Schedule and Timing Issues Complicate Withholding Premiums for Medicare Parts C and D from Social Security Payments
Gao ID: GAO-08-816R July 15, 2008The Social Security Administration (SSA) has been withholding Medicare premiums from beneficiaries' Social Security payments since the Supplementary Medical Insurance (Part B) program was first enacted in 1965. Beginning in 2006, premium withholding became a payment option for the Medicare Advantage program (Part C) and the new program for Prescription Drug Coverage (Part D). These changes were authorized by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). Two federal agencies play critical roles in the premium withholding process: the Centers for Medicare & Medicaid Services (CMS) and SSA. The Department of the Treasury (Treasury) also plays an important role by disbursing the adjusted Social Security payments to beneficiaries. Premium withholding can make paying premiums easier for both beneficiaries and the insurance plans. However, following implementation of the premium withholding provisions under MMA in 2006, there were numerous reports of beneficiaries not having the correct Parts C and D premiums withheld. Also, about 231,000 beneficiaries had their premiums refunded erroneously because they were mistakenly identified as having paid excess premiums. As a result, you requested that we review efforts to ensure that the correct Medicare premiums are being withheld from beneficiaries' Social Security payments. Specifically, we sought answers to the following key questions: 1. How do the processes for withholding premiums from Social Security payments compare for the various parts of Medicare? 2. What problems, if any, have been identified with the premium withholding process? 3. What steps have SSA and CMS taken to address these problems?
For Part B, SSA is responsible for all steps of the premium withholding process, automatically enrolling almost all beneficiaries with premium withholding, then informing CMS and Treasury of these actions. For Parts C and D, premium withholding requests must be initiated by the beneficiary and multiple entities are involved in the process. Requests must pass from the beneficiary to the plan, from the plan to CMS, and from CMS to SSA. SSA then notifies CMS and Treasury if the action is successful. This process requires that SSA and CMS records match at two critical points for a premium withholding request to be successful. At the first critical point for records matching, SSA data on the beneficiary and the plan must match the request from CMS, or SSA's information systems will reject the transaction and the premiums will not be withheld. At the second critical point for records matching, SSA data on premiums withheld must match the CMS data on the amount of premiums owed to the plans, or CMS will not pay the premiums to plans. First, SSA established a limited "window" for accepting premium withholding requests from CMS in batch transaction files (i.e., files of transactions that are collected and processed together at a specified time). This window is driven by Treasury's schedule for accepting changes to Social Security payments, which, in turn, is driven by the high volume of payments Treasury processes each month. Thus, even with no delays in processing, many premium withholding requests were not processed in time to be reflected in the next month's Social Security payment. When this happened, premium withholding was not accurate for at least 1 month and, once processed, retroactive adjustments were required for the months when the withholding was not accurate. Second, SSA's information system rejected nearly half of the transactions that CMS submitted in 2006 due to inconsistent data. Third, CMS did not complete its reconciliation of inconsistent records regarding premium amounts owed plans for 2006 until July 2007. System modifications to improve the consistency of the data across SSA and CMS databases have reduced the number of rejected transactions from 44.5 percent in 2006 to 5.3 percent in 2007. CMS adopted various new policies and worked with SSA to develop new procedures to help protect beneficiaries. For example, policies were adopted to prevent too much from being taken out of a beneficiary's Social Security payment at one time. CMS also barred plans from billing a beneficiary for premiums while a withholding request is being processed (provisions that would be codified and strengthened under the proposed regulations issued in May 2008). To expedite the resolution of premium withholding problems that impose financial hardship on a beneficiary, SSA and CMS also developed an individual case handling process that takes advantage of Treasury's extended window (of up to 8 additional workdays) for accepting a limited number of changes to the next month's Social Security payments.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Barbara D. Bovbjerg Team: Government Accountability Office: Education, Workforce, and Income Security Phone: (202) 512-5491GAO-08-816R, Schedule and Timing Issues Complicate Withholding Premiums for Medicare Parts C and D from Social Security Payments
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GAO-08-816R:
United States Government Accountability Office:
Washington, DC 20548:
July 15, 2008:
The Honorable Max Baucus:
Chairman:
Committee on Finance:
United States Senate:
Subject: Schedule and Timing Issues Complicate Withholding Premiums for
Medicare Parts C and D from Social Security Payments:
Dear Mr. Chairman:
The Social Security Administration (SSA) has been withholding Medicare
premiums from beneficiaries' Social Security payments since the
Supplementary Medical Insurance (Part B) program was first enacted in
1965.[Footnote 1] Beginning in 2006, premium withholding became a
payment option for the Medicare Advantage program (Part C) and the new
program for Prescription Drug Coverage (Part D). These changes were
authorized by the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA). Two federal agencies play critical
roles in the premium withholding process: the Centers for Medicare &
Medicaid Services (CMS) and SSA. The Department of the Treasury
(Treasury) also plays an important role by disbursing the adjusted
Social Security payments to beneficiaries.
Premium withholding can make paying premiums easier for both
beneficiaries and the insurance plans. However, following
implementation of the premium withholding provisions under MMA in 2006,
there were numerous reports of beneficiaries not having the correct
Parts C and D premiums withheld. Also, about 231,000 beneficiaries had
their premiums refunded erroneously because they were mistakenly
identified as having paid excess premiums. As a result, you requested
that we review efforts to ensure that the correct Medicare premiums are
being withheld from beneficiaries' Social Security payments.
Specifically, we sought answers to the following key questions:
1. How do the processes for withholding premiums from Social Security
payments compare for the various parts of Medicare?
2. What problems, if any, have been identified with the premium
withholding process?
3. What steps have SSA and CMS taken to address these problems?
To compare the processes for withholding premiums from Social Security
payments for the various parts of Medicare, we interviewed SSA, CMS,
and Treasury officials and reviewed documents describing the data
systems, data exchange policies, and premium withholding procedures for
each part, as appropriate. To identify any problems with the premium
withholding process, and the steps taken by SSA and CMS to address
these problems, we interviewed SSA and CMS officials; obtained
documentation, including agency memorandums, internal reports, Medicare
enrollment data, and transaction data; and examined CMS data on
beneficiary complaints. We used agency-provided data to develop time
frames for when changes to premium withholding requested by
beneficiaries are reflected in Social Security payments and to
illustrate how time frames may be extended when problems occur in the
process. We obtained the views of Medicare beneficiary advocacy groups
and representatives of eight private health insurance plans that
together provide Part C or Part D coverage (or both) to about 13.6
million people (about half of all Parts C and D beneficiaries). We also
consulted with other GAO teams working on related topics,[Footnote 2]
and we reviewed relevant federal laws and regulations.
We conducted our work from October 2007 to July 2008 in accordance with
generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
On June 5, 2008, we briefed your office on the results of our work (see
enclosure I). This report formally conveys information provided during
the briefing.
Summary:
* The process for withholding premiums for Medicare Parts C and D is
more complex than for Part B, involving more entities and data matching
requirements.
For Part B, SSA is responsible for all steps of the premium withholding
process, automatically enrolling almost all beneficiaries with premium
withholding, then informing CMS and Treasury of these actions.[Footnote
3] For Parts C and D, premium withholding requests must be initiated by
the beneficiary and multiple entities are involved in the process.
Requests must pass from the beneficiary to the plan, from the plan to
CMS, and from CMS to SSA. SSA then notifies CMS and Treasury if the
action is successful. This process requires that SSA and CMS records
match at two critical points for a premium withholding request to be
successful. At the first critical point for records matching, SSA data
on the beneficiary and the plan must match the request from CMS, or
SSA's information systems will reject the transaction and the premiums
will not be withheld. At the second critical point for records
matching, SSA data on premiums withheld must match the CMS data on the
amount of premiums owed to the plans, or CMS will not pay the premiums
to plans.
* When the MMA changes allowing beneficiaries to choose their premium
payment method for Parts C and D were first implemented, various
difficulties arose, primarily due to three key problems.
First, SSA established a limited "window" for accepting premium
withholding requests from CMS in batch transaction files (i.e., files
of transactions that are collected and processed together at a
specified time). This window is driven by Treasury's schedule for
accepting changes to Social Security payments, which, in turn, is
driven by the high volume of payments Treasury processes each month.
