MEDICARE 

SECONDARY PAYER

Additional Steps Are 

Needed to Improve 

Program Effectiveness 

for Non-Group Health 

Plans 

Report to the Ranking Member, 

Subcommittee on Health, Committee 

on Ways and Means, House of 

Representatives

March 2012

GAO-12-333

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-333, a report to the 

Ranking Member, Subcommittee on Health, 

Committee on Ways and Means, House of 

Representatives

March 2012

MEDICARE SECONDARY PAYER

Additional Steps Are Needed to Improve Program 

Effectiveness for Non-Group Health Plans

Why GAO Did This Study

The Centers for Medicare & Medicaid 

Services (CMS) is responsible for 

protecting Medicare’s fiscal integrity. 

Medicare Secondary Payer (MSP) 

situations exist when Medicare is a 

secondary payer to other insurers, 

including non-group health plans 

(NGHP), which include auto or other 

liability insurance, no-fault insurance, 

and workers’ compensation plans. 

CMS attempts to recover Medicare 

payments made that were the 

responsibility of NGHPs, but CMS has 

not always been aware of these MSP

situations. In 2007, legislation added 

mandatory reporting requirements for 

NGHPs that should enable CMS to be 

aware of these situations. NGHPs 

reported concerns about the MSP 

process, and CMS delayed the start of 

mandatory reporting by NGHPs, in part 

because of these concerns. This report 

examines (1) how the initial 

implementation of mandatory reporting 

for NGHPs has affected the workload 

of and payments to MSP contractors, 

and Medicare savings, and (2) key 

challenges within the process for MSP 

situations involving NGHPs and the 

steps CMS is taking to address those 

challenges. GAO reviewed relevant 

MSP-related documents and data on 

MSP costs, workload, Medicare 

savings, and contractor performance. 

GAO also interviewed CMS officials, 

MSP contractor officials, and NGHP 

stakeholders.

What GAO Recommends

To improve the MSP program, GAO is 

making recommendations to improve 

the cost-effectiveness of recovery, 

decrease the reporting burden for 

NGHPs, and improve communications 

with NGHP stakeholders. CMS agreed 

with these recommendations.

What GAO Found

During the initial implementation of mandatory reporting for non-group health 

plans (NGHP), the workloads of and Centers for Medicare & Medicaid Services 

(CMS) payments to Medicare Secondary Payer (MSP) contractors, and Medicare 

savings, all increased. From 2008 through 2011, the NGHP workloads of all three 

contractors CMS uses to implement the process for MSP situations—the 

Coordination of Benefits Contractor (COBC), the Medicare Secondary Payer 

Recovery Contractor (MSPRC), and the Workers’ Compensation Review 

Contractor (WCRC)—increased to varying degrees. For example, from 2008 

through 2011, the number of NGHP MSP situations voluntarily reported to the 

COBC increased from about 142,000 to about 392,000, the number of NGHP 

cases established by the MSPRC increased from about 238,000 to about 

480,000, and the number of Medicare set-aside proposals submitted to the 

WCRC increased from about 20,000 to almost 29,000. From 2008 through 2011, 

the total CMS payments to the MSP contractors increased by about $21 million, 

and Medicare savings from known NGHP situations that CMS is able to track—

including savings from claims denials and conditional payment recoveries—

increased by about $124 million. The total impact of mandatory reporting on 

Medicare savings could take years to determine for various reasons, including 

that mandatory reporting is still being phased in.

Within the process for MSP situations involving NGHPs, GAO identified key 

challenges related to contractor performance, demand amounts, aspects of 

mandatory reporting, and CMS guidance and communication. CMS has 

addressed or is taking steps to address some, but not all, of these challenges. 

• Contractor performance. Challenges related to the timeliness of the MSPRC 

and WCRC were identified, including significant increases in the time 

required to complete important tasks. CMS reported taking steps to address 

the challenges with each of these contractors’ performance. 

• Demand and recovery issues. Challenges were identified related to the 

timing of demand amounts, the cost-effectiveness of recovery efforts, and the 

amounts of Medicare demands from liability settlements. CMS reported 

taking steps to address some, but not all, of these challenges.

• Mandatory reporting. Key challenges were identified with certain aspects of 

mandatory reporting: determining whether individuals are Medicare 

beneficiaries, supplying diagnostic codes related to individuals’ injuries, and 

reporting all liability settlement amounts. CMS reported taking steps to

address some, but not all, of these challenges.

• CMS guidance and communication. Key challenges were identified related to 

CMS guidance and communication about the MSP process, guidance on 

Medicare set-aside arrangements, and beneficiary rights and responsibilities. 

CMS has taken few steps to address these challenges.

While CMS has taken, or reported it is in the process of taking, additional steps 

to address these key challenges, there are several areas related to the MSP 

program and process that still need improvement.

View GAO-12-333. For more information, 

contact Kathleen M. King at (202) 512-7114 or 

kingk@gao.gov.
Page i GAO-12-333 Medicare Secondary Payer

Letter 1 

Background 6

MSP Contractor Workloads, Payments, and Medicare Savings 

Increased during the Initial Implementation of Mandatory 

Reporting for NGHPs 15

CMS Is Addressing Some but Not All of the Key Challenges We 

Identified within the Process for MSP Situations Involving 

NGHPs 21

Conclusions 35

Recommendations for Executive Action 36

Agency Comments 37

Appendix I Comments from the Department of Health and Human Services 38

Appendix II GAO Contact and Staff Acknowledgments 42

Tables

Table 1: Medicare Secondary Payer (MSP) Contractor Non-Group 

Health Plan (NGHP) Workload for Fiscal Years 2008 

through 2011 15

Table 2: Centers for Medicare & Medicaid Services (CMS) 

Payments to Medicare Secondary Payer (MSP) 

Contractors for Fiscal Years 2008 through 2011 17

Table 3: Percentage Increases in Medicare Secondary Payer (MSP) 

Non-Group Health Plan (NGHP) Workloads and Centers 

for Medicare & Medicaid Services (CMS) Payments to MSP 

Contractors, Fiscal Years 2008 through 2011 18

Table 4: Medicare Savings from Medicare Secondary Payer (MSP) 

Situations Involving Non-Group Health Plans (NGHP) and 

Approved Workers Compensation Medicare Set-Aside 

Arrangement (WCMSA) Amounts, Fiscal Years 2008 

through 2011 20

Table 5: Steps the Centers for Medicare & Medicaid Services (CMS) 

Is Taking to Address Medicare Secondary Payer Recovery 

Contractor (MSPRC) Performance Challenges and the 

Anticipated Results 23

Contents
Page ii GAO-12-333 Medicare Secondary Payer

Figures

Figure 1: A Medicare Secondary Payer Situation Involving an Auto 

Liability Insurer 2

Figure 2: Illustration of the Process for a Medicare Secondary 

Payer (MSP) Situation Involving an Auto Liability Insurer 12

Figure 3: Illustration of the Process for a Medicare Secondary 

Payer (MSP) Situation Involving a No-Fault Insurer 13

Figure 4: Illustration of the Process for a Medicare Secondary 

Payer (MSP) Situation Involving a Workers’ 

Compensation Plan 14

Figure 5: Workers’ Compensation Review Contractor (WCRC) 

Average Processing Time for Workers’ Compensation 

Medicare Set-Aside Arrangement Proposals, April 2010 

through September 2011 24

Abbreviations

CMS Centers for Medicare & Medicaid Services

COBC Coordination of Benefits Contractor

GHP group health plan

HICN Health Insurance Claim Number

ICD-9 International Classification of Diseases, Ninth Revision, 

 Clinical Modification

MSA Medicare set-aside arrangement

MSP Medicare Secondary Payer

MSPRC Medicare Secondary Payer Recovery Contractor

NGHP non-group health plan

WCMSA Workers’ Compensation Medicare Set-Aside Arrangement

WCMSAP Workers’ Compensation Medicare Set-Aside Portal

WCRC Workers’ Compensation Review Contractor

This is a work of the U.S. government and is not subject to copyright protection in the 

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Page 1 GAO-12-333 Medicare Secondary Payer

United States Government Accountability Office

Washington, DC 20548

March 9, 2012

The Honorable Fortney Pete Stark

Ranking Member

Subcommittee on Health

Committee on Ways and Means

House of Representatives

Dear Mr. Stark:

In 2010, Medicare—the federal health insurance program that serves the 

nation’s elderly and disabled—paid an estimated $509 billion to cover 

medical expenses for its 47 million beneficiaries.1

Until 1980, Medicare was the primary payer in all situations involving 

Medicare beneficiaries except those covered by workers’ compensation.

While Medicare 

typically has primary payment responsibility for a Medicare beneficiary’s 

medical expenses that are covered and otherwise reimbursable by 

Medicare, in some situations another insurer or insurers have the primary 

payment responsibility. In these situations, referred to as Medicare 

Secondary Payer (MSP) situations, Medicare is the secondary payer and 

is only responsible for paying for a beneficiary’s Medicare-related health 

care costs that are not the responsibility of the primary insurer or insurers. 

The Centers for Medicare and Medicaid Services (CMS), an agency 

within the Department of Health and Human Services, is responsible for 

administering the Medicare program, including protecting its fiscal 

integrity. To safeguard funds, CMS must take steps to ensure that it pays 

only for those services that are the responsibility of the Medicare 

program.

2

 

1

Medicare is the federally financed health insurance program for persons age 65 or over, 

certain individuals with disabilities, and individuals with end-stage renal disease.

In 1980, Medicare became a secondary payer in all instances to nongroup health plans (NGHP), which include auto or other liability 

2

Workers’ compensation is a law or plan of the United States, or any state, that 

compensates employees who get sick because of their jobs or are injured on the job.

 
 

Page 2 GAO-12-333 Medicare Secondary Payer

insurance, no-fault insurance, and workers’ compensation plans.3,4 For 

example, an NGHP is the primary payer for medical expenses related to 

injuries that a Medicare beneficiary sustains in an automobile accident 

(see fig. 1). Since 1982, Medicare has been a secondary payer to group 

health plans (GHP) in certain situations.5

Figure 1: A Medicare Secondary Payer Situation Involving an Auto Liability Insurer

When MSP situations have occurred, CMS has not always been notified 

that beneficiaries had other insurance that should be the primary payer. 

