j;

Department of Health and Human Servces 

OFFICE OF


INSPECTOR GENERAL


MEDICARE SECONDARY PAYER: 

EFFECTIVENESS OF CURRENT 

PROCEDURES


V1CE' 

Richard P. Kusserow 

INSPECfOR GENERA 

AUGUST 1 
OFFICE OF INSPECfOR GENRA


The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452 

as amended, is to protect the integrity of the Department of Health and Human Servces 

(HHS) programs as well as the health and welfare of beneficiaries served by those programs. 

This statutory mission is carried out through a nationwide network of audits, investigations 

and inspections conducted by three OIG operating components: the Offce of Audit 

Servces, the Offce of Investigations, and the Office of Evaluation and Inspetions. The 

OIG also informs the Secretary of HHS of program, and management problems, and 

recommends courses to correct them. 

OFFCE OF AUDIT SERVICE 

The OIG's Offce of Audit Servces (OAS) provides allliuditing servce for HHS, either by 

conducting audits with its own audit resource or by overseeing audit work done by others. 

Audits examine the performance of HHS programs and/or its grantees and contractors in 

carrng out their respective responsibilities and are intended to provide independent 

assessments of HHS programs and operations in order to reduce waste, abuse, and 

mismanagement and to promote economy and effciency throughout the Department. 

OFFICE OF INTIGATIONS 

The OIG's Offce of Investigations (01) conducts criminal, civil, and administrative 

investigations of allegations of wrongdoing in HHS programs or to HHS beneficiaries and of 

unjust enrichment by providers. The investigative efforts of 01 lead to crinal convictions 

administrative sanctions, or civil money penalties. The 01 also oversee State Medicaid fraud 

control units which investigate and prosecute fraud and patient abuse in the Medicaid 

program. 

OFFICE OF EVALUATION AN INSPECfONS 

OIG' s Offce of Evaluation and Inspections (OEI) conducts short-term management and 

prc0gram evaluations (called inspections) that focus on isues of concern to the Department 

the Congress, and the public. The findings and recmmendations contained in these 

inspection reports generate rapid, accurate, and up-to-date information on the effciency, 

vulnerabilty, and effectiveness of departmental programs. 

Perr Seaton, Team Leader Thomas Noplock, Headquarters 

Julie L. Quirin, Project Leader W. Mark Krushat, Headquarters 

Hugh Owens


Doris Philips 
0: _. 

Deparment of Health and Human Services 

OFFICE 

INSPECTOR GENERAL


MEDICARE SECONDARY PAYER:


EFFECTIVENESS OF CURRENT


PROCEDURES


f.P.VICE$' 

Richard P. Kusserow 

INSPECTOR GENERAL 

'0 + OEI-07-90-00761 

1t\'d:W 
...... .._.. 

EXECUTIVE SUMMARY


PURPOSE 

To evaluate Medicar contractor procedures for identifying Medicar beneficiares who have 

insurance coverage that is primar to Medicar. 

BACKGROUND 

Unti 1980, Medicar was the primar payer of health car costs for Medcare beneficiares 

except when the beneficiar was covere by a worker s compensation progr or the Veteran 

Admnistration. Congress became concerned about significant increases in the cost of the 

Medicare progr. As a result, between 1980 and 1986 Congress passed a series of statutory 

provisions requirng certn private insurers to pay medical clais before Medicar (see 

Appendi A). 

Recent Congrssional hearngs and meda attention have brought the Medicare Seconda Payer 

(MSP) issue to the forefront Despite curnt mechanisms to identify beneficiares who have

priar insurance coverage, may primar payers reman unidentified. The OIG has estimated, 

based on a radom sample of Medicar beneficiares, that Medicare lost over $600 milion in FY 

1988 due to unidentied pri payment soures. The curent HCFA actuar estiate of 

Medicare progr losses, due to the contrctors' faiure to identify priar payment sources and 

recover inappropriate Medicare payments, has incrased to $1.3 billon for FY 1991. 

METHODOLOGY 

We solicited medical insurance information from a random sample of 4,371 beneficiares. We 

obtained responses from 3, 185 beneficiares. This represents an overall response rate of 72. 

percent We analyzed the verified cases with unidentified primar payers to determne the 

reasons why the curnt system was unsuccessful in identifying the primar payment source. 

FINDINGS 

Medicare lost at least $120. 0 million in 1988 because contractors are not coordinating with 

their private insurance operations. 

$585. million because current MSP procedures failed to detect all cases 

when a beneficiary is covered by a working spouse s EGHP. 

Medicare lost over 


Intermediaries and carrers lack coordination, resulting in a 
 $23. million loss to Medicare

during 1988. 
Contractors lack the internal coordination and systems information needed to identify all MSP 

situations. 

