Millions in Disabled Beneficiary Expenditures Shifted to Employers

HRD-91-24: Published: Apr 10, 1991. Publicly Released: Apr 10, 1991.

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Sarah F. Jaggar
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Pursuant to a legislative requirement, GAO determined the: (1) annual cost savings to Medicare from its becoming a secondary payer for certain disabled beneficiaries; and (2) effects of the secondary payment provision on employment and employment-based health coverage of disabled beneficiaries and their family members.

GAO found that: (1) Medicare saved about $322 million because of the provision; (2) Medicare could have saved an additional $148 million had the program not made erroneous payments as a primary payer for some health care services provided to ineligible beneficiaries; (3) Medicare saved about $83 million from the provision's effect on 55,000 disabled beneficiaries who had their own health coverage under employer-sponsored group health plans; (4) the provision had little adverse effect on disabled beneficiaries or their family members in terms of employment or the cost and availability of employer-sponsored health insurance; and (5) the secondary provision had little effect on the disabled, but some employers were contemplating changes that could adversely affect disabled employees.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: OBRA 1990 extended the sunset date until September 30, 1995, and OBRA 1993 extended it until September 30, 1998.

    Matter: Congress should consider permanent enactment of the Omnibus Budget Reconciliation Act (OBRA) of 1986 provision. Before taking this action, Congress should await the Health Care Financing Administration's final regulations related to determining employee status and assurance that the regulations employ only criteria establishing such status rather than factors indicative of such status.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: The Department of Health and Human Services (HHS) agreed with the recommendation and said it would issue regulations to implement it. OBRA 1993 removed the term "active individual" from the definition of secondary payer coverage for disabled beneficiaries. This has the effect of making the HHS regulatory definition moot.

    Recommendation: The Secretary of Health and Human Services should delete, from final regulations related to determining employee status for disabled individuals not currently working, factors indicative of such status.

    Agency Affected: Department of Health and Human Services


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