficiar that 
is accurte, complete, and CUIent Without this informtion, contrctors wil continue to pay 
claims inappropriately. 
To insur the contrctor has complete and accurte information, the HCFA requires contractors 
to identi primar payment soures. When a Medicare claim is submitted, the contrctor 
searches MSP history fies for health insurance coverage that is provided by another insurer. The 
procedurs for identifyig MSP situations include 
most widely used contrctor 
developing leads from HCF A' s "Y -trailer" codes; 
screening informtion included on the clai form; 
queryng data in the Common Working File (CW; 
developing the fIrst claim fIed by or on behalf of a beneficiar; and 
reviewing al clais contaning medical diagnosis codes indicating trauma-to identify 
injures related to automobile, or other trumatic injur cases, including work-related 
accidents. 
These provisions created new functions for Medicar contrctors. The contrctors ar required 
to screen, identiy, and veriy clais for other insurce involvement. In addtion, contractors 
are requied to make post-payment recoveries when Medicar has paid improperly. The HCFA 
monitors the contrctors' efforts to identi and recover MSP payments by establishing an MSP 
savings goal for each contrctor. The HCFA annualy evaluates each contrctor s performance 
using the Contrctor Performance Evaluation Plan (CPEP) standads and established goals. The 
savings figure of at least 95% of their MSP savings goal to pass the 
contrctor must achieve a 
MSP element of the CPEP review. 
millon for admistration of the 
Medicare contrctors were budgeted approximately $70 
year(F) 
Medicare Secondar Payer provisions durng fiscal  1989. They reported savings of 
2 billon in FY 1989. Accordig to information obtaied from HCFA the funding for 
over $2.
MSP activities in FY 1990 was reduced to $56 milion. 
Contractors ar not the only entities involved in identification of MSP activities. Hospitals are 
required to ask for all insurance coverage upon admttace. Personnel in physician s offices 
insurce 
and/or their biling agents are also required to collect and record complete  coverage 
information. CUIently, when a patient has insurce coverage from another source, the provider 
is requird to initially submit the claim to the primar insurr rather than Medicar. If the 
priar 
insurer does not reimburse for the tota amount of the Medicar alowable, Medicar 
would then pay the remaiing covered services as the secondar payer.  .. ..-..
- _a_---.
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The HCFA has conducted extensive educational programs for the beneficiar and provider 
clais 
communities and private health insurce companies concerning the MSP provisions and 
f1ing procedurs. 
Possible 
Addtional Savings 
attention have brought the MSP issue to the forefront. 
Recent Congrssional hearngs and media 
prima 
Despite curnt mechanisms to identiy beneficiaes who have  insurance coverage, 
many prima payers remain unidentied. Studies by the Offce of Inspector Genera (OIG), the 
General Accounting Offce (GAO) and HCFA have confmned that additional savings and 
ar 
recoveries  possible. 
The OIG has estimated, based on a radom sample of Medicar beneficiares, that Medicare lost 
priar 
over $600 miion in FY 1988 due to unidentified  payment sources. Accordig to the 
curnt 
HCFA actuar, the Medicar program lost approximately $900 milion in FY 1990. The 
HCFAactuar estiate of Medcar program losses due to the contrctors' failure to identify
priar 
payment sources and recover inappropriate Medicare payments, is $1.3 bilion for 
FY 1991. 
METHODOLOGY 
We selected a simple random sample from the population of al beneficiares who received 
services durng 1987. The Offce of Inspector Genera, Offce of Evaluation and Inspections 
maintans a one percent sample of al beneficiares receiving servces under Par B. This Bample 
is a subset of the Par B Medicar Annual Data (BMAD) IV five percent beneficiar sample f1e 
maintaned by HCFA. 
A subsample of these beneficiares, using sequential sampling, resulted in 6,777 HICNs 
representing beneficiares with Medicare claims. We matched these records with the Social 
Securty Admnistration s (SSA) Master Beneficiar Record (MBR) to obtain demogrphic data, 
includig curent address, and determe the curnt status of each beneficiar identied. The 
following table presents the results. 
Results of Medicare BMAD IV Match with SSA MBR. 
Orgial Number Selected  777 
Raioad Retiment Board Beneficiares  138 
Status Indicated as Dead  070 
Non-Matching Numbers 
Final Number of Beneficiares  371 
We deleted Railroad Board retiees from the sample (138 beneficiares) because the Social 
. Securty Admnistration (SSA) does not maitain their data. We also deleted the 1,070 
beneficiares indicated by SSA as deceased because we were not willng to identify or mail 
sureys in attempt to obtan proxy respondents. The 1, 198 HICNs thai did not match with SSA'  MBR represent a problem encountere with the Beneficiar Identification Code (BIC). We were 
unable to obtan any information on these individuals though the diect match. Therefore, we 
deleted these individuals frm the surey. 
We solicited information from the remaiing 4 371 beneficiares. We obtaied responses from 
overall response rate of 72.9 percent. 
185 beneficiares. This represents an 
We used the BMA one percent sample and the Medicare Automated Data Retreval System 
(MARS) to gather demogrphic and utiizatiop. informtion. These systems ar also 
maitaed by HCFA. The MARS provided informtion on tota Par A and Par B 
expenditus on behalf of each beneficiar. 
We asked questions concerning the respondent s supplementa medical coverage. We examned 
priar 
al inormation for indications of  payment sources. Where a positive response was 
noted, OIG sta developed the case to gather more specific information and verify the 
inormation provided.