RECOMMENDATIONS 

The HCFA should propose legislaton to require Medicare contractors to match their health 

insurance daa with Medicare files. 

The HCFA should revise all Medicare claims forms to require spousal insurance information 

before the claim is pai 

The HCFA should continue to refine and improve the MSP component of the Common 

Working File (CWF). 

COMMNTS 

The HCFA generally concur with the recommendations presented in this report. With regard to 

the recommendation that HCFA propose legislation requirng Medicare contractors to match 

their health insurce data with Medicar fies, the HCFA has proposed legislation to requir 

such matches in the past, but the Congress has not yet enacted it. In fact, section 6202 of OBRA 

1989 prohibits the Secreta from requirng such matches. The HCFA indicates it wil review 

the legislative recommendations and tae appropriate action as pan of the Deparent 

legislative development (A- 19) process. The OIG contiues to believe this is an important step 

in determning the primar payer for many beneficiares. 

This fmal report includes revisions as suggested by HCFA in its "Technical Comments" section 

of their comments on the draft report The HCFA's verbati comments can be found in 

Appendi C. 
.

.,. ............................ ................ .................... .............................. .................... ...........

TABLE OF CONTENTS


EXECUTIVE SUMMARY 

INRODUCTION..................................................................................................... .


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


Background......................................................................................................... . 

Methodology........................................................................................................ 3 

FIN IN GS .................................................................................................................. 5 

Medicare lost at least $120.0 milion in 1988 because contractors ar not 

coordiatig with their private insurance operations. .........................................


Medicare lost over $585.3 mion because curnt MSP procedurs 

faied to detect al cases when a beneficiar is covered by a 

workig spouse s EGII. .......................................... 6 

Intermediares and carers do not coordinate their efforts, 

resultig in a $23.7 millon loss to Medicar durg 1988...................................


Contractors lack the internal coordiation, systems, and informtion


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


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


AGENCY CO MMENTS ........ 


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


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


APPENDIX C ................................................................ ......................................... C­

INTRODUCTION


PURPOSE 

To evaluate Medicar contractor procedures for identiying Medicar beneficiares who have 

insurance coverage that is priar to Medicar. 

BACKGROUND 

This inspection is a par of an initiative to assess the effectiveness of procedurs used to identify 

Medicare Seconda Payer (MSP) situations. The fidings and recommendations presented in 

this repon suppon the Secrta s objective to enhance cost effectiveness of Medicar 

reimbursement by ensurng that Medicare reimbursement is secondar to other insurce. 

History of MSP Provisions 

Medicare helps pay medical costs for approximately 28 millon people aged 65 and older and 

approxiately 3 millon disabled people. Medicare Par A covers inpatient hospita services, 

home health services, and other institution-based servces. Physician, outpatient hospita, and 

varous other health services are covered by Medcar Par 

The Health Car Financing Admnistration (HCFA) is responsible for ensurng compliance with 

Medicare legislation and regulations. Prvate insurce companies contrct with HCFA to 

process and pay Medicar claims. These contrctors are known as fiscal intermediares (Par A) 

and caners (par B).


Until 1980, Medicar was the priar payer of health car costs for Medicare beneficiares 

except when the beneficiar was covered by a worker s compensation progr or the Veteran 

Admnistration. Congress became concerned about significant increases in the cost of the 

Medicare progr. As a result, between 1980 and 1986 Congress passed a series of statutory 

provisions requirng cert private insurers to pay medical claims before Medicar (See 

Appendi A). 

These provisions requir private insurers to pay medical claims primar to Medicar if the 

beneficiar has other health insurce coverage by an employer group health plan (EGHP), a 

disabled beneficiar s large group health plan (LGHP), a spouse s EGHP, or automobile, 

no-fault, or liabilty insurce. If the prima plan does not pay for al covered services, 

Medicare may pay secondar benefits for Medicare covered services. 

Implementation of MSP Provisions 

These provisions created a need for a system to coordinate private insurce benefits with 

Medicare. Curently, Medicar contractors use information from both internal and external 
sources to detennne the prima payer for clais submined for reimbursement. In order for the 

system to be effective, the contractors must have insurance information for each beneficiar that 

is accurte, complete, and CUIent Without this informtion, contrctors wil continue to pay 

claims inappropriately. 