Thus, even with no delays in processing, many premium withholding
requests were not processed in time to be reflected in the next month's
Social Security payment. When this happened, premium withholding was
not accurate for at least 1 month and, once processed, retroactive
adjustments were required for the months when the withholding was not
accurate. Second, SSA's information system rejected nearly half of the
transactions that CMS submitted in 2006 due to inconsistent data.
Third, CMS did not complete its reconciliation of inconsistent records
regarding premium amounts owed plans for 2006 until July 2007.
* SSA and CMS have taken numerous steps to address problems, and the
number of rejected transactions has decreased dramatically. But
challenges remain, and plan sponsors and beneficiary advocates continue
to voice concerns about the premium withholding process and the
difficulties it continues to cause some beneficiaries.
System modifications to improve the consistency of the data across SSA
and CMS databases have reduced the number of rejected transactions from
44.5 percent in 2006 to 5.3 percent in 2007. CMS adopted various new
policies and worked with SSA to develop new procedures to help protect
beneficiaries. For example, policies were adopted to prevent too much
from being taken out of a beneficiary's Social Security payment at one
time.[Footnote 4] CMS also barred plans from billing a beneficiary for
premiums while a withholding request is being processed (provisions
that would be codified and strengthened under the proposed regulations
issued in May 2008).[Footnote 5] To expedite the resolution of premium
withholding problems that impose financial hardship on a beneficiary,
SSA and CMS also developed an individual case handling process that
takes advantage of Treasury's extended window (of up to 8 additional
workdays)[Footnote 6] for accepting a limited number of changes to the
next month's Social Security payments.
Despite the steps taken, challenges remain due to the schedule and
timing of the premium withholding process. For example, unless SSA
receives a premium withholding request during the 1ST week of the
month, it cannot be processed in time to be reflected in the next
month's Social Security payment. In addition, the timing of the annual
election period (AEP), when beneficiaries can join, drop, or change
their enrollment in Parts C and D plans, overlaps with the processing
of annual updates to Medicare premium amounts and Social Security
benefits. However, the timing of the AEP--which is set by federal law-
-does not end in time for all of the changes to be processed
simultaneously with these other updates. When changes that affect
premium withholding are made during the last half of the AEP, it may
take several months before the correct premiums are withheld from a
beneficiary's Social Security payment. The plan sponsors and
beneficiary advocates with whom we spoke continue to voice concerns
about delays in processing premium withholding requests and about the
difficulties experienced by some beneficiaries.
Conclusions:
SSA and CMS have made considerable progress in working together to
solve problems and reduce delays in processing premium withholding
requests. However, significant challenges remain due to SSA's limited
window for processing requests, which is driven by Treasury's schedule
for accepting payment changes, and to the statutorily required dates
for accepting changes to enrollment in Medicare Parts C and D plans.
In considering possible changes to the dates of Medicare enrollment
periods, many factors must be considered in addition to the impact on
premium withholding. GAO is currently conducting a more comprehensive
study of the various issues related to the AEP, with the resulting
report scheduled for publication in the fall of 2008.
Recommendations for Executive Action:
To help premium withholding become a more viable payment option for
Medicare Parts C and D, and to reduce the number of requests requiring
retroactive adjustments, we recommend the following:
* CMS should consider alternatives to the approach put forth in the
proposed regulations for preventing double-billing of beneficiaries
while premium withholding requests are being processed. More
specifically, for initial premium withholding requests (either for new
enrollees or for existing enrollees who want to switch to premium
withholding), CMS should consider allowing plans to bill beneficiaries
directly until they are notified that the request for premium
withholding has been accepted and will begin to be reflected in the
beneficiary's next Social Security payment.
For all requests that are not addressed by the previous recommendation,
SSA--in consultation with CMS and Treasury, as appropriate--should
explore other ways to expedite the processing of premium withholding
requests, such as:
* separating batch transaction files for paper checks and Electronic
Funds Transfer (EFT) payments, which may allow extending the processing
window for changes to EFT payments, or:
* processing more cases during Treasury's extended window for accepting
changes to Social Security payments.
Agency Comments and Our Evaluation:
We provided a draft of this report to officials at SSA, CMS, and
Treasury for review and comment. In written comments, SSA agreed with
our recommendation to explore ways to expedite processing (see
enclosure V). With respect to our suggestion to separate batch
transaction files for checks and EFT payments, SSA stated that it held
exploratory discussions with Treasury on the feasibility and benefits
of taking such action, and that while a number of complex issues have
been raised, discussions are continuing. With respect to our suggestion
to process more cases during Treasury's extended window for accepting
changes to Social Security payments, SSA stated that it agreed to
increase the number of transactions or expand the window for those
transactions. SSA noted that it had discussed this with Treasury and,
as a result of these discussions, SSA has agreed to extend its window
for accepting transactions from CMS (the "CAN MEET" window) by 3
additional workdays. SSA also stated that it will continue to work with
Treasury and CMS to identify additional improvements for effectuating
Medicare premium withholding actions closer to the date of the
beneficiaries' requests.
In written comments, CMS also agreed with our recommendations (see
enclosure VI). With respect to our recommendation that CMS should
consider alternative approaches to that put forth in the proposed
regulations, CMS agreed that allowing Parts C and D premium withholding
to start prospectively, rather than having to deal with retroactive
adjustments, is desirable. CMS stated that it would consider the option
we suggested--along with other options suggested by those commenting on
its proposed rule--in deciding on the approach to be included in its
final regulations. With respect to our recommendation to explore other
ways to expedite processing, CMS stated that it concurred, and that if
viable alternatives are identified, it would be glad to work with SSA
on implementing them.
In written comments, Treasury agreed with our recommendations as well
(see enclosure VII). Specifically, Treasury noted that if SSA separated
paper checks and EFT transactions as we suggest, it would allow a
sizable increase in the number of change transactions Treasury could
process to be reflected in the next month's payments. Treasury also
commented that the underlying reason for the difficulties related to
SSA's limited window for processing is not that Treasury is unable to
process changes in a timely manner, as may be implied from the wording
in the summary, but that the statute's required dates for accepting
changes to enrollment in Parts C and D plans did not take into account
SSA and Treasury processing cycles. As discussed in the report, we
agree that statutorily required dates for enrollment periods--
especially the AEP--pose a significant challenge for processing premium
withholding requests, and we concluded that it may be worthwhile to
consider changes to these dates, but that such a decision would need to
take into account many factors beyond premium withholding. We still
conclude, however, that SSA's limited window also poses a significant
challenge, and that there may be opportunities to improve the
timeliness of processing premium withholding requests apart from the
statutory constraints--such as by separating files of paper check and
EFT payments. Since we did not intend for our discussion of this issue
to imply that Treasury is unable to process changes in a timely manner,
we have clarified the wording in the summary.
SSA and CMS also provided technical comments, which are reflected in
the report as appropriate.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the report date. At that time, we will send copies of this report
to relevant congressional committees, the Commissioner of SSA, the
Acting Administrator of CMS, the Secretary of the Treasury, and other
interested parties. We will also make copies available to others upon
request. In addition, this report will be available at no charge on
GAO's Web site at [hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-7215 or bovbjergb@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. GAO staff who made significant
contributions to this report are listed in enclosure VIII.
Sincerely yours,
Signed by:
Barbara D. Bovbjerg:
Director, Education, Workforce, and Income Security Issues:
[End of section]
List of Enclosures:
Enclosure I: Briefing Slides:
Enclosure II: Overview of the Medicare Program:
Enclosure III: Key Systems and Data Processing Involved in Withholding
Medicare Parts B, C, and D Premiums:
Enclosure IV: CMS Forms and Guidance on Premium Withholding:
Enclosure V: Comments from the Social Security Administration:
Enclosure VI: Comments from the Department of Health and Human
Services, Centers for Medicare & Medicaid Services:
Enclosure VII: Comments from the Department of the Treasury:
Enclosure III: GAO Contact and Staff Acknowledgments:
Glossary:
Abbreviations:
AEP: annual election period:
APPS: Automated Plan Payment System:
CMS: Centers for Medicare & Medicaid Services:
EFT: Electronic Funds Transfer:
FACS: Financial Accounting and Control System:
FMS: Financial Management Services:
IPAC: Intra-governmental Payment and Collection:
IRS: Internal Revenue Service:
MARx: Medicare Advantage and Prescription Drug:
MBR: Master Beneficiary Record:
MDB: Medicare Database:
MMA: Medicare Prescription Drug, Improvement, and Modernization Act of
2003:
Part A: Hospital Insurance:
Part B: Supplementary Medical Insurance:
Part C: Medicare Advantage program:
Part D: Prescription Drug Coverage:
PWS: Premium Withhold Subsystem:
SSA: Social Security Administration:
[End of section]
Enclosure I: Briefing Slides:
Medicare Premiums: Schedule and Timing Issues Complicate Withholding
Parts C and D Premiums from Social Security Payments:
Briefing for Senate Committee on Finance:
June 5, 2008:
Note: We have revised the following slides subsequent to the briefing
on June 5, 2008, in response to technical comments received from SSA
and CMS, as appropriate.