As a result, Medicare has paid for services that were the financial 

responsibility of another payer. Section 111 of the Medicare, Medicaid, 

and SCHIP Extension Act of 2007 added reporting requirements—

referred to throughout this report as mandatory reporting—for NGHPs 

 

3

Omnibus Budget Reconciliation Act of 1980, Pub. L. No. 96-499, § 953, 94 Stat. 2599, 

2647 (codified, as amended, at 42 U.S.C. § 1395y(b)(2)).

4

Liability insurance is insurance that provides payment based on legal liability for injury or 

illness or damage to property. It includes, but is not limited to, automobile liability 

insurance, uninsured motorist insurance, underinsured motorist insurance, homeowners’ 

liability insurance, malpractice insurance, product liability insurance, and general casualty 

insurance. No-fault insurance is insurance that pays for medical expenses for injuries 

sustained on the property or premises of the insured or in the use, occupancy, or 

operation of an automobile, regardless of who may have been responsible for causing the 

accident. 42 C.F.R. § 411.50(b).

5

Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. No. 97-248, § 116(b), 

96 Stat. 324, 353. Although persons age 65 or older and persons under age 65 with 

certain disabilities are eligible for Medicare coverage, some may be employed and may 

receive health insurance coverage through an employer-sponsored GHP.
 

Page 3 GAO-12-333 Medicare Secondary Payer

and GHPs with respect to MSP situations that should enable CMS to be 

aware of MSP situations.6

Section 111 added mandatory reporting but did not eliminate or change 

any existing MSP laws or regulations. Prior to mandatory reporting, 

NGHPs and GHPs involved in MSP situations already had an obligation 

to notify and repay Medicare when they determined that Medicare should 

not have paid first. Likewise, Medicare beneficiaries had an obligation to 

take whatever actions were necessary to obtain any payment that could 

be reasonably expected from an NGHP or GHP and to cooperate with 

CMS in any action CMS took to recover payments Medicare had made. 

These obligations remain, although prior to mandatory reporting the 

parties involved in MSP situations may not have always complied with 

them. For example, prior to mandatory reporting, absent CMS being 

notified about an MSP situation and any specific correspondence from 

CMS to the beneficiary about MSP obligations, a beneficiary might not 

have been aware of any responsibility to repay Medicare for the related 

medical expenses.

Specifically, with mandatory reporting, CMS 

should be able to identify which payments made by Medicare should be 

recovered because another payer had primary payment responsibility and 

situations in which CMS should avoid making payments when another 

payer should be primary. Section 111 also included penalties for 

noncompliance with mandatory reporting ($1,000 fine per day of 

noncompliance per claimant). The Congressional Budget Office estimated 

that these provisions for NGHPs and GHPs would save Medicare 

$1.1 billion over 10 years in payments that could be recovered or avoided 

by Medicare.

MSP mandatory reporting has not been fully implemented. GHPs were 

required to begin reporting in January 2009. While NGHPs were 

scheduled to begin mandatory reporting in July 2009, CMS delayed this 

deadline several times, in part because of concerns raised by the 

insurance industry. Certain NGHPs, including workers’ compensation and 

no-fault insurers, were required to begin reporting in January 2011. Other 

 

6

Pub. L. No. 110-173, § 111, 121 Stat. 2492, 2497 (codified at 42 U.S.C. § 1395y(b)(7-8)).
 

Page 4 GAO-12-333 Medicare Secondary Payer

NGHPs, including most liability insurers, were required to begin phased-in 

reporting in January 2012.7

NGHPs and beneficiary advocacy groups have reported concerns related 

to CMS’s process for handling MSP situations involving NGHPs. These 

concerns include issues with communication, policies and procedures, 

obtaining timely information, and the performance of MSP contractors. 

For example, NGHPs have reported disagreements with CMS MSP 

policies. Some of these difficulties may be because some NGHPs are 

interacting with CMS for the first time. These concerns were highlighted 

during a June 22, 2011, hearing held by the Subcommittee on Oversight 

and Investigations, House Committee on Energy and Commerce, about 

making improvements to the MSP process.8

Because of the reported concerns, you asked us to examine the issues 

surrounding the process for MSP situations involving NGHPs. In this 

report, we (1) describe how the initial implementation of mandatory 

reporting for NGHPs has affected the workload of and payments to MSP 

contractors, and Medicare savings, and (2) examine key challenges 

within the process for MSP situations involving NGHPs and the steps 

CMS is taking to address these challenges.

To determine how the initial implementation of mandatory reporting for 

NGHPs has affected the workload of and payments to MSP contractors, 

and Medicare savings, we interviewed officials from CMS and the 

contractors it uses to implement the MSP process about the effect of the 

initial implementation of mandatory reporting.9

 

7

As of January 1, 2012, liability insurers (including self-insurers), are required to report 

settlement, judgment, award, or other payment amounts that are over $100,000 and were 

paid on or after October 1, 2011. At several specified dates in subsequent years, the 

reporting thresholds are to be reduced, and as of January 1, 2015, all settlement, 

judgment, award, or other payment amounts are to be reported.

We also obtained and 

examined documentation and data from CMS and its MSP contractors 

regarding the contractors’ workloads and CMS payments to the 

contractors, as well as data on Medicare savings for fiscal years 2008 

through 2011. We interviewed CMS and MSP contractor officials about 

8

Protecting Medicare with Improvements to the Secondary Payer Regime, 112th Cong. 

(2011). 

9

For the purposes of this report, we consider the timeframe for the initial implementation of 

mandatory reporting to be fiscal year 2008 through fiscal year 2011.
 

Page 5 GAO-12-333 Medicare Secondary Payer

the data received to learn about data collection methods, quality control 

efforts, and any data limitations. We determined that the data were 

sufficiently reliable for use in this report. We also interviewed NGHP 

stakeholders, such as organizations representing insurance companies 

and attorneys, to obtain their perspectives on how the initial 

implementation of mandatory reporting has affected their interactions with 

CMS and its contractors on MSP issues.

To determine the key challenges within the process for MSP situations 

involving NGHPs, we interviewed officials from CMS, its MSP contractors, 

and NGHP stakeholders, such as organizations representing insurance 

companies, attorneys, and beneficiaries, to better understand the MSP 

program and the process for situations involving NGHPs and their 

perspectives on any challenges within the process. In order to further 

understand the reported challenges, we also reviewed relevant CMS 

documentation, including MSP regulations, manuals, and user guides; 

CMS and contractor MSP-related web pages; and articles and reports by 

NGHP stakeholders and government agencies. We aligned the key 

challenges identified through interviews with other evidence, such as data 

on contractor performance and guidelines established in our Standards 

for Internal Control in the Federal Government10 and the related Internal 

Control Management and Evaluation Tool.

11

We conducted this performance audit from February 2011 through March 

2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

To examine any steps CMS 

was taking to address the challenges, we interviewed officials from CMS, 

the MSP contractors, and NGHP stakeholders, and reviewed CMS and 

MSP contractor documents and websites.

 

10GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999). Internal control is synonymous with management 

control and comprises the plans, methods, and procedures used to meet missions, goals, 

and objectives.

11GAO, Internal Control Management and Evaluation Tool, GAO-01-1008G (Washington, 

D.C.: August 2001).
 

Page 6 GAO-12-333 Medicare Secondary Payer

Medicare’s payments in MSP situations can vary depending on the 

circumstances of the situation. CMS oversees all MSP activities and 

administers the MSP program, with contractors performing most of CMS’s 

administrative activities within the process for MSP situations involving 

NGHPs. The process for MSP situations that involve NGHPs generally 

includes five basic components—notification, negotiation, resolution, 

mandatory reporting, and recovery.

Medicare payments can vary in different MSP situations. In most MSP 

situations involving NGHPs, Medicare will pay initially for medical 

treatment related to the incident and later seek to recover those 

payments. When CMS is notified that an MSP situation exists in which an 

NGHP has accepted primary responsibility for ongoing medical services, 

Medicare will start denying the related claims. However, more commonly, 

CMS is notified about a potential MSP situation that is not yet resolved, 

and Medicare continues to make payments until the situation is resolved 

and there is a settlement, judgment, award, or other payment. Medicare 

does this to ensure that the beneficiary has access to needed medical 

services in a timely manner. CMS refers to any payments made by 

Medicare for services where another payer has primary responsibility for 

payment as conditional payments.12

To help prevent Medicare from making future payments related to MSP 

situations involving NGHPs, when an individual is expected to have future 

medical expenses (including Medicare-covered drug expenses) related to 

his/her accident, injury, or illness, CMS states that all parties involved in 

negotiating a resolution of those situations are responsible for protecting 

Medicare’s interests. One way to accomplish this is through a Medicare 

set-aside arrangement (MSA)—a voluntary arrangement where a portion 

of the proceeds from a settlement are set aside to pay for all related 

future medical expenses that would otherwise be reimbursable by 

Once a resolution is reached 

between the beneficiary and the NGHP, Medicare will seek to recover any 

conditional payments made.

 

12CMS is authorized to make conditional payments when a primary payer has not or 

cannot make payment promptly. Such payments are conditioned upon reimbursement to 

Medicare. 42 U.S.C. § 1395y(b)(2)(B). The payment must be repaid to Medicare when a 

settlement, judgment, award, or other payment is made to the beneficiary from the NGHP.

Background 

Medicare Payments in MSP 

Situations Involving 

NGHPs
 

Page 7 GAO-12-333 Medicare Secondary Payer

Medicare if Medicare were the primary payer.13 Medicare does not make 

payments for medical expenses related to the MSP situation until the 

MSA funds are exhausted. While MSAs can be used in liability or no-fault 

situations, they are most common for workers’ compensation situations, 

where they are known as Workers’ Compensation Medicare Set-Aside 

Arrangements (WCMSA).

