Department of Health and Human Services 
OFFICE OF 
INSPECTOR GENERAL 
Unidentified Primary Health Insurance: 
Medicare Secondary Payer 
Auxiliary File 
JUNE GIBBS BROWN 
Inspector General 
JUNE 2000 
OEI-07-98-00180  OFFICE OF INSPECTOR GENERAL 
The mission of the Office of Inspector General (OIG) mandated by Public Law 95-452 as 
amended by Public Law 100-504, is to protect the integrity of the Department of Health and 
Human Services programs as well as the health and welfare of beneficiaries served by them.  This 
statutory mission is carried out through a nationwide program of audits, investigations, 
inspections, sanctions, and fraud alerts.  The Inspector General informs the Secretary of program 
and management problems and recommends legislative, regulatory, and operational approaches to 
correct them. 
Office of Evaluation and Inspections 
The Office of Evaluation and Inspections (OEI) is one of several components of the Office of 
Inspector General.  It conducts short-term management and program evaluations (called 
inspections) that focus on issues of concern to the Department, the Congress, and the public.  The 
inspection reports provide findings and recommendations on the efficiency, vulnerability, and 
effectiveness of departmental programs. 
OEI's Kansas City office prepared this report under the direction of James H. Wolf, Regional 
Inspector General and Brian Pattison, Deputy Regional Inspector General.  Principal OEI staff 
included: 
REGION
 HEADQUARTERS

Linda Paddock, Project Leader
 Stuart Wright, Associate Director

Tim Dold, Team Leader
 Barbara Tedesco, Mathematical Statistician

Hugh Owens, Program Analyst
 Linda Moscoe, Program Analyst

Deborah Walden, Program Analyst

Dennis Tharp, Program Analyst

Mike Craig, Program Analyst

To obtain copies of this report, please call the Kansas City Regional Office at (816) 426-3697. 
Reports are also available on the World Wide Web at our home page address: 
http://www.dhhs.gov/progorg/oei  E X E C U T I V E   S U M M A R Y  
PURPOSE 
To determine whether Medicare beneficiaries included in the Health Care Financing 
Administrations (HCFA) Medicare Secondary Payer (MSP) Auxiliary File have 
undetected health insurance which is primary to Medicare. 
BACKGROUND 
Medicare provides health care coverage for eligible beneficiaries age 65 and older, certain 
individuals under 65 who are disabled, and individuals with kidney failure.  However, it is 
not always the primary insurance payer.  In general, Medicare is a secondary payer to: 
<	 coverage under a group health plan provided by an employer of 20 or more 
persons of working beneficiaries age 65 or older or their spouses; 
<	 coverage under a group health plan provided by an employer of 100 or more 
persons based on the current employment of disabled beneficiaries or their family 
members; 
<  group health plan coverage of beneficiaries who have end stage renal disease 
during their first 30 months of Medicare eligibility or entitlement; and 
<  coverage under an automobile, no-fault, liability insurance, or workers 
compensation plan. 
Providers and Medicare contractors share in the various tasks of primary health insurance 
detection including the retrieval of primary insurance information for the claim, 
pre-enrollment surveys of beneficiaries, screening claims, profiling trauma procedures for 
possible liability coverage, and exchanging computer data through matches. 
FINDINGS 
Overall, Medicares Secondary Payer (MSP) Auxiliary File Accurately Documents 
Primary Insurance 
Only 0.43 percent (16 of the 3,250) of beneficiaries in our sample with primary health 
insurance coverage were not identified by Medicare.  In our review of these 16 
beneficiaries, we found varying factors for Medicares status as the secondary payer. 
For the five beneficiaries found to have calendar year 1997 services inappropriately paid, 
Medicare made $8,452 in erroneous payments.  Projecting these improper payments to 
our universe of 25 million beneficiaries, we estimate that the Medicare program 
inappropriately paid approximately $56 million in 1997. 
1 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  All Medicare initiatives to detect primary health insurance have contributed to the 
identification of undetected Medicare secondary payer situations.  The IEQ is designed to 
capture all instances of primary coverage that exist when a beneficiary becomes entitled to 
Medicare; by virtue of this design, it is unable to document MSP events that occur post-
entitlement.  We found six beneficiaries in our sample who experienced life changes which 
gave them group health plan coverage subsequent to their completing the questionnaire. 
RECOMMENDATIONS 
Based on our analysis, we believe that the Medicare Secondary Payer Auxiliary File 
generally reflects primary insurance sources.  However, we did find some instances where 
other health insurance was undetected, with losses to Medicare of approximately 
$56 million.  Further, as more individuals work beyond age 65 and are covered by both 
Medicare and private health insurance, early detection of these primary payers becomes 
even more important.  Moreover, because validity indicators existed only for 20.3 million 
of the 38.5 million Medicare beneficiaries in 1997, a substantial portion of the Medicare 
population was not included in the scope of our study.  As a result, we do not know the 
extent of undetected primary coverage within this group. 
We believe that opportunities exist to strengthen the cost effective early detection of other 
primary health insurance coverage both for those currently in the MSP Auxiliary File and 
those not in the file.  To maximize these detection efforts, we recommend that HCFA 
Emphasize to Providers the Importance of Reporting Timely Employment and 
Health Insurance Information 
The HCFA should emphasize to providers the requirement that they obtain employment 
and insurance coverage information during each beneficiary visit, and code the primary 
payer portion of the claim accordingly.  This information is vital to the initial detection of 
changes in beneficiary health insurance coverage. 
Increase the Response Rate for the Initial Enrollment Questionnaire 
To the extent that beneficiaries do not respond to the Initial Enrollment Questionnaire, the 
odds that Medicare will pay for medical care covered by other insurance may be increased. 
HCFA could do any one or several of the following to increase the response rate. 
<  Conduct a second follow-up 6 months to 1 year after entitlement. 
<  Conduct the second follow-up as a pilot to test the increase in Initial Enrollment 
Questionnaire responses. 
<	 Conduct a telephone survey of beneficiaries not responding to the Initial 
Enrollment Questionnaire in order to determine the reasons for non-response and 
to improve the questionnaire. 
2 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  AGENCY COMMENTS 
We solicited and received comments on our draft report from HCFA.  The HCFA states 
that, based upon our findings, they are correctly identifying primary insurance for nearly 
99.6 percent of the 40 million Medicare beneficiaries.  Again, we must caution that our 
findings can only be projected to the approximately 20.3 million living beneficiaries 
contained in Medicares Secondary Payer Auxiliary File.  The use of this file does not 
permit projecting to all Medicare beneficiaries, but only those with records in this file. 
HCFA generally concurs with our recommendations that opportunities exist to strengthen 
early detection of other primary health insurance coverage.  They also indicate work has 
been initiated with the new Coordination of Benefits contractor, which will emphasize to 
providers the requirement to obtain employment and health insurance information during 
each beneficiary visit. 
We are pleased that HCFA continues to seek out opportunities to strengthen the MSP 
process and recognize the positive efforts being made through the new Coordination of 
Benefits contract.  We believe the results from a telephone survey of IEQ 
non-respondents should provide valuable information as to the extent of follow-up efforts 
that would be productive in ensuring the up-front response to the IEQ.  The full text of 
HCFAs comments are included in Appendix D. 
3 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  T A B L E   O F   C O N T E N T S  
PAGE

