Incentives Needed to Assure Private Insurers Pay Before Medicare

HRD-89-19: Published: Nov 29, 1988. Publicly Released: Nov 29, 1988.

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GAO reviewed the Health Care Financing Administration's (HCFA) and Medicare contractors' actions in response to GAO recommendations on erroneous payments of claims for which Medicare was not responsible. GAO focused on: (1) contractor incentives to improve billing procedures; and (2) controls to ensure that Medicare acted as secondary payer when insurance companies had primary payment responsibility.

GAO found that: (1) while Medicare saved about $1.4 billion in fiscal year 1987 by identifying secondary payment claims, HCFA indicated that implementation of secondary payer initiatives fell short of expectations because many insurers were not identified as primary payers; and (2) one contractor did not reimburse Medicare for an estimated $10 million in erroneous claims for which it had primary responsibility. GAO also found that HCFA contractors: (1) lacked adequate incentives to comply with the secondary payer provisions; (2) submitted incomplete or inaccurate data for inclusion in the HCFA database for identifying and billing beneficiaries' other insurers; (3) failed to use available data to identify and seek recoveries for erroneous payments; (4) did not follow HCFA requirements for obtaining data on new beneficiaries' insurance coverage before paying claims; and (5) have no incentives to establish secondary payment controls, since there is no penalty for erroneous payments and the contractors profit by not making payments for which they have primary responsibility.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: The Omnibus Budget Reconciliation Act of 1989 authorized collection of double damages from insurers who violate Medicare secondary payer provisions.

    Matter: Congress should amend the Social Security Act to establish the government's right to collect twice the amounts owed from insurers that do not properly treat Medicare as the secondary payer.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: The HCFA 1990 Contractor Performance Evaluation Program includes standards for RDES.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to establish Contractor Performance Evaluation Program standards and use them to evaluate the effectiveness with which contractors implement and use the controls HCFA designed to prevent Medicare from erroneously paying as the primary payer. These standards should measure the extent to which contractors: (1) provide to the Regional Data Exchange System (RDES) acceptably formatted and complete quarterly data on beneficiaries that have insurance coverage other than Medicare; (2) use RDES data to update their insurance files, help prevent future payment errors, and make timely recovery of previous overpayments; and (3) comply with HCFA instructions for researching claims of new beneficiaries for private insurance coverage.

    Agency Affected: Department of Health and Human Services


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