,.. 

Deparment of. Health and Human Services


OFFICE 

INSPECTOR GENERAL


EXTENT OF UNRECOVERED MEDICARE


SECONDARY PAYER FUNDS


" "ov


J!L 

AUGUST 1991 t4-Yd:lO 
OFFICE OF INSPECTOR GENERAL


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

amended, is to protect the integrty of the Depanment of Health and Human Services ' (HS) programs as well as the health and welfare of beneficiares served by those progrs. This 

statutory mission is cared out through a nationwide network of audits, investigations, and 

inspections conducted by three OIG operating components: the Office of Audit Services, the 

Office of Investigations, and the Offce of Evaluation and Inspections. The OIG also informs the 

Secretary of HHS of program and management problems and recommends courses to correct 

them. 

OFFICE OF AUDIT SERVICES 

The OIG' s Office of Audit Services (OAS) provides all auditing services for HHS, either by 

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

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

caring out their respective responsibilities and ar 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 Deparent 

OFFICE OF INVESTIGATIONS 

The OIG' s Office of Investigations (01) conducts crminal, civil, and admnistrative 

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

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

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

control units which investigate and prosecUte frud and patient abuse in the Medicaid program. 

OFFICE OF EVALUATION AND INSPECTIONS 

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

program evaluations (called inspections) that focus on issues of concern to the Deparent, the 

Congress, and the public. The findings and recommendations contaned in these inspection 

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

effectiveness of depanmental programs. 

This report was prepared in the Kansas City Regional Offce under the direction of Don 

McLaughlin, Regional Inspector General, and James H. Wolf, Deputy Regional Inspector 

General. Project Staff: 

Hugh Owens, 
 Project Leader Tom Noplock Headquarters 

Doris Phillips Bar Steeley, Headquarters 

Julie Quirin Mark Krshat, 
 Headquarters

Perry Seaton Linda Moscow Headquarters 
;. 

:::

Department of Health and Human Services 

OFFICE 

INSPECTOR GENERAL


EXTENT OF UNRECOVERED MEDICARE


SECONDARY PAYER FUNDS


tRVICES' 

Richard P. Kusserow 

INSPECTOR GENERAL '0 

lt 4-Yd:lO OEI-07-90-00760 
p. 

EXECUTIVE SUMMARY


PURPOSE 

To determine the extent of the unrecovered funds related to Medcar seconda payer (MSP) 

provisions and to identify varous options to prevent Medicare progr losses due to 

unidentified primary insurance sources. This report finalizes preliminar findings and 

recommendations made in a management advisory report (OEI-07-90-00764) issued in June 

1990. 

BACKGROUND 

Congress passed a series of statutory provisions between 1980 and 1986, which made certn 

other insurers primar to Medicar. These insurers became priar for beneficiares insured by 

employer group health plans (EGHPs), automobile medical, no-fault, and liabilty insurance as 

well as for end-stage renal disease. 

This inspection relates to the Secreta s goal of enhancing the effectiveness of Medicar 

reimbursement through assuring that Medicar reimbursement is seconda to other insurance. 

METHODOLOGY 

We selected a sample of all beneficiares who received services in 1987. We contacted a 

sub-sample of this group about their medical insurce coverage and about any accidents in 

which they may have been involved. Almost 73 percent of the beneficiares responded. 

FINDINGS 

Although the Health Care Financing Administration (HCFA) has made extensive efforts to 

identify MSP situations, we found significant overpayments totaling over $637 million in 

1988. 

We identified overpayments of $60,502 in our sample which projects to a loss of over $637 

milion in 1988 to the Medicare program. 

Targeting working spouses and disabled can increase the cost effectiveness of MSP efforts. 

The overall cost to benefit ratio in this study was 5.4 to 1. However, the cost-benefit ratio for 

developing spousal insurance cases was 10.2 to 1 and the cost-benefit ratio for developing 

disability cases was 11.0 to 1. 
_...

RECOMMENDATIONS 

The HCFA should take action to prevent Medicare progr losses due to unidentified primar 

insurers. This can be accomplished in a varety of ways. Among them ar: 

Revise all Medicare cla m forms to require spousal insurance information before claims 

can be paid. 

Proritize the information received from IRS and SSA according to those areas with the 

greatest cost-benefit ratio. 

Propose legislation to establish a Voluntar Disclosure and Recovery Program. 

Establish a national data system containing priar insurance information on all Medicare 

beneficiares and their spouses. 

Propose legislation to require Medicare contractors to match their private health insurnce 

records with Medicare fies. 

Propose legislation to require all insurers to provide their private health insurance data, 

including eligibilty and claims payment information, to HCFA. 

Recommend to Congress that section 6202 of Public Law 101-239 (as amended by Public 

Law 101-508) be extended beyond the statute s termnation date of September 30, 1995 

until legislation is enacted requiring diect employer reportng. 

AGENCY COMMENTS 

The HCFA commented on an earlier version of this report. They were general y in agrement 

with the recommendations, except for the matching of contrctor private health insurance 

records with Medicare fies. We continue to believe that the matching of records is an importt 

fiduciar responsibility of Medicare contractors who should reference all sources of information 

to identify primar payer sources. 
................................................ .................... .................... ................ . .................................... ............ .... .................................... ............ ............ 

.._.............. ........ .................... .............. ....... ...... ................ ...... .............. ...... ............. .................... ..................................... ........ ............................ ......................... ...... ...... 

TABLE OF CONTENTS


EXECUTIVE SUMMARY 

INTRODUCTION.................................................................................. ....................


PURPOSE.................................... .................. 


BA CK G ROUND................................ ...................... ..........................................


METH 0 DO LOG Y.................... ............ 


FIND IN G S .................................................................................................................. 3 

RECO MMEND A TIO NS .. .............. ...... ...... 

A G EN CY COMMENTS.. 

APPENDIX A .......................................... .............. ...................... .............. .......... .. AAPPENDIX B 

APPENDIX C ............................................. CAPPENDIX D ................................ DAPPENDIX E 

_n_ 
INTRODUCTION


PURPOSE 

To determine the extent of the unrecovered funds related to Medcar seconda payer (MSP) 

provisions and the varous options available to the Health Care Financing Admnistrtion 

(HCFA) to prevent losses to the Medicar program due to unidentified primar insurance 

sources. This report finalizes preliminar findings and recommendations made in a maagement 

advisory report (OEI-07-90-00764) released to HCFA in June 1990. 