EXECUTIVE SUMMARY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5

FINDINGS

Overall, MSP Auxiliary File Accurately Documents Primary Insurance . . . . . . . . . . . . .  13

RECOMMENDATIONS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18

APPENDICES

A: Non-respondent Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20

B: Estimates and Confidence Intervals  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

C: Medicare Payments Where Primary Insurance Exists . . . . . . . . . . . . . . . . . . . . . . . . 25

D: Agency Comments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

4 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  I N T R O D U C T I O N  
PURPOSE 
To determine whether Medicare beneficiaries included in the Health Care Financing 
Administrations (HCFA) Medicare Secondary Payer (MSP) Auxiliary File have 
undetected health insurance which is primary to Medicare. 
BACKGROUND 
Medicare was enacted in 1965 to pay for health care services provided to eligible 
beneficiaries age 65 and older, and certain individuals under 65 who are disabled or have 
kidney failure (end stage renal disease).  Medicare provides coverage under two parts. 
Part A, hospital insurance, covers inpatient hospital services, skilled nursing home 
services, home health services, and various other institutional services.  Part B, 
supplemental medical insurance, covers physician, outpatient hospital, and other necessary 
health services such as diagnostic tests. 
The Health Care Financing Administration (HCFA), within the Department of Health and 
Human Services (HHS), administers the Medicare program by establishing policies, 
developing operating guidelines, and ensuring compliance with Medicare law and 
regulations.  The HCFA contracts with insurance companies, called intermediaries under 
Part A, and carriers under Part B, to process and pay claims for covered services.  They 
also perform other administrative and operational tasks, such as reviewing claims, and 
ensuring that any incorrect payments are identified and returned to the Medicare program. 
Although Medicare provides health care coverage for the above referenced individuals, it 
is not always the primary insurance payer.  Growing concern for rising Medicare program 
costs resulted in the passage of a series of statutory provisions which established Medicare 
as the secondary payer (MSP) to other private health care insurers in certain situations.  In 
general, Medicare is a secondary payer to: 
<	 coverage under a group health plan (GHP) provided by an employer of 20 or more 
persons for working beneficiaries age 65 or older or their spouses; 
<	 coverage under a group health plan provided by an employer of 100 or more 
persons based on the current employment of disabled beneficiaries or their family 
members; 
<  group health plan coverage of beneficiaries who have end stage renal disease 
during their first 30 months of Medicare eligibility or entitlement; and 
<  coverage under an automobile, no-fault, liability insurance, or workers 
compensation plan. 
5 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  The Health Care Financing Administration is responsible for the implementation of the 
various MSP provisions.  In this role, it educates others about the laws; issues regulations, 
policy, and operational guidelines; delegates to its Medicare contractors various tasks to 
detect primary insurance coverage; develops and disseminates tools to enable contractors 
to better perform their responsibilities; and monitors the performance of the contractors in 
achievement of their assigned MSP functions. 
The most effective way to prevent mistaken Medicare payments is through early 
identification of beneficiaries with group health plan coverage.  When employer group 
health insurance is identified before Medicare payments for services are made, claims are 
directed to that insurance company as the primary insurance payer.  Medicare has 
established the following responsibilities related to detection of primary insurance 
situations. 
Provider Responsibilities 
Part A procedures require institutional providers to obtain data on beneficiaries health 
insurance coverage to identify other insurers who should reimburse health care services 
prior to Medicares payment.  This is accomplished through use of a series of questions 
designed to ensure that all hospitals collect similar information regarding potential primary 
payment sources.  In the event that a provider receives payments from both Medicare and 
a group health plan, they are obligated to refund the Medicare payment. 
Part B procedures require non-institutional providers to ask Medicare beneficiaries a series 
of questions to determine if other health insurance coverage exists as part of each medical 
service.  If other health insurance coverage is identified, providers must bill that insurance 
company as the primary payer or make adjustments for any duplicate Medicare payments. 
Contractor Responsibilities 
The HCFA requires contractors to identify MSP claims prior to payment to prevent the 
more costly and time-consuming task of recovering inappropriate payments.  Medicare 