Introduction:
SSA has been withholding Medicare premiums from beneficiaries‘ Social
Security payments since the Medicare program was first enacted in 1965.
More recently, Congress enacted the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (MMA). [Footnote 7] The law
made various changes to the existing parts of the Medicare program,
Hospital Insurance (Part A) and Supplementary Medical Insurance (Part
B), renamed the Medicare+Choice program as the Medicare Advantage
program (Part C), and created a new program entitled Prescription Drug
Coverage (Part D). Prior to MMA, premium withholding from
beneficiaries‘ Social Security payments had been a feature of only the
Part B program;[Footnote 8] under MMA, premium withholding is required
to be offered to beneficiaries as a payment option for the Part C and
Part D programs as well.
Premium withholding can make paying premiums easier for both
beneficiaries and the insurance plans. However, following
implementation of the premium withholding provisions under MMA in 2006,
there were numerous reports of beneficiaries not having the correct
Part C and Part D premiums withheld. Also, in August 2006, about
231,000 beneficiaries had their premiums refunded erroneously because
they were mistakenly identified as having paid excess premiums.
As a result, the Senate Committee on Finance asked GAO to review
efforts to ensure that the correct Medicare premiums are being withheld
from beneficiaries‘ Social Security payments.
Key Questions:
The overall objective of this engagement was to examine the process
implemented by SSA and CMS for withholding Medicare premiums from
Social Security payments.
Specifically, we sought answers to the following key questions:
(1)How do the processes for withholding premiums from Social Security
payments compare for the various parts of Medicare?
(2)What, if any, problems have been identified with the premium
withholding process?
(3) What steps have SSA and CMS taken to address these problems?
Scope and Methodology:
To compare the processes for withholding premiums from Social Security
payments for the various parts of Medicare, we interviewed SSA, CMS,
and Treasury officials and reviewed documents describing the data
systems, data exchange policies, and premium withholding procedures for
each part, as appropriate.
To determine the problems identified with the premium withholding
process and the steps SSA and CMS have taken to address those problems,
we:
* Interviewed SSA and CMS officials, and obtained agency memos,
internal reports, and data on enrollment and rejected transactions
relevant to Parts B, C, and D, as appropriate;
* Interviewed representatives of eight private plan sponsors, that
together provide Part C and/or Part D coverage to about 13.6 million
people (about half of all Part C and/or Part D beneficiaries);
* Interviewed Medicare beneficiary advocacy groups, and examined CMS
data on beneficiary complaints; and;
* Consulted with other GAO teams conducting work on related topics.
[Footnote 9]
We conducted our work from October 2007 to June 2008 in accordance with
Generally Accepted Government Auditing Standards (GAGAS). Those
standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Summary of Findings:
(1)Process: The process for withholding premiums for Medicare Part C
and Part D is more complex than the process for Part B, involving more
entities and requiring SSA and CMS records to match at two critical
points.
(2) Problems: When the MMA changes allowing beneficiaries to choose
their premium payment method for Parts C and D were first implemented,
the premium withholding process for Parts C and D encountered various
difficulties, primarily due to:
* SSA's limited processing window of 7 to 14 workdays each month,
established to meet Treasury‘s payment processing requirements;
* Inconsistent beneficiary and enrollment data that resulted in the
rejection of nearly half the CMS transactions sent to SSA for
processing during 2006; and;
* A 7-month delay in CMS‘ resolution of inconsistent records on the
premium amounts owed plans for 2006.
(3) Steps Taken: SSA and CMS have taken numerous steps to address the
problems occurring during initial implementation, and the number of
rejected transactions has decreased dramatically. But challenges remain
with the schedule and timing of the premium withholding process, and
plan sponsors and beneficiary advocates continue to voice concerns
about the use of premium withholding and the difficulties it has caused
some beneficiaries.
Conclusions:
SSA and CMS have made considerable progress in working together to
solve problems and to reduce delays in processing, however, significant
challenges remain. To help premium withholding become a more viable
payment option for Medicare Parts C and D premiums, further
improvements to the premium withholding process are needed.
Background: Methods of Premium Payment:
The premium payment methods available vary for the different parts of
Medicare:
* Part A: Most do not pay premiums for coverage because it is funded by
payroll taxes paid while the beneficiary (or the beneficiary‘s spouse)
was working.Those who must pay premiums do not receive Social Security,
so premiums cannot be withheld from a Social Security payment.
* Part B: By law,[Footnote 10] premiums are required to be withheld
from the beneficiary‘s Social Security payment, unless there are
insufficient funds (or no payment).
Parts C and D: As required by MMA,[Footnote 11] plans are required to
provide beneficiaries with the following payment options:
1 – Have the premium withheld from their Social Security payment.
2 – Have the premium automatically deducted from their checking or
savings account, or charged to their credit or debit card.
3 – Have the premium paid by other means specified by CMS, such as by
check or money order after receiving a monthly billing statement from
the plan, or by a third-party payer.
Note: For a more detailed overview of the different parts of Medicare,
see enclosure II.
Background: Participation Rates:
Of the more than 33 million Medicare Part B beneficiaries who owe
premiums, about 98.3 percent have premium withholding, according to SSA
data.
Of the 16 million Medicare Parts C and D participants who owe premiums,
about 30.5 percent have premium withholding, according to CMS data.
Figure 1: Participation in Premium Withholding (January 2008):
This figure is a stacked multiple bar graph depicting the following
data (beneficiaries, in millions):
Part B:
With premium withholding: 32.7 million;
With direct bill[B]: 0.5 million;
No premium owed[A]: 7.4 million;
Total: 40.7 million.
Part C & D[C]:
With premium withholding: 4.9 million;
With direct bill[B]: 11.1 million;
No premium owed[A]: 11.1 million;
Total: 27.1 million.
[A] Those beneficiaries who do not owe premiums include low-income
beneficiaries whose premiums are subsidized, as well as those who do
not receive Social Security (such as certain federal, state, and local
government retirees).
[B] Direct bill means that the plans bill the beneficiaries directly
for their premiums.
[C] Parts C and D beneficiaries include those that participate in ’Part
C only“ plans, in Part C plans that offer Part D benefits, and in stand-
alone Part D plans.
Source: GAO analysis of SSA and CMS data.
Note: Totals may not add due to rounding.
[End of figure]
Background: Key Federal Agencies Involved:
Two federal agencies play critical roles in the Medicare premium
withholding process: CMS and SSA. Each of these agencies incorporates
the tasks related to Medicare premium withholding into its existing
structure that reflects its overall mission and scope of
responsibilities related to the Medicare program.
* CMS administers the Medicare program, which in 2007 paid federal
benefits totaling $425 billion and covered 44 million people. With
respect to the premium withholding process, CMS verifies beneficiary
enrollment and premium amounts, and forwards this information to SSA.
CMS also ensures proper payment of premiums to private insurance plans,
as applicable.
* SSA administers the Old-Age, Survivors, and Disability Insurance
program (commonly referred to as Social Security), which in 2007 made
payments of over $575 billion annually to almost 50 million people.
With respect to the Medicare premium withholding process, SSA deducts
the premium amounts from the beneficiaries‘ Social Security payments
and forwards the information to Treasury.
Process: Premium Withholding for Parts C and D Is More Complex than for
Part B:
The process for initiating withholding for Medicare Parts C and D
premiums (the same process is used for both Parts C and D) is more
complex than the process for initiating withholding for Medicare Part B
premiums. Because of the differences between the programs, many of the
efficiencies of the Part B process cannot be applied to the process for
Parts C and D.