To insur the contrctor has complete and accurte information, the HCFA requires contractors 

to identi primar payment soures. When a Medicare claim is submitted, the contrctor 

searches MSP history fies for health insurance coverage that is provided by another insurer. The 

most widely used contrctor procedurs for identifyig MSP situations include 

developing leads from HCF A' s "Y -trailer" codes; 

screening informtion included on the clai form; 

queryng data in the Common Working File (CW; 

developing the fIrst claim fIed by or on behalf of a beneficiar; and 

reviewing al clais contaning medical diagnosis codes indicating trauma-to identify 

injures related to automobile, or other trumatic injur cases, including work-related 

accidents. 

These provisions created new functions for Medicar contrctors. The contrctors ar required 

to screen, identiy, and veriy clais for other insurce involvement. In addtion, contractors 

are requied to make post-payment recoveries when Medicar has paid improperly. The HCFA 

monitors the contrctors ' efforts to identi and recover MSP payments by establishing an MSP 

savings goal for each contrctor. The HCFA annualy evaluates each contrctor s performance 

using the Contrctor Performance Evaluation Plan (CPEP) standads and established goals. The 

contrctor must achieve a savings figure of at least 95% of their MSP savings goal to pass the 

MSP element of the CPEP review. 

Medicare contrctors were budgeted approximately $70 millon for admistration of the 

Medicare Secondar Payer provisions durng fiscal year(F) 1989. They reported savings of 

over $2.2 billon in FY 1989. Accordig to information obtaied from HCFA the funding for 

MSP activities in FY 1990 was reduced to $56 milion. 

Contractors ar not the only entities involved in identification of MSP activities. Hospitals are 

required to ask for all insurance coverage upon admttace. Personnel in physician s offices 

and/or their biling agents are also required to collect and record complete insurce coverage 

information. CUIently, when a patient has insurce coverage from another source, the provider 

is requird to initially submit the claim to the primar insurr rather than Medicar. If the 

priar insurer does not reimburse for the tota amount of the Medicar alowable, Medicar 

would then pay the remaiing covered services as the secondar payer. 
.. ..

.. ...._ - _a_---.


The HCFA has conducted extensive educational programs for the beneficiar and provider 

communities and private health insurce companies concerning the MSP provisions and clais 

f1ing procedurs. 

Addtional Savings Possible 

Recent Congrssional hearngs and media attention have brought the MSP issue to the forefront. 

Despite curnt mechanisms to identiy beneficiaes who have prima insurance coverage, 

many prima payers remain unidentied. Studies by the Offce of Inspector Genera (OIG), the 

General Accounting Offce (GAO) and HCFA have confmned that additional savings and 

recoveries ar possible. 

The OIG has estimated, based on a radom sample of Medicar beneficiares, that Medicare lost 

over $600 miion in FY 1988 due to unidentified priar payment sources. Accordig to the 

HCFA actuar, the Medicar program lost approximately $900 milion in FY 1990. The curnt 

HCFAactuar estiate of Medcar program losses due to the contrctors' failure to identify

priar payment sources and recover inappropriate Medicare payments, is $1.3 bilion for 

FY 1991. 

METHODOLOGY 

We selected a simple random sample from the population of al beneficiares who received 

services durng 1987. The Offce of Inspector Genera, Offce of Evaluation and Inspections 

maintans a one percent sample of al beneficiares receiving servces under Par B. This Bample 

is a subset of the Par B Medicar Annual Data (BMAD) IV five percent beneficiar sample f1e 

maintaned by HCFA. 

A subsample of these beneficiares, using sequential sampling, resulted in 6,777 HICNs 

representing beneficiares with Medicare claims. We matched these records with the Social 

Securty Admnistration s (SSA) Master Beneficiar Record (MBR) to obtain demogrphic data, 

includig curent address, and determe the curnt status of each beneficiar identied. The 

following table presents the results. 

Results of Medicare BMAD IV Match with SSA MBR. 

Orgial Number Selected 777 

Raioad Retiment Board Beneficiares 138 

Status Indicated as Dead 070 

Non-Matching Numbers 

Final Number of Beneficiares 371 

We deleted Railroad Board retiees from the sample (138 beneficiares) because the Social 

. Securty Admnistration (SSA) does not maitain their data. We also deleted the 1,070 

beneficiares indicated by SSA as deceased because we were not willng to identify or mail 

sureys in attempt to obtan proxy respondents. The 1, 198 HICNs thai did not match with SSA' 
MBR represent a problem encountere with the Beneficiar Identification Code (BIC). We were 

unable to obtan any information on these individuals though the diect match. Therefore, we 

deleted these individuals frm the surey. 

We solicited information from the remaiing 4 371 beneficiares. We obtaied responses from 

185 beneficiares. This represents an overall response rate of 72.9 percent. 

We used the BMA one percent sample and the Medicare Automated Data Retreval System 

(MARS) to gather demogrphic and utiizatiop. informtion. These systems ar also 

maitaed by HCFA. The MARS provided informtion on tota Par A and Par B 

expenditus on behalf of each beneficiar. 

