Memorandum to:
Under Secretary for Health (10)
Under Secretary for Benefits (20)
Assistant Secretary for Management (004)
1. The Office of Inspector General conducted a review of selected aspects of the Department of Veterans Affairs (VA) Veterans Health Administration's (VHA) Medical Care Cost Recovery (MCCR) program. The purpose of the review was to assess VHA's collection activities for first party MCCR program debts and identify opportunities to enhance collection results. First party debts are debts owed primarily by veterans for various copayment charges incurred for treatment of nonservice-connected conditions.
2. During Fiscal Year (FY) 1994, MCCR program staff collected nearly $41.2 million in first party medical care billings. Also during FY 1994, MCCR program staff wrote off first party debts totaling approximately $10.7 million. As of September 30, 1994, VHA had 1,867,000 delinquent first party debts totaling $52.2 million. In accordance with VA policy, except for initial billing and sending computer generated collection letters to debtors, delinquent first party debts are generally not pursued for collection. VA policy also provides that delinquent first party debts be written off after being referred twice to the IRS for offset with no recoveries.
3. We found that management action is needed to correct and prevent improper billings to VA pensioners and service-connected veterans. We also concluded that valid first party collections could be increased by over $6.5 million annually, if action was taken to change existing MCCR debt write-off policies and expedite the planned transfer of first party delinquent debts to Veterans Benefits Administration's (VBA) Debt Management Center (DMC) for collection. In addition to enhancing collections, another benefit of consolidating first party delinquent debts at the DMC would be that the DMC could provide a final safeguard to prevent improper collection activity by further validating veterans' eligibility.
4. We recommended that: (a) the Under Secretary for Health, the Under Secretary for Benefits, and the Assistant Secretary for Management develop a joint timetable to expedite the planned transfer of first party delinquent MCCR debts to VBA's DMC for collection, (b) the Under Secretary for Health (1) correct improper billings to disabled veterans to include canceling and refunding payments of improper billings, and (2) prevent future improper billings by correcting Decentralized Hospital Computer Program system Compensation and Pension status codes, and (c) the Under Secretary for Health and the Assistant Secretary for Management issue a directive to VHA facilities not to write-off MCCR debts pending consolidation of debt collection at the DMC.
5. The Under Secretary for Benefits, and the Assistant Secretary for Management concurred with the findings and monetary benefits and provided acceptable implementation plans for the recommendations. Based on our discussions, VHA generally concurred with the findings, recommendations, and monetary benefits. However, because VHA was unable to provide written comments after an extended comment period, we consider the recommendations unresolved until final written comments are provided.
MICHAEL G. SULLIVAN
Assistant Inspector General
for Auditing
For Official Use Only
Public Availability To Be
Determined Under Title 5
U.S.C., Section 552
Memorandum to: Under Secretary for Health (10) Under Secretary for Benefits (20) Assistant Secretary for Management (004) page i
RESULTS AND RECOMMENDATIONSVA Should Systematically Correct Eligibility Data and Consolidate the Collection of First Party Debts page 1
Conclusion page 5
Recommendations page 5
APPENDIXESI OBJECTIVES, SCOPE AND METHODOLOGY page 8
II BACKGROUND page 9
III DETAILS OF AUDIT - Sampling Plan and Results page 11
IV MONETARY BENEFITS IN ACCORDANCE WITH IG ACT AMENDMENTS page 12
V UNDER SECRETARY FOR BENEFITS COMMENTS page 13
VI ASSISTANT SECRETARY FOR MANAGEMENT COMMENTS page 15
VII FINAL REPORT DISTRIBUTION page 18
VA Should Systematically Correct Eligibility Data and Consolidate the Collection of First Party Debts
Management action is needed to correct and prevent improper Medical Care Cost Recovery (MCCR) billings and collections. Because medical facility eligibility data was inaccurate, veterans were improperly billed and their debts were subject to referral to the Internal Revenue Service (IRS) for offset of their tax refunds. The audit also showed that collections of valid debts could increase by over $6.5 million annually, if current MCCR debt write-off policies were changed and Department of Veterans Affairs' (VA) management expedited the planned transfer of first party delinquent debts to Veterans Benefits Administration's (VBA) Debt Management Center (DMC) for collection. In addition to enhancing collections, another benefit of expediting the consolidation of first party delinquent debts at the DMC would be the ability of the DMC to provide a final safeguard to prevent improper collection activity by further validating veterans' eligibility.