* There are significant differences in the fundamental characteristics
of the different Medicare programs that affect the premium withholding
process.
* The process for initiating premium withholding for Part B is
relatively simple, while the process for Parts C and D is more complex,
involving multiple entities and requiring that SSA and CMS records
match at two critical points.
Table 1: Differences in the Fundamental Characteristics of Part B
Compared with Parts C and D:
Payment methods available:
Part B: Premium withholding is put in place automatically upon
enrollment (unless the Social Security payment is insufficient to cover
the premium amount or there is no payment).
Parts C and D: Premium withholding is one of several payment methods
that beneficiaries can choose. Other options that beneficiaries can
arrange with their plans include automatic payment from a bank account
or monthly billing.
When withholding can be elected:
Part B: Not applicable. Beneficiaries do not choose their payment
method, and cannot opt out of premium withholding.
Parts C and D: Beneficiaries may request premium withholding during the
enrollment process, or at any time after enrollment. They also may
request to discontinue premium withholding at any time.
Insurer(s):
Part B: Part B coverage is provided by a single entity: the federal
government.
Parts C and D: Parts C and D coverage is provided under approximately
800 different contracts with over 6,000 plan benefit packages among
private plan sponsors nationwide.
Premium calculation:
Part B: The monthly premium for Part B is a standard amount for most,
and is based on a standard calculation for others (such as high-income
enrollees[A] and late enrollees).
Parts C and D: The monthly premium amounts for Parts C and D vary
widely by plan.
Source: GAO analysis of SSA and CMS documents.
[A] Beginning in 2007, monthly Part B premiums for higher-income
enrollees were changed to include an added amount based on income.
[End of table]
The Process for Withholding Part B Premiums:
Almost all Social Security recipients are automatically enrolled in
Medicare Part B upon turning age 65 (or at the 25th month of disability
benefit entitlement), with premium withholding, unless the Social
Security payment is too small to cover the premium amount or the person
opts out of Part B coverage. SSA is responsible for all the steps in
this process:
* SSA enrolls the beneficiary and initiates premium withholding
automatically for all whose Social Security payment amount is
sufficient to cover the premium.
* SSA notifies CMS so that CMS can update its records.
* SSA forwards the new payment amount with premiums withheld to
Treasury in batch transaction files”that is, electronic files of
transactions that are collected and processed together on specified
dates each month.
* SSA transfers the collected withheld premiums to CMS via Treasury.
Note: Premiums are transferred to CMS through Treasury‘s Intra-
governmental Payment and Collection (IPAC) System. For a detailed
description of this process from an information systems perspective,
see enclosure III.
Figure 2: The Process for Withholding Medicare Part B Premiums:
[See PDF for image]
This figure is an illustration of the process for withholding Medicare
Part B premiums, as follows:
SSA:
Start:
* Automatically initiates Medicare premium withholding for Social
Security beneficiaries;
* Verifies Social Security payment status and determines if sufficient
funds. Notifies CMS, which updates records;
* Adds change in payment to batch transaction files prepared monthly
for Treasury;
- Treasury disburses Social Security payment, as adjusted by SSA;
- Beneficiary receives payment with premium withholding reflected;
* Adds amount of withholding to monthly file for CMS of all premiums
withheld, and transfers collected premiums to CMS, which updates
records.
Source: GAO analysis of SSA, CMS, and Treasury documents.
[End of figure]
The Process for Withholding Parts C and D Premiums:
When beneficiaries elect to have their Medicare Parts C and D premiums
withheld from their monthly Social Security payments, multiple entities
are involved in processing the transaction:
* The beneficiary submits the request to the Part C or Part D plan.
* The plan forwards the request to CMS.
* CMS updates its records.
* CMS forwards the request to SSA in batch transaction files during a
window when SSA accepts such files (from 7 to 14 workdays each month).
* SSA updates its records and forwards the new payment amount to
Treasury in batch transaction files on specified dates each month.
* SSA adds the withheld premium amount to its monthly file of premiums
withheld and forwards the file to CMS.
Note: For a detailed description of this process from an information
systems perspective, see enclosure III.
SSA‘s and CMS‘ records must match at two critical points or the request
for premium withholding will not be successful.
* When SSA receives the request, it first verifies the beneficiary‘s
identification information against its own data systems, and the
premium information against the plan data provided by CMS. If the
records do not match, SSA rejects the transaction and, if the
inconsistency cannot be resolved, CMS will notify the plan to bill the
beneficiary directly for their premiums.
* After the premium has been withheld from the beneficiary‘s Social
Security payment, SSA adds the amount of withholding to a monthly file
prepared for CMS of all premiums withheld. CMS attempts to reconcile
the information in this file with its records of premiums owed to the
plans. If the records do not match, CMS will not pay the plans the
amount in question. If the records cannot be reconciled, CMS may
resolve the discrepancy by directing SSA to refund excess premiums to
the beneficiary and/or notifying the plan to bill the beneficiary
directly for any premiums still owed.
Figure 3: The Process for Withholding Parts C and D Premiums:
[See PDF for image]
This figure is an illustration of the process for withholding Medicare
Parts C and D premiums, as follows:
Beneficiary submits premium withhold request;
* Plan forwards request to CMS;
* CMS: Updates records and forwards requests to SSA in a batch
transaction file daily during a window when SSA accepts such files;
* SSA: Verifies beneficiary identification and Medicare plan
information; (SSA and CMS records must match or request will be
rejected);
* SSA: Verifies Social Security payment status and determines if
sufficient funds. Notifies CMS, which updates records;
* SSA: Adds change in payment to batch transaction files prepared
monthly for Treasury;
- Treasury disburses Social Security payment, as adjusted by SSA;
- Beneficiary receives payment with premium withholding reflected;
* SSA: Adds an amount of withholding to monthly file for CMS of all
premiums withheld, and transfers collected premiums to CMS; (SSA and
CMS records must match or plan will not be paid);
* CMS: Adds withheld premiums to payment file for plans prepared
monthly for Treasury;
* Treasury: Pays plan sponsors as directed by CMS;
- Plan receives payment for withheld premiums.
Source: GAO analysis of SSA, CMS, and Treasury documents.
[End of figure]
Problems: Beneficiaries‘ Requests for Parts C and D Premium Withholding
Encounter Various Difficulties:
During 2006, when the MMA changes allowing beneficiaries to choose
their premium payment method for Parts C and D were first
implemented,premium withholding for Parts C and D encountered various
difficulties primarily due to the following key problems:
* The limited processing window SSA established for accepting premium
withholding requests from CMS, driven by Treasury‘s timetable for
submitting changes to be reflected in the next month‘s Social Security
payments.
* The large volume of transactions rejected due to inconsistencies
between SSA and CMS data when CMS submitted requests to SSA for
processing.
* The length of time CMS required to determine how to resolve
discrepancies between SSA‘s monthly file of premiums withheld and CMS‘
records of premiums owed.
Limited processing window:
Treasury pays Social Security benefits on established dates each month:
* The third of the month for beneficiaries first receiving benefits
before May 1997 (referred to as ’cycle 1“ payments)[Footnote 12] ”about
63% of beneficiaries in fiscal year 2007, according to Treasury data.
* On the 2nd, 3rd, or 4th Wednesday of each month for beneficiaries who
filed claims on or after May 1, 1997 (referred to as ’cycle 2, 3, and
4“ payments)”about 37% of beneficiaries in fiscal year 2007 (but
increasing over time), according to Treasury data.
Due to the high volume of payments Treasury processes each month,
Treasury requires SSA to submit files of payment changes on certain
specified dates in order for the changes to be reflected in the next
month‘s payments. For cycle 1 payments, the files are due 2 to 3 weeks
before the payment date. For cycle 2, 3, and 4 payments, the files are
due 1 week before the payment date.
To allow time to process CMS transactions together with other changes
to Social Security payments for submission to Treasury on the specified
dates, SSA has established a processing schedule that limits the window
for accepting CMS batch data files to between 7 to 14 workdays each
month.
In general:
* SSA accepts CMS batch data files during the first week of each month,
and the changes on these files are reflected in the next month‘s Social
Security payments.
* SSA closes the window for about 2 weeks in the middle of each month;
no CMS batch data files are accepted during this time.