contractors are required to: 
<  notify providers of appropriate procedures for properly billing MSP claims; 
<  audit providers for compliance with billing procedures; 
<  screen all claims for coverage by another insurer; 
<	 review all claims containing a diagnosis code indicating trauma which may have 
resulted from an automobile or work-related accident; and 
<	 add, delete, and otherwise maintain MSP data on CWFs MSP Auxiliary File as 
new information becomes available and in this way share primary insurance 
information with other contractors. 
6 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  HCFA Initiatives 
The HCFA has undertaken the following initiatives to identify health insurance that should 
pay primary to Medicare: 
Initial Enrollment Questionnaire  Since 1995, HCFA has contracted with Douglas 
Consulting and Computer Services to survey Medicare beneficiaries for available health 
insurance coverage.  An Initial Enrollment Questionnaire (IEQ) is mailed to beneficiaries 3 
months before Medicare entitlement begins.  This questionnaire, which is voluntary,  asks 
beneficiaries about their employment status, other health insurance coverage, spouses 
employment status, age, and any health insurance coverage purchased through their 
employer.  If the beneficiary does not return the questionnaire within 45 days, a follow-up 
survey is sent.  If the information provided in response to the questionnaire is incomplete 
or inconsistent, the contractor contacts the beneficiary by telephone.  The contractor 
reported that 70 percent of the surveys are initially returned, which increased to 79 
percent after follow-up.  If primary health insurance coverage is detected, an indicator of 
primary health insurance coverage is then electronically integrated with the Common 
Working File, Medicares central claims processing file.  Where a definitive determination 
about the absence of MSP is made a result of the IEQ process, a N validity code 
indicator is entered on the CWF MSP Auxiliary File record.  In 1997, HCFA estimated 
this process was instrumental in the annual identification of 110,000 cases of third party 
health insurance, which generated an estimated annual Medicare Program savings of $425 
million. 
First Claim Development  The Common Working File electronically notifies contractors 
when the first claim after Medicare entitlement is submitted on behalf of a beneficiary. 
This process, called first claim development, is performed by all Medicare intermediaries 
and carriers.  Since 1987, individuals completing Medicare claims are asked to designate if 
other health insurance exists.  If no MSP information is included on the first Medicare 
claim, the contractor processes it.  They then mail a questionnaire to the beneficiary or the 
servicing provider to determine if the beneficiary or their spouse is covered under a group 
health plan and make payment adjustments, as necessary, based on the information so 
received. 
IRS/SSA/HCFA Data Match  The Omnibus Budget Reconciliation Act of 1989 
authorized an exchange of information between the Social Security Administration (SSA) 
and the Internal Revenue Services (IRS).  These computer data exchanges identify 
beneficiaries or their spouses who are employed and may have health insurance coverage 
through a group health plan.  Through this initiative, the IRS links the names and Social 
Security numbers of each individual filing joint or separate married income tax returns, and 
SSA identifies beneficiaries or spouses with earnings posted to their records.  The SSA 
provides employer names and addresses for these beneficiaries to the HCFA contractor, 
Group Health Incorporated of New York.  The contractor develops information about 
other health insurance coverage and adds, deletes, and otherwise updates the CWF MSP 
Auxiliary File to reflect the data about other health insurance coverage that it receives 
pursuant to the IRS/SSA/HCFA Data Match. 
7 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  Prospective Data Sharing  This initiative stems from a 1995 settlement agreement

between HCFA and a number of private insurers (The Blue Cross and Blue Shield

Association, Blue Cross Blue Shield of Florida, Blue Cross Blue Shield of Massachusetts,

Blue Cross Blue Shield of Michigan, Transamerica, and Travelers Insurance Company)

over disputed payments for Medicare beneficiaries.  A major element of this agreement

was the creation of a 3 year data exchange program between these insurance companies

and Medicare.  Provisions called for sharing private health insurance information with

Medicare to identify MSP situations before claims were paid.  The Health Care Financing

Administration estimates this initiative saved Medicare approximately $720 million in

Fiscal Year 1997.  The GAO recently found that since 1995, case settlements in which a

related company was also a Medicare contractor totaled almost $66 million, with an

additional $98 million in claims filed against current and former contractors.  These

companies processed over 85 percent of all Part A claims, and 60 percent of all Part B

claims.

