Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

JUNE GIBBS BROWN 

Inspector General 

JUNE 2000 

OEI-07-98-00180 

Unidentified Primary Health Insurance: 

Medicare Secondary Payer 

Auxiliary File 
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

Linda Paddock, Project Leader

Tim Dold, Team Leader

Hugh Owens, Program Analyst

Deborah Walden, Program Analyst

Dennis Tharp, Program Analyst

Mike Craig, Program Analyst

HEADQUARTERS

Stuart Wright, Associate Director

Barbara Tedesco, Mathematical Statistician

Linda Moscoe, 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 
EXECUTIVE SUMMARY 

PURPOSE 

To determine whether Medicare beneficiaries included in the Health Care Financing 

Administration’s (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, Medicare’s 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 Medicare’s 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. 

MSP: Unidentified Primary Insurance Sources 1 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 postentitlement. 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. 

MSP: Unidentified Primary Insurance Sources 2 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 Medicare’s 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 

HCFA’s comments are included in Appendix D. 

MSP: Unidentified Primary Insurance Sources 3 OEI-07-98-00180 
TABLE OF CONTENTS 

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

MSP: Unidentified Primary Insurance Sources 4 OEI-07-98-00180 
INTRODUCTION 

PURPOSE 

To determine whether Medicare beneficiaries included in the Health Care Financing 

Administration’s (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. 

MSP: Unidentified Primary Insurance Sources 5 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 Medicare’s 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 CWF’s MSP Auxiliary File as 

new information becomes available and in this way share primary insurance 

information with other contractors. 

MSP: Unidentified Primary Insurance Sources 6 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, spouse’s 

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, Medicare’s 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. 

MSP: Unidentified Primary Insurance Sources 7 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. 

MSP: Unidentified Primary Insurance Sources 8 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 HCFA’s 

Medicare Secondary Payer Auxiliary File, we surveyed a stratified sample of beneficiaries 

in the data system in 1998. This file, which contained approximately 

1

GAO/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 Administration’s Efforts to Assure 

Employer Group Health Plan Compliance with Medicare Secondary Payer Data Match 

Requirements,” A-02-98-01036, February 2000. 

MSP: Unidentified Primary Insurance Sources 9 OEI-07-98-00180 
25 million beneficiaries, is housed within the Medicare Common Working File. We also 

obtained Medicare utilization records from Medicare’s 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. 

MSP: Unidentified Primary Insurance Sources 10 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 spouse’s 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 Medicare’s 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. 

MSP: Unidentified Primary Insurance Sources 11 OEI-07-98-00180 
We also extracted demographic information retrieved from HCFA’s 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 President’s Council on Integrity and Efficiency. 

MSP: Unidentified Primary Insurance Sources 12 OEI-07-98-00180 
FINDINGS

Overall, Medicare’s Secondary Payer (MSP) Auxiliary File

Accurately Documents Primary Insurance

We examined Medicare’s 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. 

MSP: Unidentified Primary Insurance Sources 13 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. 

MSP: Unidentified Primary Insurance Sources 14 OEI-07-98-00180 
TABLE 3

Survey Responses

Group 

I - Responded to IEQ 

II - Did not respond to IEQ 

III - Did not receive IEQ 

Total 

Sampled Returned 

Beneficiaries Our Survey 

1,549 1,288 

454 429 

2,128 1,533 

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 

MSP: Unidentified Primary Insurance Sources 15 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 

Beneficiary Group Coverage Type Began Dollars 

Spousal Medicare Insurance 1997 

Date 

Entitlement 

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)

HCFA’s 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.

MSP: Unidentified Primary Insurance Sources 16 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 contractor’s 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. 

MSP: Unidentified Primary Insurance Sources 17 OEI-07-98-00180 
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. 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 

MSP: Unidentified Primary Insurance Sources 18 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 Medicare’s 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 

HCFA’s comments are included in Appendix D. 

MSP: Unidentified Primary Insurance Sources 19 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.

MSP: Unidentified Primary Insurance Sources 20 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. 

5 

119 45. 

6 

Female 689 53. 

5 

142 54. 

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. 

5 

291 46. 

9 

Female 1050 53. 

5 

329 53. 

1 

Total 1962 620 

Chi-square=.040 not significant 

df=1 

MSP: Unidentified Primary Insurance Sources 21 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. 

Dev. 

Std. Error 

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. 

Dev. 

Std. Error 

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. 

MSP: Unidentified Primary Insurance Sources 22 OEI-07-98-00180 
Table 5

Did Not respond to IEQ by Disabled vs. Age

Respondents Non-respondents 

Category n % n % 

Aged 1553 79. 

2 

472 76. 

1 

Disabled 409 20. 

8 

148 23. 

8 

Total 1962 620 

Chi-square=2.55 - not significant 

df=1 

MSP: Unidentified Primary Insurance Sources 23 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. 

Survey Respondents Percent 

Weighted 

Interval 

Confidence 

90 % 

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% 

MSP: Unidentified Primary Insurance Sources 24 OEI-07-98-00180 
APPENDIX C 

25

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 

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

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