CMS oversees all MSP activities and administers the MSP program, 

through activities such as developing program policy and guidance. In

addition, CMS communicates to stakeholders—including NGHPs, 

beneficiaries, providers, and attorneys—about the MSP process, policies, 

and guidance. For example, CMS maintains websites related to parts of 

the MSP process, from which NGHPs and beneficiaries can obtain 

information about their respective responsibilities in MSP situations 

involving NGHPs. GAO has established guidelines on internal control that 

are relevant for federal agencies such as CMS. Internal control includes 

the components of an organization’s management that provide 

reasonable assurance that certain objectives are being achieved, 

including effective communication with external stakeholders.14

Since 2006, CMS has had three contractors to perform most of its 

administrative activities within the MSP process: the Coordination of 

Benefits Contractor (COBC), the Medicare Secondary Payer Recovery 

Contractor (MSPRC), and the Workers’ Compensation Review Contractor 

(WCRC). Current contractor responsibilities are as follows:

• COBC: The COBC collects, manages, and maintains information in 

the CMS data systems about other health insurance coverage for 

Medicare beneficiaries and initiates MSP claims investigations. The 

information the COBC collects is available to other CMS contractors.

• MSPRC: The MSPRC uses information updated by the COBC as well 

as information from CMS’s data systems to identify and recover 

 

13In situations where an MSA is used, the responsibility for managing the MSA funds is 

not established by CMS. Thus, an MSA can be managed by various parties, including the 

beneficiary or a third-party administrator, such as an attorney.

14See GAO/AIMD-00-21.3.1. This document discusses key characteristics of specific 

internal controls and their essential role in communications, including that effective 

communications should include information flowing down, across, and up the organization.

Roles of CMS and CMS 

Contractors in MSP 

Activities
 

Page 8 GAO-12-333 Medicare Secondary Payer

Medicare payments that should have been paid by another entity as 

primary payer. Once a resolution has been reached between the 

beneficiary, or other individuals authorized by the beneficiary, and the 

NGHP, the MSPRC calculates the final amount owed to Medicare and 

issues a demand letter to the beneficiary or other individual authorized 

by the beneficiary.15

• WCRC: The WCRC evaluates proposed WCMSA amounts and 

projects future medical expenses related to workers’ compensation 

accident, injury, or illness situations that would otherwise be payable 

by Medicare. The WCRC generally only reviews proposed WCMSA 

amounts for current Medicare beneficiaries within certain thresholds, 

referred to as CMS workload review thresholds.16 WCRCrecommended WCMSA amounts are forwarded to one of six CMS 

regional offices for final approval.17

The process for MSP situations that involve NGHPs generally includes 

five basic components—notification, negotiation, resolution, mandatory 

reporting, and recovery. However, the details of the process, and the 

administrative tasks that must be conducted, can vary depending on 

when in the process notification occurs, the type of insurance involved 

(liability, no-fault, or workers’ compensation), and the type of resolution 

 

15This assumes a resolution in which the Medicare beneficiary or someone on the 

beneficiary’s behalf receives a settlement, judgment, award, or other payment from the 

NGHP.

16The WCRC reviews proposed WCMSA amounts for injured individuals whose total 

settlement amounts are valued greater than $25,000 if the situation involves a current 

Medicare beneficiary and greater than $250,000 in situations where there is a reasonable 

expectation that the injured individual will become a Medicare beneficiary within 

30 months of the date of the settlement. The WCRC rejects ineligible submissions—those 

that do not meet the workload review thresholds, are not related to workers’ compensation 

cases, or involve black lung disease, as the Federal Black Lung Program pays first for any 

health care for black lung disease covered under that program. For the purposes of this 

report, we refer to all submissions to the WCRC as WCMSA proposals, even though they 

include some ineligible submissions that do not pertain to workers’ compensation 

situations.

17The six CMS regional offices that provide final approval of proposed WCMSA amounts 

are Boston, Chicago, Dallas, Philadelphia, San Francisco, and Seattle.

Process for MSP Situations 

Involving NGHPs
 

Page 9 GAO-12-333 Medicare Secondary Payer

reached.18

• Notification: The COBC is notified that a beneficiary’s accident, injury, 

or illness is an MSP situation and creates a record. Notification can 

come from various sources—including the beneficiary, an attorney, a 

physician, or the NGHP—and can occur at various times during the 

process for MSP situations involving NGHPs. While mandatory 

reporting requires NGHPs to report MSP resolutions to the COBC, 

NGHPs or other involved parties may also provide voluntary 

notification earlier in the process. For example, a beneficiary’s 

attorney could provide notification of an MSP situation involving an 

NGHP shortly after an accident occurs. After notification of the MSP 

situation, Medicare usually continues to make conditional payments 

although it may begin denying claims. Once the record for an MSP 

situation is created by the COBC, the MSPRC issues an MSP rights 

and responsibilities letter to the beneficiary or the beneficiary’s 

representative, such as an attorney, which explains the applicable 

MSP law and how MSP recovery works.

While the details vary by situation and the timing of notification 

may vary, in general, the process contains the following components:

• Negotiation: Negotiation occurs between the NGHP and the injured 

beneficiary or the beneficiary’s representative. The point in the 

process at which notification of a potential MSP situation is made can 

affect the number and amount of conditional payments made by 

Medicare as well as whether, and the extent to which, information on 

conditional payments is available during the negotiation.19

 

18Because this report is focused on MSP situations in which an NGHP is the primary 

payer, when a resolution is referenced throughout this report we assume an outcome 

between a Medicare beneficiary and an NGHP in which there is a settlement, judgment, 

award, or other payment.

For 

example, if CMS is notified about a potential MSP situation early in 

the process, the MSPRC can provide information about what it has 

identified as any related claims that have been paid by Medicare. This 

information may then be used during the negotiations. This 

information is provided in writing through a conditional payment letter. 

For workers’ compensation situations that involve future medical 

expenses, the WCRC may be involved in reviewing proposed 

WCMSA amounts.

19If an NGHP immediately agrees to assume ongoing responsibility for a beneficiary’s 

medical expenses, current and future, then there may not be a negotiation component to 

the MSP process. 
 

Page 10 GAO-12-333 Medicare Secondary Payer

• Resolution: Resolution is reached between the beneficiary or the 

beneficiary’s attorney and the NGHP. The type of resolution varies 

and can include the NGHP assuming ongoing responsibility for 

payment of medical claims related to the injury or illness, a lump sum 

payment, a Medicare set-aside arrangement, or a combination of any 

of these. The beneficiary or the beneficiary’s representative submits 

the resolution information to the MSPRC. For resolutions that include 

a WCMSA, no payments are made by Medicare for medical expenses 

related to the workers’ compensation injury or illness until the setaside is exhausted. The administrator of the WCMSA, typically the 

beneficiary or the beneficiary’s representative, must submit an annual 

accounting of the set-aside funds to the MSPRC.

• Mandatory reporting: The NGHP reports the resolution to the COBC. 

Regardless of whether notification of the MSP situation occurred 

earlier in the process, after a resolution is reached in which the 

Medicare beneficiary or someone on the beneficiary’s behalf receives 

a settlement, judgment, award, or other payment from the NGHP, the 

NGHP is required to report information about the MSP situation and 

its resolution to the COBC under mandatory reporting. The data 

NGHPs are required to submit include information to identify the 

beneficiary; diagnosis codes for the injury, accident, or illness; 

information concerning the policy or insurer; information about the 

injured party’s representative or attorney; and settlement or payment 

information.

• Recovery: The MSPRC seeks to recover Medicare’s conditional 

payments that have been made. The MSPRC calculates the total 

amount owed to Medicare and issues a demand for payment—

referred to as a demand letter. This letter is typically issued to the 

beneficiary or the beneficiary’s representative. The MSPRC compares 

the resolution data reported by the NGHP under mandatory reporting

to any resolution data submitted by the beneficiary, or the 

beneficiary’s representative, to ensure that the resolution data match. 

Either payment is received and the case closed or a response is 

received challenging all or part of the demand. If no response is 

received, debt delinquent more than 180 days is referred to the 

Department of the Treasury for collection action. The beneficiary has 
 

Page 11 GAO-12-333 Medicare Secondary Payer

the right to question, appeal,20 or request a waiver of recovery of the 

amount demanded.21

Figures 2, 3, and 4 illustrate how the process could work for MSP 

situations that involve an auto liability insurer, a no-fault insurer, and a 

workers’ compensation plan, respectively. In each case, the timing of 

notification and the parties involved in each step can vary.

 

20Medicare beneficiaries have administrative appeal rights with respect to an MSP 

recovery claim against them that include five levels. The first level of appeal is to a CMS 

contractor. The second level of appeal is to an independent contractor to review the 

decision made at the first level of appeal. The third level of appeal is to an administrative 

law judge and must meet a minimum monetary threshold. The fourth level of appeal is 

with the Departmental Appeals Board before the Medicare Appeals Council. The fifth level 

is with the federal district court and has a minimum monetary threshold.

21The debt is not referred to the Department of the Treasury if there is open 

correspondence related to the debt or if there is a pending appeal or waiver request.
 

Page 12 GAO-12-333 Medicare Secondary Payer

Figure 2: Illustration of the Process for a Medicare Secondary Payer (MSP) Situation Involving an Auto Liability Insurer
 

Page 13 GAO-12-333 Medicare Secondary Payer

Figure 3: Illustration of the Process for a Medicare Secondary Payer (MSP) Situation Involving a No-Fault Insurer
 

Page 14 GAO-12-333 Medicare Secondary Payer

Figure 4: Illustration of the Process for a Medicare Secondary Payer (MSP) Situation Involving a Workers’ Compensation Plan
 

Page 15 GAO-12-333 Medicare Secondary Payer

During the initial implementation of mandatory reporting for NGHPs, the 

workloads of and CMS payments to MSP contractors, and Medicare 

savings, all increased. For example, since fiscal year 2008, CMS 

payments to the MSP contractors have increased by about $21 million 

while Medicare savings from NGHP MSP situations—including savings 

from claims denials and conditional payment recoveries—have increased 

by about $124 million. However, because mandatory reporting is still 

being phased in, particularly for most liability settlements, it is too soon to 

determine the full impact of its implementation.

