allowing recovery of delinquent overpayments at the higher of the amount of interest income lost to the trust fund or the value lost to the trust fund due to inflation. Could this be accomplished administratively by the SSA, or would legislation be required? Answer. The OIG believes that SSA has the statutory authority to implement the OIG recommendation. In an opinion written in June 1988, the office of General Counsel (OGC) stated that SSA clearly had common law authority to apply interest and penalty assessments as part of its debt collection procedures. Moreover, in a 1984 study, GAO indicated that the exclusion of SSA from the 1982 Debt Collection Act did not necessarily mean that SSA could not assess interest. Rather, the GAO felt that the Debt Collection Act did not prohibit SSA from charging interest under some other statute or principle of common law. Question. What has been the reaction of the SSA and public interest groups to this idea? Answer. SSA agrees that action should be taken, but maintains that there should be clear statutory authority to charge interest on overpayment amounts. SSA also disagrees with the savings potential identified in the OIG report, but does agree that savings of $560 million can be realized as the result of the OIG recommendation. HARD SAVINGS Question. Your latest semiannual report claims to have obtained over $5.6 billion in settlements, fines, restitutions, receivables and savings in fiscal 1989. How much of this represents hard savings already realized, and what portion represents potential savings based on recommendations? O O Answer. The $5.6 billion is composed of the following: savings to programs resulting from legislative or regulatory actions or policy decisions of management on behalf of OIG recommendations; amounts placed in accounts receivable for recoupment as a result of management determinations in favor of audit findings and recommendations; and the amount of fines, savings, restitutions, settlements and recoveries determined through judicial or administrative processes in support of OIG investigative findings. The policy of the OIG has been, and continues to be, to count only those recommendations with monetary consequences which have been implemented by the appropriate authority. Therefore, we claim only those audit disallowances which have been concurred to by the program managers and placed in the accounts receivable for collection. Similarly, fines, settlements and restitutions arising from OIG investigations are claimed only after final court settlement and collection orders are issued. Further, only after the Secretary has issued final regulations in the Federal Register do we report those OIG recommendations which will create savings as a result of regulatory correction. We then use the monetary estimates established by the program management, not by the OIG. We do so not because we think program officials have better data than OIG, but because their numbers are neutral to the OIG and not under our control; therefore, such numbers are more credible. Finally, much of our savings arise from legislative action on behalf of our recommendations. We claim those savings only after enactment into law. We then use the Congressional Budget office (CBO) scoring of the savings, not our own estimates. Once again, we do this not because we believe CBO has better data than OIG, but because it is derived independently of the OIG and is therefore more credible. Examples of savings resulting from legislative changes are illustrated in the following summary of OIG recommendations contained in OBRA 1989. OBRA 1989 SAVINGS BASED ON OIG RECOMMENDATIONS * I. MEDICARE Reduction in Capital Costs for Inpatient Services $580 Reductions in Certain Overpriced Procedures (Cataract and CABG only) $940 OAI-02-89-00050; CIN: A-0788-00080 Reductions in Payments for Anesthesia Services $245 Reduction in Capital Payments for Outpatient Hospital $23 ACN: 14-52083; ACN: 09-52032; ACN: 09-52002; Clinical Diagnostic Lab Tests OAI-02-89-01910 Durable Medical Equipment $770 $690 OAI-02-88-00100; CIN: A-05-87-0013; OAI-02-88-00060; Question. How much of these recommended savings are repeats of proposals made in prior years, but never implemented? Answer. None. All savings claimed in the 1989 HHS OIG Semiannual Reports represent new actions. Savings are not claimed until the recommendations on which they are based are implemented. We have more than $27 billion in potential annual savings in the OIG Cost Saver Handbook (the so-called Red Book) which have never been claimed. Much of which may never be claimed because they have not been implemented. We are submitting for the record our last edition of the Red book which is currently undergoing revision. We will furnish to the committee the revised version as soon as it is completed. The OIG semiannual report has separate appendices to distinguish those savings effected during the reporting period from those savings which would be realized if favorable action were taken on OIG recommendations. Question. Is it fair for you to claim $12.1 billion in savings over 5 years by simply speeding up social security payroll tax deposits, which shifts payments to earlier years? Answer. In our April 1 September 30, 1989 Semiannual Report to the Congress, we estimated that $15.5 billion in monetary benefits could result from our proposal to accelerate payroll tax deposits for large employers. The $15.5 billion consists of $12.1 billion in tax collections being shifted to earlier years and $3.4 billion in earned interest. The estimated monetary benefits from this unimplemented proposal are composed of general fund revenue (withheld income tax deposits) as well as Social Security trust funds revenues (Federal Insurance Contributions Act [FICA] deposits). Our Management Advisory Report (A-09-89-00075) treats the $15.5 billion as a deficit reduction opportunity consisting of the $12.1 billion being shifted to earlier years and the $3.4 billion in interest that would be earned from the accelerated deposits. Our proposal was based on the existing Department of the Treasury definition of a large employer: one whose total payroll taxes (income tax and FICA withholdings) exceed $3,000 for each pay period. Congress partially implemented our recommendation with the passage of the OBRA 1989, which requires large employers to deposit payroll taxes by the next banking day after the date that a