We conducted telephone intervews with the beneficiares to verify the information they 
provided and to collect names and addesses of employers and insurance companes. Additional 
contacts with these employers and with representatives frm the involved insurce company 
were made to furer verify Medicar s status as seconda payer. This process enabled us to 
determe whether Medicare paid appropriately as seconda payer. Medicare contractors 
provided payment histories and documentation to determne if Medicar payments shown were 
situations where the contractor paid the clai cOlTectly as the seconda payer. 
priar 
We analyzed the veried cases with unidentied  payers to determe the reasons why 
the curnt system was unsuccessfu in identiing the primar payment source. This analysis 
was completed by interviewing Medicare contrctor sta, private insurce companies, and 
employers. In addition, we requested documentation frm these entities. This documentation 
included the Medicare billg form, the explanation of benefits from the third par payer 
payment information/istory printout on the claim(s) in question, and any other documentation 
clai(s). 
supportg development of the  FINDINGS

The following fmdigs are based on an analysis of the 34 confIrmed overpayment cases. Each 
case may be included in one or more of the analysis categories. These categories are not 
mutualy exclusive. 
Medicare lost at least $120. because contractors are not coordinating with
0 milion in  1988 
their private insurance operatons. 
All Medicare contrctors have a fiducia responsibilty to the Federa Government to assur that 
only appropriate Medicare payments ar made. The CUIent argement crates a potential

conflct of interest between the contractors ' private insurance business and their Medicare

operations.

Insurce companies curntly contrcting with HCFA to process and pay Medicare claims also 
conduct private health insurce business. Often the contrctor s private business operation 
insures beneficiares who ar afected by the MSP provisions. Records for private insurance 
operations and Medicare business operations are maintaned separtely. 
The majority of the Medicare contractors ar owned by the Blue CrosslBlue Shield corporation. 
Accordig to the Blue Cross of America, 87 percent of contractors ' private business comes from 
EGHP coverage for companies offerig group health insurce to their employees. 
We identified primar insurce coverage on 34 cases. These cases totaed an actual loss to the 
progr  estited  1 in 
Medicare  of $60,502. This projects to an  annual loss of over $637 millon 
1988. Furer analysis of the 34 overpayment cases shows that Medicare paid as the primar 
payer in eight (23.5%) of these cases when the beneficiar had primar insurace coverage 
though an EGHP admnistered by the contractors ' private business operations. These eight 
cases account for $11,420 or approximately 18.8% of the tota overpayment. When projected to 
the universe of Medicare beneficiares, Medicar lost over $120.2 millon due to lack of 
coordiation between Medicar contractors and their private business. CUIent procedures were 
not effective in identifying these cases for the contrctor. 
Of the eight claims that should have been paid by the contrctors ' private business operations, 
the. 
source claim information was readily available on  In each of these cases, the claim form 
prima 
indicated that a  payer other than Medicare was available. The contrctor did not provide 
source claim information for the remaiing five claims because the claims were submitted 
electronically. 
1 For detas of this estiate see "Extent of Unrecovered Medca Seconda Payer Funds" 
- OEI-07-9Q-00760.  millon because current MSP procedures failed to detect all cases

Medicare lost over  $585.3 
when a beneficiary is covered by a working spouse s EGHP.