We asked questions concerning the respondent s supplementa medical coverage. We examned 

al inormation for indications of priar payment sources. Where a positive response was 

noted, OIG sta developed the case to gather more specific information and verify the 

inormation provided.


We conducted telephone intervews with the beneficiares to verify the information they 

provided and to collect names and addesses of employers and insurance companes. Additional 

contacts with these employers and with representatives frm the involved insurce company 

were made to furer verify Medicar s status as seconda payer. This process enabled us to 

determe whether Medicare paid appropriately as seconda payer. Medicare contractors 

provided payment histories and documentation to determne if Medicar payments shown were 

situations where the contractor paid the clai cOlTectly as the seconda payer. 

We analyzed the veried cases with unidentied priar payers to determe the reasons why 

the curnt system was unsuccessfu in identiing the primar payment source. This analysis 

was completed by interviewing Medicare contrctor sta, private insurce companies, and 

employers. In addition, we requested documentation frm these entities. This documentation 

included the Medicare billg form, the explanation of benefits from the third par payer 

payment information/istory printout on the claim(s) in question, and any other documentation 

supportg development of the clai(s). 
FINDINGS


The following fmdigs are based on an analysis of the 34 confIrmed overpayment cases. Each 

case may be included in one or more of the analysis categories. These categories are not 

mutualy exclusive. 

Medicare lost at least $120.0 milion in 1988 because contractors are not coordinating with

their private insurance operatons. 

All Medicare contrctors have a fiducia responsibilty to the Federa Government to assur that 

only appropriate Medicare payments ar made. The CUIent argement crates a potential


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


operations.


Insurce companies curntly contrcting with HCFA to process and pay Medicare claims also 

conduct private health insurce business. Often the contrctor s private business operation 

insures beneficiares who ar afected by the MSP provisions. Records for private insurance 

operations and Medicare business operations are maintaned separtely. 

The majority of the Medicare contractors ar owned by the Blue CrosslBlue Shield corporation. 

Accordig to the Blue Cross of America, 87 percent of contractors ' private business comes from 

EGHP coverage for companies offerig group health insurce to their employees. 

We identified primar insurce coverage on 34 cases. These cases totaed an actual loss to the 

Medicare progr of $60,502. This projects to an estited annual loss of over $637 millon 1 in 

1988. Furer analysis of the 34 overpayment cases shows that Medicare paid as the primar 

payer in eight (23.5%) of these cases when the beneficiar had primar insurace coverage 

though an EGHP admnistered by the contractors ' private business operations. These eight 

cases account for $11,420 or approximately 18.8% of the tota overpayment. When projected to 

the universe of Medicare beneficiares, Medicar lost over $120.2 millon due to lack of 

coordiation between Medicar contractors and their private business. CUIent procedures were 

not effective in identifying these cases for the contrctor. 

Of the eight claims that should have been paid by the contrctors ' private business operations, 

source claim information was readily available on the. In each of these cases, the claim form 

indicated that a prima payer other than Medicare was available. The contrctor did not provide 

source claim information for the remaiing five claims because the claims were submitted 

electronically. 

1 For detas of this estiate see "Extent of Unrecovered Medca Seconda Payer Funds" 

- OEI-07-9Q-00760. 
millon because current MSP procedures failed to detect all cases


when a beneficiary is covered by a working spouse s EGHP.


Medicare lost over $585.3 

Medicare is the seconda payer when a beneficiar is covered by a working spouses s EGHP. 

These situations often are the most dicult for contrctors to identify. This is ilustrted by our 

of review the 34 overpayment cases identic.il in the beneficiar surey. Twenty-five of the 34 

overpayment cases (73.5 percent) had unidentified primar insurce coverage though the 

EGHP of a working spouse. Of the $60,502 identified overpayments, $54 294 resulted from 

unidentied spousal insurce coverage. This accounted for $583.3 miion (90 percent) of the 

anual projected loss to the Medicare progr for 1988. 

Intermediares and carrers do not coordinate their efforts, resulting in a $23. million loss to 

Medicare during 1988. 

We found four of the 34 (11.8%) overpayment cases where MSP information was not exchanged 

between contractors or the informtion exchanged was inaccurate. These four cases total $2 257. 

This amount projects to o.ver $23.7 millon of the total overpayment projection. 

Intermediares and carers frequently receive claims filed on behal of the same beneficiar.


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


. concerng the beneficiar s insurance and mployment status. The Regional Data Exchange


System (RDES) has been the primar mechanism for exchange of MSP information between 

contractors. Al contractors were requird to do quarerly updates to this system. These updates 

include al newly identied MSP cases. 