MCCR Program Operations
Current law requires VA to collect fees (copayments) for medical care and medications relating to medical services provided certain veterans and other individuals (nonveterans) for nonservice-connected (NSC) conditions. Veterans who are responsible for first party copayments have been means tested and have annual incomes of $20,469 or more. Veterans receiving VA pension or compensation for service-connected (SC) disabilities evaluated 50 percent or higher are exempt from MCCR program payments except for certain NSC dental services. Veterans receiving compensation for SC disabilities evaluated less than 50 percent are exempt from MCCR program payments except for medication copayments for NSC conditions and certain NSC dental services.
First party debts are established by MCCR program staff at 1661 Veterans Health Administration (VHA) medical facilities. MCCR staff need to have accurate income and compensation and pension (C&P) benefit award status information for each individual receiving medical services to ensure appropriate billings are made. VA refers delinquent debts over $25 to the IRS for collection by offset of tax refunds. During Fiscal Year (FY) 1994, IRS offsets for tax year 1993 refunds recovered $1.7 million from 118,000 accounts valued at $28.8 million. During FY 1995, IRS offsets for tax year 1994 refunds recovered about $3 million through July 1995 from 150,000 accounts valued at $35.5 million. Agencies are required to exhaust administrative collection procedures prior to referring the debts to IRS. The offset agreement with IRS requires VA to ensure debts are valid before referral to IRS.
VA management is planning to consolidate the collection of delinquent first party MCCR debts at the DMC. According to VA policy, a debt is classified as delinquent when it is unpaid after 30 days. MCCR program management consider a MCCR debt to be eligible for referral to IRS when it is unpaid after 90 days. The age of the debts to be collected by the DMC was being negotiated by VA management. We concluded that VA management should expedite the planned consolidation. We believe the planned consolidation will help prevent improper billing and erroneous collections of MCCR debts. Additionally, the DMC will be able to enhance collections of delinquent MCCR debts through efficient use of administrative collection tools prior to referring them to the IRS.
Veterans Were Improperly Billed Because DHCP Records Were Inaccurate
Our match of VHA delinquent first party debts referred to the IRS in 1993 and 1994 with VBA's C&P file identified 19,503 veterans who were receiving VA pension benefits, but had been billed $2.7 million for medical services. Current law exempts VA pensioners from being billed under the MCCR program except for certain dental services. Our match of VHA and VBA files also identified 74 veterans receiving compensation benefits, who had been billed $338,000. These veterans had debts ranging from $1,027 to $46,700. We believe SC veterans, who are exempt from MCCR program payments except for certain dental services and NSC medication copayments, would be unlikely to have valid charges over $1,000. We found that veterans were improperly billed because:
The veterans' Decentralized Hospital Computer Program (DHCP) records had not been updated by facility staff to show the veterans' correct C&P status, therefore VHA staff were unaware the veterans were receiving C&P benefits. For example:
A veteran receiving compensation received medical treatment at a VHA facility and debts totaling $6,675 were established for ineligible hospitalization by VHA staff. The patient's debts were referred to IRS for offset of tax year 1992 and 1993 refunds. The facility collected through tax refund offset $930.81 in February 1993 and $928.72 in April 1994. VHA staff were unaware the veteran was receiving compensation benefits. Facility management stated that debts would be canceled and amounts previously offset would be refunded.
The veterans' DHCP records had been updated to show they were receiving pension but staff did not cancel medication copayment debts for prescriptions received after October 29, 1992 (when pensioners were exempted from medication copayments) and the date the DHCP records were updated. For example:
A veteran was awarded pension in October 1991. The medical facility staff did not correct the eligibility information in the veteran's DHCP record until June 6, 1994. When the veteran's DHCP record was corrected, facility staff did not cancel debts totaling $225 established for medication copayments for prescriptions filled after October 29, 1992. Facility staff canceled the debts as a result of our review.