CMS MSP contractors’ NGHP workloads increased during the initial 

implementation of mandatory reporting, and workloads are expected to 

continue to increase as mandatory reporting is phased in. The NGHP 

workloads of all three MSP contractors increased to varying degrees 

during the initial implementation of mandatory reporting. For example, 

from fiscal year 2008 through fiscal year 2011, the number of MSP 

situations involving NGHPs that were voluntarily reported to the COBC 

increased by 176 percent and the number of WCMSAs submitted to the 

WCRC increased by 42 percent (see table 1). Although mandatory 

reporting for NGHPs did not begin to be phased in until January 1, 2011, 

CMS officials told us that the effects of the mandate began earlier as the 

voluntary reporting of MSP situations (by NGHPs, attorneys, or 

beneficiaries) increased after the law’s passage in December 2007.

Table 1: Medicare Secondary Payer (MSP) Contractor Non-Group Health Plan (NGHP) Workload for Fiscal Years 2008 through 

2011

MSP contractor workload measure 2008 2009 2010 2011

Percentage increase, 

2008 to 2011 

NGHP MSP situations voluntarily reported to the 

Coordination of Benefits Contractor 141,890 185,085 357,747 392,254 176

NGHP cases established by the MSP Recovery 

Contractor 238,293 260,912 413,090 480,188 102

Workers’ Compensation Medicare Set-Aside 

Arrangement proposalsa submitted to the Workers’ 

Compensation Review Contractor 20,255 24,203 26,296 28,847 42

Source: GAO analysis of MSP contractor data

a

These include all submissions to the Workers’ Compensation Review Contractor, including any that 

are later determined to be ineligible for review.

MSP Contractor 

Workloads, Payments, 

and Medicare Savings 

Increased during the 

Initial Implementation 

of Mandatory 

Reporting for NGHPs

MSP Contractors’ NGHP 

Workload Increased during 

the Initial Implementation 

of Mandatory Reporting 

for NGHPs
 

Page 16 GAO-12-333 Medicare Secondary Payer

CMS officials told us they expect that the COBC’s and MSPRC’s 

workloads will continue to increase once mandatory reporting is phased in 

for most liability MSP situations. CMS officials and an NGHP stakeholder 

group both told us that many liability MSP situations were not reported to 

CMS prior to mandatory reporting. CMS officials could not estimate the 

extent of future increases because CMS has no reliable estimates on the 

actual number of liability cases that include MSP situations.

The increased number of WCMSA proposals submitted to the WCRC 

during the past 4 years may be due, in part, to the NGHP industry’s 

increased submission of ineligible and $0 WCMSA proposals in reaction 

to mandatory reporting. While the number of WCMSA submissions 

increased by 42 percent from fiscal year 2008 through fiscal year 2011, 

some of these submissions were not eligible for WCRC review—for 

example, they did not meet the minimum reporting thresholds—and the 

number of ineligible WCMSA submissions has grown rapidly. Ineligible 

submissions increased by about 148 percent from 2008 through 2011, 

growing from about 4,500 ineligible submissions in 2008 to about 

11,200 ineligible submissions in 2011. Although mandatory reporting did 

not add any new WCMSA requirements, a CMS official told us the NGHP 

industry may be submitting more WCMSA proposals that are not eligible 

for WCRC review because it wants documentation from CMS stating that 

a WCMSA did not meet CMS’s review thresholds.

Similarly, although not directly related to any reporting requirements, 

WCRC officials said that they have also seen an increase in $0 WCMSA 

proposals. A workers’ compensation plan may submit these proposals 

when a settlement amount meets the minimum thresholds and is eligible 

for WCRC review, but the plan is asserting that it does not have 

responsibility for paying the beneficiary’s future medical expenses. 

WCRC officials told us that when an NGHP submits a $0 WCMSA 

proposal, it may be seeking CMS confirmation that it does not have 

responsibility for paying the beneficiary’s future medical expenses.
 

Page 17 GAO-12-333 Medicare Secondary Payer

The total amount of CMS payments to the MSP contractors increased 

during the initial implementation of mandatory reporting.22

Table 2: Centers for Medicare & Medicaid Services (CMS) Payments to Medicare Secondary Payer (MSP) Contractors for 

Fiscal Years 2008 through 2011

Total CMS 

payments to the MSP contractors in fiscal year 2011 were about 

$21 million higher than payments in fiscal year 2008 (see table 2). 

Payments for the MSPRC’s services increased by the greatest amount 

over this period—increasing about $16 million from 2008 through 2011. 

While CMS’s overall contractor payments increased during this time 

period, the percentage increases in payments to the COBC and MSPRC 

were substantially lower than the increases in their workloads (see 

table 3).

Fiscal year

2008 2009 2010 2011

Payments percentage 

increase, 2008 to 2011

Coordination of Benefits Contractor $40,358,460 $41,794,506 $47,171,893 $41,999,996 4 

MSP Recovery Contractor 42,014,107 63,070,146 53,205,744 58,130,229 38

Workers’ Compensation Review 

Contractor

3,817,289 5,264,402 4,986,204 6,715,620 76

Total $86,189,856 $110,129,054 $105,363,841 $106,845,845 24

Source: GAO summary of CMS data.

Notes: “Payment” amounts and percentages are based on the amounts CMS obligated for the MSP 

contractors each fiscal year. A CMS official stated that the obligated amounts are an accurate 

reflection of the CMS payments made in each fiscal year to each MSP contractor. Total payments to 

the Coordination of Benefits Contractor and the MSP Recovery Contractor include payments for 

activities related to group health plan and non-group health plan MSP situations.

 

22“Payment” amounts are based on the amounts CMS obligated for the MSP contracts 

each fiscal year. A CMS official stated that the obligated amounts are an accurate 

reflection of the CMS payments made in each fiscal year to each MSP contractor.

CMS’s Payments to MSP 

Contractors Increased 

during the Initial 

Implementation of 

Mandatory Reporting
 

Page 18 GAO-12-333 Medicare Secondary Payer

Table 3: Percentage Increases in Medicare Secondary Payer (MSP) Non-Group Health Plan (NGHP) Workloads and Centers for 

Medicare & Medicaid Services (CMS) Payments to MSP Contractors, Fiscal Years 2008 through 2011

NGHP workload 

percentage increase

Total CMS payments to MSP contractors 

percentage increase 

Coordination of Benefits Contractora 176 4 

MSP Recovery Contractorb 102 38

Workers’ Compensation Review Contractorc 42 76

Source: GAO analysis of CMS and MSP contractor data.

Notes: “Payment” amounts and percentages are based on the amounts CMS obligated for the MSP 

contracts each fiscal year. A CMS official stated that the obligated amounts are an accurate reflection 

of the CMS payments made in each fiscal year to each MSP contractor. Total payments to the 

Coordination of Benefits Contractor and the MSP Recovery Contractor include payments for activities 

related to group health plan and NGHP MSP situations.

a

The workload measure used to calculate the percentage increase was the number of NGHP MSP 

situations voluntarily reported to the Coordination of Benefits Contractor.

b

The workload measure used to calculate the percentage increase was the number of NGHP cases 

established by the MSP Recovery Contractor.

c

The workload measure used to calculate the percentage increase was the number of Workers’ 

Compensation Medicare Set-Aside Arrangement proposals submitted to the Workers’ Compensation 

Review Contractor. The workload measure also includes submitted proposals that the Workers’ 

Compensation Review Contractor determined were ineligible for review.

In order to control costs and contractor workloads, CMS is taking steps to 

improve the overall efficiency of the MSP program. CMS officials told us 

that they intend to move the MSP program to more of a “self-service” 

model. In this model, NGHPs, attorneys, and beneficiaries could obtain or 

submit required information through contractor websites or contractor 

automated phone lines, rather than submitting information via mail or fax, 

or waiting to speak to a customer service representative, as has 

traditionally been the process. This may result in increased efficiencies in 

the MSP process, for example, by allowing both NGHP stakeholders and 

MSP contractors to receive necessary information more quickly. Officials 

estimated that these steps will be able to reduce the workload performed 

per case by the MSP contractors.

Medicare savings increased during the initial implementation of 

mandatory reporting for NGHPs, but an accurate estimate of savings 

could take years to determine because of the lag time between initial 

notification of MSP situations and recovery, the fact that not all reported 

situations result in recoveries, and the fact that mandatory reporting is still 

being phased in. MSP savings from known NGHP situations that CMS is 

able to track—including savings from claims denials and conditional 

payment recoveries—increased by about $124 million from fiscal year 

Medicare Savings 

Increased during the Initial 

Implementation of 

Mandatory Reporting, but 

the Total Impact on 

Savings Could Take Years 

to Determine
 

Page 19 GAO-12-333 Medicare Secondary Payer

2008 through fiscal year 2011. Savings attributable to liability insurance 

increased by the greatest amount during this time period, growing from 

about $342 million in fiscal year 2008 to about $448 million in fiscal year

2011. In addition to these savings, Medicare also avoids costs as a result 

of the use of MSAs. CMS only tracks cost-avoided savings attributable to 

approved WCMSA proposals, not other types of MSAs, and accounts for 

the savings by reporting the total WCMSA amounts approved each fiscal 

year.23 These numbers therefore represent the maximum cost-avoided 

savings that could potentially be realized through these WCMSAs in the 

future. See table 4 for the total amount of MSP savings from NGHP 

situations and WCMSAs approved from fiscal year 2008 through fiscal 

year 2011. Because of a change in CMS policy implemented in 2009, it is 

unclear to what extent the increases in approved WCMSA amounts can 

be attributed to mandatory reporting.24

 

23While this does not accurately project the year in which the savings would actually be 

incurred, it does provide some additional information about the extent to which Medicare is 

getting cost-avoided savings through the WCMSA process. CMS is not able to track 

savings attributable to WCMSAs that are not submitted to, and approved by, CMS.