BACKGROUND 

Title XVIII of the Social Security Act (42 USC 1395), enacte in 1965, established the Medicare 

program to pay for health care services for eligible beneficiares age 65 and older. Also, 

beneficiares are covered who were disabled and those with end-stage renal disease (ESRD). 

Until 1980, Medicare was primar payer for all health care costs (less co-pay and deductibles) 

for these beneficiares. Concurrent coverage by other payers was considered seconda. The 

only exceptions to this rule were services covered by workers' compensation and services by 

other Federal programs, such as the Veterans Administration. 

Growing concern for rising Medicare progr costs influenced Congrss to pass a series of 

statutory provisions durig the period betWeen 1980 and 1986. (See Appendix A.) These 

provisions require certain private insurers to pay medcal claims before Medcare if the aged or 

disabled beneficiar has other health insurce coverage by an employer group health plan 

(EGHP) or by the spouse s EGHP. Medicar is also secondar payer if the beneficiar has an 

accident and is covered by automobile medical, no-fault, or liabilty insurance. Another 

statutory provision made Medicare the secondar payer for items and services furnished to 

ESRD beneficiares who are covered under EGHPs during a specified period of up to 12 months. 

In general, providers are required to bil other insurers first when a beneficiar falls within one 

of these categories. Medicare pays any remaining amounts for which it may be responsible. 

The HCFA is responsible for ensuring contractors comply with Medicare legislation and 

regulations. Further, HCFA provides contracto s with procedures and instrctions concerning 

the identification of MSP situations and recovery of inappropriate payments. As pan of their 

fiduciary responsibilty, contractors should identify and record information for beneficiares 

having primar medical insurance coverage. 

Medicare contractors were budgeted approximately $115 millon for administration of MSP 

provisions in the law during Fiscal Years (FYs) 1987 and 1988. The data from HCFA shows 

MSP savings to be $3.3 bilion ($1. 1 bilion for Pan A and $.3 bilion for Pan B for FY 1987 and 

$1.4 bilion for Pan A and $.5 bilion for Pan B in FY 1988). However, diffculties in de!ecting . 
primar payment sources stil exist which result in substantial losses to Medicare. Despite 

current procedures for HCFA's educational and outreach programs, Offce of Inspector General 

(OIG) inspections and audits, Genera Accounting Offce (GAO) audits, and HCFA pilot studies 

have confirmed that additional savings and recoveries ar possible. These prior inspections and 

studies claim estimates of progrm losses raging from $300 million to $900 millon each year. 

Recently, congrssional hearngs, GAO audits, and media attention have focused on report of 

unrealized savings. In addition, lawsuits under Qui Tam provisions of the False Claims Act and 

Deparent of Justice actions have brought the MSP issue to the forefront. 

METHODOLOGY 

We selected a simple random sample from al beneficiares who received services in 1987, which 

resulted in identifying over 350,00 beneficiares. Next, we took a sub-sample of this group, 

using sequential sampling, which identified over 6,700 beneficiares. We deleted the 

categories in the sub-sample: Railroad Retirement beneficiares, dece sed beneficiares, and 

those beneficiares with non-matching Health Insurace claim numbers. These groups were 

dropped because suffcient data was not available to include them in our sample. 

After the categories mentioned above were dropped, this left over 4 300 beneficiares in our 

sub-sample. We attempted to contact the beneficiares about their medical insurace coverage 

and any accidents in which they may have been involved. Almost 73 percent of the beneficiares 

responded. More detailed information on the sample selection process is given in the surey 

methodology section of Appendix B. 
FINDINGS


The following findings are based on an analysis of the 34 conflIed overpayment cases. Each 

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

mutually exclusive. 

Although RCF A has made extensive efforts to identify MSP situations, we found 

signifcant overpayments totaling over $637 milion in 1988. 

Our total overpayment projects to an estimated loss to the Medicar program of over $637 

million in Calendar Year 1988. (See Appendix B.) The completed analysis identified prima 

insurance coverage on 34 beneficiares (33 EGHP and 1 accident) out of the 3, 185 beneficiares 

or about 1 percent of those who responded. (See Appendix C.) We identified $4 744 paid by 

Medicare in the accident liabilty case for which a third-par payer had responsibilty for 

payment. This amount represents 8 percent of the tota overpayment identified. We established 

an actual loss to the Medicare progr of $60,502, of which Pan A payments totaed $29,695 

and Pan B $30,807. 

We found that over $583.3 millon of the projected loss to the Medcar program was due to 

unidentified spousal insurance coverage. Twenty-five of the 33 beneficiares (76 percent) with 

EGHP coverage had unidentified primar insurance coverage through their working spouses. 

Included in the 25 cases were eight disabilty cases. Of the $60,502 identified, a total of $54 294 

was due to this coverage. This was alost 90 percent of the tota identified overpayments. 

We project an annual loss for unidentifed disabled beneficiares of over $265 milion.


Nine of the 33 beneficiares (27 percent) with an EGHP received Medicar coverage because of


a disabling condition and accounted for over 47 percent or $28,393 of the total overpayment.


Eight of the disabled beneficiares were insured through their spouses ' EGHP and one


beneficiar through his own EGHP.


We project an annual loss of almost $16.5 millon for unidentified coverage of the workig 

beneficiar. Seven of these 33 beneficiares (21 percent) had unidentified EGHP coverage 

through their own employer. This includes one disabled beneficiar. These working 

beneficiares accounted for 2 percent or $1,449 of the total overpayment. 

We found that Medicare contractors are not coordinating with their private insurance operations. 

Medicare paid as the primar payer in eight cases when the beneficiar had primar payer 

coverage through an EGHP administered by the contractor s private business operation. Three 

of the cases had identifying information in the fie that there was other insurance. The other five 

cases did not have other insurance information in the file because the claims were submitted 

electronically. 
OVERPAYMENTS 

by Case Category 

Working Spouses


90% 

Accident 

Wkg Beneficiaries 

Calendar Year 1988


Targeting working spouses and disabled can increase the cost effectiveness of MSP 

efforts. 