* SSA reopens the window for accepting CMS batch data files during the
last week of each month, but the changes on these files are not
reflected in the next month‘s Social Security payments”they are
reflected in the payments another month later.
Despite the move to electronic funds transfer (EFT) payments, about 12%
of all Social Security beneficiaries still receive paper checks,
according to SSA data.
* During fiscal year 2007, Treasury printed about 8.3 million Social
Security checks monthly.
* About the 2nd week of each month, Treasury begins printing checks for
the next month‘s payments.
The need to meet Treasury‘s cycle 1 payment processing schedule drives
SSA‘s schedule for accepting and processing requests for premium
withholding.
Figure: Photograph of check processing machine.
[See PDF for image]
Source: Department of Treasury, April 2008.
Due to this limited window, CMS received many requests for premium
withholding that were not processed in time to be reflected in the next
month‘s Social Security payments. Yet the premiums owed”to be paid by
premium withholding”started accruing in that next month.
* Beneficiaries may make changes to their enrollment in Parts C or D
plans during certain periods set by federal law,and”depending on when
during the period they make the change”their new coverage could become
effective the next month, even if the next month begins the very next
day. (For example, during the annual election period (AEP),
beneficiaries may join, drop, or switch Part C or D plans from November
15 through December 31 of each year, and their new coverage is
effective January 1 of the following year.)
* Beneficiaries can request changes to their premium withholding at any
time, with changes to take effect with the next month‘s payments,
according to CMS policy.
The following slide illustrates how even a request submitted early in
the month may miss the cut-off and not be processed by the next month‘s
payment. When this happens, premium withholding would not be accurate
for at least 1 month, and once processed, retroactive adjustments would
be required for the months when the withholding was not accurate.
Figure 4: Processing Timeline”Two Hypothetical Scenarios for a Routine
Request:
[See PDF for image]
The following two timelines are depicted:
Beneficiary A: Routine request submitted on 3/6/07:
1) 3/6/07: Beneficiary submits request for premium withholding to
his/her Part C or Part D plan;
2) 3/7/07: The plan notifies CMS of the request for premium
withholding;
3) 3/8/07: CMS updates its records to show the premium withhold
request;
4) 3/9/07: CMS forwards the request to SSA as part of a batch
transaction file (must be during a window when SSA accepts such files);
[Processing window (2/26/07 to 3/9/07) for April payment]
5) 3/12/07: SSA updates its records to reflect the change in the
beneficiary's Social Security payment;
6) 3/14/07: SSA forwards the new payment amount with premiums withheld
in a batch transaction file to Treasury on a specified data;
7) 4/3/07: Beneficiary receives Social Security payment with premium
withholding reflected.
Beneficiary B: Routine request submitted on 3/7/07:
1) 3/7/07: Beneficiary submits request for premium withholding to
his/her Part C or Part D plan;
2) 3/8/07: The plan notifies CMS of the request for premium
withholding;
3) 3/9/07: CMS updates its records to show the premium withhold
request;
4) 3/28/07: CMS forwards the request to SSA as part of a batch
transaction file (must be during a window when SSA accepts such files);
[Processing window (3/28/07 to 4/9/07) for May payment]
5) 3/29/07: SSA updates its records to reflect the change in the
beneficiary's Social Security payment;
6) 4/13/07: SSA forwards the new payment amount with premiums withheld
in a batch transaction file to Treasury on a specified data;
7) 5/3/07: Beneficiary receives Social Security payment with premium
withholding reflected.
Source: Based on GAO analysis of SSA, CMS, and Treasury standard
processing schedules. All hypothetical beneficiaries are assumed to be
in the cycle 1, group 1, payment batch.
[End of figure]
Rejected transactions:
At the first critical point for records matching, SSA data for 2006
show that almost half (44.5 percent) of the transactions CMS submitted
to SSA[Footnote 13](including repeated submissions of the same
requests) were rejected by SSA‘s information systems. CMS acknowledges
that this was due, in part, to its lack of understanding of SSA‘s
highly-detailed data needs to successfully process a request.
The most frequent reasons for these rejections were inconsistencies
between SSA and CMS databases containing Medicare enrollment data.
* In some cases, these inconsistencies would be resolved when CMS
received the latest monthly record updates from SSA.
* In most cases, however, some action by CMS was required to resolve
the problem.
* If no CMS action was taken to resolve the problem and the transaction
still failed after repeated submissions, CMS would notify the plan to
bill the beneficiary directly for their premiums.
Table 2: Most Frequent Types of CMS Transaction Rejects in Calendar
Year 2006:
CMS enrollment transaction does not match any enrollment period on
SSA's database:
Number: 7,582,445.
Part D plan premium amount on the CMS transaction is inconsistent with
the plan data provided by CMS;
Number: 5,276,955.
Enrollment dates on the CMS transaction overlap with current enrollment
dates;
Number: 2,609,140.
Part C Plan premium amount on the CMS transaction is inconsistent with
the plan data provided by CMS;
Number: 2,204,555.
Premium withholding periods on the CMS transaction overlap with the
current premium withholding periods for the same plan;
Number: 1,213,408.
Second enrollment transaction received from CMS without disenrolling
from the former plan;
Number: 1,184,659.
Plan number on the CMS transaction is invalid or missing;
Number: 1,095,446.
Latest existing premium end date on the CMS transaction does not match
SSA's date;
Number: 869,440.
Social Security number on the CMS transaction does not match any number
on SSA‘s database;
Number: 847,137.
Enrollment transaction contains an invalid payment option;
Number: 618,153.
Case identification number on the CMS transaction does not match any
number on SSA‘s database;
Number: 605,796.
Part D enhanced premium amount on the CMS transaction does not match
the plan data provided by CMS;
Number: 557,179.
Source: GAO analysis of SSA data.
Note: Data include CMS transactions other than premium withhold
requests, and may reflect repeated submissions of the same requests.
Total number of transactions processed in calendar year 2006:
60,365,024; total number rejected: 26,832,431.
[End of table]
Figure 5: Cycling of Rejected Transactions:
[See PDF for image]
This figure is an illustration of the cycling of rejected transactions,
as follows:
Start:
* SSA: Verifies beneficiary identification and Medicare plan
information;
* Approved? Accepted; Verifies Social Security payment status and
determines if sufficient funds;
* Rejected: Sent to CMS for resolution;
- Unable to resolve: Updates records with rejected request and notifies
plan to direct bill; Plan direct bills beneficiary for premium owed;
- Resolved: Updates records and resends request to SSA in a batch
transaction file daily during a window when SSA accepts such files;
* Process restarts.
Source: GAO analysis of SSA and CMS documents.
[End of figure]
Discrepancies between CMS and SSA records:
At the second critical point for records matching, CMS reconciliation
data for 2006 show that, even after a request had been processed and
premiums withheld, problems still occurred during CMS‘ reconciliation
of its records of premiums owed plans with SSA‘s monthly file of
premiums withheld.
* Premiums withheld were not remitted to plan sponsors until CMS
reconciled the differences with SSA records to establish the correct
amount to pay the plans. For 2006 records, this reconciliation effort
was not completed until 7 months later, in July 2007.
- In some cases, where beneficiaries had overpaid their premiums during
2006, refunds were not provided until July 2007 or later.
- In other cases, where beneficiaries had been in withholding status,
but no premiums had been withheld during 2006, CMS notified plans in
July 2007 that they would need to bill these beneficiaries directly for
the premiums owed.
* In the reconciliation of transactions for 2006, CMS data indicate
that discrepancies were identified affecting 277,534 beneficiaries.
[Footnote 14]
Figure 6: Reconciliation Process:
[See PDF for image]
This figure is an illustration of the reconciliation process, as
follows:
* SSA: Adds amount of withholding to monthly file for CMS of all
premiums withheld, and transfers collected premiums to CMS;
* CMS: Able to reconcile records?
- Unable to reconcile: Premiums withheld are nor remitted to plan. CMS
may direct SSA to refund premiums withheld and/or notify plans to
direct bill for premiums owed;
- Plan bills beneficiary for premiums owed;
- Able to reconcile: Adds withheld premiums to payment file for plans
prepared monthly for Treasury;
* CMS: If unable to reconcile, send to SSA who adds changes in payment
to batch transaction files prepared monthly for Treasury;
-Treasury disburses Social Security payment as adjusted by SSA;
Beneficiary receives payment with premium withholding reflected;
* CMS: If able to reconcile, sends to Treasury which pays plan sponsors
as directed; Plan receives payment for withheld premiums.