Coordination of Benefits Contract  This latest initiative, awarded a multi-year contract

in November 1999 to Group Health Incorporated of New York.  In this role, Group

Health Incorporated will consolidate activities to support the collection, management, and

reporting of all health insurance coverage of Medicare beneficiaries for the purpose of

implementing an improved plan for coordinating Medicare benefits with all other insurance

coverages.  These activities include:

<  Initial Enrollment Questionnaire

<  IRS/SSA/HCFA Data Match

<  Voluntary Data Matches through negotiations with employers and other insurers

to exchange eligibility information on Medicare beneficiaries 
<  First Claim Development 
<  MSP Claims Investigations 
<  Coordination of Benefits Agreements between HCFA and other health insurers for 
the exchange of eligibility and paid claims data 
<  Maintenance of the Common Working File MSP Auxiliary File 
<  Customer service through a staff charged with validating insurance information, 
resolving discrepant information and electronically updating beneficiary records 
Other Initiatives  In addition, Medicare has implemented the following processes:

<  establishing secondary payer units within contractors;

<  improving education and training for providers and beneficiaries;

<  incorporating beneficiary MSP information into the national beneficiary entitlement

and utilization data housed on the Common Working File; 
<  establishing procedures for administrative sanctions of up to triple the amount of 
damages where Medicare made a primary payment when group health plans were 
obligated to pay as the primary insurer. 
8 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  Prior GAO and OIG Work 
Numerous reports have been issued by the HHS Office of Inspector General (OIG) and 
General Accounting Office (GAO)1 which describe problems associated with the 
identification of other primary health insurance.  These reviews found deficiencies in 
internal management controls and identified MSP as a material weakness.  These reports 
also noted the conflict of interest when Medicare contractors function as both the 
Medicare claims processor and the private insurer of Medicare beneficiaries who have 
additional health insurance. 
In a 1991 OIG study entitled Extent of Unrecovered Medicare Secondary Payer Funds, 
(OEI-07-90-00760), 4,300 beneficiaries were surveyed regarding their medical insurance 
coverage.  The OIG identified primary insurance coverage for 34 beneficiaries (33 with a 
group health plan and 1 with auto accident insurance) for an actual loss of $60,502, which 
projected to an estimated Medicare program loss of over $637 million for calendar year 
1988. 
In a recently issued audit report2 the OIG found that based upon the IRS/SSA/HCFA data 
match from 1991 through 1997, HCFA does not have group health plan information for 
over one million employees.  This resulted in the OIG identifying potential savings of 
approximately $282 million where claims were paid but a primary payer may have existed 
with liability other than Medicare. 
METHODOLOGY 
We researched Federal laws, regulations, and Medicare policies addressing the 
identification and reimbursement of claims for beneficiaries who have coverage through an 
employer group health plan.  We gathered additional information through interviews with 
a local Medicare intermediary, the Initial Enrollment Questionnaire contractor, and HCFA 
staff responsible for oversight of the various MSP provisions. 
To determine the extent of undetected primary health insurance coverage in HCFAs 
Medicare Secondary Payer Auxiliary File, we surveyed a stratified sample of beneficiaries 
in the data system in 1998.  This file, which contained approximately 
1GAO/HEHS-99-115, "Medicare Contractors - Despite Its Efforts, HCFA Cannot Ensure 
Their Effectiveness or Integrity," July 1999. 
2"Follow-up Review of the Health Care Financing Administrations Efforts to Assure 
Employer Group Health Plan Compliance with Medicare Secondary Payer Data Match 
Requirements, A-02-98-01036, February 2000. 
9 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  25 million beneficiaries, is housed within the Medicare Common Working File.  We also 
obtained Medicare utilization records from Medicares 1997 National Claims History file 
to verify services received by these beneficiaries. 
The Common Working File maintains complete claim and entitlement data for all 
Medicare beneficiaries.  When an intermediary or carrier receives a claim, it processes the 
claim to the point of payment or denial, using data from its own files and information on 
the claim.  Claims are then processed against the Common Working File system to verify 
utilization and entitlement and check MSP edits to determine whether the claim should be 
approved for payment. 
The MSP auxiliary record is established as a product of the IEQ process or the processing 
of a Medicare claim.  The Common Working File checks its MSP Auxiliary File for the 
existence of an MSP record, then for relevant data within that record where one exists, 
before processing claims to adjudication.  This procedural flow is used to assure that 
claims are validated against the most recent primary insurance coverage data. 
The Common Working File also updates the MSP Auxiliary File through transactions from 
contractors and from information provided to HCFA by SSA.  The Common Working File 
and auxiliary file contain a validity indicator field which denotes confirmation that: (1) 
another insurer other than Medicare is responsible for payment (Y in the field), (2) 
Medicare is the primary payer (N in the field), or (3) absence of a Y or N indicates 
absence of an MSP. 
Our sample included both persons eligible for Medicare due to age 65 as well as those 
entitled due to disability or end stage renal disease.  We categorized the population 
contained in the MSP Auxiliary File into two strata: 
<  Stratum 1 - Beneficiaries receiving an IEQ and responding to it, and 
<  Stratum 2 - All other beneficiaries.  This includes beneficiaries either not 
responding to the questionnaire or never receiving the survey because their 
entitlement date for Medicare occurred before the Initial Enrollment Questionnaire 
process began. 
We stratified our sample under the assumption that beneficiaries who do not return their 
Initial Enrollment Questionnaire surveys are more likely to have undetected primary health 
insurance.  We therefore weighted our sample by selecting 35 percent of the sample 
beneficiaries from Stratum 1 and 65 percent from Stratum 2. 
We were aware that the total population in the MSP Auxiliary File contained deceased 
individuals.  We did not survey deceased individuals and they were excluded from our 
sample popluation.  The number of beneficiaries for analysis was 3,250 based on exclusion 
of deceased beneficiaries and a response rate less than 100 percent. 
10 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  TABLE 1