Actions to Correct Billings Have Been Initiated
During the audit, we provided information to 162 VHA facilities regarding all potentially improperly billed veterans that we identified. VHA facilities have taken corrective action which included, updating DHCP system C&P eligibility status, canceling improper MCCR debts, and refunding payments collected from improper billings. We found that 162 facilities have reported that 6,821 veterans, with debts valued at $812,698 were improperly billed. Improperly billed debts totaling $741,867 were canceled and refunds totaling $70,831 have been made to 1,558 veterans. Facility staff have corrected the DHCP system C&P eligibility status in 4,721 cases. Although prompt action by facilities will prevent these veterans from being improperly billed in the future, many veterans whose debts were less than $25 were not referred to IRS for offset of tax years 1993 and 1994, may also have been improperly billed and may be due refunds from the VA.
Measures to Prevent Improper Billings and Collections Need To Be Taken
We believe the Atlanta Income Verification Match (IVM) Center could assist VHA medical facilities in correcting DHCP eligibility data. The IVM Center has developed a centralized database for income verification match purposes. Eligibility information for veterans whose eligibility for VA medical care is based on income is downloaded from each VA medical facility's DHCP into the IVM database. An initial step in the income verification match process at the IVM Center is the verification of veterans' C&P eligibility status through the Hospital Inquiry (HINQ) database. Veterans' C&P status contained in the HINQ is updated weekly from VBA's C&P system. Changes in veterans' C&P eligibility are transmitted from the centralized IVM database into each facility's DHCP. Atlanta IVM management has advised us that they could verify all veterans' C&P eligibility status for each medical facility. This verification would improve the accuracy of veterans' DHCP eligibility data and help prevent future improper medical care billings. We believe VHA management should develop an action plan to prevent improper medical care billings by having the Atlanta IVM Center match each medical facility's DHCP file with the HINQ file to systematically correct veterans' DHCP status.
First Party Debt Collection Can Be Enhanced
The collection results of first party debts could be increased by over $6.5 million annually, if action was taken to change current MCCR debt write-off policies and the responsibility for collection was transferred to VBA's DMC.
About 47 percent of first party delinquent debts were written off
In accordance with VA Manual MP-4, Part VIII, except for initial billing and sending computer generated collection letters to debtors, facility MCCR program staff generally do not pursue collection of delinquent first party debts. VA policy also provides that delinquent first party debts be written off after being referred twice to the IRS for offset with no recoveries. A statistical sample of 300 delinquent debts, valued at $67,230, referred to the IRS for offset of 1993 tax refunds showed that all or a portion of 196 delinquent debts valued at $31,421 (47 percent) were written off in accordance with MCCR debt write-off procedures. Based upon these results, we project that $12.5 million of the $28.8 million in first party debts referred to IRS were written off. By writing off first party delinquent debts, VHA medical facilities have lost the opportunity to collect these debts through the administrative collection tools in place at the DMC. We believe MCCR debt write-off policies should be changed and VHA facilities directed not to write off MCCR debts pending consolidation of debt collection at the DMC.
(See Appendix III on page 11 for discussion of our statistical sampling plan and results.)
DMC has effective administrative tools to enhance collections
The DMC has provided collection services for VBA benefit program debts for over 20 years. The DMC is a centralized and automated collection center that efficiently processes the collection of a high volume of low dollar debts through voluntary payment and offset collection tools. During FY 1994, the DMC collected 13.4 percent or $384.6 million of VBA's accounts receivable totaling $2.86 billion. About $1.7 billion of these accounts receivable relate to loan guaranty debts which are often difficult to collect. For example during 1994, the DMC's collection rate for loan guaranty accounts receivable was 4.2 percent or $72 million. For the remaining accounts receivable of $1.1 billion, the DMC achieved a collection rate of about 28 percent or $313 million.