We identified administrative costs accrued by the OIG to detect and develop unidentified

priar insurance coverage for the sampled beneficiares. When compared to the progr loss, 

based upon identified prima insurance coverage, the overall cost to benefit ratio was 5.4 to 1. 

However, the cost effectiveness of developing insurance information for those respondents who 

reported that their spouse was insured increased to 10.2 to 1. The development of insurce 

information concerning disabled individuals had an even higher cost to benefit ratio of 11.0 to 

(See Appendix D.) The increased ratio equates to a higher overpayment identified for the 

spousal and disability cases. 
RECOMMENDATIONS


The HCFA should take action to prevent Medicare program losses due to unidntified primary 

insurers. This can be accomplished in a variety of ways. Among them are: 

Revise all Medicare claims forms to require spousal insurance information before 

claims can be paid. 

We suggest that the following information be obtained as pan of the application: 

Is the beneficiar covered by an EGHP though his or her own employer or the employer of the spouse? 

If yes, enter the name and Social Security number of the person working, the name of 

the employer, and name of the insurance company. 

Prioritize the information received from IRS and SSA according to those areas with the 

greatest cost-benefit rati. 

Section 6202(a) of OBRA of 1989 (Public Law 101-239) established a systematic process 

of providig MSP information to HCFA. The Act provides that the IRS wil fursh spousal information on any Medicare beneficiares identified by SSA. The SSA wil furish 

wage information on Medicar beneficiares and their spouses to HCFA. 

The cost-benefit ratio of developing cases involving the working spouse covere by an 

EGHP is considerably more than for working beneficiares covered by an EGHP. This 

provides justification that initial efforts should develop those cases with indications of a 

working spouse. In our sample, 25 out of 33 EGHP overpayment cases involved working 

spouses, which produced our largest porton of the overpayment. . 

Propose legislation to establish a Voluntary Disclosure and Recovery Program. 

The program would permit insurers, employers, or third-par administrators, acting 

within one year of enactment, to identify instances of improper MSP payments and make 

restitution of the appropriate amounts without theat of future Government action with respect to those claims. The legislation should also provide for a waiver of the existing statute of limitations applicable to improper MSP payments. Any insurer norpartdpating in 

this program would be subjecLto a civil penalty of treble damages, plus costs, with respect 

to all improper MSP claims later identified by the government 
Establish a national dam system conmining primary insurance information on all 

Medicare beneficiaries and their spouses. 

The HCFA should continue to pursue legislation requirng the insurer, underwters, and


third pany admnistrtors of health plans to notify HCFA about covered individuals who


are age 65 and over, under age 65 and disabled, or diagnosed as having ESRD, and who


are enrolled in insurance progrs to which Medcare is seconda payer.


Alternatively, this could be embodied into a broader proposal to establish a national clearinghouse of information pertaining to medical insurace available to beneficiares of al 

Federal and State health benefit programs. Under this proposal HCFA would run claims 

through this clearnghouse in order to identify MSP situations. 

Propose legislation to require Medicare contractors to match their private health 

insurance records with Medicare files. 

The HCFA contracts with health insurance companies to adjudicate and pay Medicar 

claims. In this capacity, Medicar contrctors have a fiduciar responsibilty to the Federal government to assure that only appropriate Medicar payments ar made. If contractors were required to match primar beneficiares to their private business, all such cases 

in this inspection should have been identified as a Medcar seconda payer situation. 

The HCFA should pursue legislation to reverse the OBRA 89 mandate which prohibits 

such data matches. 

Propose legislation to require aU insurers to provide their private health insurance dam, 

including eligibility and claims payment information, to RCF A. 

The MSP identification efforts would be greatly enhanced by requiring all insurers to report their eligibilty and claims information. The matching of Medicare fies with this private insurance information could be accomplished by HCFA through a national 

clearnghouse. This system would provide HCFA with maximum capability to identify 

MSP situations. 
AGENCY COMMENTS


This report is a final version of a management advisory report (MAR) prepar in June 1990 for 

a congressional hearng on the identication and recovery of Medicar seconda payments. 

This report was based on data obtaned during our field work at that point in time. We have 

completed the review of data obtained durg this study, and have issued this final report. 

The HCFA commented in their response to the MAR (see Appendix E) and at an exit conference 

covering this final report that they were generally in agrement with the recommendations, 

except for the matching of contrctor private health insurance records with Medicare fies. 

continue to believe that the matching of records is an importnt fiduciar responsibility of 

Medicare contractors who should reference all sources of information to identify primar payer 

sources. 
APPENDIX A


MEDICARE SECONDARY PAYER LEGISLATION 

TITLE OF PUBLIC ENACTMENT EFFECTIVE 

LAW LAW DATE DATE DESCRIPTION 

Omnibus 96-499 12-05- 12-05- ORA made 

Reconciliation Medicare the 

Act of 1980 secondar payer 

(ORA) to automobile 

medcal, no fault 

or any liabilty


insurance. 

Omnibus Budget 97- 08- 13- 10-01- OBRAmae 

Reconciliation Medcare 

Act of 1981 seconda payer 

(OBRA) for end-stage 

renal disease for 

up to 12 months 

following 

entitlement if the 

person is eligible 

for medical insurce 

under an EGHP. 

Tax Equity 97-248 09-03- 01-01- TEFRA made 

and Fiscal Medicare 

Responsibility benefits 

Act of 1982 seconda 

(TEFRA)	 if the employee 

or spouse is age 

65 through 69 

covered by an


EGHP and the 

employer has at 

least 20 employees. 
.

MEDICARE SECONDARY PAYER LEGISLATION


Deficit 

Reduction Act 

of 1984 

(DEFRA) 

Consolidated 

Omnibus Budget 

Reconciliation 

Act of 1985


(COBRA) 

Omnibus 

Budget 

Reconciliation 

Act of 1986 

(OBRA) 

98- 369 07- 18- 01-01­


98-272 04-06- 05-01­

99-509 10-21- 01-01­

DEFRA 

broadened the 

definition of 

working spC


by including spouses 

age 65-69 of


employed individuals 

under age 65, 

thereby removing 

the lower age limt. 