24In June of 2009, CMS began independently calculating expenses for prescription drug 

treatments included in WCMSA proposals. Prior to that, WCMSA submitters had been 

using their own calculations for prescription drug treatments, and the conventions used to 

establish these prices varied among the submitters.
 

Page 20 GAO-12-333 Medicare Secondary Payer

Table 4: Medicare Savings from Medicare Secondary Payer (MSP) Situations Involving Non-Group Health Plans (NGHP) and 

Approved Workers Compensation Medicare Set-Aside Arrangement (WCMSA) Amounts, Fiscal Years 2008 through 2011 

NGHP MSP situation savingsa 2008 2009 2010 2011

Percentage increase, 

2008 to 2011

Workers’ compensation $136,907,844 $107,201,462 $169,960,944 $142,736,039 4 

No-fault insurance 258,728,298 248,181,610 326,282,034 271,117,941 5 

Liability insurance 341,702,138 323,768,272 424,568,902 447,889,979 31

Total $737,338,280 $679,151,344 $920,811,880 $861,743,959 17

Approved WCMSA amountsb $905,202,448 $1,125,261,415 $1,443,739,397 $1,102,662,414 22

Source: GAO summary of CMS data.

a

Savings attributable to MSP situations involving NGHPs were calculated by combining known, 

tracked savings from claims denials, recoveries, and CMS data matching activities to identify 

situations where another payer may be primary to Medicare and conducted with the Social Security 

Administration and Internal Revenue Service.

b

The total approved WCMSA amounts include the total amounts approved in each fiscal year, and 

represent the maximum cost-avoided savings that could potentially be realized through these

WCMSAs in the future. While this does not accurately project the year in which the savings would 

actually be avoided, it does provide some additional information about the extent to which Medicare is 

getting cost-avoided savings through the WCMSA process. CMS is not able to track savings 

attributable to WCMSAs that are not submitted to, and approved by, CMS.

While Medicare savings attributable to NGHP MSP situations have been 

increasing overall, it is too soon to determine the total impact that 

mandatory reporting will have on NGHP Medicare savings. Savings 

amounts have not increased as quickly as the overall increase in NGHP 

MSP situations reported to CMS. There are two reasons why this may be 

occurring. CMS officials told us that because it can take several years for

a case involving an NGHP MSP situation to be resolved, there is a delay 

between when increases are seen in the number of new situations 

reported and when increases are seen in the amounts of demands and 

recoveries. Additionally, since there is not necessarily a recovery demand 

issued for every NGHP situation reported, an increase in the number of 

reported cases will not necessarily result in a corresponding increase in 

recoveries. These MSP situations represent cost-avoided savings, but 

CMS officials told us that to the extent that these situations are working 

appropriately and CMS is not receiving claims, they have no way of 

knowing the savings associated with these situations.
 

Page 21 GAO-12-333 Medicare Secondary Payer

Within the process for MSP situations involving NGHPs, we identified key 

challenges related to contractor performance, demand amounts, aspects 

of mandatory reporting, and CMS guidance and communication. CMS 

has addressed, or is taking steps to address some, but not all, of these 

challenges.

Challenges related to the timeliness of the MSPRC and WCRC were 

identified, including recent significant increases in the time required to 

complete certain processes or tasks, and CMS reported taking steps to 

address the challenges with each of these contractors’ performance.

Problems related to the timeliness of the MSPRC have been identified, 

and several actions have been taken or are under way by CMS to 

address these problems. NGHPs and beneficiary advocates have cited 

performance problems with the MSPRC that include the length of time 

taken to answer phone calls and to issue demand letters after resolutions 

for an MSP situation were provided to the MSPRC. MSPRC data show 

that from fiscal year 2008 through fiscal year 2011 the average wait time 

for NGHP callers has increased from an average of less than 3 minutes to 

an average of more than 38 minutes. During that same period, the 

number of NGHP-related calls handled by the MSPRC’s customer service 

representatives increased from about 550,000 in fiscal year 2008 to about 

630,000 in fiscal year 2011, and the number of calls abandoned after 

31 seconds or more increased from about 30,000 in fiscal year 2008 to 

about 220,000 in fiscal year 2011. CMS officials told us that while the 

MSPRC did not have a specific performance standard for average call 

wait times in its contract, they found the current average wait time of over 

38 minutes for NGHP-related phone calls unacceptable.

In fiscal year 2011, the MSPRC averaged about 76 days to issue a 

demand letter when notice of settlement was the initial notification of the 

MSP situation to the MSPRC. If the MSPRC was aware of the MSP 

situation prior to receiving the notice of settlement, it averaged about 

48 days to issue a demand letter. Delays in issuing demand letters could 

result in delays in distributing funds from MSP situation resolutions to 

beneficiaries. CMS officials stated that the agency has a performance 

standard stating that the issuance of a demand letter within 20 days is 

CMS Is Addressing 

Some but Not All of 

the Key Challenges 

We Identified within

the Process for MSP 

Situations Involving 

NGHPs

CMS Is Taking Steps to 

Address Challenges 

Related to MSPRC and 

WCRC Timeliness

MSPRC Performance
 

Page 22 GAO-12-333 Medicare Secondary Payer

timely if the case was established prior to settlement and the initial 

conditional payment letter was issued.

CMS and MSPRC officials attributed some of the MSPRC’s performance 

challenges to higher-than-expected workloads. MSPRC officials attributed 

their inability to keep up with increased call volumes to a lack of 

resources, stating that since the contract’s inception they have not been 

adequately funded by CMS for their workloads. They stated that CMS has 

consistently underestimated the annual volume of calls the MSPRC would 

receive. CMS officials acknowledged that when the contract started in 

2006, at which time the MSP recovery tasks were transitioned from CMS 

claims contractors to the MSPRC, CMS underestimated the MSPRC 

workload. Officials said that just when the MSPRC was close to catching 

up from that transition, mandatory reporting was announced, which 

created a new, additional workload.

CMS reported that the agency was taking several steps intended to 

address MSPRC performance challenges. For example, CMS did not 

renew the contract with the entity that served as the MSPRC since 

October 1, 2006, and is planning to make a significant change to its 

current MSP contracting structure by combining the functions of the 

current COBC and MSPRC. CMS intends to streamline the MSP data and 

debt collection processes for Medicare stakeholders by establishing a 

centralized coordination of benefits and MSP recovery organization. CMS 

reports that this approach will allow the agency to minimize duplicative 

activities that were previously performed by both the COBC and MSPRC, 

provide a single point of contact for internal and external stakeholders, 

and consolidate MSP responsibility under one umbrella. CMS is also 

working to develop a web-based MSPRC portal, which will enable 

beneficiaires and beneficiaries’ representatives to, among other things, 

obtain information about their Medicare claim payments. Table 5 presents 

the steps CMS is taking to address MSPRC performance challenges and 

the anticipated results of taking these steps. Most of these steps were 

either implemented only recently or have not yet been implemented, 

therefore it is too soon to tell to what extent these functions currently 

performed by the MSPRC will improve as a result of these actions.
 

Page 23 GAO-12-333 Medicare Secondary Payer

Table 5: Steps the Centers for Medicare & Medicaid Services (CMS) Is Taking to Address Medicare Secondary Payer Recovery 

Contractor (MSPRC) Performance Challenges and the Anticipated Results 

Steps CMS is taking to address 

MSPRC performance challenges Anticipated results

Establishing a centralized coordination of 

benefits and Medicare Secondary Payer 

(MSP) recovery organization

Provide greater efficiency and oversight by: minimizing duplicative activities previously 

performed by both the Coordination of Benefits Contractor (COBC) and MSPRC and 

provide a single point of contact for internal and external stakeholders.

Contracted with current COBC to serve as 

the new interim MSPRC contractor 

Minimal disruption to the services provided to beneficiaries, attorneys, and non-group 

health plans (NGHP) while the details of the new combined COBC MSPRC contracts are 

worked out. 

Self-service MSPRC phone linea Reductions in call wait times. 

Improvements to MSPRC processes Improve the timely issuance of demand letters; the agency will continue to monitor these 

activities and make revisions as necessary. 

Develop MSPRC web portalb Reduce contractor workload and help relieve problems related to contractor 

responsiveness. 

Source: GAO analysis.

a

Through the self-service, automated phone line, stakeholders can obtain up-to-date conditional 

payment and demand amounts, as well as the dates the MSPRC issues letters.

b

The web-based MSPRC portal, which CMS anticipates will be implemented in July 2012, will allow 

the beneficiary, or beneficiary’s representative, to obtain information about Medicare’s conditional 

payments and input information about disputed claims (claims that the beneficiary asserts are 

unrelated to the MSP situation).

The average processing time for the WCRC to review WCMSA proposals 

has increased significantly over the past year and a half, resulting in 

delays in the resolution of MSP cases, and several actions have been 

taken or are under way by CMS that are intended to reduce processing 

time. According to WCRC data, the average processing time for all cases 

increased from 22 days in April 2010 to 95 days in September 2011 (see 

fig. 5).25

 

25These numbers do not include cases where the regional offices request the WCRC to 

conduct a re-review. CMS regional offices may, at their discretion, request that the WCRC 

perform a re-review of WCMSAs. This may occur if, for example, the regional office finds 

an error in the WCRC’s original review, or if the WCMSA submitter provides additional 

information after the WCRC’s review is complete that should have been considered during 

its initial review.

While the current WCRC contract does not include a 

performance standard related to the length of time for the WCRC to 

review submitted WCMSA proposals, WCRC officials told us they would 

like WCMSA reviews to be completed within 45 days. CMS and WCRC 

officials report that a number of factors contributed to the WCRC’s review 

process taking longer, including increased workload. For example, while 

in fiscal year 2011 the WCRC contract estimated that the WCRC would 

WCRC Performance
 

Page 24 GAO-12-333 Medicare Secondary Payer

review 1,700 WCMSA proposals each month, the WCRC received an 

average of about 2,400 WCMSA proposals per month and was able to 

review an average of about 2,100 per month. As a result, a backlog grew. 

