Debt Management: Treasury's Cash Management Challenges and Timing of Payments to Medicare Private Plans
GAO-09-118
Published: Jan 30, 2009. Publicly Released: Mar 02, 2009.
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Highlights
A timing difference between cash in- and outflows poses challenges for the Department of the Treasury. Increased volatility of monthly cash flows may lead to unexpected short-term debt issuance and hence increased borrowing. While Social Security payments made at the start of the month will diminish gradually in coming years, start-of month payments to Medicare plan sponsors for Medicare Advantage and Part D benefits are projected to grow. As requested, this report (1) describes how Treasury, the Centers for Medicare & Medicaid Services (CMS), and plan sponsors operate under the current payment schedule; (2) identifies timing options; and (3) describes potential implications for Treasury, CMS, and Medicare. GAO analyzed Treasury cash flows, and interviewed Treasury, CMS officials, and plan sponsor representatives.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| In designing new programs, Congress may wish to consider the nature of Treasury's cash management challenge when enacting legislation that specifies payment timing. Where payment timing is not specified, Congress should direct the implementing agency to consult with Treasury in establishing payment schedules. |
Closed – Not Implemented
|
According to Treasury, enacted legislation that specified payment timing has not had substantial effects on their cash management operations. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Centers for Medicare & Medicaid Services | The Secretary of the Treasury and the Administrator of CMS should expeditiously convene a joint interagency effort to study options identified by GAO and any other options that would improve Treasury's ability to manage cash flow and reduce overall interest costs while not unduly increasing administrative burden for CMS. For each option, the joint study should include discussion of (1) operational impacts on and likely consequences for cash management, CMS, and Treasury operations; (2) plan sponsors' likely responses and the consequences of these for the Medicare program and beneficiaries; (3) the expected change in federal costs and the distribution of any increases or decreases; (4) analysis of feasibility and mechanics of varying payment schedule by size/scale of plan; and (5) what would be needed for implementation, including which options would require statutory change and if so the specific changes necessary. Based on the work done and our discussions with Treasury officials, we believe it is reasonable for this study to be completed by the end of CY 2009. |
Closed – Not Implemented
Treasury and CMS worked together throughout 2009 analyzing several options. Concurrently, CMS began plans to update its IT systems, which constituted a barrier to flexibility in payment timing. Efforts to explore the timing of Medicare payments have been overtaken in recent years by higher priority events, including the passage of health care reform laws.
|
| Department of the Treasury | The Secretary of the Treasury and the Administrator of CMS should expeditiously convene a joint interagency effort to study options identified by GAO and any other options that would improve Treasury's ability to manage cash flow and reduce overall interest costs while not unduly increasing administrative burden for CMS. For each option, the joint study should include discussion of (1) operational impacts on and likely consequences for cash management, CMS, and Treasury operations; (2) plan sponsors' likely responses and the consequences of these for the Medicare program and beneficiaries; (3) the expected change in federal costs and the distribution of any increases or decreases; (4) analysis of feasibility and mechanics of varying payment schedule by size/scale of plan; and (5) what would be needed for implementation, including which options would require statutory change and if so the specific changes necessary. Based on the work done and our discussions with Treasury officials, we believe it is reasonable for this study to be completed by the end of CY 2009. |
Closed – Not Implemented
Treasury and CMS worked together throughout 2009 analyzing several options. However, efforts to explore the timing of Medicare payments and manage cash flows have been overtaken in recent years by higher priority issues. Further, the lower interest rate environment coupled with other factors including the Federal Reserve's October 2008 policy change to begin paying interest on depository institutions? required and excess reserve balances have supported higher Treasury cash balances and decreased the use and cost of cash management bills for managing cash flows.
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Budget activitiesBudget obligationsCash managementClaims settlementCost analysisCost controlDebtDebt collectionFederal social security programsFinancial managementFunds managementHealth care programsInteragency relationsInterestMedicarePaySocial security benefitsTreasury accountsUS Treasury securities