COBRA furter 

broadened the 

definition of 

working aged by 

removing the 

limitation of age 

70 and older. 

OBRA made 

Medcare 

items and 

servIces 

secondar for 

payment if the 

disabled beneficiar 

or spouse 

is working 

and covere 

under a large 

group health plan. 
MEDICARE SECONDARY PAYER LEGISLATION


Omnibus 

Budget 

Reconciliation 

Act of 198? 

(OBRA) 

Omnibus 

Budget 

Reconciliation 

Act of 1990 

(OBRA) 

101-239 12- 19- 12- 19­


101-508 11-05- 11-05­


OBRA provided 

a two 

year period for 

matching 

IRS ta records


to records of SSA 

and HCFA to identify 

working beneficiares 

and their spouses. 

OBRA provided 

for the extension 

of the transfer 

of data from 

IRS and SSA to 

HCFA through 

September 30, 1995. 

A- 3

APPENDIX 


MEDICARE SECONDARY PAYER BENEFICIARY SURVEY 

Survey Methodology, Response Analysis and Savings Projections 

Survey Methodology 

The beneficiares selected for the Medicare seconda payer (MSP) survey were selected using a 

simple random sample from the population of all beneficiares purorted to have received 

services some tie durng 1987. A one percent sample of all Medcar beneficiares receiving 

services under Pan B is maintaned by the Offce of Inspector General, Offce of Evaluation and 

Inspections. This me is a subset of the Pan B Medcar Annual Data (BMAD) IV 5 percent 

beneficiar sample file maintaned by HCFA. 

For 1987, this 1. percent sample contans 352,385 separte beneficiar Health Insurce Clai 

Numbers (HCN). A subsample of these beneficiares, using sequential sampling, resulte in 

777 HICNs representing beneficiares with Medcar clais. These records were matched 

with the Social Security Admnistrtion s (SSA) Master Beneficiar Record (MR) to obtan 

demogrphic data, including curent addess, and determe the curnt status of each beneficiar 

identified. The following Table 1. 1 gives the results of this matching proess. 

TABLE 

Results of Medicare BMAD IV Match with SSA MBR. 

Orginal Number Selected 777 

Rairoad Retiment Board Beneficiares 138 

Status Indicated as Dead 070 

Non-Matching Numbers 

Final Number of Beneficiares 371 

Railroad Board retiees were deleted from the sample (138 beneficiares) because SSA does not 

maintan their data. The 1,070 beneficiares indicated by SSA to be dead were deleted because 

we chose not to identify or to obtain proxy respondents. The 1,198 mCNs that did not match 

with SSA' s MBR represent a problem encountered with the Beneficiar Identification Code 

(BIC). We were unable to obtan any addess information on these individuals. Therefore, we 

did not contact these individuals. The estimated populations of beneficiares receiving servces, 

based upon the subgroups resulting from the sample, ar given in Table 1. 

.-o,.­
_

TABLE 1. 

Estimated Population Sizes 

Sample Est. Population 

Orginal Sample 777 35,238,500 

Railroad Retirement Board 138 718,800 

Dead 070 563,700 

Non matches 198 229,300 

Survey Contacts 371 728, 

Responden ts 185 16,561, 100 

Non Respondents 186 166,900 

Contacts were made with the remaining 4 371 beneficiares. About 3 weeks later, we followed 

up with those beneficiares who were not responsive to our initial efforts to contat them. A tota 

of 3, 185 beneficiares had been contacted and responded by March 1, 1990. This represents an 

overal response rate of 72.9 percent. 

Paral demographic and utilzation information was gathered frm two soures: 1) the BMAD 

one percent sample and 2) the Medicare Automated Data Retreval System (MARS), also 

maintaned by HCFA. As mentioned earlier, address information came from SSA files. The 

MADRS provided information on tota Pan A and Pan B expenditures on behalf of each 

beneficiar. 

We discussed supplemental medical coverage that an individual might possess as well as any 

accidents in which they may have been involved. Where a beneficiar made a positive response, 

the specific information was developed by OIG field sta to obtan employer and insurrs names 

and addresses. Contacts with employees and insurrs were made to verify whether Medicar 

was the primar or seconda payer. 

Response Analysis 

An importnt consideration in studies of this type is the bias that may be present in the results if 

the non respondents and others not contacte ar different than the respondents. To test for the 

presence of any bias, we compared responders with non responders, for certain varables, in an 

attempt to determine how any observed differences might afect the results. We compared age, 

sex, Pan A reimbursed amounts and Pan B allowed amounts. 
Table 2. 1 gives the breakdown of the sample by sex. 

TABLE 2. 

Non Non


Respondents Respondents Matching Dead


Sex


Male 1192 37.4 512 43. 434 36. 317 32. 

Female 1993 62. 672 56. 764 63. 752 67. 

Unknown 

Tota 3185 1186 1198 1070 

The non respondents tended to have a higher proporton of males while the beneficiares 

determined to be dead have a slightly lower proporton of males, when compared to the 

respondents. Those beneficiares who were not contacted for reasons of non match appear to 

emulate the respondents with respect to sex. Attached to this appendix, in Table I, is a furer

breakdown of the sub groups, cross tabulatig by age and sex. The average ages ar listed at the 

bottom of the tables. For those HICNs that were not matched, no age information was available. 

Table I shows that the average age of the respondents is greater than that of the non respondents. 

For both of the sexes, the age distrbutions ar skewed towards the lower end of the age 

distrbution for the non responders when compar to the responders. As might be expected, 

beneficiares determined to have expired were considerably older than both the respondents and 

the non respondents. This table would suggest that age is also a factor in determning the 

response status of a beneficiar. 
Table 2.2 presents the average Pan A reimbursement and the average Pan B reimbursement, as 

determined from the MADRS fie, for each of the sub populations included in the sample. 

TABLE 

Average Reimbursement by Sub Population 

Part 

Population 

Total 

Avg 

Male 

Avg 

Female 

Avg 

Unkn 

Responses 

No Response 

Non Match 

Total 

746 

140 

1354 

$6159. 

$3766.31 

$64. 

286 

557 

$7124. 

$3659.42 

$7133. 

460 

797 

$5558. 