According to WCRC data, over the past several years, an increasing 

number of submitted WCMSA proposals were determined by the WCRC 

to be ineligible for review, meaning that more of the WCRC’s time has 

been spent responding to ineligible proposals. Also, CMS reported that a 

change made to the data system used by the WCRC to process 

WCMSAs resulted in a decrease in system performance, which 

significantly increased review time from September 2010 through January 

2011, adding to the backlog of WCMSA proposals to be reviewed.

Figure 5: Workers’ Compensation Review Contractor (WCRC) Average Processing 

Time for Workers’ Compensation Medicare Set-Aside Arrangement Proposals, April 

2010 through September 2011

Several actions have been taken or are under way by CMS to reduce the 

average processing time for WCMSA proposal review. For example, in 

fiscal year 2011 CMS provided the WCRC with additional funding that 

enabled the WCRC to authorize overtime for its employees to attempt to 

decrease the existing backlog of submitted WCMSA proposals. CMS is 

also currently in the process of awarding a new WCRC contract. 

According to CMS officials, the new contract provides for an increased 
 

Page 25 GAO-12-333 Medicare Secondary Payer

estimated number of monthly WCMSA proposal reviews—increasing the 

number from 1,700 a month to from 2,000 to 2,500 a month. Additionally, 

CMS implemented a web-based portal—the WCMSA Portal 

(WCMSAP)—which is intended to improve the efficiency of the WCMSA 

submission process. The WCMSAP allows registered users, such as 

beneficiaries, attorneys, and insurance companies, to directly enter 

WCMSA case information electronically, upload documentation, and 

receive up-to-date case status information electronically. CMS conducted 

a pilot test with 10 WCMSA submitters that according to COBC officials, 

collectively represented 80 percent of all WCMSA submissions. We 

contacted the 10 WCMSA submitters that participated in the WCMSAP 

pilot, and they told us that the WCMSAP could improve the overall 

WCMSA submission and review process.26 The WCMSAP became 

available for use by all WCMSA submitters on November 29, 2011. 

Finally, CMS hired a contractor to conduct an assessment of its WCMSA 

process, which could result in recommendations to address related 

policies and procedures, such as the average processing time. CMS 

officials told us that they expected to receive a draft of the contractor’s 

report in March 2012, with a final report in June 2012.

We identified three key challenges related to demand and recovery of 

MSP amounts. They include challenges related to the timing of the final 

demand amounts, the cost-effectiveness in recovery efforts, and the 

amounts demanded in liability settlements. CMS officials reported that the 

agency was taking steps to address some, but not all, of these

challenges.

Stakeholders, such as attorneys and NGHPs, reported that because CMS 

does not provide a final demand amount prior to a settlement, they have 

difficulty determining an appropriate settlement amount, which delays 

settlements. CMS is taking several steps to address this challenge. 

NGHP stakeholders reported that it would be helpful if CMS could 

calculate a final demand amount that can be provided to concerned 

parties prior to settlement, rather than after settlement. CMS officials 

stated, however, that they do not know what the final demand amount will 

be because Medicare continues to make conditional payments up to the 

 

26CMS told us that WCMSA submitters will be able to continue to mail hard copies of 

WCMSA proposal submission documents to the COBC to process and forward to the 

WCRC for review even after the WCMSAP’s implementation. 

CMS Is Taking Steps to 

Address Some of the Key 

Demand and Recovery 

Challenges We Identified

Timing of Final Demand 

Amount
 

Page 26 GAO-12-333 Medicare Secondary Payer

settlement date.27

CMS is taking steps that may improve NGHP stakeholders’ ability to 

obtain or estimate Medicare’s demand amount prior to settlement. For 

example, as of September 30, 2011, beneficiaries can obtain the latest 

issued Medicare conditional payment amounts through an automated, 

self-service feature of the MSPRC phone line. In November 2011, CMS 

implemented an option for beneficiaries to pay Medicare a fixed 25 

percent of their settlement amount for certain liability situations involving a 

physical-trauma-based injury with settlement amounts of $5,000 or less.

CMS officials also noted that during settlement 

negotiations, beneficiaries can view all their claims paid to date by 

Medicare on the MyMedicare.gov website.

28

In December 2011, CMS announced an option for beneficiaries, 

beginning in February 2012, to self-calculate conditional payment 

amounts for liability insurance MSP situations with settlement amounts of 

$25,000 or less that involve physical-trauma-based injuries.29

CMS has sometimes spent more in administrative costs attempting to 

recover certain conditional payment amounts than the demands are 

actually worth, but has recently implemented two initial recovery 

thresholds and may consider additional thresholds once it has had an 

opportunity to review 2012 data. NGHP stakeholders provided an 

example of a demand letter issued by the MSPRC for an amount of 

The 

MSPRC will review the proposed self-calculated conditional payment 

amount and, if it finds the amount accurate, will respond with Medicare’s 

final conditional payment amount within 60 days.

 

27CMS does, however, have an alternate process it uses to calculate its recovery claim for 

certain situations which the agency refers to as global resolutions. In these cases, when 

CMS has determined it is cost effective to do so, CMS uses modeling to calculate 

Medicare’s recovery claim for a group of Medicare beneficiaries. For example, officials 

said that this modeling might be used in the instance of a group of Medicare beneficiaries 

who were injured as a result of taking a particular prescription drug.

28The beneficiary must also elect this option prior to the MSPRC issuing a demand letter, 

and the beneficiary must not have received, and not expect to receive, any other 

settlements related to the incident. 

29The beneficiary’s date of incident must have occurred at least 6 months before the 

beneficiary or the beneficiary’s representative submitted the proposed self-calculated 

conditional payment amount to the MSPRC. The beneficiary must also demonstrate that 

treatment has been completed and no further treatment is expected, and the beneficiary 

must settle within 60 days after the date of Medicare’s response with the final conditional 

payment amount.

Recovery Cost-effectiveness
 

Page 27 GAO-12-333 Medicare Secondary Payer

$1.59; one NGHP stakeholder noted seeing numerous examples of 

demand letters for amounts less than $5.00. MSPRC officials confirmed 

that they have traditionally pursued any recoveries the MSPRC was made 

aware of, regardless of the administrative costs to recover them. In 2004

we noted the importance of improving the cost-effectiveness of the MSP 

recovery process, and CMS concurred with our recommendations.30

CMS has already implemented two initial recovery thresholds, and is 

currently reviewing and evaluating its costs and recovery data. CMS 

officials report that they are considering implementing additional, higher 

recovery thresholds, if appropriate, that balance protecting Medicare’s 

interests and responding to the NGHP stakeholders’ concerns. For 

example, on June 30, 2011, CMS instructed the MSPRC to cease issuing 

demands for amounts of $25 or less. CMS officials told us that the agency 

selected the $25 threshold based on provisions in the Federal Claims 

Collection Act and on the MSPRC’s collection costs.

The 

cost-effectiveness of recovery has improved greatly. In 2004, we reported 

that CMS recovered only 38 cents for every dollar spent on recovery 

activities in fiscal year 2003, but in June 2011 CMS reported that MSP 

activities have provided an average rate of return on recoveries of 

$9.32 for each dollar spent since fiscal year 2008. NGHP stakeholders 

suggested that CMS should take an additional step to improve costeffectiveness by setting a recovery threshold based on the settlement 

amount that would likely yield a recovery amount at or above CMS’s cost 

to recover that money.

31

 

30See GAO, Medicare Secondary Payer: Improvements Needed to Enhance Debt 

Recovery Process, 

In addition, in 

September 2011 CMS announced that the agency would not act to 

recover certain liability settlements of $300 or less, based on a 

preliminary analysis of all NGHP recoveries, which determined that the 

MSPRC’s average recovery cost per NGHP case was between $150 and 

GAO-04-783 (Washington, D.C.: Aug. 20, 2004), 20-21.

31Among other things, the Federal Claims Collection Act permits the Secretary of Health 

and Human Services to end collection actions on certain claims when the cost of 

collecting such claims is likely to be more than the amount recovered. 31 U.S.C. 

§ 3711(a)(3). See also, 31 C.F.R. §§ 903.1-903.5. Additionally, the MSP statutory 

provision provides for the waiver of conditional payment requirements, including 

repayment, when the Secretary determines that such a waiver is in the best interests of 

Medicare. 42 U.S.C. § 1395y(b)(2)(B)(v).
 

Page 28 GAO-12-333 Medicare Secondary Payer

$200.32

NGHP stakeholders suggested that because CMS does not recognize the 

concept of proportionality in liability settlement situations a 

disproportionate share of liability settlement amounts may be paid to 

Medicare; however, CMS has a process that may sometimes address this 

challenge. The concept of proportionality in liability settlement amounts is 

relevant in situations when individuals and liability insurers agree to settle 

for less than the full amount of incurred expenses associated with the 

alleged incident, and therefore the amount of medical expenses to be 

reimbursed to an individual’s health plan is proportionally reduced. NGHP 

stakeholders said that CMS does not recognize this concept for MSP 

situations and instead wants 100 percent reimbursement of claims it paid. 

They assert that CMS should recognize proportionality in these situations 

and likewise proportionally reduce Medicare’s demand amount in these 

cases. NGHP stakeholders stated that if CMS does not proportionally 

reduce Medicare’s demand amount in these situations, it could leave 

beneficiaries without any compensation for issues such as pain and 

suffering or lost wages. However, CMS officials said that the concept of 

proportionality is in conflict with MSP provisions granting CMS a priority 

right of recovery, which entitles Medicare to full recovery for the expenses 

it paid up to the settlement amount. Nonetheless, CMS officials said that 

Medicare beneficiaries may contact the appropriate CMS regional office 

prior to settling a case to request a pre-demand compromise in the event 

that the demand amount would consume the entire settlement. CMS 

officials told us that they do not, however, advertise the availability of this 

option and do not keep data on how often compromises are requested or 

granted. Limited MSPRC data on those compromise requests of which 

the MSPRC is made aware suggest that about two out of every three 

compromise requests are approved by the reviewing CMS regional office.

CMS officials report that the agency will consider establishing 

additional recovery thresholds for certain NGHP situations once officials 

have had a chance to review 2012 data, which will include information on 

some liability MSP situations.