Beneficiary Sample Selection

Stratum 1  Stratum 2 
IEQ  All 
Sample Category  Respondents  Others  Total 
Total Population  2,692,816  22,388,885  25,081,701 
Estimated Deceased  102,327  4,701,666  4,803,993 
Estimated Population After Excluding 
Deceased  2,590,489  17,687,219  20,277,708 
Random Sample  1,811  3,364  5,175 
Sample Deceased  68  703  771 
Sample Beneficiaries  1,549  2582  4,131 
Sample Beneficiaries Who Responded 
To Our Survey  1,288  1,962  3,250 
As noted above, we developed and mailed surveys to 4,131 beneficiaries, soliciting 
information about the beneficiary or their spouses work status in 1997; eligibility for end 
stage renal disease, Black Lung, Workers Compensation, and disability benefits; and other 
medical insurance coverage information.  We asked beneficiaries to provide us with the 
names, addresses, and phone numbers of employers and insurance companies where 
appropriate.  A total of 3,250 beneficiaries (1,288 and 1,962 from Stratum 1 and Stratum 
2, respectively) returned our survey.  This represents a 79 percent response rate. 
When responses to our survey identified the potential for additional primary health 
insurance coverage, we conducted a sequence of steps to determine whether improper 
Medicare payments had been made.  These included: 
<  retrieving utilization information from the Medicares Common Working File; 
<	 obtaining secondary payer information from the MSP Auxiliary portion of the 
Common Working File to determine if Medicare contractors had detected primary 
health insurance; 
<  conducting telephone interviews with beneficiary employers and insurance 
companies to determine eligibility for coverage in 1997 under a group health plan; 
<  determining the amount payable by the group health plan considering deductibles 
and coinsurances; and 
<  calculating improper Medicare payments. 
11 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  We also extracted demographic information retrieved from HCFAs Enrollment Database 
for use in preparing a non-respondent analysis (See Appendix A.)  While the focus of this 
study involves services rendered in 1997, the Common Working File also contained 
information on 1998 and 1999 claims billed to Medicare. 
We conducted our review in accordance with the Quality Standards for Inspections 
issued by the Presidents Council on Integrity and Efficiency. 
12 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  F I N D I N G S 
Overall, Medicares Secondary Payer (MSP) Auxiliary File 
Accurately Documents Primary Insurance 
We examined Medicares Secondary Payer Auxiliary File which contained information 
about approximately 20.3 million living beneficiaries in 1997.  Each beneficiary record in 
this file has an MSP validity code showing whether a primary payer other than Medicare 
existed or not.  Our purpose was to determine the accuracy of the data in this file.  The 
use of the Auxiliary File does not permit projecting to all Medicare beneficiaries, but only 
those with records in this file. 
Undetected Coverage 
Only a small number of beneficiaries having primary insurance in our sample were 
undetected by Medicare.  Of the 3,250 beneficiaries who returned our survey, 7 percent 
(241) had additional insurance which was primary to Medicare.  We found HCFA 
processes had previously identified 93 percent of these individuals (225 of the 241) as 
having a primary insurance.  In addition, 101 of these 225 beneficiaries with primary 
insurance coverage responded to the Initial Enrollment Questionnaire.  The remaining 124, 
while not receiving, or if received, not responding to the Initial Enrollment Questionnaire, 
were nonetheless detected by Medicare as having primary insurance coverage. 
The remaining 16 beneficiaries, or 0.43 percent of our population had primary health 
insurance coverage which had not been detected by Medicare.  For those 16 individuals, 
we determined Medicare should be secondary payer for 
<  seven beneficiaries age 65 or older who were working or had a working spouse. 
<  eight disabled beneficiaries who were working or had a working spouse. 
<  one beneficiary covered by automobile liability insurance. 
Table 2 on the following page summarizes the sampled beneficiaries responses, and the 
beneficiaries found to have primary insurance coverage.  It also reflects the various 
weighted percentages in calculation of these figures. 
13 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  TABLE 2 
Beneficiaries with Primary Insurance Other Than Medicare

Category  1997 Study

Total Surveys Mailed  4,131 
Total Surveys Returned  3,250 
Number of Survey Respondents with Primary Insurance Other Than 
Medicare  241 
Number of Survey Respondents with Primary Insurance Other Than 
Medicare Whose Coverage Was Not Identified by HCFA  16 
Percentages* 
Percent of All Beneficiaries with Records in the MSP Auxiliary File with