$3864.41 

$5962.46 

1198 

Part 

Total Male Female Unkn 

Population Avg Avg Avg 

Responses 3185 $1108. 1192 $1259.33 1993 $1017. 

No Response 1184 $437.46 512 $435. 672 $438. 

Non Match 1198 $99. 434 $93. 764 $103. 

Total 6636 $840. 2429 $1019. 4207 $737. 

The unmatched population s Pan A utilization is unkown because they were not found on the 

MADRS fie. For Pan B reimbursed amounts, this table shows both male and female unmatched 

beneficiares used Pan B services sparngly, approximately 10 percent of what the respondents 

use. This is probably why they weren t matched, many of them had no Medicare utilization. We 

also compared Pan A and Pan B reimbursed amounts for calenda year 1988. The average Pan 

A reimbursed amount for respondents was $6159.01 and $3766.31 for non respondents, while 

the average Pan B reimbursed amount for respondents was $1108.31 and $437.46 for non 

respondents. Only 12 percent of non responders used Pan A services, versus 23 percent of 

responders. 

Table 2.3 compares respondents, non respondents, dead and unmatched groups by Pan B 

allowed amount categories, as determined from the BMA IV beneficiar sample fie. Included 

in this table are the results of a contingency table analysis to compare the distrbutions of the 

three sub groups, non respondents, non matches and dead beneficiares, with the respondent 

category. The Chi-square value assesses to what extent two distrbutions are alike. The larger 

the value of the Chi-square, the greater the probabilty that the two distrbutions are different. 

B ­
TABLE 

Distribution of Sampled Beneficiaries


By Part B Allowed Amounts and Response Category


Allowed Non 

Amount Respondents Respo'!1ents Non Match Dead 

1.7% 7.3% 158 13. 

$1-$99 638 20. 423 35. 850 71. 375 35. 

$100-$299 658 20. 321 27. 115 136 12. 

$300+ 836 57. 354 29. 6.3% 506 47. 

Total 185 1 , 184 198 069 

Chi-Square 

(vs Resp) 550.675 3126.545 238.956 

These results indicate that the thee sub grups not parcipating in the survey ar substantialy 

different with respect to their utilization of Pan B services. Whereas approximately 78 percent 

of the respondents had allowed services in excess of $100, only 57 percent of the non 

respondents, 16 percent of the non matches and 60 percent of the dead beneficiares received 

services in excess of this amount. This result is consistent with the data in Table 2.2. The 

conclusion being that responders to this survey tended to use more services, or more expensive 

services, than the groups not included in the follow up. 


The results of this analysis would indicate that there ar some significant differences between 

those who responded and those beneficiares not parcipating, including the non responders, 

those not matched, and those expirng prior to our contact. Differences exist both by sex and 

age, and with respect to the dollar amounts expended for services on behal of the beneficiares. 

This implies that making projections beyond the responders may not be appropriate and, if made, 

must be qualified with appropriate adjustments. 

Savings Projections


Of the 3, 185 beneficiar contacts, 280 had positive responses requirng follow-up. Additional 

Medicare secondar payer overpayments were found to exist for 34 respondents. These 

payments totaled $60,502.04. Thus 1.07 percent of respondents had MSP savings previously 

unidentified. Approximately half of the total amount identified occurd under Pan A (49. 

percent). 

To project these findings to the universe of respondents presents no problem. Projecting our 

results to the other subgroups in the original sample, the non respondents, the non matches and 

the dead beneficiares, is problematic because of their non representation in our sample. As 

shown above, there appears to be substantial differences between these subgroups and the 

B - 5 
..

respondents. However, it may be reasonably assumed that the population of beneficiares who 

did not respond would also have MSP overpayments. 

In an attempt to project our results to the non pancipating populations, we have made cert 

assumptions. Since the sample of beneficiares was drwn from the BMA IV Beneficiar 

Sample, we arayed the savings by strta based on Pan B allowed amounts per benefici.: 

recorded in this fie. Table 2.3, above, shows the breakdown of the subgrups into this 

stratification. Table 3. 1, below, compars the 34 beneficiares with MSP savings to the sample 

of respondents. 

TABLE 3. 

Distribution of Sample Respondents 

Number in Number with Percent with 

Allowed Sample Savings Savings 

Amount 

1.7 1.9 

$1-$99 642 20. 29.4 1.6 

$100-$299 654 20.


$300+ 1836 57. 58. 1.1


TOTAL 3185 1.1 

It was also noted in Table 2.3, that the subgroups in the sample vared gratly by these Pan B 

strata. Consequently, the projections developed here ar based upon the strata defined by the 

Pan B allowed amounts. We assumed that those beneficiares in a given strata, as defined in 

Table 3. 1 and regardless of the subgroup in which they were a member, would produce MSP 

overpayments equal to the appropriate strta in the respondents subgroup. Implied in this 

assumption is that all of the other differences identified earlier with respect to age and sex, 

either related to services received, as expressed by the Pan B allowed amount, or unrlated to 

MSP savings. For convenience, the overpayment projections are presented by subgroup so that 

their contrbution to the total may be determined. 

For each strata, an average overpayment per respondent was calculated, with an associated 

standard error. This strata specific average was then applied to the other subgroups. Tota 

overpayment projections represent the sum of the projections across the strta within a subgroup, 

and then across each subgroup. Varances for these estimates were calculated appropriately. 

Table I shows sampled beneficiares by age, sex, and response sub group. Table II includes all 

classes of beneficiares, Table III, beneficiares with working spouses, Table IV, beneficiares that 

are working, and Table V gives savings estimates for beneficiares associated with a disability. 

B - 6

TABLE I 

Distribution of Sampled Beneficiaries by Age, Sex 

and Response Sub Group 

Respondents Non Respondents Dead* 

Male Female Male Female Male Female 

c:65 152 12. 109 150 38. 172 32. 6.3 1.7


65- 283 23. 421 21.1 25. 18.4


70- 366 30. 551 27. 16. 118 22.3 15. 10.


75- 223 18. 409 20. 10. 13. 19. 107 14.3


80- 105 288 14. 19. 129 17.


85+ 5.3 215 10. 30. 398 53.


Unkn 127 144 

Total 1192 1993 385 528 317 750 

Avge 70. 74. 69. 72. 78. 84. 