In contrast to the limited MCCR debt collection procedures, the DMC uses a variety of centralized and automated collection processes to collect VBA benefit program debts. Two of the most cost effective of these administrative debt collection tools are the recovery of delinquent debt through administrative offsets of C&P and Education benefit payments and federal employee salaries. Audit results of our match of MCCR delinquent debts referred to IRS for offset of tax year 1993 and 1994 refunds with VBA's C&P and Education payment file identified 50,139 debts, valued at $4.4 million, which were associated with veterans receiving compensation and education payments. We also found 2,890 debts, totaling $571,838, that were associated with VA employees. These debts could be efficiently collected by the DMC using the C&P and Education benefit and federal employee salary offset programs.
As of September 30, 1994, the total value of outstanding delinquent debts/MCCR accounts receivable was nearly $50 million. By transferring collection responsibility for these debts to the DMC, MCCR can administratively offset any debts associated with VA beneficiaries or federal employees. All remaining means test copayment medical care debts pertain to veterans who agreed to pay MCCR copayments and have incomes of at least $20,469 per year. Veterans with medication copayment debts have incomes of at least $12,855 per year. As a result, the collectibility of first party delinquent debts should be relatively higher than the average realized by the DMC on VBA's accounts receivable. By applying DMC's average collection rate of 13.4 percent, we conservatively estimate that VA could increase its collections of delinquent debts by about $6.5 million (13.4 percent x $50 million). As a result, VA management should expedite the planned consolidation of first party debt collection activity to the DMC.
Conclusion
We found that management action is needed to correct and prevent inappropriate billings to VA pensioners and service-connected veterans. We also concluded that first party collections could be increased by over $6.5 million annually, if action was taken to change existing MCCR debt write off policies and expedite the planned transfer of first party delinquent debts to the DMC for collections.
Recommendations
We recommend that:
a. The Under Secretary for Health, the Under Secretary for Benefits, and the Assistant Secretary for Management develop a joint timetable to expedite the planned transfer of first party delinquent MCCR debts to VBA's DMC for collection in an effort to both (1) prevent collection of improper billings of MCCR debts from C&P beneficiaries and (2) enhance collection of valid first party debts.
b. The Under Secretary for Health (1) ensure action is taken by medical facilities to immediately correct improper billings to include updating DHCP system C&P status, canceling invalid MCCR debts, and refunding payments of improper billings by C&P beneficiaries and (2) develop an action plan to prevent future improper billings by systematically correcting DHCP system C&P status codes. One option is to have the Atlanta IVM Center periodically match each medical facility's DHCP file with VBA's C&P file to systematically correct DHCP eligibility data.
c. The Under Secretary for Health and the Assistant Secretary for Management change existing MCCR debt write off policies and issue a directive to VHA facilities not to write off MCCR debts pending consolidation and collection action by the DMC.
Monetary impact associated with the recommendations is shown on Appendix IV on page 12.
Under Secretary for Health Comments
VHA was unable to provide written comments after an extended comment period was provided. Based on our discussions, VHA generally concurred with the findings, recommendations, and monetary benefits.
Office of Inspector General Comments
We consider the recommendations unresolved until final written comments are provided.
Under Secretary for Benefits Comments
The Under Secretary for Benefits concurred with the recommendations and stated the methodology used to estimate monetary benefits appeared to be reasonable.
Implementation Plan
The Under Secretary provided an implementation plan which indicated that VBA was coordinating the transfer of first party delinquent MCCR debts to VBA's DMC for collection with the offices of the Under Secretary for Health and the Assistant Secretary for Management. (See Appendix V on page 13 for the full text of the Under Secretary's comments).
Office of Inspector General Comments
The Under Secretary's implementation plan is acceptable. However, we consider the recommendations unresolved until final written comments are provided by VHA.
Assistant Secretary for Management Comments
The Assistant Secretary for Management concurred with the recommendations and indicated the estimated monetary benefits appeared to be reasonable.
Implementation Plan
The Assistant Secretary furnished an implementation plan which provided for working with VHA and VBA management to expedite the planned transfer of first party delinquent MCCR debts to VBA's DMC for collection and changing existing MCCR debt write off policies. (See Appendix VI on page 15 for the full text of the Assistant Secretary's comments).
Office of Inspector General Comments
The Assistant Secretary's implementation plan is acceptable. However, we consider the recommendations unresolved until final written comments are provided by VHA.