Source: GAO analysis of SSA, CMS, and Treasury documents.
[End of figure]
Steps Taken: Despite Improved Processes, Challenges Remain:
SSA and CMS have taken a number of steps to address the problems that
occurred with premium withholding for Parts C and D during the first
year of implementation:
* System modifications have reduced the number of rejected transactions
dramatically”from 44.5 percent in 2006 to 5.3 percent in 2007;
* New policies and procedures have helped to protect and educate
beneficiaries and improve the premium withholding process; and;
* Individual case handling was made available to expedite resolution of
critical problems.
But challenges remain with the schedule and timing of the premium
withholding process, and plan sponsors and beneficiary advocates
continue to voice concerns.
Modifications to information systems:
CMS and SSA have implemented various system changes to improve the
consistency of the data across databases. For example:
* CMS implemented an initiative referred to as a ’mismatch check,“which
is a monthly process that compares CMS premium withhold data to SSA‘s
premium withhold data in order to identify any data inconsistencies.
CMS then sends a transaction to SSA to correct the mismatch. According
to CMS, this initiative has had a significant impact on reducing the
number of transactions rejected by SSA.
* SSA and CMS made coding changes to avoid various reasons for rejects.
For example, SSA changed its edit code to eliminate the edit
requirement for day of birth. Prior to this change, many transactions
were rejected on this basis, even though the month and year of birth
were correct, and the date was only off by a day or two. (According to
SSA data, approximately 4,000 transactions were rejected in 2007 due to
mismatched day of birth.)
* CMS now more readily notifies plans that they should bill
beneficiaries directly for the premiums when requests for withholding
have been rejected for reasons CMS cannot resolve and when
discrepancies between the records of premiums paid and premiums owed
cannot be reconciled.
As a result of modifications made, transaction problems associated with
premium withholding requests have been reduced dramatically”to just 5.3
percent in 2007.
This lower rejection rate reflects both:
* Fewer transactions (due to both fewer requests being submitted and
fewer requests being cycled several times); and;
* Fewer rejections.
Figure 7: Number of Rejected Transactions (2006 and 2007):
[See PDF for image]
This figure is a stacked vertical bar graph depicting the following
data:
Year: 2006;
Accepted transactions: 35,532,593;
Rejected transactions: 26,832,431;
Total transactions: 60,365,024.
Year: 2007;
Accepted transactions: 19,302,825;
Rejected transactions: 1,069,669;
Total transactions: 20,371,825.
Source: GAO analysis of SSA data.
Note: Data include CMS transactions other than premium withholding
requests, and may reflect repeated submissions of the same requests.
[End of figure]
New policies and procedures:
CMS adopted various new policies and worked with SSA to develop new
procedures to help protect beneficiaries and improve the processing of
requests for premium withholding.
For example:
* To protect beneficiaries from having too much taken out of their
Social Security payments at one time:
- If the processing of a request for premium withholding is delayed and
would require more than 3 months‘ retroactive adjustments, CMS will
reject the request.
- If a request for premium withholding involves accumulated premiums of
over $200, SSA will reject the request.
In such cases, CMS notifies the plan to bill the beneficiary directly
for the premiums owed so that no additional premiums accrue unpaid, and
payment for what is already owed can be spread out rather than deducted
from a single Social Security payment.
* To ensure beneficiaries who had requested premium withholding
continue to receive benefits even if their Part C or Part D plans have
not received payment, CMS directed plans to:
- Continue to provide coverage to these beneficiaries; and;
- Not to bill these beneficiaries directly for their premiums unless
CMS notifies them specifically to do so.
* To ensure beneficiaries are informed about the length of time it
could take before premium-related requests are reflected in Social
Security payments:
- The CMS online enrollment form was changed to set the payment default
to direct bill and include additional detailed information on possible
delays and complications related to the premium withhold payment
method.
- CMS added a sentence on its model application to inform beneficiaries
that SSA deductions could take two or more months to begin.
- CMS included information on the possible delays related to premium
withholding on talking points distributed to private plans.
Note: See enclosure IV for examples of CMS forms and guidance.
* To facilitate the processing of requests received during the AEP,held
between November 15 and December 31 with changes to be effective in
January:
- CMS provides SSA with information on new Medicare premium amounts so
that SSA can include these changes when processing the annual benefit
rate increase for Social Security (also to be reflected in the January
payment).
- Due to the heavy workload during this time, CMS adopted a priority
system for determining which changes to place on the batch transaction
files sent to SSA each day during the processing window for the January
payment.
* To prevent double-billing of beneficiaries who have requested premium
withholding while those requests are being processed, and for other
purposes:
- On May 16, 2008, CMS issued proposed regulations which state that
plans may not bill enrollees for premiums if they have requested that
their premiums be withheld from their Social Security benefits.
[Footnote 15]
(The official comment period for the proposed regulations closes on
July 15, 2008.)
Process for individual case problem resolution:
To better respond to problems concerning Parts C and D premium
withholding, SSA and CMS developed a special system for handling
’congressional inquiry“ and ’dire need“ cases”such as when a
beneficiary has a problem with premium withholding that is creating a
financial hardship. Between July 2006 and March 2008, a total of 8,356
cases were processed using this system.
* The special handling system provides for individualized attention to
resolve problems for a limited number of cases and takes advantage of
Treasury‘s process for accepting changes to cycle 1 payments outside of
the normal processing schedule.[Footnote 16]
* Treasury allows SSA to submit a limited number of changes to paper
checks up to 8 workdays later than the first batch file due date for
cycle 1 payments, and the changes can be reflected in the next month‘s
Social Security payment. Changes to EFTs can be submitted up to 10
workdays later, with the changes reflected in the next month‘s Social
Security payments. However, since SSA does not separate the batch files
for paper checks from EFTs, the longer window for EFTs is not being
utilized.[Footnote 17]
The figure on the next page illustrates how individual case handling
enables processing of a transaction in between the normal processing
windows for routine requests.
Figure 8: Impact of Special Handling on Processing Timeline Illustrated
in Figure 4:
The following three timelines are depicted:
Beneficiary A: Routine request submitted on 3/6/07:
1) 3/6/07: Beneficiary submits request for premium withholding to
his/her Part C or Part D plan;
2) 3/7/07: The plan notifies CMS of the request for premium
withholding;
3) 3/8/07: CMS updates its records to show the premium withhold
request;
4) 3/9/07: CMS forwards the request to SSA as part of a batch
transaction file (must be during a window when SSA accepts such files);
[Processing window (2/26/07 to 3/9/07) for April payment]
5) 3/12/07: SSA updates its records to reflect the change in the
beneficiary's Social Security payment;
6) 3/14/07: SSA forwards the new payment amount with premiums withheld
in a batch transaction file to Treasury on a specified data;
7) 4/3/07: Beneficiary receives Social Security payment with premium
withholding reflected.
Beneficiary B: Routine request submitted on 3/7/07:
1) 3/7/07: Beneficiary submits request for premium withholding to
his/her Part C or Part D plan;
2) 3/8/07: The plan notifies CMS of the request for premium
withholding;
3) 3/9/07: CMS updates its records to show the premium withhold
request;
4) 3/28/07: CMS forwards the request to SSA as part of a batch
transaction file (must be during a window when SSA accepts such files);
[Processing window (3/28/07 to 4/9/07) for May payment]
5) 3/29/07: SSA updates its records to reflect the change in the
beneficiary's Social Security payment;
6) 4/13/07: SSA forwards the new payment amount with premiums withheld
in a batch transaction file to Treasury on a specified data;
7) 5/3/07: Beneficiary receives Social Security payment with premium
withholding reflected.