A!!e 

* One dead beneficiary was of unknown sex. 

B ­
TABLE II


Calculated Savings Total Overpayments All Classes of Beneficiaries


Allw amt Resp Avg 

Reimb Est Popln Est Recov 

$1.51 510 275,585 $416,030 

$1-$99 638 $23. 12.727 317,421 $76,997,350 

$100-$299 658 $0.49 0.412 3,421,416 $1,676,494 

$300+ 1836 $24. 717 546,686 $235,421,275 

185 $18. 16,561, 108 $314 511, 148 

Non Resp. 

$1. 1.510 447, 176 $675,067 

$1-$99 423 $23. 12.727 199,482 $51,049,967 

$100-$299 321 $0.49 412 669, 110 $817,864 

$300+ 354 $24. 717 840,701 $45,391 684 

184 $15. 156,468 $97,934 582 

Non-Match 

158 $1. 510 821,556 240,239 

$1-$99 850 $23. 12.727 4,419,762 $102 582,676 

$100-$299 115 $0.49 412 597,968 $293,004 

$300+ $24. 717 389,979 $9,616,882 

198 $18. 229,265 $113,732,802 

Dead 

$1. 510 270,385 $408, 180 

$1-$99 375 $23. 12.727 949,895 $45,257,063 

$100-$299 136 $0.49 0.412 707, 162 $346,509 

$300+ 506 $24. 717 631,058 $64,881,898 

069 $19. 558,501 $110,893,650 

Totals 636 34,505,342 $637,072,181 

L90% $437,798,254 

U90% $836,346, 109 

Precision 31.3% 

B - 8 
_._ . 

TABLE 18 

Calculated Savings Total Overpayments Beneficiaries with Working Spouses 

:ut Resp Avg Est Popln Est Recov Allw Reimb 

$1. 1.510 275,585 $416, 134 

$1-$99 638 $22.46 12.719 , 317,421 $74,509,284 

$100-$299 658 $0. 0.412 421,416 $1,676,494 

$300+ 1836 $21.55 9.364 546,686 $205,731,082 

185 $17 . 16,561, 108 $282,332,993 

Non Resp. 

$1. 1.510 447, 176 $675,236 

$1-$99 423 $22. 12.719 199,482 $49,400,356 

$100-$299 321 $0.49 0.412 669, 110 $817,864 

$300+ 354 $21.55 9.364 840,701 $39,667, 104 

1, 184 $14. 156,468 $90,560,559 

Non-Match 

158 $1. 510 821 556 $1,240,549 

$1-$99 850 $22.46 12.719 419,762 $99,267,855 

$100-$299 115 $0.49 412 597,968 $293,004 

$300+ $21.55 9.364 389,979 $8,404 047 

198 $17. 229,265 $109,205,455 

Dead 

$1. 1.510 270,385 $408,282 

$1-$99 375 $22.46 12.719 949,895 $43,794 642 

$100-$299 136 $0.49 0.412 707, 162 $346,509 

$300 506 $21.55 9.364 631,058 $56,699,307 

069 $18. 558,501 $101,248,740 

Totals 636 34,505,342 $583,347,747 

L90% $388,500,515 

U90% $778, 194 979 

Precision 33.4% 

B ­
TABLE IV


Calculated Savings Total Overpayments Working Aged Beneficiaries


Allw amt Resp 

$1-$99 638 

$100-$299 658 

$300+ 1836 

185 

Non Resp. 

$1-$99 423 

$100-$299 321 

$300+ 354 

184 

Non-Match 

158 

$1-$99 850 

$100-$299 115 

$300+ 

198 

Dead 

$1-$99 375 

$100-$299 136 

$300 506 

069 

Totals 636 

Avg 

Reimb 

$0. 

$0. 

$0. 

$0. 

$0. 

$0. 

$0. 

$0. 

$0. 

$0. 

0.495 

0.366 

495 

366 

:'t Popln 

275,585 

317,421 

3,421,416 

546,686 

16,561 108 

447, 176 

199,482 

669, 110 

840,701 

156,468 

Est Recov 

$2,421 718 

$5, 155,210 

$7,576,928 

$1,605,622 

$993,978 

$2,599,600 

$0. 

$0. 

$0. 

$0. 

$0. 

$0. 

$0. 

$0. 

$0. 

$0. 

495 

0.366 

0.495 

0.366 

821,556 

4,419,762 

597,968 

389,979 

229,265 

270,385 

949,895 

707, 162 

631,058 

558,501 

34,505,342 

L90% 

U90% 

Precision 

$3,226,426 

$210,589 

$3,437,015 

$1,423,423 

$1,420,771 

844 195 

$16,457,738 

$8,856,625 

$24 058,850 

46. 

B ­
:,,,..

TABLE V


Calculated Savings Total Overpayments Disabled Beneficiaries 

Allw amt Resp 

$1-$99 638 

$100-$299 658 

$300+ 1836 

185 

Non Resp. 

$1-$99 423 . 

$100-$299 321 

$300+ 354 

184 

Non-Match 

158 

$1-$99 850 

$100-$299 115 

$300+ 

198 

Dead 

$1-$99 375 

$100-$299 136 

$300 506 

069 

Totals 636 

Avg 

Reimb 

$0. 

$6. 

$0. 

$13.32 

$8. 

O.()OO 

410 

673 

Est Popln 

275,585 

317,421 

3,421,416 

546,686 

16,561 108 

Est Recov 

$20,435,316 

$127, 161 856 

$147,597, 172 

$0. 

$6. 

$0. 

$13.32 

$6. 

410 

673 

447, 176 

199,482 

669, 110 

840,701 

156,468 

$13,548,806 

$24 518, 136 

$38,066,942 

$0. 

$6. 

$0. 

$13.32 

$5. 

4.410 

673 

821,556 

4,419,762 

597,968 

389,979 

229,265 

$27,225,734 

$5, 194 520 

$32,420,254 

$0. 

$6. 

$0. 

$13.32 

$8.47 

4.410 

673 

270,385 

949,895 

707, 162 

631 058 

558,501 

$12 011,353 

$35,045,697 

$47,057,050 

34,505,342 

L90% 

U90% 

Precision 

$265,141,418 

$134 970,997 

$395,311,840 

49. 

