Medicare Secondary Payer:

Improvements Needed to Enhance Debt Recovery Process

GAO-04-783: Published: Aug 20, 2004. Publicly Released: Sep 20, 2004.

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Last year, employer-sponsored group health plans (EGHP) were responsible for most of the nearly $183 million in outstanding Medicare secondary payer (MSP) debt. MSP debts arise when Medicare inadvertently pays for services that are subsequently determined to be the financial responsibility of another. The Centers for Medicare & Medicaid Services (CMS) administers Medicare with the assistance of about 50 contractors that, as part of their duties, are required to recover MSP debt. GAO was asked to determine whether Medicare contractors are appropriately recovering MSP debt. GAO (1) assessed the cost-effectiveness of the current debt recovery system and (2) identified CMS's plans to enhance the recovery process. GAO analyzed workload and budget information and assessed plans to develop a new debt recovery system--the Recovery Management and Accounting System (ReMAS).

Medicare's system for recovering MSP debt from EGHPs is no longer cost-effective, with CMS recovering only 38 cents for every dollar it spent on recovery activities in fiscal year 2003. This is largely due to workload and budgetary factors. While the number of new debt cases referred to contractors has declined by more than 80 percent since fiscal year 2000, CMS's budget for contractor recovery activities has remained relatively unchanged. As a result, contractors were funded at a level that exceeded their workload. Almost half of the contractors that CMS funded to process the 7,634 cases associated with the fiscal year 2003 workload were assigned fewer than 50 cases--and eight were not assigned any. The current system is also constrained by procedures that prevent contractors from maximizing recoveries. For example, CMS has instructed contractors not to pursue cases in which the amount of mistaken payments made on behalf of the same beneficiary is less than $1,000. In addition, CMS neglected to transmit more than 2,000 cases to the contractors--which depend on these transmittals to initiate recoveries--during fiscal years 2000, 2001, and 2003. CMS is developing a new recovery system--ReMAS--to enhance the MSP recovery process. This system has the potential to help increase savings, provide CMS with greater flexibility in distributing the workload, and simplify the collection of MSP debt. ReMAS is designed to identify relevant mistaken payments and will generate a case that can be assigned to any contractor for recovery--not only the contractor that processed the mistakenly paid claims. However, ReMAS has been under development for over 6 years and is currently only being used for liability and workers' compensation recoveries by a fraction of the contractors. Pilot testing of ReMAS on EGHP cases will not begin until October 2004.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: The administrator of CMS should develop detailed plans and time frames for expanding ReMAS to include EGHP cases, and expedite implementation of the EGHP component of ReMAS.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

    Status: Closed - Implemented

    Comments: In July 2007, CMS reported that the employer-sponsored group health plans (EGHP)and non-EGHP functionally within the Recovery Management and Accounting System (ReMAS)has been implemented. On October 1, 2006, CMS awarded a contract to process all Medicare Secondary Payer(MSP)EGHP and non-EGHP recoveries. The MSP Recovery Contractor (MSPRC), Chickasaw Nation Industries, Inc. Administration Services, LLC (CNI), will consolidate all post-payment MSP services previously administered by over 40 individual Medicare intermediary and carrier contractors. The MSPRC became fully operational on October 2, 2006.

    Recommendation: The administrator of CMS should improve the efficiency of MSP payment recovery activities by consolidating the EGHP workload under a smaller number of contractors and ensuring that contractor budgets for EGHP recovery activities more closely reflect their actual workloads.

    Agency Affected: Department of Health and Human Services: Centers for Medicare and Medicaid Services

    Status: Closed - Implemented

    Comments: In July 2007, CMS reported that it awarded a $44.6 Million cost-plus-award-fee contract for Medicare Secondary Payer Recovery Contractor (MSPRC) services to Chickasaw Nation Industries, Inc. Administration Services, LLC (CNI). The MSPRC will consolidate all post-payment Medicare Secondary Payer (MSP) services previously administered by over 40 individual Medicare intermediary and carrier contractors. The MSPRC contract became fully operational on October 2, 2006.

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