payroll is distributed. However, the Act also redefined a large employer as one whose total payroll taxes exceed $100,000 for each pay period. The CBO estimate for implementation of this provision reduces the expected monetary benefits from $15.5 billion to $3.1 billion (including shifting and interest earned) over the five-year budget cycle beginning in FY 1990. The CBO amount ($3.1 billion) will be shown in our October 1, 1989 March 31, 1990 Semiannual Report to the Congress as the amount of monetary benefits associated with implementation of our proposal. MEDICARE AS SECONDARY PAYOR Question. You issued a draft report in September 1989 concluding that the Medicare program is annually paying $400 to $900 million that actually should be paid by other primary insurers. In November 1989, Congress enacted reforms as part of reconciliation legislation that CBO estimates should save $300 million in fiscal 1990 by strengthening the Medicare Secondary Payor program. What is your assessment of how effective the new legislation enacted by the Congress will be in reducing Medicare payments that should be paid by private insurance? Answer. The OIG's Office of Audit Services has developed a data base using SSA/HCFA computer interfaces to identify Medicare secondary payer (MSP) situations. This data base is virtually identical to the Internal Revenue Service (IRS)/SSA/HCFA data match initiative mandated by OBRA 1989. Its development has greatly assisted both HCFA and SSA in implementing the OBRA 1989 data match initiative. We support the MSP provisions contained in OBRA 1989 and believe that these changes will be effective in reducing MSP overpayments. However, we believe that the magnitude of the program losses as a result of inappropriate Medicare payments and the complexity of the MSP program will require a number of distinct actions to rectify current deficiencies. Even after implementation of the OBRA 1989 provisions, MSP overpayments will undoubtedly still occur to some extent. We continue to support the Department's unenacted MSP legislative proposal, which would require insurers, underwriters, and third-party administrators of employer group health plans to notify HCFA about covered individuals who are enrolled in insurance programs to which Medicare is secondary payer. - The Department's unenacted legislative proposal and MSP provisions contained in OBRA 1989 both address prevention of MSP overpayments through increased identification of primary payers. We have also put forth a proposal aimed at recouping MSP overpayments which have already occurred. We recommended in a report entitled Medicare as Secondary Payer A Restitution Proposal (AO-12-89-00002) that the Department seek legislation to establish a voluntary disclosure and recovery program which would permit insurers, employers or third-party administrators to identify improper MSP payments and make restitution. Any insurer not participating in the program would be subject to treble damages, plus costs, with respect to each such claim subsequently identified by the Federal government. Non-participating insurers would also be subject to debarment for three years from all Federal government contracting programs if the government later identifies improperly processed MSP claims. We believe that the implementation of this program will facilitate the identification and recoupment of overpayments which have already occurred. Question. Do you think the President's fiscal 1991 Medicare contractor budget is sufficient to adequately carry out these new initiatives, as well as payment safeguard activities in general? Answer. The FY 1991 budget request of $334.8 million for Medicare payment safeguard activities is comprised of the following: The OIG defers to HCFA on the adequacy of funding levels for payment safeguard activities. HCFA believes the $334.8 million budget request is adequate for maintenance of on-going contractor activities. HCFA has requested a $36.5 million contingency to implement the OBRA 1989 MSP provisions and $8.9 million will be needed to implement the OBRA 1989 IRS/SSA/HCFA data match initiative in FY 1992. OVERPRICED MEDICARE LAB PAYMENTS Question. In a report on Medicare lab payments, the Inspector General's Office found that Medicare, on average, paid nearly twice the price charged to physicians (p.33 of April September 1989 semiannual report). How much do you estimate would be saved if Medicare lab payments were held down to the price charged physicians? Answer. In January 1990, the OIG issued a report entitled Changes are Needed in the Way Medicare Pays for Clinical Laboratory Tests, which compared prices charged to Medicare and physicians by large commercial laboratories. Based on our analysis, limiting independent laboratories to the prices charged physicians would save about $420 million per year. Limiting physicians and hospitals to the same prices would save about $850 million and $560 million, respectively. Thus, the total potential savings is approximately $1.8 billion a year, or nearly one-half of current outlays. Question. Would you favor demonstration projects to test competitive bidding on Medicare lab services? Answer. The OIG strongly supports the use of such demonstration projects based on our analysis of Medicare expenditures for lab services. We issued a report in January 1990 entitled Changes Are Needed in the Way Medicare Pays for Clinical Laboratory Tests, which found a large discrepancy in prices paid by Medicare and physicians for laboratory services. With Medicare Part B laboratory outlays approaching $4 billion annually, volume purchasing offers the potential for very significant savings. Question. What can the Health Care Financing Administration do, under current law, to reduce excessive lab fees under Medicare? Answer. In January 1990, we issued a report entitled Changes Are Needed In The Way Medicare Pays for Clinical Laboratory Tests, which showed that the most dramatic differences between Medicare and physician prices were on test packages, or profiles. In response to our report, HCFA is conducting a survey of available test packages with a view toward establishing national payment caps for these types of tests. Current law does not appear to preclude such payment limitations. However, we did recommend that the law be revised to permit Medicare reimbursement to labs at the market price levels, as reflected by laboratory charges to physicians. |