 

32CMS will not seek recovery of lump sum liability settlements of $300 or less that meet 

certain criteria—if the beneficiary’s settlement is related to an alleged physical-traumabased incident, the liability insurance (including self-insurance) settlement is for $300 or 

less, the beneficiary has not yet received and does not expect to receive any other 

payments related to the incident, and the MSPRC has not previously issued a recovery 

demand letter.

Demand Amounts in Liability 

Settlements
 

Page 29 GAO-12-333 Medicare Secondary Payer

We identified three key challenges related to aspects of mandatory 

reporting for NGHPs: determining whether individuals are Medicare 

beneficiaries, supplying diagnostic codes related to individuals’ injuries, 

and reporting all settlement amounts. CMS reported that it is taking steps 

to address some, but not all, of these challenges.

NGHP stakeholders reported difficulty in determining whether individuals 

are Medicare beneficiaries for the purposes of mandatory reporting, and 

CMS has taken a step to address the challenge and is considering 

another. NGHP stakeholders have reported difficulty obtaining the 

information needed from individuals involved in NGHP situations in order 

to determine whether an individual is a Medicare beneficiary, and whether 

the NGHP is therefore required to report the situation. In order to verify an 

individual’s Medicare eligibility, an NGHP either needs the person’s 

Medicare Health Insurance Claim Number (HICN) or the person’s Social 

Security number, first initial of the first name and last six characters of the 

last name, date of birth, and gender. NGHP stakeholders report that 

individuals are reluctant to surrender sensitive information, such as Social 

Security numbers, to NGHPs—particularly as there may be an adversarial 

relationship between the individual and the NGHP (i.e., that individual is 

suing the insurer or self-insured company). Without this information, the 

NGHP cannot verify whether the individual is a Medicare beneficiary and 

cannot submit the mandatory reporting record. Therefore, NGHP 

stakeholders also reported concerns that they could be subject to 

mandatory reporting noncompliance fines if not being able to obtain this 

information led to being unable to submit a mandatory reporting record.33

To assist NGHPs with this challenge, CMS has provided them with model 

language that they can use to document their unsuccessful attempts to 

obtain individuals’ HICNs or Social Security numbers. This model 

language is a sample statement to be signed by the individual indicating 

whether the individual is a Medicare beneficiary for use in cases when the 

NGHPs cannot otherwise determine the individual’s Medicare status. 

CMS has stated that if an individual refuses to furnish a HICN or Social 

Security number, and the NGHP reporting entity chooses to use this 

model language, CMS will generally consider the reporting entity 

 

33As of January 2012, CMS had not yet begun assessing these fines.

CMS Is Taking Steps to 

Address Some Key 

Challenges We Identified 

with Aspects of Mandatory 

Reporting 

Determining Whether 

Individuals Are Medicare 

Beneficiaries 
 

Page 30 GAO-12-333 Medicare Secondary Payer

compliant for purposes of mandatory reporting.34

Liability insurance representatives maintain that it is difficult for them to 

obtain the diagnostic information that CMS requires they report, and CMS 

officials told us that they were not considering eliminating any of the 

required data elements for mandatory reporting in the near future. Under 

mandatory reporting, NGHPs are required to report the International 

Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9)

diagnostic codes related to the claimant’s injury. However, liability 

insurers have historically not had access to such detailed information 

about a claimant’s injuries, and they report difficulty in obtaining these 

codes.

In addition, CMS 

officials stated that CMS and a number of other federal agencies are 

currently conducting internal studies to evaluate possible alternatives that 

could be used in lieu of Social Security numbers.

35

 

34CMS will consider the reporting entity compliant for purposes of mandatory reporting if a 

signed copy of the model language is obtained and retained (even if the individual is later 

discovered to be a Medicare beneficiary). With respect to cases where ongoing 

responsibility for medical items and services applies, CMS suggests that the model 

language be re-signed and dated at least once every 12 months and kept available on file 

by the NGHP. CMS notes that this process does not provide a “safe harbor” to any 

reporting entity attempting to use it to avoid reporting MSP data about an individual known 

to the reporting entity to be a Medicare beneficiary.

Prior to January 1, 2011, CMS allowed NGHPs to submit a text 

description of an individual’s injury in lieu of ICD-9 codes, but the text 

description is no longer allowed. Without ICD-9 codes, liability insurers 

are unable to submit a mandatory reporting record. CMS officials told us 

that NGHPs, including liability insurers, should be able to obtain ICD-9 

codes for the purposes of reporting. For example, they said that 

beneficiaries and their attorneys know the claims involved in their 

particular MSP situations and could share the claims with the NGHP. 

However, while this information is required to be reported, CMS may 

already have this information if the agency has already been notified of 

the MSP situation because the codes are required to create an MSP 

record within the CMS data systems. MSPRC officials told us that CMS 

was already aware of the MSP situations for about 90 percent of cases 

currently reported via mandatory reporting because MSP records were 

35ICD-9 codes are used by the Medicare claims contractors to determine whether specific 

Medicare claims should be denied or paid. NGHPs submitting incorrect ICD-9 codes could 

result in beneficiaries’ claims that are actually unrelated to their MSP situations being 

incorrectly denied.

Supplying Diagnostic Codes
 

Page 31 GAO-12-333 Medicare Secondary Payer

created within the CMS data systems. Therefore, CMS would already 

have had access to the related codes.

Some NGHP stakeholders assert that they should not have to report all 

liability settlements, as CMS may be able to recover very little from 

certain settlements,36

Nonetheless, CMS is evaluating its data and the agency is considering 

implementing reporting thresholds, if appropriate. However, CMS officials 

expressed concern that setting reporting thresholds could have 

unintended consequences. If thresholds were set at, for example, 

$25,000, then the NGHP industry might begin settling many cases at 

amounts just under $25,000 in order to avoid mandatory reporting. CMS 

officials reported that any determination of reporting thresholds should 

wait until liability reporting data are available so the data can be analyzed 

and an appropriate threshold set. CMS officials also note that the 

establishment of any mandatory reporting thresholds would not eliminate 

CMS’s recovery rights for settlements below the threshold.

and CMS is evaluating data to determine if 

appropriate reporting thresholds could be established. An official of an 

organization representing NGHPs has stated that liability settlements of 

less than $25,000 include a small portion of annual settlement payments 

but constitute a large number of individual claims. Therefore, the official 

suggested that liability NGHPs should not have to report these 

settlements to CMS as it would just increase the reporting burden on 

NGHPs while yielding small recovery amounts. However, recovery data 

show that for fiscal year 2011, the MSPRC issued almost 57,000 

demands for liability settlements under $25,000. These demands related 

to these settlements totaled almost $71 million, with an average demand 

amount of about $1,250.

 

36Not all liability settlements are currently required to be reported, and there is a phased-in 

schedule for liability reporting based on the total settlement amount. However, all 

settlements “over minimum threshold” are scheduled to begin reporting on January 1, 

2013. The current minimum reporting threshold is $5,000 for liability settlements with no 

ongoing responsibility for medical items and services. That threshold is currently 

scheduled to decrease over time and eventually will be eliminated.

Reporting on All Settlements
 

Page 32 GAO-12-333 Medicare Secondary Payer

We identified key challenges related to CMS guidance and 

communication of information on the MSP process, guidance on MSAs, 

and beneficiary rights and responsibilities related to MSP recoveries, 

resulting in communication of information that does not meet GAO 

standards for internal control. CMS has taken few steps to address these 

challenges.

The overall presentation and organization of MSP process guidance for 

situations involving NGHPs on the CMS website does not ensure that 

pertinent information can be identified by external stakeholders, including 

NGHPs. For example, there is no main web page for the MSP program. 

Instead, information relevant to the MSP process for situations involving 

NGHPs is categorized on the main Medicare home page in two separate 

sections—some MSP process information falls under “Coordination of 

Benefits” and other process information falls under “Medicare Secondary 

Payer Recovery.” This makes it difficult to find any recent developments 

or changes to the MSP process as a whole, as an individual has to check 

multiple web pages to locate recent news. Additionally, while CMS has 

created an MSP manual, there is no direct link to the manual under the 

Coordination of Benefits or Medicare Secondary Payer Recovery 

headings on the Medicare home page. Also, because CMS regularly 

updates its MSP policies and process by issuing memos or “alerts,” it is 

difficult to determine what the current policy is or what may have changed 

in the process.

CMS has issued guidance regarding WCMSAs, but finding current, official 

WCMSA guidance can be challenging, and CMS has issued little other 

MSA guidance. While CMS has a policy manual for describing the MSP 

process in general, no similar manual, or chapter in the MSP process 

policy manual, describes WCMSA policy. Further, while guidance in the 

form of memorandums related to WCMSAs exists, no manual or similar 

document currently exists to organize this guidance. The WCMSA-related 

memorandums are accessible on the CMS website, but are poorly 

organized, making it difficult to find memorandums on particular topics. As 

a result, NGHP stakeholders have reported that it is difficult to find 

updated WCMSA policies. However, CMS officials told us in January 

2012 that the agency was developing a WCMSA user manual that would 

be available through the CMS website. Stakeholders also said that the 

WCMSA review and approval criteria are not clear, and expressed a 

desire for CMS to make this information more transparent. Furthermore, 

CMS has established an e-mail address to accept questions regarding 

CMS Has Taken Few Steps 

to Address Challenges 

Related to Insufficient and 

Confusing CMS Guidance 

and Communication about 

NGHP MSP Situations

Overall MSP Process Guidance 

on the CMS Website

CMS Guidance regarding MSAs
 

Page 33 GAO-12-333 Medicare Secondary Payer

WCMSA submission policy, but the actual e-mail address is not well 

publicized and is difficult to find.

Additionally, while guidance exists for WCMSAs, CMS has issued very 

little guidance related to liability MSAs and NGHP stakeholders reported 

inconsistent handling of liability MSAs. CMS issued its first formal 

memorandum related to MSA for liability situations on September 29, 

2011, detailing when it would consider Medicare’s interests satisfied with 

respect to future medical expenses in liability settlements.37

CMS communications with beneficiaries regarding their rights and 

responsibilities in the MSP recovery process are not always sufficient or 

clear and CMS has taken few steps to address this challenge. 