Objectives
The Office of Inspector General conducted a review of selected aspects of the Department of Veterans Affairs (VA) Veterans Health Administration's (VHA) Medical Care Cost Recovery (MCCR) program. The purpose of the review was to assess VHA's collection activities for first party MCCR program debts and identify opportunities to enhance collection results.
Scope and Methodology
During Fiscal Years 1994 and 1995, 162 VHA facilities forwarded 118,000 and 150,000 delinquent debts valued at $28.8 and $35.5 million, respectively, to the Internal Revenue Service (IRS) for tax refund offset. We matched veterans whose delinquent MCCR debts were referred to IRS for offset of 1993 and 1994 tax year refunds with the compensation and pension (C&P) payment file.
We statistically sampled 300 of the 118,000 debts VHA medical facilities referred to IRS for offset of 1993 tax year refunds. We reviewed the debts to determine the number and value of first party delinquent debts referred to IRS for tax refund offset during 1993 that were written off and to estimate the potential value lost in cost recoveries. We did not independently validate that the 118,000 and 150,000 debts referred to IRS for offset of tax year refunds comprised the total universe of debts referred to IRS for offset of tax refunds. We did validate the data we received to veterans' MCCR debt records we sampled. Nothing came to our attention which would lead us to believe that debts were missing from our universe. In addition to our statistical sample we also:
Provided information to 162 VHA medical facilities relating to veterans who may have been improperly billed.
Conducted on-site reviews at VAMCs Atlanta, GA; Bedford, MA; and VBA's DMC, St. Paul, MN.
Reviewed written responses from responsible VHA medical facilities regarding debt status of our statistical sample of 300 debts.
Discussed our audit process, findings, and proposed recommendations at various stages of the audit with VBA, VHA, and Assistant Secretary for Management officials.
The review was conducted in accordance with government auditing standards for qualifications, independence and due professional care.
In accordance with Title 38, U.S.C. 1710, 1712, and 1722A, the Department of Veterans Affairs (VA) is required to collect fees (copayments) for medical care and medications relating to medical services provided certain veterans (first party) for nonservice-connected (NSC) conditions. Veterans who are responsible for first party copayments have been means tested and have annual incomes of $20,469 or more. Veterans with medication copayment debts have incomes of at least $12,855 per year. The basic provisions follow:
Veterans receiving NSC pension or compensation for service-connected (SC) disabilities evaluated 50 percent or more are exempt from being billed under the Medical Care Cost Recovery (MCCR) program except for NSC dental services.
Veterans receiving compensation for service-connected disabilities evaluated less than 50 percent are exempt from being billed under the MCCR program except for medication copayments for NSC conditions ($2 per prescription) and certain dental services.
On October 29, 1992, Public Law 102-568, the Veterans Benefit Act of 1992 established an exemption from the medication copayment program for veterans whose income does not exceed the maximum annual rate of pension. The MCCR program implemented a copayment reimbursement program designed to compensate those veterans who were eligible for copayment exemption but made payments for prescriptions since October 1992.
During Fiscal Year (FY) 1994, MCCR program staff collected nearly $41.2 million in first party medical care billings. Also during FY 1994, MCCR program staff wrote off first party debts totaling approximately $10.7 million. As of September 30, 1994, the Veterans Health Administration (VHA) had 1,867,000 delinquent first party debts totaling $52.2 million, for an average of about $27.95 per debt. First party medical care debts (means test, medication copayments, humanitarian/ineligible hospitalization) are established by MCCR program staff at 166 VHA medical facilities, who rely on obtaining accurate income, and compensation and pension (C&P) benefit award status for each individual receiving medical services to ensure appropriate billings are made. MCCR program staff are required to follow-up on unpaid first party debts by sending computer generated collection letters at regular intervals.
If medical facilities are unsuccessful in collecting from debtors, delinquent first party debts are referred to the Internal Revenue Service (IRS) for collection by offset of tax refunds. The offset agreement with IRS requires VHA to exhaust all administrative collection procedures and ensure debts are valid before referral to IRS. VA policy also provides that debts referred twice to IRS, but not collected because the debtor was not due a refund be written off. During FY 1994, VA recovered $1.7 million from 118,000 accounts valued at $28.8 million referred to the IRS for tax refund offset for tax year 1993. During FY 1995, VA recovered about $3 million through July 1995 from 150,000 accounts valued at $35.5 million referred to the IRS for tax refund offset for tax year 1994.