Beneficiary C: Dire need request identified on 3/7/07:
1) 3/7/07: Beneficiary contacts his/her Part C or Part D plan with dire
need request concerning premium withholding[A];
2) 3/8/07: The plan notifies CMS of the request for premium
withholding;
3) 3/9/07: CMS updates its records and confirms the request as a "dire
need" situation;
4) 3/13/07: CMS forwards the request to SSA for individual case
handling;
[Individual case processing window (3/13/07 to 3/26/07) for April
payment]
5) 3/14/07: SSA works with CMS to resolve problem, then updates its
records to reflect the change in beneficiary's Social Security payment;
6) 3/15/07: SSA forwards the new payment amount to Treasury for
individual case handling; Treasury pulls the check payment (or
intercepts the EFT payment), and SSA sends a corrected, certified
payment to Treasury for disbursement;
7) 4/3/07: Beneficiary receives Social Security payment with changes
reflected.
Source: Based on GAO analysis of SSA, CMS, and Treasury standard
processing schedules and special handling provisions. All hypothetical
beneficiaries are assumed to be in the cycle 1, group 1, payment batch.
[A] A dire need request may also be identified through the Social
Security 800 number, website, or field office.
[End of figure]
The individual case handling process takes advantage of the extended
window Treasury provides to place holds on a limited number of payments
and replace them in time for next month‘s payments.
* Treasury can manually pull a printed check and reissue a new one.
* Treasury can place an electronic hold on an EFT and process a new
payment.
In fiscal year 2007, Treasury placed holds on over 2.3 million Social
Security payments.
Figure: Photograph of Treasury processing area.
[See PDF for image]
Source: Department of Treasury, April 2008.
[End of figure]
Challenges remain:
Despite the steps taken, challenges remain due to the schedule and
timing of the premium withholding process:
* The schedule for batch processing during certain specified intervals,
with files sent to Treasury on certain specified dates, has resulted in
a system that, unless a premium withholding request is received during
the first week of the month, it cannot be processed in time to be
reflected in the next month‘s Social Security payment.
* The timing of the AEP, when beneficiaries can join, drop, or make
changes to their enrollment in Part C and Part D plans, overlaps with
the processing of annual updates to Medicare premium amounts and Social
Security benefits. The current practice of making premium adjustments
presumptively”assuming beneficiaries will not switch plans, then making
changes later if they do switch plans”can create added workload for the
agencies when beneficiaries make changes in the last half of the AEP.
Making presumptive adjustments may be a better option than disenrolling
beneficiaries from their plans, which could lead to a gap in coverage.
However, it can also lead to confusion for plans and beneficiaries when
premiums are withheld for a plan that the beneficiary did not choose.
The following series of slides illustrates an actual case example of
how the processing of multiple actions during the AEP overlapped and
extended the length of time before the correct premiums were withheld
from the beneficiary‘s Social Security payment. The three actions that
took place in this case were as follows:
* On 11/17/07, SSA rolled over the beneficiary‘s enrollment for January
2008 in the same plan, with premium withholding, when processing the
annual increase for the beneficiary‘s Social Security payment.
* On 12/13/07, the beneficiary submitted a request to switch plans, to
be effective in January 2008.
* On 12/26/07, the new plan discovered it had inadvertently submitted
the request without premium withholding, and it submitted a corrected
request. Because of the way the system works, the correct premium
amount was not reflected until the beneficiary‘s March 2008 Social
Security payment, and retroactive adjustments to correct for 2 months
of inaccurate withholding needed to be included.
Figure 9A: One Case Example of Processing Changes during the AEP:
[See PDF for image]
This figure is an illustration of the following timeline:
Action A: Beneficiary presumptively rolled over to same plan for the
next year:
1) 11/17/07: SSA rolls over enrollment of the beneficiary with premium
withholding to the same plan when processing the benefit rate increase
for Social Security;
2) 11/27/07: CMS updates its records with the same rollover
information, and forwards the change to SSA in a batch transaction file
(must be during a window when SSA accepts such files);
[Processing window (11/20/07 to 12/7/07) for January payment]
3) 11/28/07 (Estimated date): SSA updates its records to reflect the
change in the beneficiary's Social Security payment;
4) 12/12/07 (Estimated date): SSA forwards the new payment amount in a
batch transaction file to Treasury on a specified date;
5) 1/03/08 (Estimated date): Beneficiary receives Social Security
payment with change reflected; [January premium withheld for same
rollover plan]
Action B: Beneficiary presumptively rolled over to same plan for the
next year:
1) 12/13/07: Beneficiary submits request to switch to a new plan;
2) 12/14/07: New plan notifies CMS of the change and indicates that the
beneficiary does not want premium withholding;
3) 12/31/07: CMS updates its records and forwards the request to SSA to
stop premium withholding in a batch transaction file (must be during a
window when SSA accepts such files);
[Processing window (12/26/07 to 1/8/07) for February payment]
4) 1/2/08 (estimated date): SSA updates its records to reflect the
change in the beneficiary's Social Security payment;
5) 1/11/08 (estimated date): SSA forwards the new payment amount in a
batch transaction file to Treasury on a specified date;
6) 2/1/08 (estimated date): Beneficiary receives Social Security
payment with change reflected; [No premium withheld plus refund for
January withholding]
Action C: New plan discovers error concerning premium payment method:
1) 12/26/07: New plan discovers inadvertent error concerning premium
payment method; beneficiary wants to keep premium withholding;
2) 12/27/07: New plan notifies CMS of the change and indicates that the
beneficiary does want premium withholding;
3) 1/31/07 (estimated date): CMS updates its records and forwards the
request to SSA to stop premium withholding in a batch transaction file
(must be during a window when SSA accepts such files);
[Processing window (1/28/08 to 2/6/07) for March payment]
4) 2/1/08 (estimated date): SSA updates its records to reflect the
change in the beneficiary's Social Security payment;
5) 2/11/08 (estimated date): SSA forwards the new payment amount in a
batch transaction file to Treasury on a specified date;
6) 3/3/08 (estimated date): Beneficiary receives Social Security
payment with change reflected; [March premium withheld for new plan,
plus retroactive adjustment for January and February premiums still
owed]
Source: Based on case example data provided by CMS and GAO analysis of
SSA, CMS, schedules. The beneficiary is assumed to be in the cycle 1,
group 1, payment batch.
[End of figure]
Continuing concerns:
Premium withholding can make paying premiums easier for both
beneficiaries and insurance plans. But beneficiary advocates and
private plan sponsors continue to voice concerns about the problems
associated with processing requests for premium withholding.
* From February 2007 (when premium withholding complaints began to be
specifically tracked) through October 2007, 46,445 (approximately 18
percent) of the total complaints filed with CMS were related to
problems beneficiaries experienced with premium withholding.[Footnote
18]
* The plan sponsors and beneficiary advocates we spoke with cited
advantages to premium withholding, such as convenience and consistency
of coverage for vulnerable populations. At the same time, sponsors and
advocates continued to voice concerns about the length of time it takes
to process a request for premium withholding and the difficulties it
has caused some beneficiaries.
* Although the percentage of beneficiaries with premium withholding
grew between January 2006 and January 2007, the portion using this
payment method took a slight downturn by January 2008.
Continuing concerns: Plan sponsor and beneficiary advocate
perspectives:
Plan sponsors told us:
* Premium withhold provides security for members such as those who are
hospitalized and worried about making payments.
* Although premium withhold is less expensive for plans to administer
than direct bill, problems may be too numerous to justify this payment
option.
* Timeliness is a major issue for both plans and members. The variety
of problems arising from delays and time lags is a ’nightmare“.
* These critical problems bring unwanted negative attention and blame
onto the plans.
* The premium withhold process is flawed and needs to be repaired or
eliminated.
Source: Interviews with eight private plan sponsors providing coverage
to about half of all Part C and/or Part D beneficiaries nationwide.
Beneficiary advocates told us:
* That the process should be repaired, not eliminated; vulnerable
segments of the population would receive potential benefits if process
functioned correctly.
* Beneficiaries with mental disabilities may have difficulty making
regular payments on their own, and this option helps keep their
coverage current.
* Some beneficiaries do not have bank accounts or have problems keeping
accurate records.
* Despite potential benefits, the current problems with premium
withholding keep them from encouraging its use.
Source: Interviews with the Center for Medicare Advocacy, Inc., and the
Medicare Rights Center.
Continuing concerns: Plan sponsor changes to enrollment forms:
One plan we spoke with had removed the premium withhold payment option
as a check-off box on its enrollment form, making it a more onerous
option for the enrollee to select (see below). Officials from this plan
told us that they made this change, with CMS approval, in response to
problems associated with premium withholding, and that the election of
premium withholding is now only possible post-enrollment. (Plans are
required to submit all materials related to the on-line enrollment
process to CMS for approval.)
