Debt Collection Improvement Act of 1996: HHS's Centers for Medicare & Medicaid Services Faces Challenges to Fully Implement Certain Key Provisions
GAO-02-307
Published: Feb 22, 2002. Publicly Released: Mar 26, 2002.
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Highlights
The Debt Collection Improvement Act (DCIA) of 1996 requires that agencies refer eligible debts delinquent more than 180 days that they have been unable to collect to the Department of the Treasury for payment and offset and to Treasury or a Treasury-designated debt collection center for cross-servicing. The Centers for Medicare and Medicaid Services (CMS) made progress in referring eligible delinquent debts for collection during fiscal year 2001. Much of the referral volume was late in the year, however, and substantial unreferred balances remained at the end of the fiscal year. Inadequate procedures and controls hampered prompt identification and referral of both eligible non-Medicare Secondary Payer (MSP) and MSP debts. The delayed referral of non-MSP debts resulted from problems with the CMS debt-referral system and insufficient CMS monitoring of contractor referrals. The low level of MSP debt referrals resulted primarily from limited contractor efforts and insufficient CMS monitoring of contractor performance. Although GAO did not test whether selected CMS debts had been reasonably excluded from referral and reached no overall conclusion about the appropriateness of CMS exclusions, GAO found that CMS did not report reliable Medicare debt information to the Treasury Department as of September 30, 2000.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Centers for Medicare & Medicaid Services | To help ensure that the Centers for Medicare and Medicaid (CMS) promptly refers all eligible delinquent Medicare debts to the Department of Health and Human Services' Program Support Center (PSC), as GAO recommended in September 2000, and that all benefits from closed-out debts are realized, GAO recommends that the Administrator of CMS establish and implement policies and procedures to monitor contractors' implementation of CMS's May 2001 instructions to ensure the prompt referral of eligible Medicare Secondary Payer debts. |
Closed – Implemented
In May 2001, the Centers for Medicare and Medicaid Services (CMS) issued a memorandum requiring Medicare Secondary Payer (MSP) contractors to identify delinquent MSP debts and refer them to the Program Support Center (PSC). To help ensure the prompt referral of eligible MSP debts, CMS' Internet Only Manual (IOM), Pub. 100-5, Chapter 7, Section 60, dated May 26, 2006, contains detailed MSP referral instructions; and the IOM, Pub. 100-6, Chapter 5, Section 400, dated April 4, 2006, contains financial reporting instructions regarding eligible and ineligible debt. According to CMS, it relies on Statement of Auditing Standards (SAS 70) audits to verify compliance with referral requirements. SAS 70 provides for contractor performance oversight that utilizes independent auditors to complete a performance audit. There are two types of SAS 70 audits used by CMS to monitor MSP debt referrals--Type I audits determine if essential internal controls are in place and Type II audits determine if the internal controls are effective. These audits, which are performed annually, take approximately six months to complete and the contractor's performance during the most recent two quarters of the fiscal year are evaluated.
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| Centers for Medicare & Medicaid Services | To help ensure that the Centers for Medicare and Medicaid (CMS) promptly refers all eligible delinquent Medicare debts to PSC, as GAO recommended in September 2000, and that all benefits from closed-out debts are realized, GAO recommends that the Administrator of CMS implement changes to CMS's non-Medicare Secondary Payer (MSP) debt tracking systems so that CMS personnel will be better able to monitor contractors' referral of eligible non-MSP debts as required by CMS's April 2001 instructions to contractors. |
Closed – Implemented
To be better able to monitor contractors' referral of eligible non-Medicare Secondary Payer (MSP) debts, the Centers for Medicare and Medicaid Services (CMS) revised and issued the 2001 instructions with Internet Only Manual (IOM), Pub. 100-6, Chapter 4, Section 70. CMS also created additional codes in its Debt Collection System (DCS), a system used to track non-MSP debt. For example, according to the IOM, all debts transmitted to Treasury are to be marked with a status code "UJ", meaning debt sent for cross-servicing. The IOM emphasizes that contractors must be aware of the status code of a debt because it is "critical in making a determination regarding what the next step will be."