The RDES is no longer used in this capacity. The Common Working File (CWF) has replaced 

RDES as the priar mechanism for exchangig MSP information between contrctors. 

Contractors lack the internal coordination, systems, and informaton needed to identify all 

MSP situatons. 

Eleven of the 34 overpayment cases were paid inappropriately due to genera deficiencies and/or 

errors by the contractors. According to existig procedures, Medicare claims should be 

developed and/or denied when the contrctor has information indicatig that a private insurance 

company may be the primar payer. Our analysis of the identified claims, established several 

areas that resulted in inappropriate Medicare payments. The following is a listing of specific 

causes for these inappropriate Medicar payments. 

The contrctor paid the claim despite a development letter on fie at the contrctor that 

indicated EGHP coverage. 

The contractor did not promptly recover an overpayment when information confirming the 

prima payer was available. 
The contrctor paid the claim despite infonnation in the contractor s computer system that 

the beneficiar s spouse was working. 

The contrctor initiated recovery for a beneficiar after it received infonnation that a 

priar payment source existed. However, the contrctor did not mae recoveries on all 

previously adjudicated claims.


The contrctor received infonnation frm RDES that indicated there \yas a primar 

payment source. However, the contrctor did not initiate recovery on the previously paid 

clais. 

The contrctor paid the claim despite infonnation in the contractor s computer system that 

indicated a primar insurce source. 

The hospital received payment from Medicare and the private insurce source which 

exceeded its charges. The hospita notied the contractor of this, but the contractor did not 

intiate recovery of the overpayment. 
RECOMMENDATIONS


The fIrst two recommendations have been presented in a previous OIG Management Advisory 

Repon (MAR) entitled "Medicar Seconda Payer: Unrcovered Funds" (OEI-07-90-00764). 

They are also included in this repon because they are supponed by the fmdings of this 

inspection. We have indicated the curnt status on those recommendations where HCFA has 

previously commented. 

The HCFA should propose legislaton to require Medicare contractors to match their health 

insurance daa with Mediare files. 

We recognize that Section 6202(d) of OBRA 1989 prohibits the Secrtar from requirg 

Medicare contrctors to match their records with their private business operations. However, we 

found a substatial number of unidentified MSP cases that would have been identied if this 

type of match had been requird. 

The potential for conflct of interest inherent in the corporate strctue of the Medicar 

contractors could be eliminated by requirg regular matches between the contrctor s private 

insurance fles and their Medicar fies. This matchig activity would result in more accurate 

MSP data for the contractor. The contrctor would accurtely identify many more MSP 

situations in the pre-payment phase of processing the Medicar clai alowing contractors to 

avoid "pay and chase" situations. 

The DIG recommends that HCFA pursue a legislative proposal that would requir Medicare 

contrctors to match their records with the private health insurce data. This proposal should 

furer require Medicare contrctors to review their private insurance files to identify and repon 

potential MSP situations. 

The HCFA has disagreed with this recommendation in their comments on the MAR entitled 

Medicare Seconda Payer: Unrecovered Funds," because of the provisions of Section 6202 of 

OBRA of 1989 that prohibit the Secreta from requirng such matches. 

The HCFA should revise all Medicare claim forms to require spousal insurance information 

before the claim is paid. 

As of June 20, 1991 , the HCFA 1500 claim form submitted by or on behalf of the beneficiar 

does not ask for complete information concerning spousal employment or insurce coverage. 

This mechanism would be a useful way to identiy a substantial number of cases where the 

benefIciar is covered by their spouse s EGRP. 
. ..

We suggest that the followig questions be added as par of the claim forms: 

Are you covered by medical insurance though your employer? 

Are you covered by medical insurance through your spouses employer? 

The HCFA has concur with this recommendation in their comments on the MAR entitled 

Medicare Seconda Payer: Unrecovere Funds" and will inform the Uniform Claim Form 

Task Force (this task force makes Medicar clai form changes) of its concurnce. The OIG 

wil follow though with HCFA on the changes being made to the clai form. 

The HCF A should contnue to refine and improve the MSP component of the Common 

Working File (CWF). 

As of December 1990, al contractors who process and pay Medicar clais ar using CWE 

Ths system is designed to simpliy and improve Medicare claims processing. The 

establishes a prepayment review and payment authorization proess that, when working 

properly, wil signicantly reduce claims payment errors and provider overpayments. It wil 

provide the most curnt and accurate Medicar entitlement and eligibilty data on beneficiares. 

The CWF should also improve MSP claims processing and exchange of informtion between 

contractors. 