Primary Insurance Other Than Medicare (weighted projection)  7%

Percent of All Beneficiaries with Records in the MSP Auxiliary File with

Primary Insurance Other Than Medicare Whose Coverage Was Not

Identified by HCFA (weighted projection)  0.43%

Percent of All Beneficiaries with Records in the MSP Auxiliary File with

Primary Insurance Whose Coverage Was Not Identified by HCFA  6%

* Confidence intervals are shown in Appendix B 
For analysis purposes, we divided our original sample (4,131) and survey responses 
(3,250) into three groups: group I consists of beneficiaries receiving an Initial Enrollment 
Questionnaire and returning it; group II reflects beneficiaries receiving the questionnaire 
and not returning it; and group III covers beneficiaries that never received the survey 
because their Medicare entitlement date preceded implementation of the questionnaire 
process, but they responded to our survey.  The results of our analysis are shown in Table 
3 on the following page and are discussed further in the following findings. 
14 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  TABLE 3

Survey Responses

Sampled  Returned 
Group  Beneficiaries  Our Survey 
I - Responded to IEQ  1,549  1,288 
II - Did not respond to IEQ  454  429 
III - Did not receive IEQ  2,128  1,533 
Total  4,131  3,250 
We believe that Medicare initiatives to detect primary insurance coverage situations have 
contributed to the identification of undetected primary payer coverage.  A number of 
initiatives have been implemented since our 1991 report which have had a positive impact. 
Despite being unable to quantify the level of impact of specific HCFA initiatives, we 
believe that the percentage of beneficiaries for which primary insurance payers were 
detected demonstrates the Initial Enrollment Questionnaire process is an effective 
mechanism. 
Dollars Lost 
Of the 16 beneficiaries in our sample with undetected primary health insurance coverage, 
we found 5 received medical services which were inappropriately billed and paid by 
Medicare in calendar year 1997, totaling $8,452.  Projecting these improper payments to 
the total number of beneficiaries in the MSP Auxiliary File, we estimate the Medicare 
program inappropriately paid approximately $56 million in 1997.  At the 90 percent 
confidence level, this amount ranges between $8,452 and $139 million.  The $56 million is 
only 0.056 percent of the $99 billion in benefits which Medicare paid on behalf of 
beneficiaries with a record in the MSP Auxiliary File in 1997.  In fact, we estimate 
Medicare also paid $108 billion for the 18 million beneficiaries not in the Auxiliary File, 
and for which improper payments could have been made. 
Appendix C provides a summary of data related to these losses to the Medicare program 
in 1997 and subsequent instances of undetected primary coverage in 1998 and 1999. 
Initial Enrollment Questionnaire 
The Initial Enrollment Questionnaire is among the recent Medicare initiatives to identify 
primary insurance payment sources.  The results of our survey look at the effects of this 
initiative and are presented in Table 4 which is broken down by whether the beneficiary 
15 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  responded to the questionnaire, received but did not respond, or did not receive the 
questionnaire. 
TABLE 4 
Initial Enrollment Questionnaire Responses 
Spousal  Medicare Entitlement  Insurance  1997 
Beneficiary  Group  Coverage  Type  Date  Began  Dollars 
A  I  No  Aged  1997  1996  $0 
B  I  No  Aged  1997  1997  $0 
C  I  Yes  Aged  1995  1994  $0 
D  I  No  Disabled  1996  1997  $0 
E  I  Yes  Disabled  1995  1997  $0 
F  I  Yes  Disabled  1995  1979  $0 
G  I  Yes  Disabled  1997  1995  $0 
H  I  Yes  Disabled  1996  1994  $0 
I  II  No  Aged  1996  1994  $309 
J  II  No  Disabled  1997  1998  $0 
K  II  Yes  Disabled  1995  1997  $0 
L  III  No  Aged  1992  1989  $395 
M  III  No  Aged  1993  1997  $6,732 
N  III  Yes  Aged  1991  1997  $0 
O  III  No  Disabled  1985  1995  $797 
P  III  No  Auto  1993  N/A  $219 
Group I  Responded to IEQ

Group II  Received but did not respond to IEQ

Group III  Did not receive IEQ (as entitlement date proceeded IEQ implementation)

HCFAs initiatives seem to be effective.  But, because the instances of unidentified

insurance and the actual lost revenues to Medicare were so low, we were unable to 

distinguish the effects of the Initial Enrollment Questionnaire from all other initiatives. 

However, the table above clearly indicates that the questionnaire does not identify all

instances of primary health insurance coverage.