Medicare is the seconda payer when a beneficiar is covered by a working spouses s EGHP. 
dicult 
These situations often are the most  for contrctors to identify. This is ilustrted by our 
of review the 34 overpayment cases identic.il in the beneficiar surey. Twenty-five of the 34 
overpayment cases (73.5 percent) had unidentified primar insurce coverage though the 
EGHP of a working spouse. Of the $60,502 identified overpayments, $54 294 resulted from 
unidentied spousal insurce coverage. This accounted for $583.3 miion (90 percent) of the 
progr 
anual projected loss to the Medicare  for 1988. 
Intermediares and carrers do not  $23.  million loss to 
coordinate their efforts, resulting in a 
Medicare during 1988. 
We found four of the 34 (11.8%) overpayment cases where MSP information was not exchanged 
between contractors or the informtion exchanged was inaccurate. These four cases total $2 257. 
This amount projects to o.ver $23.7 millon of the total overpayment projection. 
Intermediares and carers frequently receive claims filed on behal of the same beneficiar.

Curent procedures should provide both entities with updated and accurate MSP information

. concerng the beneficiar  mployment status. The Regional Data Exchange

s insurance and 
System (RDES) has been the primar mechanism for exchange of MSP information between 
were requird to do quarerly updates to this system. These updates 
contractors. Al contractors 
include al newly identied MSP cases. 
The RDES is no longer used in this capacity. The Common Working File (CWF) has replaced 
priar 
RDES as the  mechanism for exchangig MSP information between contrctors. 
Contractors lack the internal coordination, systems, and informaton needed to identify all 
MSP situatons. 
Eleven of the 34 overpayment cases were paid inappropriately due to genera deficiencies and/or 
errors by the contractors. According to existig procedures, Medicare claims should be 
developed and/or denied when the contrctor has information indicatig that a private insurance 
company may be the primar payer. Our analysis of the identified claims, established several 
areas that resulted in inappropriate Medicare payments. The following is a listing of specific 
causes for these inappropriate Medicar payments. 
The contrctor paid the claim despite a development letter on fie at the contrctor that 
indicated EGHP coverage. 
The contractor did not promptly recover an overpayment when information confirming the 
prima 
payer was available.  The contrctor paid the claim despite infonnation in the contractor s computer system that 
the beneficiar s spouse was working. 
The contrctor initiated recovery for a beneficiar after it received infonnation that a 
priar payment source existed. However, the contrctor did not mae recoveries on all 
previously adjudicated claims.

The contrctor received infonnation frm RDES that indicated there \yas a primar 
payment source. However, the contrctor did not initiate recovery on the previously paid 
clais. 
The contrctor paid the claim despite infonnation in the contractor s computer system that 
indicated a primar insurce source. 
insurce 
The hospital received payment from Medicare and the private  source which 
exceeded its charges. The hospita notied the contractor of this, but the contractor did not 
overpayment. 
intiate recovery of the  RECOMMENDATIONS

