oversight

Medicare Secondary Payer: Additional Steps Are Needed to Improve Program Effectiveness for Non-Group Health Plans

Published by the Government Accountability Office on 2012-03-09.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

             United States Government Accountability Office

GAO          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




GAO-12-333
                                                March 2012

                                                MEDICARE SECONDARY PAYER
                                                Additional Steps Are Needed to Improve Program
                                                Effectiveness for Non-Group Health Plans
Highlights of GAO-12-333, a report to the
Ranking Member, Subcommittee on Health,
Committee on Ways and Means, House of
Representatives



Why GAO Did This Study                          What GAO Found
The Centers for Medicare & Medicaid             During the initial implementation of mandatory reporting for non-group health
Services (CMS) is responsible for               plans (NGHP), the workloads of and Centers for Medicare & Medicaid Services
protecting Medicare’s fiscal integrity.         (CMS) payments to Medicare Secondary Payer (MSP) contractors, and Medicare
Medicare Secondary Payer (MSP)                  savings, all increased. From 2008 through 2011, the NGHP workloads of all three
situations exist when Medicare is a             contractors CMS uses to implement the process for MSP situations—the
secondary payer to other insurers,              Coordination of Benefits Contractor (COBC), the Medicare Secondary Payer
including non-group health plans                Recovery Contractor (MSPRC), and the Workers’ Compensation Review
(NGHP), which include auto or other             Contractor (WCRC)—increased to varying degrees. For example, from 2008
liability insurance, no-fault insurance,
                                                through 2011, the number of NGHP MSP situations voluntarily reported to the
and workers’ compensation plans.
                                                COBC increased from about 142,000 to about 392,000, the number of NGHP
CMS attempts to recover Medicare
payments made that were the
                                                cases established by the MSPRC increased from about 238,000 to about
responsibility of NGHPs, but CMS has            480,000, and the number of Medicare set-aside proposals submitted to the
not always been aware of these MSP              WCRC increased from about 20,000 to almost 29,000. From 2008 through 2011,
situations. In 2007, legislation added          the total CMS payments to the MSP contractors increased by about $21 million,
mandatory reporting requirements for            and Medicare savings from known NGHP situations that CMS is able to track—
NGHPs that should enable CMS to be              including savings from claims denials and conditional payment recoveries—
aware of these situations. NGHPs                increased by about $124 million. The total impact of mandatory reporting on
reported concerns about the MSP                 Medicare savings could take years to determine for various reasons, including
process, and CMS delayed the start of           that mandatory reporting is still being phased in.
mandatory reporting by NGHPs, in part
because of these concerns. This report          Within the process for MSP situations involving NGHPs, GAO identified key
examines (1) how the initial                    challenges related to contractor performance, demand amounts, aspects of
implementation of mandatory reporting           mandatory reporting, and CMS guidance and communication. CMS has
for NGHPs has affected the workload             addressed or is taking steps to address some, but not all, of these challenges.
of and payments to MSP contractors,             •   Contractor performance. Challenges related to the timeliness of the MSPRC
and Medicare savings, and (2) key
                                                    and WCRC were identified, including significant increases in the time
challenges within the process for MSP
                                                    required to complete important tasks. CMS reported taking steps to address
situations involving NGHPs and the
steps CMS is taking to address those
                                                    the challenges with each of these contractors’ performance.
challenges. GAO reviewed relevant
MSP-related documents and data on               •   Demand and recovery issues. Challenges were identified related to the
MSP costs, workload, Medicare                       timing of demand amounts, the cost-effectiveness of recovery efforts, and the
savings, and contractor performance.                amounts of Medicare demands from liability settlements. CMS reported
GAO also interviewed CMS officials,                 taking steps to address some, but not all, of these challenges.
MSP contractor officials, and NGHP
stakeholders.                                   •   Mandatory reporting. Key challenges were identified with certain aspects of
                                                    mandatory reporting: determining whether individuals are Medicare
What GAO Recommends                                 beneficiaries, supplying diagnostic codes related to individuals’ injuries, and
To improve the MSP program, GAO is                  reporting all liability settlement amounts. CMS reported taking steps to
making recommendations to improve                   address some, but not all, of these challenges.
the cost-effectiveness of recovery,
decrease the reporting burden for               •   CMS guidance and communication. Key challenges were identified related to
NGHPs, and improve communications                   CMS guidance and communication about the MSP process, guidance on
with NGHP stakeholders. CMS agreed                  Medicare set-aside arrangements, and beneficiary rights and responsibilities.
with these recommendations.                         CMS has taken few steps to address these challenges.
View GAO-12-333. For more information,          While CMS has taken, or reported it is in the process of taking, additional steps
contact Kathleen M. King at (202) 512-7114 or
kingk@gao.gov.                                  to address these key challenges, there are several areas related to the MSP
                                                program and process that still need improvement.
                                                                                         United States Government Accountability Office
Contents