B - 11 
...

APPENDIX 


SUMMARY OF IDENTIFIED MSP CASES


Total Respondents = 3, 185 

Total Overpayment Cases = 34 

CLASS 

RESPONDENTS CASES 

OVER. 

PAYMENT % OF TOTAL 

COST TO 

BENEFI 

RATIO 

108 $ 1,463.64* .3 TO 1.0 

105 24% $54,294.36 90% 10.2 TO 1.0 

$ 4 744. 1.2 TO 1.0 

Totals 280 32% $60,502. 100% 5.4 TO 1.0 

Class IA includes those respondents who indicated they were working for an employer with 20 

or more employees during 1988. 

Class IB includes those respondents who indicated their spouse worked for an employer with 20 

or more employees during 1988. 

Class IC includes those respondents who indicated that they were involved in either an 

automobile or personal injury accident in 1988. 

Every respondent in these three classes was contac d to gather additional employment and 

insurance information. This allowed staf to identify and verify actual MSP situations. 

*This includes one disabled beneficiary for whom Medicare paid $14.46. 

C ­
APPENDIX D


CALCULATIONS OF COST-BENEFIT RATIOS 

The overall cost ratio was calculated as follows: 

Varable Costs


Labor $9,488. 

Telephone $114. 

Total Varable Costs$ 602. 

Fixed Costs


Rent/ tilities $615. 

Mailing Costs 085. 

Total Fixed Costs $1,700. 

Total Varable and Fixed Costs $11,302. 

Cost-Benefit Ratio 

Total Overpayment $60,502. 

Total Costs $11,302. 

Cost-Benefit Ratio 5.4:1 

The cost benefit of developing responses that were identified as working spouses was calculated 

as follows: 

Varable Costs


Total Varable Costs $ 9,602. 

Total Number of Responses 280 

Cost per Response $34. 

N umber of Spousal Insurance


Responses 105 

Varable Costs of Spousal Insurance 

Responses $3,600.45 

D ­
Fixed Costs 

Total Fixed Costs 

Total Varable and Fixed Costs 

Cost-Benefit Ratio 

Total Overpayment on Spousal 

Insurance Responses 

TOtal Costs 

Cost-Benefit Ratio 

$ 1,700. 

$ 5,300.45 

$54 294. 

$ 5,300.45 

10.2:1 

The cost benefit of developing responses that were identified as disabled beneficiares was 

calculated as follows: 

Varable Costs


Total Varable Costs $9,602. 

Total Number of Responses 280 

Cost per Response $ 34. 

Number of Disabled Beneficiares 

. Varable Costs of Beneficiar 

Case Development $ 891.54 

Fixed Costs


Total Fixed Costs $ 1,700. 

Total Varable and Fixed Costs $ 2 591.54 

Cost-Benefit Ratio 

Total Overpayment on Disabled 

Beneficiares $28,393. 

Total Costs $ 2 591.54 

Cost-Benefit Ratio 11.0:1 

__n_ 
APPENDIX 


E - 1

:: 

Health Care


DEPARTMENT OF HEALTH Ii HUMAN SERVICES Financig Administion 

'... t . Ifr Memorandum 

Date 

Gai R. Wiensky, Ph.D. '1t0 

Frm dministrtor 

Management AdVIsory Report "Medicae Seconda Payer (MP): 

Subject Unrecovered Funds" (OEI-07-90-00764) 

The Inpec:or Genera 

Offce of the Secreta 

Thank you for the opponunity to comment on the subject management Offce of the 

adviory report The repon restates thee recommendations the 

Inpec:or Genera (OIG) made in separte auditS of the MSP progrm and 

to each of


offers thr=::: additional recommendations. Our position with respect 

these recommendations is as foI!ows: 

OIG recommends that Medicae clai forms be revised to require 

HCF A 

spousal insurance information before the claim is paid. 


canC:l with this recommendation. 

OIG recommends that HCFA prioritize the inormation received 

from SSA according to areas of greatest cost/enefit ratio. HCFA 

concurs with thi recommendation. 

OIG recommends that HCFA propose legilation to establish a 

Since the initial voluntary disclosure and recovery program 

provision on debarent of Medicare fica agnts if they fail to 

panicipate has be::n dropped fr the legislative proposal HCF A 

support OIG.s legislati proposal 

OIG recommends that HCFA consider establihig a national data 

priar insurance data on beneficiares and their 

system containing 

spouses. HCF A believes fuher study is needed to determe the 

impact of thi proposal

Page 2 - Inpector Genera 

OIG recommends that HCFA propose legilation to requie 

Medicae contrctors to match their prite health inurce data 

with Medicae fies HCF A diagrees with th recommendation, 

because Congres recently pased legilation prohibitig such a 

requiement. We have no reason to believe that Congress has 

changed its position on th isue. 

OIG recommends that HCF A propose legilation to require an 

inurers to provide their health inurce data includig eligibilty 

and claims payment inormation, to HCFA. We ar unure 

01G.s objeCte. It would appear that th proposal is intended to 

give HCFA and OIG stronger authority to requie inurers to 

provide the inormation necessar to determe MSP recoveries. In 

ent form we caot agree with th recommendation, its c 

because it would be unecessary burdensome both to employers 

and to HCFA. However, we would be wig to discus with OIG 

how to better frme th proposal to establish such authorities. 

The attached paper discuses each recommendation and provides 

additional commentS on statementS in and the metho ology of, the subject 

report Please advise us whether you agree with our position on the repon 

recommendations at your earli st convenience. 

Attachment 
Comments of the Health Care Financim! 

dministrtion on the Offce of the 

JnsDector Genera eDort on
 icare Second.. 

Paver SP: Unrecovered Funds" OEJ-07-90-764 

IG Recommendation


Revie an Medicae claim form to require spousal inurce inormation 

before the clai ca be paid. 

RCF A ResDonse 

RCF A bas inormed OIG (in response to eIG Management Adviory Report 

, A-09-89-00100) that we wi advie the Uniorm Cai Form Task Force of our 

conCUence with thi recommendation to requie spousal inormation on clai 

form. Tne Uniform Cairn Fcr Task Fan: is responsible for makg changes 

to the Medicae claim form. 