The MSP component of the CW was established with data from the Regional Data Exchange 

System (RDES). Contractor representatives have indicated that this system is not reliable 

because of incorrect and inconsistent data. Using the RDES to establish this porton of the CWF 

trsferrd the incorrect and inconsistent data to the CWF. The CW wil not improve MSP 

identication and recovery efforts unless al Medicar contractors ar receiving reliable and 

consistent MSP informtion. The HCFA should work to assur that the problems with the CWF 

are corrcted. 

Also, the system has crated duplicate auxiliar records for MSP information. One record is a 

slight deviation. This causes every clai to reject as a potential MSP situation. The contrctors 

have been holding these claims. Obviously, this has created a large backlog. In addition, many 

auxilar records have incorrct effective dates. Only the contrctor that originally set up the 

record can change the effective date. This causes confusion when one contractor fmds an error 

but is unable to corrct it until they discover which contrctor originally set up the MSP fie. 
::_ . . .

AGENCY COMMENTS


The HCFA generally agred with the recommendations presented in the drt report. The fit 

recommendation has been presented to HCFA in previous OIG reports. The HCFA has indicated 

that "appropriate action wil be taen as par of the Deparent s legislative development (A- 19) 

process." The OIG continues to believe this is an importt step in determning the primar 

payer for may beneficiares. 

Our second recommendation suggests that Medicar revise all clai form to requir spousal 

health insurance information. The HCFA indicated that the HCFA 1500 has recently been 

revised. However, as of June 20, 1991 , we were advised that many providers ar not using ths 

revised form. They continue to use a version of the HCFA 1500 that does not request spousal 

health insurance inormation. The HCFA also indicates that they are considerig other 

modcations but "it wil be a tie consumig proess." We contiue to believe that the HCFA 

1500 clam form should be revised to request complete employment and health insurce 

information for the beneficiar and his/her spouse. The HCFA should work to expedite this 

process. 

The HCFA concurs with the recommendation to refine and improve the MSP component of the 

Common Working File (CWF). As HCFA requested, we have modfied the report to detal the 

specific problems that we have discovered with the CWF. 

This fmal report includes revisions as suggested by HCFA in its "Technical Comments" section 

of their comments on the draft report The HCFA's verbati comments can be found in 

Appendi C. 
_..

APPENDIX A


MEDICARE SECONDARY PAYER LEGISLATION 

TITLE OF PUBLIC ENACTMENT EFFECTIV 

LAW LAW DATE DATE DESCRIPTION 

Omnbus 96-499 12-05- 12-05- ORA made Medicar 

Reconcilation the seconda payer to 

Act of 1980 automobile medical, 

(ORA) no fault or any 

liabilty insurance.


Omnbus Budget 97- 08- 13- 10-01- OBRA made Medicare 

Reconcilation seconda payer for 

Act of 1981 end-stage renal disease 

(OBRA) for up to 12 months 

following entitlement 

if the person is 

eligible for medical 

insurance under an 

EGRP. 

Tax Equity 97 - 248 09-03- 01-01- TEFR made Medicare 

and Fiscal benefits seconda 

Responsibilty if the employee or 

Act of 1982 spouse is age 65 

(TEFR) though 69 covered 

by an EGRP and the 

employer has at 

least 20 employees. 

Deficit 98-369 07- 18- 01-01- DEFR broadened the 

Reduction Act definition of 

of 1984 working spouse by 

(DEFR) including spouses 

age 65-69 of


employed i 

under age 65, thereby 

removing the lower 

age limt.

MEDICARE SECONDARY PAYER LEGISLATION


Consolidated 98-272 04-06­ 05-01­ COBRA fuer 

Omnbus Budget 

Reconcilation 

broadened the 

defmition of 

Act of 1985 working aged by 

(COBRA) removing the 

limitation of age 

70 and older. 

Omnbus 99-509 10-21­ 01-01­ OBRA made Medicare 

Budget 

Reconcilation 

seconda for people 

under 65 who have 

Act of 1986 Medicare because of 

(OBRA) disabilty (other than 

kidney failur) and 

who ar covered under 

a LGHP as an 

employee, employer 

self-employed person 

business associate, or 

famy member. 

