Guest Article

Inspector General Report: Tough Penalties Needed For Data Match Noncompliance

---

Summary: The Health Care Financing Administration should be more aggressive in punishing employers who refuse to comply with the Data Match program's request for information about employees who are covered under both Medicare and another plan, according to a report from the U.S. Department of Health and Human Services' Office of Inspector General.

(Oct. 20, 2000) - Penalties should be assessed more aggressively against employers that refuse to comply with the Health Care Financing Administration's (HCFA's) request for employee dual coverage information under HCFA's Data Match program, according to a report written by the U.S. Department of Health and Human Services' (HHS') Office of Inspector General (OIG). The report noted that Medicare has lost savings of more than $282 million because it was the primary payer of a recipient's medical care when another insurer should have paid primary.

The Omnibus Budget Reconciliation Act of 1989 (OBRA) established the Data Match program, which is designed to identify, recover and prevent improper payments made by Medicare when primary insurance was available through an employer-sponsored group health plan. To accomplish this goal, HCFA performed five Data Match assessments of the records of the Internal Revenue Service, the Social Security Administration and Medicare between 1991 and 1998, which covered tax years 1987 through 1996. The information was collected by Group Health Inc. (GHI), which HCFA recently designated to coordinate all of HCFA's Medicare secondary payer (MSP) efforts. GHI sent Data Match questionnaires -- also known as Letter Cs -- to employers through a series of mailings in order to collect employee health coverage information. Those employers had 30 days to respond.

Report's Findings

The report found that, of the nearly two million employers contacted, 87 percent responded to HCFA's request for information. However, the remaining 13 percent of employers had not responded by that period. As a result, HCFA had no information on more than 1.2 million employees, which put Medicare at risk for paying claims for which it did not have liability. The report noted that if the nonresponding employers have the same percentage of MSP-covered employees and MSP savings as the responding employers, Medicare could lose as much as $282 million.

The report also noted that the number of nonresponding employers is increasing, which it attributed to HCFA's failure to aggressively pursue compliance. To remedy this, as part of the Data Match process, nonresponding employers are being informed that they will be assessed a civil monetary penalty (CMP) of up to $1,000 for each individual for which an inquiry was made for failing to comply with the request for information. The report noted that 241,249 employers have been placed on CMP status, but no CMPs have been assessed because of, according to HCFA, limited resources. The report added that HCFA's failure to follow through on its threat to assess CMPs reduces employers' incentive to respond.

The report also found that, since October 1994, HCFA has had the authority to assess CMPs against nongovernmental agencies that refuse to comply with the Data Match request for information. However, it does not have the authority to assess penalties against governmental employers that fail to respond, which currently number 4,425. To combat this, the OIG suggested that HCFA seek legislative authority to assess CMPs against governmental agencies. In the interim, OIG recommended that it and HCFA work together to partner up with those agencies' oversight groups.

The report noted that HCFA's current procedures have increased the risk that employers would not comply with the Data Match information request. According to the report, OIG found that HCFA used to send two follow-up letters to the chief executive officers (CEOs) of nonresponding employers and, if there was no response, GHI placed the employer in CMP status. However, HCFA modified its procedures and began sending only one letter to nonresponding employers informing them of the CMP. HCFA further modified these procedures, requiring GHI to only send follow-up letters to employers with more than 100 employees, the report found.

The report also found that HCFA did send a more strongly worded follow-up letter to the CEOs of 267 noncompliant employers with more than 100 employees, informing them of: (1) the CMP; (2) a subpoena for the employer's business records; (3) an investigation of the group health plan to determine why it is not responding to the Data Match requests; and (4) a possible referral to the IRS for the imposition of an excise tax against the employer. As of Sept. 30, 1998, 125 of those employers responded to the Data Match questionnaire, and 54 others either requested an additional questionnaire or an extension of time. Despite the letter's success, the report noted, HCFA did not use it regularly. The use of this information resulted in $2.5 billion savings to Medicare as of Sept. 30, 1998.

To understand why employers did not respond, OIG conducted a random survey of 33 nonresponding employers. According to OIG, 18 employers claimed they were unaware of or never received the Data Match questionnaire. OIG noted that most of the individuals it spoke to said that they were relatively new in their position and the questionnaire and follow-up letter were probably received by someone who no longer worked in that office. Seven employers claimed they had difficulty in completing the questionnaire, five claimed they were in the process of completing it, and three claimed that their records were missing or unavailable. The report found that many of the employers that claimed not to have received a questionnaire requested that a new one be sent. GHI mailed out replacement questionnaires, and as of August 1999, 13 of the 33 employers had submitted completed questionnaires.

Using its success with the random sample of employers, OIG recommended that HCFA incorporate a personal contact in its follow up procedures for nonresponding employers. Other steps recommended by the OIG include: (1) writing and routinely sending a more forceful follow-up letter to nonresponding employers; (2) making telephone calls or personal visits to nonresponding employers to request the information; and (3) assessing CMPs against employers that still refuse to comply.

HCFA's Response

In a letter from HCFA Administrator Nancy-Ann Min DeParle, HCFA agreed with OIG's recommendations. Specifically, Min DeParle said it has been working with its Office of General Counsel to identify an appropriate pilot test case for imposing CMPs because, according to Min DeParle, "it is unclear whether the imposition of a $1,000 fine would lead to greater compliance among employers . . . alternatively, the resources required to impose such fines may be better directed at efforts at increasing compliance and obtaining correct, updated insurance information about beneficiaries." Min DeParle also noted that imposing CMPs would require additional staff and resources.

Regarding OIG's recommendation regarding governmental employers, Min DeParle said a more effective tool would be for HCFA to seek legislative authority for mandatory data sharing among federal, state and local government employers. She also supported HCFA's partnering with federal government agencies' oversight groups, calling it "an additional compliance tool."

Copies of the report are available at HHS' Office of Assistant Secretary's web site, www.hhs.gov/progorg/oas/reports/region2/29801036.htm.

Excerpted from the October 2000 supplement to Coordination of Benefits Handbook, ©Thompson Publishing Group, Inc., 2000. All rights reserved.

---

BenefitsLink is an independent national employee benefits information provider, not formally affiliated with the firms and companies who kindly provide much of the content and advertisements published on this Web site, including the article shown above.