OIG Recommendation 2 

Prioritize the information received from SSA ac:ording to these are:a \Tim the 

greatest cost/enefit ratio. 

HCFA ResDonse 

HCF A sta have discussed this issue with eIG sta prior to the issuance of 

report We fully agree with th recommendation. As we develop potential 

MSP sitUations with employers, we wm gie priority to situations that appear to 

have the greatest payback, inc1u ing spousal case development. 

OIG Recommendation 3 

Propose legilation to establish a Volunta Disc10sure and Recovery Progr 

HCF A Resuonse


OIG made th recommendation in a prior report (AO-12-89-0). Th 

report contained a proviion to debar Medicae contrctors from the progr if 

they faed to partcipate in the disclosure progr and if the Federa 

governent identifed improper payments In dicussions with OIG, sta 
, .

J . 

Page 2 

agreed to remove the debarent provion. HCFA now support OIG' 

legiIa ive proposal and is workig with OIG to rewrte it 

We believe that the Departent of Health and Human Servces (DHH) and 

the Deparent of Justice (DO!) aleady have authority to anounce a genera 

amesty from the litigation related to violations of the . :ASP provions 

suggest that OIG and HCFA consider proposing that, whie the Volunta 

Disclosure and Recovery Progr is being considered by Congress, DHH and 

DOJ announce a l-year general amnesty progr for those other payers tht 

voluntay repay Medica 

OIG Recommendation 4 

Consider establishig a national data system containg priar inurance 

inormation on al Medicare beneficiares and their spouses. 

HCF A could ac:omplish this by continuing to pursue 1egilation to 

require insurers, underwters, and thd par admitrators of 

health plans to notif HCF A about covered individual who are: 

over ae:e 65, under 65 and disabled or diae:osed as havine: End 

Stage Renal Disease, and who are enrolled in iIsura. c= progrms to 

which Medicare is secondar payer. 

Altc:Tative!y, this could be absorbed into a broader proposal to 

esabIih a natioIW clearnghouse of information pertg 

medica inL'!ncc avaiable to beneficiares of al Federa and State 

health benefit programs. Under this proposal, HCF A would run its ­

clais information though ths clearghouse in order to identi 

MSP situations. 

HCFA ResDonse 

HCFA is curently fializng a FY 1992 legislatie proposal on inurer reportg 

which wi permt us to obtain more timely MSP inormation. 

The propriety of establihig a national clearghouse is cuently under 

discussion at the Budget Summt. We intend to discus th issue fuer with 

the Congressional Budget Offce sta to determe potenti Medica-C'l. 

We do, however, believe that further study is necessar to assess its impact on 

the way our progr arc curently admitered. 
Page 3


orG Recommendation 


their prite Propose legilation to require Medicare contrctors to match 

health inurance data with Medicae fies. 

HCF A Resuonse


Secton 6202( d) of the Social Security AI prohibits the Secreta from requig 

agait their priate records as a 

the contrctors to perform data matches 


condition for enterig or renewig the contrct. We believe that it would not 

be prudent or praCtcal to propose elimiation of th prolu"bition. Congress has 

dearly stated its position in opposition to such a requiement. 

orG Rc:commendation 6 

Propose legislation to require al insurers to provide their health insuranc: data 

includig eligl"bilty and claims payment information, to HCF A. 

HCFA R:suonse 

Ths proposal appear to go beyond our legislatie proposal to require inurer 

reponing disCused under Recommendation 4. In addition, read broadly, the 

proposal could require the submission of unnecessar inormation that would be 

burde:lsome both to inurers and to HCF A. We arc unsure of 01G' s objeCte. 

We believe this proposal is intended to gie HCFA and CIG stronger authority 

necessar to. determe the 

to require inurers to provide the information 


amountS of Medicare recoveries. If our belief is cOrTect HCF A does not need 

al of tlUs inormation on an ongoing ,basis. 

We would support legilation that would require inurers, and entities 

responsible for payment under employer group health plan (including inurers 

and thd par admitrtors), upon request from Medicare, to submit 

inormation pertng to medical policies, benefit eligibilty, policy litations 

and exclusions and payment inormation relatig to their obligations to make 

priar payment for servces provided to Medicae beneficiares. We are 

wig to discuss with 01G how to better fre th proposal to establih such 

authorities. 
, J Page 4 

General Comments 

BacklZound Statements 

The repon indicates that, prior to 1980, Medicae wa always the primar payer 

for servc:s provided to Medicae beneficiares. Medicae has always been the 

seconda payer for servces covered by workers' compensation progrms. 

Medicae alo has always been prohibited from payig for servces authoried 

by other F edera progr such as the Veterans Admitration. 

The repon compares MSP progr savigs and contractor admitrtie 

exenses for fical year (FY 1987 and 1988. The figures cited are $ 1.4 bilon 

in savigs and $115 mIllion in admistrative expenses. The correct figue for 

MSP savigs is S3.3 bilion ($1.1 bilon for Par A and $.3 bilon for Pan B in 

IT 1987 and $1.4 bilon for Par A and S.s bilon for Pan B in 1988). 

Me!hodolc and Savines Estiates 

OIG sampled beneficiares were enroIIed in Pan B and rec:ived Medicare 

covered se:vic:s in 1987. Ths sample contai at least tWo sourc:s of e:!ors 

which could cause the sample to underreprent MSP sitUations. Firt, some 

beneficiares who are afected by the workig aged and disabilty proviions 

elect not to paridpate in Par B because their employer based coverage is such 

that purchasing Pan B coverage is not cost effectve and because there is no 

penalty for delayed enrollment. Second, some MSP beneficiares were excluded 

because their priar coverage was such that nQ Medicare secondar payments 

were due. There is alo one source of error that could cause beneficiares to 

be falely identifed as MSP beneficiares. Individual enrolled in Par B only 

are not affected by the workig aged or disabilty proviions. Thus 

beneficiares with employer health plan coverage though their own or a 

spouse s employer who are enroIIed in Par B but not covered under Par A 

should not be considered MSP beneficiares 


The exclusion of the Railroad Retiement Board (RRB) beneficiares couId alo 

bias the estiates. We do not know what proporton ,of RR beneficiares 

have employer heath pla coverage as a spouse of an employed individua or if