The fIrst two recommendations have been presented in a previous OIG Management Advisory 
Repon (MAR) entitled "Medicar Seconda Payer: Unrcovered Funds" (OEI-07-90-00764). 
They are also included in this repon because they are supponed by the fmdings of this 
curnt 
inspection. We have indicated the  status on those recommendations where HCFA has 
previously commented. 
The HCFA should propose legislaton to require Medicare contractors to match their health 
insurance daa with Mediare files. 
We recognize that Section 6202(d) of OBRA 1989 prohibits the Secrtar from requirg 
Medicare contrctors to match their records with their private business operations. However, we 
found a substatial number of unidentified MSP cases that would have been identied if this 
type of match had been requird. 
The potential for conflct of interest inherent in the corporate strctue of the Medicar 
contractors could be eliminated by requirg regular matches between the contrctor s private 
insurance fles and their Medicar fies. This matchig activity would result in more accurate 
MSP data for the contractor. The contrctor would accurtely identify many more MSP 
situations in the pre-payment phase of processing the Medicar clai alowing contractors to 
avoid "pay and chase" situations. 
The DIG recommends that HCFA pursue a legislative proposal that would requir Medicare 
insurce 
contrctors to match their records with the private health  data. This proposal should 
furer require Medicare contrctors to review their private insurance files to identify and repon 
potential MSP situations. 
The HCFA has disagreed with this recommendation in their comments on the MAR entitled 
Medicare Seconda Payer: Unrecovered Funds," because of the provisions of Section 6202 of 
OBRA of 1989 that prohibit the Secreta from requirng such matches. 
The HCFA should revise all Medicare claim forms to require spousal insurance information 
before the claim is paid. 
As of June 20, 1991, the HCFA 1500 claim form submitted by or on behalf of the beneficiar 
insurce 
does not ask for complete information concerning spousal employment or  coverage. 
This mechanism would be a useful way to identiy a substantial number of cases where the 
benefIciar is covered by their spouse s EGRP.  . ..
We suggest that the followig questions be added as par of the claim forms: 
Are you covered by medical insurance though your employer? 
Are you covered by medical insurance through your spouses employer? 
concur 
The HCFA has  with this recommendation in their comments on the MAR entitled 
Medicare Seconda Payer: Unrecovere Funds" and will inform the Uniform Claim Form 
Task Force (this task force makes Medicar clai form changes) of its concurnce. The OIG 
wil follow though with HCFA on the changes being made to the clai form. 
The HCF A should contnue to refine and improve the MSP component of the Common 
Working File (CWF). 
As of December 1990, al contractors who process and pay Medicar clais ar using CWE 
Ths system is designed to simpliy and improve Medicare claims processing. The 
establishes a prepayment review and payment authorization proess that, when working 
payment errors and provider overpayments. It wil 
properly, wil signicantly reduce claims 
provide the most curnt and accurate Medicar entitlement and eligibilty data on beneficiares. 
The CWF should also improve MSP claims processing and exchange of informtion between 
contractors. 
The MSP component of the CW was established with data from the Regional Data Exchange 
System (RDES). Contractor representatives have indicated that this system is not reliable 
because of incorrect and inconsistent data. Using the RDES to establish this porton of the CWF 
trsferrd the incorrect and inconsistent data to the CWF. The CW wil not improve MSP 
identication and recovery efforts unless al Medicar contractors ar receiving reliable and 
consistent MSP informtion. The HCFA should work to assur that the problems with the CWF 
are corrcted. 
Also, the system has crated duplicate auxiliar records for MSP information. One record is a 
slight deviation. This causes every clai to reject as a potential MSP situation. The contrctors 
have been holding these claims. Obviously, this has created a large backlog. In addition, many 
auxilar records have incorrct effective dates. Only the contrctor that originally set up the 
record can change the effective date. This causes confusion when one contractor fmds an error 
but is unable to corrct it until they discover which contrctor originally set up the MSP fie.  ------.
'::"_ '- - '. -- .--. '- - -- "".
AGENCY COMMENTS

drt  fit 
The HCFA generally agred with the recommendations presented in the  report. The 
recommendation has been presented to HCFA in previous OIG reports. The HCFA has indicated 
that "appropriate action wil be taen as par of the Deparent s legislative development (A-19) 
process." The OIG continues to believe this is an importt step in determning the primar 
payer for may beneficiares. 
Our second recommendation suggests that Medicar revise all clai form to requir spousal 
health insurance information. The HCFA indicated that the HCFA 1500 has recently been 
revised. However, as of June 20, 1991, we were advised that many providers ar not using ths 
revised form. They continue to use a version of the HCFA 1500 that does not request spousal 
health insurance inormation. The HCFA also indicates that they are considerig other 
modcations but "it wil be a tie consumig proess." We contiue to believe that the HCFA 
insurce 
1500 clam form should be revised to request complete employment and health 
information for the beneficiar and his/her spouse. The HCFA should work to expedite this 
process. 
The HCFA concurs with the recommendation to refine and improve the MSP component of the 
Common Working File (CWF). As HCFA requested, we have modfied the report to detal the 
specific problems that we have discovered with the CWF. 
This fmal report includes revisions as suggested by HCFA in its "Technical Comments" section 
of their comments on the draft report The HCFA's verbati comments can be found in 
Appendi C.  ~~~~~_..
APPENDIX A