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




              Page i                                   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



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          Page ii                                             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 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.

                                   Until 1980, Medicare was the primary payer in all situations involving
                                   Medicare beneficiaries except those covered by workers’ compensation. 2
                                   In 1980, Medicare became a secondary payer in all instances to non-
                                   group health plans (NGHP), which include auto or other liability




                                   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.
                                   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 1                                             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 2                                                 GAO-12-333 Medicare Secondary Payer
and GHPs with respect to MSP situations that should enable CMS to be
aware of MSP situations. 6 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.

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.

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 3                                             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 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


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.
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 4                                               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 Government 10 and the related Internal
Control Management and Evaluation Tool. 11 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.

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.



10
  GAO, 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.
11
 GAO, Internal Control Management and Evaluation Tool, GAO-01-1008G (Washington,
D.C.: August 2001).




Page 5                                            GAO-12-333 Medicare Secondary Payer
                           Medicare’s payments in MSP situations can vary depending on the
Background                 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 in MSP   Medicare payments can vary in different MSP situations. In most MSP
Situations Involving       situations involving NGHPs, Medicare will pay initially for medical
NGHPs                      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 Once a resolution is reached
                           between the beneficiary and the NGHP, Medicare will seek to recover any
                           conditional payments made.

                           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




                           12
                             CMS 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.




                           Page 6                                            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).


Roles of CMS and CMS   CMS oversees all MSP activities and administers the MSP program,
Contractors in MSP     through activities such as developing program policy and guidance. In
Activities             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


                       13
                         In 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.
                       14
                         See 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.




                       Page 7                                            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 WCRC-
                                  recommended WCMSA amounts are forwarded to one of six CMS
                                  regional offices for final approval. 17


Process for MSP Situations   The process for MSP situations that involve NGHPs generally includes
Involving NGHPs              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




                             15
                               This 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.
                             16
                               The 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.
                             17
                               The six CMS regional offices that provide final approval of proposed WCMSA amounts
                             are Boston, Chicago, Dallas, Philadelphia, San Francisco, and Seattle.




                             Page 8                                              GAO-12-333 Medicare Secondary Payer
reached. 18 While the details vary by situation and the timing of notification
may vary, in general, the process contains the following components:

•    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.

•    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 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.


18
  Because 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.
19
  If 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 9                                            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 set-
    aside 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 10                                    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.




20
  Medicare 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.
21
  The 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 11                                               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 12                                          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 13                                          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 14                                        GAO-12-333 Medicare Secondary Payer
                                           During the initial implementation of mandatory reporting for NGHPs, the
MSP Contractor                             workloads of and CMS payments to MSP contractors, and Medicare
Workloads, Payments,                       savings, all increased. For example, since fiscal year 2008, CMS
                                           payments to the MSP contractors have increased by about $21 million
and Medicare Savings                       while Medicare savings from NGHP MSP situations—including savings
Increased during the                       from claims denials and conditional payment recoveries—have increased
Initial Implementation                     by about $124 million. However, because mandatory reporting is still
                                           being phased in, particularly for most liability settlements, it is too soon to
of Mandatory                               determine the full impact of its implementation.
Reporting for NGHPs
MSP Contractors’ NGHP                      CMS MSP contractors’ NGHP workloads increased during the initial
Workload Increased during                  implementation of mandatory reporting, and workloads are expected to
the Initial Implementation                 continue to increase as mandatory reporting is phased in. The NGHP
                                           workloads of all three MSP contractors increased to varying degrees
of Mandatory Reporting                     during the initial implementation of mandatory reporting. For example,
for NGHPs                                  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

                                                                                                                       Percentage increase,
MSP contractor workload measure                                    2008                  2009     2010         2011            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
                     a
Arrangement proposals 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.