Omnbus. 101-239 12- 19­ 12- 19­ OBRA provided a two 

Budget 

Reconcilation 

year period for matching 

IRS tax records to 

Act of 1989 records of the Social 

(OBRA) Securty Admistration 

and the Health Care 

Financing Admistration 

to identify working 

beneficiares and 

their spouses. 
APPENDIX 

PREVIOUSLY PUBLISHED REPORTS 

Prority Audit Memoradum - Su.1"::y of the Tax Equity and Fiscal Responsibilty Act of 

1982 - March 7, 1984, Contrl Number: ACN-03-4200 

Medicare Seconda Payer Provision End-Stage Renal Disease - Progr Inspection 

Report - August 24, 1984, Control Number: 1-07-4001­

Medcare Seconda Payer Provision End-Stage Renal Disease - South DakotaNovember 20, 1984, Contrl Number: 1-08-400­

Medicare Seconda Payer Provision End-Stage Renal Disease - Colorado-


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


Medicare Seconda Payer Provision End-Stage Renal Disease - Progr Inspection 

Report - April 3, 1985, Control Number: 1-07/08-4002­

Medicare Seconda Payer Provision Automobile Medical and No-Fault InsuranceNort Dakota - May 1, 1985, Inspection Contrl Number: 03-08-5001­

Prgr Inspection of Medcar as a Seconda Payment Source for Beneficiares with 

End-Stage Renal Disease in the State of Orgon - May 10, 1985, Inspection Control 

Number: 3- 10-4008­

Medicare as Seconda Payer for Medical Servces Related to Automobile Accidents in 

Massachusetts -June 1985, Contrl Number: 1-01-4105­

Medicare as a Seconda Payer for Medical Servces Related to Automobile Accidents in 

Massachusetts - Boston - June 1985, Control Number: 1-01-4105­

10.	 Report by the Comptroller Genera of the United States. The Congrss Should Consider 

Amending the Medicare Seconda Payer Provisions to Include Disabilty Beneficiares ­

September 30, 1985, Control Number: GAOIH-85- 102 

11.	 Medicare Seconda Payer Provision Automobile Liabilty and Medical Insurce - State 

of Missour -Program Inspection Report - December 1985, Control Number: 3-07-5001­

12.	 Medicare Seconda Payer Provision Automobile Medical and No-Fault Insurance - State 

of Colorado - Program Inspection Report - December 1985, Control Number: 

08-5002­
_._ 

_....._ . 

- - _-_0_ 

13.	 Medcare Seconda Payer Provision Credit Balances in Medicar Beneficiar Hospita 

Accounts, Control Number: OPI-85-070-040 

14.	 Medicare Seconda Payer Prvision Workig Aged in Missour - July 1986, Control 

Number P-07-86-0079 

15.	 Medcare Seconda Payer Provision Workig Aged in Colorado - July 1986, Control 

Number: P-07-86-0071 

16.	 OIG Audit Report - Medcare Overpayments for Services Provided to Beneficiares with 

End-Stage Renal Disease - April 28, 1987, Control Number: A- 10-86-62003 

17.	 OIG Audit Report - Retiees of Exempt State and Loal Governents Could Cost 

Medicare $12.8 Bilion over the Next 5 Year - September 10, 1987, Control Number: 

CIN A-09-86-62050 

18.	 Amending the Medicar Seconda Payer Prvision for ESRD Beneficiares Could Save 

the Medcare Progr $3 Billon Over the Next 5 Years - December 1, 1987, Control 

. Number: CIN- 10-86-62016 

19.	 Medicare as a Seconda Payment Soure - End-Stage Renal Disease - Januar 1988, 

Control Number: OAI-07-86-002 

20.	 Medicare as a Seconda Payment Soure - Januar 1988, Control Number: 

OAI-07-86-0017 

21.	 Medicare as a Seconda Payment Soure: Medicar Beneficiares Covered By Employer 

Group Health Plans - Februar 1988, Control Number: OAI-07-86-0091 

22.	 Nationwide Review of Medicare as Seconda Payer for the Period September 1 , 1983 

though November 30, 1985, Control Number: CIN A- 10-86-62005 

23.	 Medicare: Incentives Needed to Assur Prvate Insurers Pay Before MedicareNovember 1988, Control Number: GAOIH-89- 191 

24.	 Management Advisory Report: Medicar as Seconda Payer - A Restitution Proposal, 

Control Number: AO- 12-89-002 

25.	 Management Advisory Report: More Complete Employer Group Health Plan Infonntion 

is Needed to Admister the Medicar Seconda Payer Progr, Control Number: 

09-89-001oo 

26.	 Draft Management Advisory Report: MSP Survey - Contrctors Questionnaie, 

Control Number: A-09-89-00151 
_

27. Management Advisory Report: Medicare Seconda Payer: Unrcovered Funds 

(OEI -07 90-(9764) 
APPENDIX 


HEALTH CAR FINANCING ADMINISTRATION COMMENTS


C ­
&. . 

...

Date


From


Subject 

Health Care 

DEPARTMENT OF HEALTH HUMAN SERVlie Financing Administration 

Memorandum 

JU - 1991 

Gail R. Wilensky, Ph. D. 