The Veterans Benefits Administration's (VBA's) Debt Management Center (DMC) is organized to collect outstanding debts for VBA's benefit programs. The DMC is a centralized and automated collection center that efficiently processes the collection of high volume low dollar debts through voluntary payment and offset collection tools. In FY 1994, the DMC collected VBA accounts receivable totaling $384.6 million (13.4 percent of $2.86 billion workload) through voluntary payment and offset programs. As part of its collection process, the DMC routinely identifies debtors who are receiving C&P benefit payments or are federal employees for offset of debts.
Sampling Plan and Results
Audit Universe
We reviewed delinquent first party debts established by Veterans Health Administration (VHA) medical facilities which were referred to the Internal Revenue Service (IRS) for tax refund offset during 1994. The audit universe consisted of 118,328 delinquent first party accounts valued at $28.5 million and 13 delinquent first party accounts with balances over $5,000, valued at $300,000 for 162 VHA medical facilities. We found 4 of 166 facilities did not refer delinquent first party debts to the IRS for tax refund offset during 1994.
Sample Design
The purpose of our review was to determine the number and value of delinquent first party debts referred to IRS for tax refund offset during 1993 that were written off. We used random numbers generated by Office of Inspector General statistical sampling software to select delinquent debts for review. The sample was based on a variable sampling design at a 90 percent confidence level. The sample consisted of 300 debt accounts valued at $67,230. We also reviewed all 13 accounts with balances over $5,000.
Sample Results
We found that 196 debts, valued at $31,421, of the 300 debts in our sample were written off in whole or in part. Based on the sample results, we estimate with 90 percent confidence that from 71,966 to 82,649 (point estimate 77,308) of the 118,328 debts were written off in whole or in part. The amount of debts which the facilities wrote off ranged from $3.5 million to $21.3 million, with a point estimate of $12.4 million. We also found 5 of 13 accounts, valued at $93,000, with balances over $5,000 were written off. Based on the statistical sample results and our review of accounts with balances over $5,000, we project that $12.5 million of the $28.8 million in first party debts referred to IRS were written off.
REPORT TITLE: Review of Selected Aspects of the Medical Care Cost Recovery Program
PROJECT NUMBER: 5R1-045
Recommendation Category/Explanation Better Use Questioned Number of Benefits of Funds Costs
a. and c. Better Use of Funds. Estimate of first party debt collection increase as a result of changing MCCR debt write-off policies and transferring first party delinquent debts to VBA's DMC for collection. $6.5 Million
VA Distribution
Secretary (00)
Under Secretary for Health (172C)
Under Secretary for Benefits (20A11 )
Assistant Secretary for Management (004)
General Counsel (02)
Deputy Assistant Secretary for Congressional Liaison (60C)
Deputy Assistant Secretary for Public Affairs (80)
Director, Office of Management Controls (004B)
Chief Financial Officer (24)
Chief Financial Officer (17)
Non-VA Distribution
Office of Management and Budget
U.S. General Accounting Office
Congressional Committees:
Chairman, Senate Committee on Governmental Affairs
Senate Ranking Minority Member, Committee on Governmental Affairs
Chairman, Senate Committee on Veterans' Affairs
Senate Ranking Minority Member, Committee on Veterans' Affairs
Chairman, Senate Committee on Appropriations
Chairman, Subcommittee on VA, HUD, and Independent Agencies, Senate Committee on Appropriations
Senate Ranking Minority Member, Subcommittee on VA, HUD, and Independent Agencies, Committee on Appropriations
Chairman, House Committee on Government Reform and Oversight
House Ranking Minority Member, Committee on Government Reform and Oversight
Chairman, House Committee on Veterans' Affairs
House Ranking Minority Member, Committee on Veterans' Affairs
Chairman, House Committee on Appropriations
1N
ote: During the period of review 166 VHA medical facilities (medical centers and independent clinics) employed MCCR staff to bill and collect for certain medical treatments provided to veterans.