MEDICARE SECONDARY PAYER LEGISLATION 
TITLE OF  PUBLIC  ENACTMENT  EFFECTIV 
LAW  LAW  DATE  DATE  DESCRIPTION 
Omnbus  96-499  12-05- 12-05- ORA made Medicar 
Reconcilation  the seconda payer to 
Act of 1980  automobile medical, 
(ORA)  no fault or any 
liabilty insurance.

Omnbus Budget  97- 08-13- 10-01- OBRA made Medicare 
Reconcilation  seconda payer for 
end-stage renal disease 
Act of 1981 
(OBRA)  for up to 12 months 
following entitlement 
if the person is 
eligible for medical 
insurance under an 
EGRP. 
Tax Equity  97 - 248  09-03- 01-01- TEFR made Medicare 
and Fiscal  benefits seconda 
Responsibilty  if the employee or 
Act of 1982  spouse is age 65 
(TEFR)  though 69 covered 
by an EGRP and the 
employer has at 
least 20 employees. 
DEFR 
Deficit  98-369  07-18- 01-01- broadened the 
Reduction Act  definition of 
of 1984  working spouse by 
(DEFR)  including spouses 
age 65-69 of

employed i 
under age 65, thereby 
removing the lower 
age limt.
 MEDICARE SECONDARY PAYER LEGISLATION

Consolidated  98-272  04-06 05-01 COBRA fuer 
Omnbus Budget  broadened the 
Reconcilation  defmition of 
working aged by 
Act of 1985 
removing the 
(COBRA) 
limitation of age 
70 and older. 
Omnbus  99-509  10-21 01-01 OBRA made Medicare 
seconda for people 
Budget 
Reconcilation  under 65 who have 
Medicare because of 
Act of 1986 
(OBRA)  disabilty (other than 
kidney failur) and 
who ar covered under 
a LGHP as an 
employee, employer 
self-employed person 
business associate, or 
famy member. 
Omnbus.  101-239  12-19 12-19 OBRA provided a two 
Budget  year period for matching 
Reconcilation  IRS tax records to 
Act of 1989  records of the Social 
Securty Admistration 
(OBRA) 
and the Health Care 
Financing Admistration 
to identify working 
beneficiares and 
their spouses.  APPENDIX 
PREVIOUSLY PUBLISHED REPORTS 
Prority Audit Memoradum - Su.1"::y of the Tax Equity and Fiscal Responsibilty Act of 
1982 - March 7, 1984, Contrl Number: ACN-03-4200 
Progr 
Medicare Seconda Payer Provision End-Stage Renal Disease - Inspection 
Report - August 24, 1984, Control Number: 1-07-4001
Medcare Seconda Payer Provision End-Stage Renal Disease - South Dakota-
November 20, 1984, Contrl Number: 1-08-400
Medicare Seconda Payer Provision End-Stage Renal Disease - Colorado-