                                           Page 15                                                        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 16                                   GAO-12-333 Medicare Secondary Payer
CMS’s Payments to MSP                  The total amount of CMS payments to the MSP contractors increased
Contractors Increased                  during the initial implementation of mandatory reporting. 22 Total CMS
during the Initial                     payments to the MSP contractors in fiscal year 2011 were about
                                       $21 million higher than payments in fiscal year 2008 (see table 2).
Implementation of
                                       Payments for the MSPRC’s services increased by the greatest amount
Mandatory Reporting                    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).

Table 2: Centers for Medicare & Medicaid Services (CMS) Payments to Medicare Secondary Payer (MSP) Contractors for
Fiscal Years 2008 through 2011

                                                                   Fiscal year
                                                                                                               Payments percentage
                                              2008                  2009             2010           2011      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            3,817,289            5,264,402           4,986,204      6,715,620                             76
Contractor
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.




                                       Page 17                                                   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                 Total CMS payments to MSP contractors
                                                                    percentage increase                                 percentage increase
                                  a
Coordination of Benefits Contractor                                                          176                                               4
                          b
MSP Recovery Contractor                                                                      102                                             38
                                      c
Workers’ Compensation Review Contractor                                                          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                          Medicare savings increased during the initial implementation of
Increased during the Initial              mandatory reporting for NGHPs, but an accurate estimate of savings
Implementation of                         could take years to determine because of the lag time between initial
                                          notification of MSP situations and recovery, the fact that not all reported
Mandatory Reporting, but                  situations result in recoveries, and the fact that mandatory reporting is still
the Total Impact on                       being phased in. MSP savings from known NGHP situations that CMS is
Savings Could Take Years                  able to track—including savings from claims denials and conditional
to Determine                              payment recoveries—increased by about $124 million from fiscal year



                                          Page 18                                                          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




23
  While 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.
24
  In 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 19                                             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

                                                                                                                  Percentage increase,
                              a
NGHP MSP situation savings                 2008                   2009              2010                 2011             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
                          b
Approved WCMSA amounts            $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 20                                                    GAO-12-333 Medicare Secondary Payer
                         Within the process for MSP situations involving NGHPs, we identified key
CMS Is Addressing        challenges related to contractor performance, demand amounts, aspects
Some but Not All of      of mandatory reporting, and CMS guidance and communication. CMS
                         has addressed, or is taking steps to address some, but not all, of these
the Key Challenges       challenges.
We Identified within
the Process for MSP
Situations Involving
NGHPs
CMS Is Taking Steps to   Challenges related to the timeliness of the MSPRC and WCRC were
Address Challenges       identified, including recent significant increases in the time required to
Related to MSPRC and     complete certain processes or tasks, and CMS reported taking steps to
                         address the challenges with each of these contractors’ performance.
WCRC Timeliness
MSPRC 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


                         Page 21                                     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 22                                      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       Provide greater efficiency and oversight by: minimizing duplicative activities previously
benefits and Medicare Secondary Payer            performed by both the Coordination of Benefits Contractor (COBC) and MSPRC and
(MSP) recovery organization                      provide a single point of contact for internal and external stakeholders.
Contracted with current COBC to serve as         Minimal disruption to the services provided to beneficiaries, attorneys, and non-group
the new interim MSPRC contractor                 health plans (NGHP) while the details of the new combined COBC MSPRC contracts are
                                                 worked out.
                                a
Self-service MSPRC phone line                    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.
                            b
Develop MSPRC web portal                         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).


WCRC Performance                             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 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


                                             25
                                                These 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.




                                             Page 23                                                    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 24                                      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.


CMS Is Taking Steps to     We identified three key challenges related to demand and recovery of
Address Some of the Key    MSP amounts. They include challenges related to the timing of the final
Demand and Recovery        demand amounts, the cost-effectiveness in recovery efforts, and the
                           amounts demanded in liability settlements. CMS officials reported that the
Challenges We Identified   agency was taking steps to address some, but not all, of these
                           challenges.