16 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  Our analysis established that the Initial Enrollment Questionnaire did not always identify 
primary insurance coverage for the following reasons: 
<	 Five beneficiaries did not receive an Initial Enrollment Questionnaire because their 
entitlement to Medicare occurred before the questionnaire process began. 
<	 Three beneficiaries did not respond to the Initial Enrollment Questionnaire.  The 
contractor reports a 70 percent response rate to the first mailing of the 
questionnaire.  This improves to 79 percent after a follow-up.  Nonetheless, we 
identified 338 beneficiaries (338 of 2582, or 13 percent) who responded to our 
request but had not responded to the questionnaire or the contractors follow-up. 
We also found that of the 454 beneficiaries not responding to the questionnaire, 
104 (23 percent) did not respond to our survey.  The questionnaire is sent to all 
newly enrolled beneficiaries within 3 months of their entitlement to Medicare. 
As previously noted, of the five beneficiaries found to have group health coverage 
with medical services billed to Medicare in 1997, one had not responded to the 
Initial Enrollment Questionnaire.  Additionally, 1 of the 11 beneficiaries we found 
who had primary insurance coverage but no 1997 Medicare services, did not 
respond to it. 
<	 Employment and group health plan coverage circumstances can change after the 
Initial Enrollment Questionnaire is submitted.  In fact, 6 of the 15 beneficiaries we 
identified with group health plan coverage had changes in employment or marital 
status subsequent to Medicare entitlement. 
<	 Five beneficiaries in our sample with undetected primary payer situations 
completed the Initial Enrollment Questionnaire, with Medicare payment records 
indicating that they had no group health plan coverage.  For these individuals, our 
review identified they had primary insurance at the time they completed the 
questionnaire.  While we could not verify specific reasons for the discrepancies, as 
source documents are not available, we surmise that reporting differences may be 
the result of erroneous information provided by the beneficiary, or errors in data 
entry from the initial questionnaire. 
17 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  R E C O M M E N D A T I O N S  
Based on our analysis, we believe that the Medicare Secondary Payer Auxiliary File 
generally reflects primary insurance sources.  However, we did find some instances where 
other health insurance was undetected, with losses to Medicare of approximately 
$56 million.  Moreover, because validity indicators existed only for 20.3 million of the 
38.5 million Medicare beneficiaries in 1997, a substantial portion of the Medicare 
population was not included in the scope of our study.  As a result, we do not know the 
extent of undetected primary coverage within this group. 
We believe that opportunities exist to strengthen the cost effective early detection of other 
primary health insurance coverage both for those currently in the MSP Auxiliary File and 
those not in the file.  To maximize these detection efforts, we recommend that HCFA 
Emphasize to Providers the Importance of Reporting Timely 
Employment and Health Insurance Information 
The HCFA should emphasize to providers the requirement that they obtain employment 
and insurance coverage information during each beneficiary visit, and code the primary 
payer portion of the claim accordingly as part of their continuing provider education 
efforts.  The ongoing and timely collection of this information is vital to the initial 
detection of changes in beneficiary health insurance coverage and should decrease the 
likelihood that claims will be paid subject only to detection in post payment processes. 
Increase the Response Rate for the Initial Enrollment 
Questionnaire 
It is clearly advantageous to identify primary coverage at the earliest opportunity, thus 
preventing inappropriate primary payments by Medicare.  Further, as more individuals 
work beyond age 65 and are covered by both Medicare and private health insurance, early 
detection of these primary payers becomes even more important.  To the extent that 
beneficiaries do not respond to the Initial Enrollment Questionnaire, the odds that 
Medicare will pay for medical care covered by other insurance may be increased.  HCFA 
could do any one or several of the following to increase the response rate. 
<	 Conduct a second follow-up 6 months to 1 year after the onset of entitlement, for 
those beneficiaries who have not received services and, therefore, were not asked 
to complete first claim development.  Because we found 6 of 15 beneficiaries with 
primary coverage subsequent to Medicare entitlement, this postponement may also 
18 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  permit detection of beneficiary changes in employment or marital status subsequent 
to entitlement. 
<	 Perform the second follow-up as a pilot to test the effectiveness of this approach 
for increasing responses generated by the additional request sent at either the 
6th month or anniversary of entitlement. 
<	 Conduct a telephone survey of a sample of beneficiaries not responding to the 
initial questionnaire or its follow-up in order to determine the reasons for 
non-response and to improve the questionnaire. 
Agency Comments 
We solicited and received comments on our draft report from HCFA.  The HCFA states 
that, based upon our findings, they are correctly identifying primary insurance for nearly 
99.6 percent of the 40 million Medicare beneficiaries.  Again, we must caution that our 
findings can only be projected to the approximately 20.3 million living beneficiaries 
contained in Medicares Secondary Payer Auxiliary File.  The use of this file does not 
permit projecting to all Medicare beneficiaries, but only those with records in this file. 
HCFA generally concurs with our recommendations that opportunities exist to strengthen 
early detection of other primary health insurance coverage.  They also indicate work has 
been initiated with the new Coordination of Benefits contractor, which will emphasize to 
providers the requirement to obtain employment and health insurance information during 
each beneficiary visit. 
We are pleased that HCFA continues to seek out opportunities to strengthen the MSP 
process and recognize the positive efforts being made through the new Coordination of 
Benefits contract.  We believe the results from a telephone survey of IEQ 
non-respondents should provide valuable information as to the extent of follow-up efforts 
that would be productive in ensuring the up-front response to the IEQ.  The full text of 
HCFAs comments are included in Appendix D. 
19 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  APPENDIX A 
Analysis of Respondents vs. Non-respondents

A consideration in surveys of this type is that the results may be biased if 

non-respondents are different from respondents.  To test for the presence of any bias, we

compared responders with non-responders, for certain variables, in an attempt to determine

how any observed differences might affect the results.  We compared age, sex, and disabled

vs. aged for each of the two strata sampled.  Our analysis (Tables 1-5) demonstrate no

significant differences between these two groups.