Specifically, two letters sent to beneficiaries are not sufficient or clear with 

regard to the beneficiary’s rights to dispute unrelated claims. The rights 

and responsibilities letter, which is sent to beneficiaries by the MSPRC 

after it is notified of an MSP situation, does not make beneficiaries’ rights 

and responsibilities clear regarding their ability to dispute the conditional 

payments that the MSPRC identifies. While the letter notes that the 

But this is the 

only formal memorandum related to liability MSAs that CMS has 

provided. And unlike for WCMSAs, CMS does not have a formal review 

and approval process for liability or no-fault MSA arrangements. Upon 

request, some CMS regional offices will review liability or no-fault MSAs, 

but this is at the regional office’s discretion. NGHP stakeholders report 

variation in regional office response, including which regional offices will 

review liability MSAs, policies (such as setting thresholds for review), and 

regional office responsiveness. Regarding developing policies and 

procedures for liability MSAs, CMS officials report that the agency is 

working to operationalize policy regarding the reporting of future medical 

expenses in liability insurance situations, including an option to allow for 

an immediate payment to Medicare for future medical costs. This would 

provide an additional option for taking Medicare’s interests into account 

rather than the option of establishing an MSA. CMS officials did not report 

that they were taking any steps to address regional office variation in 

liability MSA review.

 

37CMS clarified that if the beneficiary’s treating physician certifies in writing that treatment 

for the alleged injury related to the liability insurance settlement has been completed as of 

the date of the settlement, and that future medical items and services for that injury will not 

be required, Medicare considers its interests satisfied with respect to future medical items 

and services for the settlement. 

CMS Communications with 

Beneficiaries 
 

Page 34 GAO-12-333 Medicare Secondary Payer

beneficiary should expect to receive a letter detailing the conditional 

payments Medicare has made to date, it does not explain that this letter 

may contain some unrelated claims and the beneficiary should review the 

document carefully. Furthermore, it does not explain that the beneficiary 

has the right to dispute any claims unrelated to the MSP situation. While 

CMS revised the rights and responsibilities letter in 2011, the revisions 

did not address these issues.38

Beneficiaries also receive a conditional payment letter, which CMS 

regards as a first step in determining conditional payments, but that is not 

made clear to the beneficiaries. Beneficiary advocates report that these 

letters often include charges for unrelated medical services. As a 

consequence, according to an attorney who represents Medicare 

beneficiaries, beneficiaries are often asked to return too great a portion of 

their settlements to Medicare. CMS officials stated that they consider the 

conditional payment letter the first attempt at determining the conditional 

payments based on the information the MSPRC has, and that they want 

the beneficiary and beneficiary’s attorney to help clarify which claims are 

related. They told us that the beneficiary is in the best position to clarify 

which claims are related, and that the MSPRC will work with the 

beneficiary and the beneficiary’s attorney prior to issuing the demand 

letter. However, while the conditional payment letter states that the 

beneficiary should inform the MSPRC if any of the identified conditional 

payments are inaccurate or incomplete, the language used in the 

conditional payment letter does not convey that the MSPRC will work with 

the beneficiary and the beneficiary’s attorney prior to issuing the demand 

letter. Additionally, the letter does not include that CMS may be willing to 

compromise its demand amount if it appears the conditional payments will 

consume the beneficiary’s entire settlement. The letter also does not 

include the beneficiary’s rights to appeal the amount of the MSP claim, as 

well as to seek a waiver of recovery, once the demand letter is issued. 

CMS did not report any plans to revise the language used in the 

conditional payment letter.

 

38CMS revised the rights and responsibilities letter by omitting a statement that Medicare 

should be repaid before funds disbursed for other purposes. The agency also added a 

statement that Medicare will not take any collection action if an appeal or waiver is 

pending.
 

Page 35 GAO-12-333 Medicare Secondary Payer

CMS has a responsibility to protect the Medicare Trust Funds by ensuring 

that funds owed the program are recovered. Mandatory reporting should 

increase CMS’s awareness of MSP situations and therefore increase 

recoveries and MSP savings. Thus far, the initial implementation of 

mandatory reporting for NGHPs has greatly increased the number of 

MSP NGHP situations reported to CMS. MSP savings have also shown 

increases and should continue to increase as mandatory reporting is fully 

implemented. However, the volume of liability settlements that have yet to 

be reported to CMS is unknown; therefore, the extent to which workloads,

recoveries, and savings will increase is also unknown.

As a result of mandatory reporting, some NGHPs, particularly liability 

insurers, are interacting with CMS for the first time. Some of these 

NGHPs and NGHP stakeholder groups have raised concerns about longstanding MSP process and policies. Additionally, mandatory reporting 

increased the MSP contractors’ workloads, leading to performance 

delays. CMS has been responsive to some of the concerns expressed by 

NGHPs, in particular by continuing to delay the start of mandatory 

reporting for various types of liability settlements. CMS has also 

evaluated and modified some of its long-standing MSP policies and 

procedures, and is in the process of considering additional changes and 

program improvements. However, because these changes are new or still 

being implemented, it is too soon to tell the effect that they will have on 

improving the MSP process. Additionally, there are several areas related 

to the MSP program and process that still need improvement.

In order to maximize its ability to protect the Medicare Trust Funds, 

CMS’s efforts to recover conditional payments when Medicare should not 

have been the primary payer need to be cost-effective. CMS recently 

implemented two recovery thresholds—a low, across-the-board threshold 

based in part on provisions in the Federal Claims Collection Act and a 

higher threshold that applies to certain liability MSP situations. CMS 

officials said the agency will consider setting additional recovery 

thresholds for certain NGHP situations once the agency has had a 

chance to review 2012 data. If recovery thresholds need to later be 

adjusted based on 2012 data, then CMS could make adjustments as 

appropriate. CMS could also improve program effectiveness by aligning 

mandatory reporting thresholds with recovery thresholds, once they are 

set.

Additionally, CMS has opportunities to improve the MSP program by 

reducing specific reporting requirements for NGHPs and improving 

communication with stakeholders. While CMS’s main goal with mandatory

Conclusions 
 

Page 36 GAO-12-333 Medicare Secondary Payer

reporting should be to obtain necessary information to pursue MSP 

recoveries, CMS could take steps to lessen the burden on NGHPs, 

without substantially increasing the burden on CMS or its contractors. 

Communication between CMS and various NGHP stakeholders, including 

beneficiaries, also needs improvement. Ensuring that these stakeholders 

have current, complete information so that they can understand the MSP 

process and policies, and their roles and responsibilities in the process, is 

essential for ensuring the overall effectiveness of the program.

We are making five recommendations to CMS to improve the 

effectiveness of the MSP program and process for NGHPs.

To ensure cost-effectiveness in the agency’s NGHP recovery process, we 

recommend that the Acting Administrator of CMS review recovery 

thresholds periodically for appropriateness to ensure that the agency’s 

recovery efforts are being conducted in the most cost-effective manner 

possible, and not require NGHPs to report on cases for which the agency 

will not seek any recovery.

To potentially decrease the administrative burden of mandatory reporting 

for NGHPs, we recommend that the Acting Administrator of CMS 

consider making the submission of ICD-9 codes an optional component of 

reporting for liability NGHPs.

To improve the agency’s communication regarding the MSP process for 

situations involving NGHPs. we recommend that the Acting Administrator 

of CMS take the following three actions:

• develop a centralized MSP program website, to include links to 

information about the various parts of the MSP process;

• develop guidance regarding liability and no-fault set-aside 

arrangements; and

• review and revise the correspondence with beneficiaries, such as 

letters sent during the recovery process, to ensure that beneficiary 

rights and responsibilities are more clearly communicated.

Recommendations for 

Executive Action
 

Page 37 GAO-12-333 Medicare Secondary Payer

We received written comments on a draft of this report from the 

Department of Health and Human Services on behalf of CMS. These 

comments are reprinted in appendix I.

CMS agreed with our recommendation to review recovery thresholds 

periodically for appropriateness and our three recommendations to 

improve the agency’s communication regarding the MSP process for 

situations involving NGHPs. CMS also agreed to consider our 

recommendation on potentially making the submission of ICD-9 codes an 

optional component of reporting for liability NGHPs. However, the agency 

also noted that about 95 percent of NGHPs reporting data to CMS have 

provided the required ICD-9 codes, and provided reasons why allowing 

text descriptions rather than ICD-9 codes could increase the burden on 

parties such as beneficiaries.

As agreed with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Secretary of Health 

and Human Services, the Acting Administrator of CMS, appropriate 

congressional committees, and other interested parties. In addition, the 

report will be available at no charge on the GAO website at 

http://www.gao.gov. 

If you or your staff have any questions about this report, please contact 

me at (202) 512-7114 or kingk@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix II.

Sincerely yours,

Kathleen M. King

Director, Health Care

Agency Comments
Appendix I: Comments from the Department of 

Health and Human Services

Page 38 GAO-12-333 Medicare Secondary Payer

Appendix I: Comments from the Department 

of Health and Human Services
Appendix I: Comments from the Department of 

Health and Human Services

Page 39 GAO-12-333 Medicare Secondary Payer
Appendix I: Comments from the Department of 

Health and Human Services

Page 40 GAO-12-333 Medicare Secondary Payer
Appendix I: Comments from the Department of 

Health and Human Services

Page 41 GAO-12-333 Medicare Secondary Payer
Appendix II: GAO Contact and Staff 

Acknowledgments

Page 42 GAO-12-333 Medicare Secondary Payer

Kathleen M. King, (202) 512-7114 or kingk@gao.gov

In addition to the contact named above, key contributors to this report 

were Gerardine Brennan, Assistant Director; Christina Ritchie; and Lisa 

Rogers. Laurie Pachter; Jessica C. Smith; and Jennifer Whitworth also 

provided valuable assistance.

Appendix II: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(290910)
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