	Background

CMS administers the Medicare program with the assistance of about 50  claims administration contractors. As part of their duties, contractors  deny claims that are the responsibility of other insurers. This comparison allows CMS to determine whether Medicare may have  mistakenly paid claims on behalf of the beneficiary. The recovery process is also constrained by  procedures that prevent contractors from maximizing their recoveries of  mistaken payments. To measure cost- effectiveness, we compared the amount that CMS spent on contractor  recovery activities for a given fiscal year with the amount recovered from  all cases that were opened during the same year—regardless of when the  funds were recovered. In that year, Medicare lost money on  EGHP recovery activities, recovering only 38 cents for every dollar spent. The number of new MSP EGHP debt cases has decreased by more than   80 percent in recent years, from 49,240 cases in fiscal year 2000 to 7,634  cases in fiscal year 2003. However, almost half of the contractors were assigned fewer than  50 cases. Moreover, CMS funded 8 contractors  that were not assigned any EGHP debt cases. Our review of EGHP debt cases revealed that, during  fiscal years 2000, 2001, and 2003, CMS neglected to transmit 2,364 cases to  the contractors, representing more than $28 million in potential mistaken  payments. As a result, no recovery  action was ever initiated for these cases. Efforts to Improve MSP Management Have Not Focused on EGHP Debt Cases

Recognizing the need to improve the coordination of its MSP recovery  efforts, CMS contracted for the development of a new recovery system— the Recovery Management and Accounting System (ReMAS)—in 1998. Once ReMAS  determines that Medicare has paid claims that were the primary  responsibility of another insurer, it will generate a case that can be  assigned to any contractor for recovery. To date, only the  initial software testing and validation for the liability and workers’  compensation components have been completed. The  remaining contractors that process MSP liability cases are scheduled to  implement ReMAS by October 2004. In addition, funding for these  activities is not always related to contractors’ workloads—in fiscal year  2003, almost half of the contractors received fewer than 50 cases to  process while 8 of these, which had a collective budget of more than   $1.8 million, received no cases at all. Plans to expand the  scope of ReMAS to recover debt associated with employer-sponsored  group health plans could ultimately address current operational  weaknesses, such as an inefficient distribution of workload and limited  coordination among contractors. Appendix I: Scope and Methodology

To assess the cost-effectiveness of the current system for recovering  Medicare Secondary Payer (MSP) debt, we analyzed information from two  CMS databases—the Contractor Administrative-Budget and Financial  Management (CAFM) system and the Mistaken Payment and Recovery  Tracking System (MPaRTS). To identify the agency’s efforts to enhance the MSP process, we reviewed  documents and interviewed CMS officials on CMS’s planned Recovery,  Management and Accounting System (ReMAS), a new CMS system for  MSP debt recovery activities that is under development.
Why GAO Did This Study

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).

What GAO Found

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.