December 4, 1984, Contrl Number: 1-08-4001

Progr 
Medicare Seconda Payer Provision End-Stage Renal Disease - Inspection 
Report - April 3, 1985, Control Number: 1-07/08-4002
Medicare Seconda Payer Provision Automobile Medical and No-Fault Insurance-
Nort Dakota - May 1, 1985, Inspection Contrl Number: 03-08-5001
Prgr 
Inspection of Medcar as a Seconda Payment Source for Beneficiares with 
End-Stage Renal Disease in the State of Orgon - May 10, 1985, Inspection Control 
Number: 3-10-4008
Medicare as Seconda Payer for Medical Servces Related to Automobile Accidents in 
Massachusetts -June 1985, Contrl Number: 1-01-4105
Medicare as a Seconda Payer for Medical Servces Related to Automobile Accidents in 
Massachusetts - Boston - June 1985, Control Number: 1-01-4105
10.	 Report by the Comptroller Genera of the United States. The Congrss Should Consider 
Amending the Medicare Seconda Payer Provisions to Include Disabilty Beneficiares 
September 30, 1985, Control Number: GAOIH-85-102 
Insurce -
11.	 Medicare Seconda Payer Provision Automobile Liabilty and Medical  State 
of Missour -Program Inspection Report - December 1985, Control Number: 3-07-5001
12.	 Medicare Seconda Payer Provision Automobile Medical and No-Fault Insurance - State 
of Colorado - Program Inspection Report - December 1985, Control Number: 
08-5002 ---_..	
_._ ----..._ - ----. ---------- - _-_0_ - --
13.	 Medcare Seconda Payer Provision Credit Balances in Medicar Beneficiar Hospita 
Accounts, Control Number: OPI-85-070-040 
14.	 Medicare Seconda Payer Prvision Workig Aged in Missour - July 1986, Control 
Number P-07-86-0079 
15.	 Medcare Seconda Payer Provision Workig Aged in Colorado - July 1986, Control 
Number: P-07-86-0071 
16.	 OIG Audit Report - Medcare Overpayments for Services Provided to Beneficiares with 
End-Stage Renal Disease - April 28, 1987, Control Number: A-10-86-62003 
17.	 OIG Audit Report - Retiees of Exempt State and Loal Governents Could Cost 
Medicare $12.8 Bilion over the Next 5 Year - September 10, 1987, Control Number: 
CIN A-09-86-62050 
18.	 Amending the Medicar Seconda Payer Prvision for ESRD Beneficiares Could Save 
Progr 
the Medcare  $3 Billon Over the Next 5 Years - December 1, 1987, Control 
. Number: CIN- 10-86-62016 
19.	 Medicare as a Seconda Payment Soure - End-Stage Renal Disease - Januar 1988, 
002 
Control Number: OAI-07-86-
20.	 Medicare as a Seconda Payment Soure - Januar 1988, Control Number: 
OAI-07-86-0017 
21.	 Medicare as a Seconda Payment Soure: Medicar Beneficiares Covered By Employer 
Group Health Plans - Februar 1988, Control Number: OAI-07-86-0091 
22.	 Nationwide Review of Medicare as Seconda Payer for the Period September 1 , 1983 
though November 30, 1985, Control Number: CIN A-10-86-62005 
23.	 Medicare: Incentives Needed to Assur Prvate Insurers Pay Before Medicare-
November 1988, Control Number: GAOIH-89-191 
24.	 Management Advisory Report: Medicar as Seconda Payer - A Restitution Proposal, 
002 
Control Number: AO-12-89-
Infonntion 
25.	 Management Advisory Report: More Complete Employer Group Health Plan 
Progr, 
is Needed to Admister the Medicar Seconda Payer  Control Number: 
09-89-001oo 
26.	 Draft Management Advisory Report: MSP Survey -Contrctors Questionnaie, 
Control Number: A-09-89-00151  --_..- -. -
27.  Management Advisory Report: Medicare Seconda Payer: Unrcovered Funds 
(OEI - 90-(9764) 
07  APPENDIX 

HEALTH CAR FINANCING ADMINISTRATION COMMENTS

C  . - ...
&. 
Health Care 
HUMAN SERVlie  Financing Administration 
DEPARTMENT OF HEALTH 
Memorandum 
JU -
1991 
Date

Gail R. Wilensky, Ph.D. 
From
 Administrator 
OIG Draft Report: "Medicare Secondary Payer (MSP): Effectveness of Current 
Subject 
Procedures" (OEI-07-90-00761) 
Inpector General