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| Centers for Medicare & Medicaid Services | To help ensure that the Centers for Medicare and Medicaid Services (CMS) promptly refers all eligible delinquent Medicare debts to PSC, as GAO recommended in September 2000, and that all benefits from closed-out debts are realized, GAO recommends that the Administrator of CMS develop and implement a comprehensive referral plan for all eligible delinquent Medicare debts that includes time frames for promptly referring all types of debts, including Medicare Secondary Payer liability and Part A claims adjustment debts. |
Closed – Implemented
The Centers for Medicare and Medicaid Services (CMS) Medicare Secondary Payer (MSP), Debt Collection Improvement Act of 1996 (DCIA) referral process previously applied only to certain third party payer Group Health Plan (GHP)-based debt. On July 26, 2002, however, CMS implemented changes to expand its MSP DCIA referral process to all MSP debts and debtors to include all GHP-based debts, including those where the debtor is the provider, physician, other supplier, or beneficiary; liability and no-fault-based debts of all types for all debtors; and workers' compensation-based debts for all debtors. On July 1, 2003, CMS implemented procedural changes for the referral to the Treasury Offset Program and for cross-servicing, collection, and termination of collection action and write-off closure of its non-MSP debt, which includes Part A claims adjustment debts. The CMS DCIA referral instructions for MSP and non-MSP debts include time frames for promptly referring all types of debts.
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| Centers for Medicare & Medicaid Services | To help ensure that the Centers for Medicare and Medicaid Services (CMS) promptly refers all eligible delinquent Medicare debts to PSC, as GAO recommended in September 2000, and that all benefits from closed-out debts are realized, GAO recommends that the Administrator of CMS perform an assessment of Medicare Secondary Payer debts being closed out because they are more than 6 years and 3 months delinquent to determine whether to pursue collection action on the debts, and document the results of the assessment. |
Closed – Implemented
To help ensure that all eligible delinquent Medicare debts are promptly referred to the Program Support Center (PSC), the Centers for Medicare and Medicaid Services (CMS) issued guidance on March 10, 2006, requiring that all outstanding/open delinquent Medicare Secondary Payer (MSP) debt, including debts that are more than 6 years and 3 months delinquent, be reviewed and appropriate action taken, such as referral or close out.
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| Centers for Medicare & Medicaid Services | To help ensure that the Centers for Medicare and Medicaid Services (CMS) promptly refers all eligible delinquent Medicare debts to PSC, as GAO recommended in September 2000, and that all benefits from closed-out debts are realized, GAO recommends that the Administrator of CMS establish and implement policies and procedures for reporting closed-out Medicare debts, when appropriate, to the Internal Revenue Service. |
Closed – Implemented
In December 2008, CMS sent a file to Treasury's Financial Management Service (FMS)containing debts that required 1099Cs to be generated. As a result, FMS generated 1099Cs for calendar year 2008 on behalf of CMS. According to a CMS official, the aggregate amount of the generated 1099Cs issued was more than $10 million. CMS plans to continue this process for calendar year 2009. CMS provided a copy of one of the 1099Cs issued for 2008. These actions are responsive to the intent of our recommendation.
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| Centers for Medicare & Medicaid Services | To help ensure that the Centers for Medicare and Medicaid Services (CMS) promptly refers all eligible delinquent Medicare debts to PSC, as GAO recommended in September 2000, and that all benefits from closed-out debts are realized, GAO recommends that the Administrator of CMS validate the accuracy of debt-eligible amounts reported in the Medicare Trust Fund Treasury Report on Receivables Due from the Public by establishing a process that ensures, among other things, (1) accurate reporting of the aging of certain delinquent debts, (2) accurate and complete reporting of debts excluded from referral requirements, and (3) verification of data entry for referral amounts. |
Closed – Implemented
To help ensure the accuracy of debt-eligible amounts reported in the Medicare Trust Fund Treasury Report on Receivables Due from the Public, CMS's Internet Only Manual (IOM), Pub. 100-6, Chapter 4, Section 70, dated December 30, 2005, contains detailed instructions regarding referral requirements, exemptions to referral, and the data entry and verification of referral amounts. According to CMS, it relies on Statement of Auditing Standards (SAS 70) audits to verify compliance with referral requirements. SAS 70 provides for contractor performance oversight that utilizes independent auditors to complete a performance audit. There are two types of SAS 70 audits used by CMS to monitor MSP debt referrals--Type I audits determine if essential internal controls are in place and Type II audits determine if the internal controls are effective. These audits, which are performed annually, take approximately six months to complete and the contractor's performance during the most recent two quarters of the fiscal year are evaluated.
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