Administrator 

OIG Draft Report: "Medicare Secondary Payer (MSP): Effectveness of Current 

Procedures" (OEI-07-90-00761) 

Inpector General


Offce of the Secretary 

We have reviewed the C1lJove referenced draft report evaluating the etIecnven 

of current procedures to identify Medicare beneticiaries who have insurance 

coverage that is primary to Medicare. OIG found that: 

Medicare contractors are not coordinating with their private insurance 

operations when the private insurance side of the corporation is the 

primary payer. 

Beneficiaries who are covered by a working spouse s employer group 

health plan are least likely to be identified for MSP purposes. 

Medicare contractors lack the internal coordination and systems 

information needed to identify all MSP situations. 

Medicare intermediaries and carriers fail to exchange accurate MSP data. 

Based on these findings, OIG makes three recommendations to enhance the cost 

effectiveness of Medicare reimbursement by ensuring that Medicare reimbursement 

is secondary to other insurance. HCF A concurs with the two management 

recommendations. OIG's legislative recommendation wil be reviewed and 

appropriate action taken as part of the Department s legislative development 

(A- 19) process. 

Attached are our comments on OIG's specific recommendations. Thank you for 

the opportunity to comment on this draft report. Please advise us whether you 

agree with our position on the report s recommendations at your earliest 

convenience. 

Attachment 
, .

Comments of the Health Care Financing Administration 

Draft Report: Medicare Secondary 

Paver: Effectiveness of Current Procedures 

07-90-0076U 

OIG recommends three actions for improving the effectiveness of contractor MSP 

identification procedures. Two of these have previously been identified by OIG and 

addressed by HCFA. Following are comments on each of the recommendations 

and some technical comments on the draft repone 

orG Recommendation 

HCF A should propose legislation to require Medicare contractors to match 

their health insurance data with Medicare fies. 

HCFA ResDonse 

HCF A wm review the legislative recommendation and appropriate action wil be


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


In the past, HCF A has proposed legislation to require such matches, but the 

Congress has nOt yet emlcted such legislation. In fact, as GIG pointed out


secticY 6202 of OBRA 1989 prohibits the Secretary from requiring Medicare


contractors to match their private insurance data with Medicare data. There are.


however, various other HCFA activities and legislative proposals for obtaining


information on primary coverage of Medicare beneficiaries.


OIG Recommendation 

HCF A should revise all Medicare claim forms to require spousal information 

before the claim is paid. 

HCFA ResDonse 

. The basic Medicare claim form, HCFA 1500, has recently been revised to request 

information about spousal insurance coverage, and about any coverage beneficiaries 

may have through employment. We are also considering recommending additional 

revisions to the HCF A 1500 to require more information on primary insurance and 

spousal eligibilty, but it wiI be a time consuming process. Additional changes must 

be cleared with the appropriate work groups and multiple users, and approved by 

the Offce of Management and Budget under the Paperwork Reduction Act. In the 

interim, we plan to reemphasize to physicians and suppliers who prepare this form, 

their responsibilty for coHecting information about primary insurers. 
___

I ­


Page 2


DIG Recommendation 

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


Common WC'!'king File - (CW).


HCF A Response


We agree with DIG' s recommendation. HCFA expected, the data As ..intially

loaded into the CWF contained some inconsistencies. However, the information 

obtained from the IRSISSAlCF A data match project will be loaded into the CWF 

andwm take precedence over conflcting data. We are also pursuing data match 

projects with the Department of Labor s Black Lung Program, the Depanment of 

Veterans Afairs and many State agencies to secure better MSP data. 

DIG' s draft report does not provide details concerning the specific problems with 

CW data noted by Medicare contractors. This information would be helpful in 

determining the particular refinements and improvements that may be necessar. 

We therefore request that in the final report, DIG provide a further descriptitm and 

analysis of the CWF system problems that its study revealed. 

Technical Comments 

On page 1, last paragraph, third line, the text should read "a disabled beneficiary


LGHP" instead of "a disabled beneficiary s EGHP.


The last sentence of the last paragraph on page 1 should be r vised to read: " 

the primary plan does not pay for al1 covered services, Medicare may pay secondary 

benefits for Medicare covered services. 

On page 2, the last bullet point in the middle of the page should be revied to 

read: "reviewing all claims containing medical diagnosis codes indicating trauma-to 

identify injuries related to automobile, or other traumatic injury caes, including 

. work-related !ccidents. 

On page 12, the first item in the right column should be revised to read: "OBRA 

1986 made Medicare secondary for people under 65 who have Medicare because of 

disabilty (other than kidney faiJure) and who are covered under a LGHP as an 

employee, employer, self-employed person, business associate, or family member.