Timing of Final Demand     Stakeholders, such as attorneys and NGHPs, reported that because CMS
Amount                     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


                           26
                            CMS 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.




                           Page 25                                           GAO-12-333 Medicare Secondary Payer
                              settlement date. 27 CMS officials also noted that during settlement
                              negotiations, beneficiaries can view all their claims paid to date by
                              Medicare on the MyMedicare.gov website.

                              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. 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 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.

Recovery Cost-effectiveness   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



                              27
                                CMS 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.
                              28
                                The 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.
                              29
                                The 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.




                              Page 26                                              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 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 cost-
effectiveness 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.

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. 31 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




30
 See GAO, Medicare Secondary Payer: Improvements Needed to Enhance Debt
Recovery Process, GAO-04-783 (Washington, D.C.: Aug. 20, 2004), 20-21.
31
  Among 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 27                                            GAO-12-333 Medicare Secondary Payer
                              $200. 32 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.

Demand Amounts in Liability   NGHP stakeholders suggested that because CMS does not recognize the
Settlements                   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.




                              32
                                CMS 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-trauma-
                              based 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.




                              Page 28                                               GAO-12-333 Medicare Secondary Payer
CMS Is Taking Steps to      We identified three key challenges related to aspects of mandatory
Address Some Key            reporting for NGHPs: determining whether individuals are Medicare
Challenges We Identified    beneficiaries, supplying diagnostic codes related to individuals’ injuries,
                            and reporting all settlement amounts. CMS reported that it is taking steps
with Aspects of Mandatory   to address some, but not all, of these challenges.
Reporting
Determining Whether         NGHP stakeholders reported difficulty in determining whether individuals
Individuals Are Medicare    are Medicare beneficiaries for the purposes of mandatory reporting, and
Beneficiaries               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




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




                            Page 29                                         GAO-12-333 Medicare Secondary Payer
                             compliant for purposes of mandatory reporting. 34 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.

Supplying Diagnostic Codes   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. 35 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




                             34
                               CMS 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.
                             35
                               ICD-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.




                             Page 30                                             GAO-12-333 Medicare Secondary Payer
                               created within the CMS data systems. Therefore, CMS would already
                               have had access to the related codes.

Reporting on All Settlements   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 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.

                               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.




                               36
                                 Not 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.




                               Page 31                                               GAO-12-333 Medicare Secondary Payer
CMS Has Taken Few Steps        We identified key challenges related to CMS guidance and
to Address Challenges          communication of information on the MSP process, guidance on MSAs,
Related to Insufficient and    and beneficiary rights and responsibilities related to MSP recoveries,
                               resulting in communication of information that does not meet GAO
Confusing CMS Guidance         standards for internal control. CMS has taken few steps to address these
and Communication about        challenges.
NGHP MSP Situations
Overall MSP Process Guidance   The overall presentation and organization of MSP process guidance for
on the CMS Website             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 Guidance regarding MSAs    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




                               Page 32                                    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 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.

CMS Communications with   CMS communications with beneficiaries regarding their rights and
Beneficiaries             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



                          37
                            CMS 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.




                          Page 33                                                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.




38
  CMS 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 34                                              GAO-12-333 Medicare Secondary Payer
              CMS has a responsibility to protect the Medicare Trust Funds by ensuring
Conclusions   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 long-
              standing 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


              Page 35                                    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
Recommendations for   effectiveness of the MSP program and process for NGHPs.
Executive Action
                      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.




                      Page 36                                     GAO-12-333 Medicare Secondary Payer
                  We received written comments on a draft of this report from the
Agency Comments   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




                  Page 37                                     GAO-12-333 Medicare Secondary Payer
Appendix I: Comments from the Department
             Appendix I: Comments from the Department of
             Health and Human Services



of Health and Human Services




             Page 38                                       GAO-12-333 Medicare Secondary Payer
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
                  Appendix II: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Kathleen M. King, (202) 512-7114 or kingk@gao.gov
GAO Contact
                  In addition to the contact named above, key contributors to this report
Staff             were Gerardine Brennan, Assistant Director; Christina Ritchie; and Lisa
Acknowledgments   Rogers. Laurie Pachter; Jessica C. Smith; and Jennifer Whitworth also
                  provided valuable assistance.




(290910)
                  Page 42                                   GAO-12-333 Medicare Secondary Payer
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