Offce of the Secretary 
We have reviewed the C1lJove referenced draft report evaluating the etIecnven 
of current procedures to identify Medicare beneticiaries who have insurance 
coverage that is primary to Medicare. OIG found that: 
Medicare contractors are not coordinating with their private insurance 
operations when the private insurance side of the corporation is the 
primary payer. 
s employer group 
Beneficiaries who are covered by a working spouse 
be identified for MSP purposes. 
health plan are least likely to 
systems 
Medicare contractors lack the internal coordination and 
information needed to identify all MSP situations. 
exchange accurate MSP data. 
Medicare intermediaries and carriers fail to 
cost 
Based on these findings, OIG makes three recommendations to enhance the 
ensuring that Medicare reimbursement 
effectiveness of Medicare reimbursement by 
A concurs with the two management 
is secondary to other insurance. HCF 
recommendations. OIG's legislative recommendation wil be  reviewed and 
s legislative development 
appropriate action taken as part of the Department 
(A-19) process. 
Attached are our comments on OIG's specific recommendations. Thank you for 
comment on this draft report. Please advise us whether you 
the opportunity to 
position on the report s recommendations at your earliest 
agree with our 
convenience. 
Attachment  , .
Comments of the Health Care Financing Administration 
Draft Report: Medicare Secondary 
Paver: Effectiveness of Current Procedures 
07-90-0076U 
OIG recommends three actions for improving the effectiveness of contractor MSP 
have previously been identified by OIG and 
identification procedures. Two of these 
recommendations 
addressed by HCFA. Following are comments on each of the 
and some technical comments on the draft repone 
orG Recommendation 
contractors to match 
HCF A should propose legislation to require Medicare 
their health insurance data with Medicare fies. 
HCFA ResDonse 
HCF A wm review the legislative recommendation and appropriate action wil be

taken as pan of the Department s legislative development (A-19) process.

In the past, HCF A has proposed legislation to require such matches, but the 
Congress has nOt yet emlcted such legislation. In fact, as GIG pointed out

secticY 6202 of OBRA 1989 prohibits the Secretary from requiring Medicare

There are.

contractors to match their private insurance data with Medicare data. 
however, various other HCFA activities and legislative proposals for obtaining

information on primary coverage of Medicare beneficiaries.

OIG Recommendation 
HCF A should revise all Medicare claim forms to require spousal information 
before the claim is paid. 
HCFA ResDonse 
. The basic Medicare claim form, HCFA 1500, has recently been revised to request 
information about spousal insurance coverage, and about any coverage beneficiaries 
may have through employment. We are also considering recommending additional 
HCF A 1500 to require more information on primary insurance and 
revisions to the 
spousal eligibilty, but it wiI be a time consuming process. Additional changes must 
be cleared with the appropriate work groups and multiple users, and approved by 
the Offce of Management and Budget under the Paperwork Reduction Act. In the 
interim, we plan to reemphasize to physicians and suppliers who prepare this form, 
information about primary insurers. 
their responsibilty for coHecting  ___- -- - -- -
I 

Page 2

DIG Recommendation 
HCF A should continue to refine and improve the MSP component of the

(CW).

Common WC'!'king File -
HCF A Response

We agree with DIG'  HCFA expected, the data ..intially
s recommendation.  As 
loaded into the CWF contained some inconsistencies. However, the information 
obtained from the IRSISSAlCF A data match project will be loaded into the CWF 
andwm take  We are also pursuing data match 
precedence over conflcting data. 
s Black Lung Program, the Depanment of 
projects with the Department of Labor 
data. 
many State agencies to secure better MSP 
Veterans Afairs and 
DIG' s draft report does not provide details concerning the specific problems with 
CW data noted by Medicare contractors. This information would be helpful in 
determining the particular refinements and improvements that may be necessar. 
We therefore request that in the final report, DIG provide a further descriptitm and 
analysis of the CWF system problems that its study revealed. 
Technical Comments 
On page 1, last paragraph, third line, the text should read "a disabled beneficiary

LGHP" instead of "a disabled beneficiary s EGHP.

The last sentence of the last paragraph on page 1 should be r vised to read: " 
the primary plan does not pay for al1 covered services, Medicare may pay secondary 
benefits for Medicare covered services. 
On page 2, the last bullet point in the middle of the page should be revied to 
trauma-to 
diagnosis codes indicating 
read: "reviewing all claims containing medical 
identify injuries related to automobile, or other traumatic injury caes, including 
. work-related !ccidents. 
OBRA 
On page 12, the first item in the right column should be revised to read: "
because of 
1986 made Medicare secondary for people under 65 who have Medicare 
LGHP as an 
disabilty (other than kidney faiJure) and who are covered under a 
employee, employer, self-employed person, business associate, or family member.