20 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  Tables 1 and 2 below give the breakdown of the sample by sex for each of the two strata, 
responded to the Initial Enrollment Questionnaire and did not respond to the Initial 
Enrollment Questionnaire. 
Table 1

Responded to IEQ by Sex

Respondents  Non-respondents 
Sex  n  %  n  % 
Male  599  46.  119  45. 
5  6 
Female  689  53.  142  54. 
5  4 
Total  1288  261 
Chi-square= .078 not significant 
df=1 
Table 2 
Did Not Respond to IEQ by Sex 
Respondents  Non-respondents 
Sex  n  %  n  % 
Male  912  46.  291  46. 
5  9 
Female  1050  53.  329  53. 
5  1 
Total  1962  620 
Chi-square=.040 not significant 
df=1 
21 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  Tables 3 and 4 show a comparison of the average age of each respondent type for each of 
the two strata sampled, respondents to the Initial Enrollment Questionnaire and 
non-respondents to the questionnaire.  A t-test was used to determine if a difference 
occurred between responders and non-responders. 
Table 3 
Responded to IEQ by Age 
n  Mean Age  Std.  Std. Error 
Dev. 
Responders  1288  64.9  5.72  .16 
Non-Responders  455  64.7  6.77  .42 
t= .32 not significant 
Table 4 
Did Not Respond to IEQ by Age 
n  Mean Age  Std.  Std. Error 
Dev. 
Responders  1962  68.5  11.1  .25 
Non-Responders  620  67.3  12.7  .51 
t=1.98 significant at .05 level 
The t-test showed a significant difference between the ages of responders vs. 
non-responders within the strata for those who did not respond to the Initial Enrollment 
Questionnaire.  Therefore, the average age of the responders to our survey was slightly 
greater than the average age on those who did not respond to our survey.  Since by 
definition, the disabled population is younger than the aged (Medicare defines all disabled 
as being under 65), a further analysis was done by aged vs. disabled for only the strata 
containing the questionnaire non-respondents.  It is given in Table 5 on the following page. 
22 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  Table 5

Did Not respond to IEQ by Disabled vs. Age

Respondents  Non-respondents 
Category  n  %  n  % 
Aged  1553  79.  472  76. 
2  1 
Disabled  409  20.  148  23. 
8  8 
Total  1962  620 
Chi-square=2.55 - not significant 
df=1 
23 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  Appendix B 
Estimates And Confidence Intervals

The chart below summarizes the estimated proportions and the confidence intervals for key 
statistics presented in this report.  The estimates refer to the percentage of survey 
respondents with primary insurance other than Medicare. 
90 % 
Weighted  Confidence 
Survey Respondents  Percent  Interval 
Percent of All Beneficiaries with Records in the 
MSP Auxiliary File with Primary Insurance Other 
Than Medicare  7%  6% - 8% 
Percent of All Beneficiaries with Records in the 
MSP Auxiliary File with Primary Insurance Other 
Than Medicare Whose Coverage Was Not 
Identified by HCFA  0.43%  0.22% - 0.65% 
Percent of All Beneficiaries with Records in the 
MSP Auxiliary File with Primary Insurance Whose 
Coverage Was Not Identified by HCFA  6%  3.1% - 9.3% 
24 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  APPENDIX C 
Medicare Payments Where Primary Insurance Exists 
Identified Savings 
1997  1998  1999  Notes 
6 Working Aged Beneficiaries 
2 of which did not receive the IEQ  $  395  $  396  Not elig  MSP ended 8/31/98 
$6,732  $  3  Not elig  MSP ended 8/1/98 
1 of which did not respond to the IEQ  $  309  $  279  Not elig  MSP ended 1/1/99 
3 of which responded to IEQ  No svcs  No svcs  Potential dollars*  MSP ended 7/1/99 
No svcs  No svcs  Not elig  MSP ended 6/30/98 
No svcs  No svcs  Potential dollars*  MSP continues 
1 Beneficiary with a Working Aged Spouse 
did not receive the IEQ  No svcs  Not elig  $  119  Elig 2/97 and 1-6/99 
2
5 3 Working Disability Beneficiaries 


1 of which did not receive the IEQ  $  797  $  757  $  228  MSP continues 
1 of which did not respond to the IEQ  Not elig  No svcs  Potential dollars*  MSP continues 
1 responded No to IEQ in 1996  No svcs  No svcs  Potential dollars*  MSP continues 
5 Disability Beneficiaries with Working Spouses 
1 of which did not respond to the IEQ  No svcs  No svcs  Potential dollars*  MSP continues 
2 of which responded to the IEQ in 1995  No svcs  No svcs  Potential dollars*  MSP continues 
No svcs  No svcs  Potential dollars*  MSP continues 
2 of which responded to the IEQ in 1996  No svcs  No svcs  Potential dollars*  MSP continues 
No svcs  $13,420  Not elig  MSP ended 10/1/98 
1 Aged Beneficiary with Auto Accident in 1997  $ 219 
*Possible dollar loss 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  APPENDIX D 
Agency Comments

26 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  27 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  28 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180  29 
MSP: Unidentified Primary Insurance Sources  OEI-07-98-00180