5. Please Selected Your Premium Payment Option:
* Indicates required information.
You can pay your monthly plan premium by mail or Electronic Fund
Transfer (EFT) each month. [Highlight start] After your coverage takes
effect, you can also choose to pay your premium by automatic deduction
form your Social Security check each month. If you are interested in
other payment options, please contact us at 1-888-0075 [Highlight end],
8 a.m. to 8 p.m. daily, Central and Mountain time (TTY/TDD: 1-800-693-
3819).
* Please select your payment option:
Paper bill:
Electronic Fund Transfer (complete EFT form):
Note: If you qualify for extra help with your Medicare prescription
drug coverage costs, Medicare will pay all or part of your plan
premium. In Medicare pays only a portion of this premium, we will bill
you for the amount that Medicare does not cover. Generally, you must
stay with the option you choose for the rest of the year. If you don't
select a payment option, you will receive a bill each month.
Source: [hyperlink, http://www.yourmedicaresolutions.com] (highlighting
added).
Figure 10: Trends in Parts C and D Premium Withholding:
[See PDF for image]
This figure is a horizontal bar graph depicting the following data:
Date: January 2006;
Percent of beneficiaries with premium withholding among those who owe
premiums: 25.1%.
Date: January 2007;
Percent of beneficiaries with premium withholding among those who owe
premiums: 31.1%.
Date: January 2008;
Percent of beneficiaries with premium withholding among those who owe
premiums: 30.5%.
Source: GAO analysis of CMS data.
[End of figure]
Conclusions:
Premium withholding can provide beneficiaries a convenient way to pay
their Medicare premiums and, at the same time, can lessen plan
sponsors‘ administrative burden of collecting premiums. Yet
beneficiaries are being discouraged from using this payment method
because of continuing problems processing requests.
The fundamental characteristics of the Part C and Part D programs make
withholding these premiums a complex process, and in 2006, during the
first year of implementation, SSA and CMS encountered many
difficulties. Since then, SSA and CMS have made considerable progress
in working together to solve problems and to reduce the delays in
processing. Nevertheless, significant challenges remain with SSA‘s
limited window for processing requests (which is driven by Treasury‘s
schedule) and the statutorily-required dates of enrollment periods.
[End of enclosure]
Enclosure II: Overview of the Medicare Program:
Medicare is a health insurance program for people aged 65 years or
older who are eligible to receive Social Security benefits; certain
people under aged 65 years with disabilities; and people of all ages
with end-stage renal disease (i.e., permanent kidney failure). A
description of the four parts of the Medicare Program follows with
further details in table 1.
Part A: Hospital Insurance:
Part A provides for a fee-for-service insurance program run by the
federal government that helps cover inpatient care in hospitals and
skilled nursing facilities, and some home health services and hospice
care. Most people do not pay a premium for Part A because they or a
spouse earned this coverage through their employment by paying payroll
taxes for at least 10 years.
Part B: Supplementary Medical Insurance:
Part B provides for a fee-for-service insurance program run by the
federal government that helps cover visits to doctors, outpatient care,
and other services not covered under Part A. Those eligible for Part A
can choose to enroll in Part B. Those who enroll generally are required
to pay a monthly premium. However, certain beneficiaries who are also
eligible for Medicaid ("dual-eligibles") may have their Part B premium
paid by their state Medicaid program. Premium rates are set annually.
Part C: Medicare Advantage Plans:
Part C provides for health plans that are approved by CMS, but are run
by private companies. These plans must cover at least all of the
medically necessary services that Parts A and B provide for enrollees
entitled to benefits under both parts. They also generally offer extra
benefits, and many offer Part D drug coverage. Most beneficiaries
eligible for Part A and enrolled in Part B can choose to enroll in a
Part C plan, instead of the fee-for-service, government-run plan. Part
C plans include Medicare-preferred provider organization plans,
Medicare health maintenance organization plans, Medicare private fee-
for-service plans, Medicare special needs plans, and Medicare medical
savings account plans. Costs vary by plan, and some plans charge a
monthly premium in addition to the Part B premium.
Part D: Prescription Drug Coverage:
Part D provides for plans approved by CMS, but run by private companies
that offer coverage for prescription drug costs not covered under Parts
A or B. Medicare beneficiaries can choose to participate in a Part D
plan--either as an option under their Part C plan or in a stand-alone
plan. Those who participate are generally required to pay a monthly
premium. However, certain low-income Medicare beneficiaries may qualify
for "extra help" from the Part D low-income subsidy program or State
Pharmacy Assistance Programs. Premium rates vary widely by plan.
Table 1: Overview of the Medicare Program:
Participation:
Part A: Hospital Insurance: Automatic for most: Eligibility is based on
Social Security eligibility;
Part B: Supplementary Medical Insurance: Optional: Those eligible for
Part A can choose to enroll in Part B;
Part C: Medicare Advantage Plans: Optional: Eligibility generally is
based on eligibility for Part A and enrollment in Part B;
Part D: Prescription Drug Coverage: Optional: Eligibility is based on
eligibility for Part A or enrollment in Part B.
Insurer:
Part A: Hospital Insurance: Federal government;
Part B: Supplementary Medical Insurance: Federal government;
Part C: Medicare Advantage Plans: Private plans;
Part D: Prescription Drug Coverage: Private plans.
Coverage:
Part A: Hospital Insurance: Helps cover inpatient care in hospitals and
skilled nursing facilities, and some home health services and hospice
care;
Part B: Supplementary Medical Insurance: Helps cover visits to doctors,
outpatient care, and other services not covered under Part A;
Part C: Medicare Advantage Plans: Same coverage as provided under Parts
A and B, plus coverage for enhanced services also generally offered;
Part D: Prescription Drug Coverage: Helps cover prescription drug costs
not covered under Parts A and B.
Premium amounts in 2008:
Part A: Hospital Insurance: Most pay no premium; funded by payroll
taxes of current workers[A];
Part B: Supplementary Medical Insurance: Standard amount: $96.40 per
month in 2008 (plus an added increment for certain beneficiaries, such
as late enrollees and high-earners)[D];
Part C: Medicare Advantage Plans: Varies by plan and may be more or
less than the Part B premium, depending on the benefits offered by the
plan[C];
Part D: Prescription Drug Coverage: Varies by plan (monthly premiums
ranged from $0 to $107.50 in 2008)[B].
Enrollment as of January 2008:
Part A: Hospital Insurance: 44,005,633;
Part B: Supplementary Medical Insurance: 40,676,927[E];
Part C: Medicare Advantage Plans: 9,224,895;
Part D: Prescription Drug Coverage: 24,924,796[F].
Percentage of beneficiaries with withholding:
Part A: Hospital Insurance: (no withholding)[A];
Part B: Supplementary Medical Insurance: 80%[E];
Part C: Medicare Advantage Plans: 5%;
Part D: Prescription Drug Coverage: 19%[F].
Source: GAO analysis of agency documents, data, and federal laws and
regulations.
[A] A small number of Medicare beneficiaries are not entitled to Part
A, but may purchase the benefit by paying premiums ($423 per month in
2008). Because these beneficiaries also are not entitled to Social
Security, withholding is not an option.
[B] Certain beneficiaries may have their Part D premiums subsidized in
various ways, such as under the federal Low-Income Subsidy program, by
a State Pharmacy Assistance Program; by third-party payers, such as
employers and unions; or by their Part C plans (see note d).
[C] When a beneficiary chooses to enroll in a Part C plan, the Part B
premium is paid to the Part C plan. Thus, the same subsidies described
in note d may also apply to certain Part C beneficiaries.
[D] Certain beneficiaries may have their Part B premiums subsidized in
various ways, such as by a state Medicaid program; by third-party
payers, such as employers and unions; or by their Part C plans
(referred to as a Part B reduction). Under the MMA, some Part C plans
may receive rebates that they can use to provide their beneficiaries
with additional benefits, reduce premiums, and/or reduce cost sharing.
For more on Part C rebates, see GAO, Medicare Advantage: Increased
Spending Relative to Medicare Fee-for-Service May Not Always Reduce
Beneficiary Out-of-Pocket Costs, GAO-08-359 (Washington, D.C.: Feb. 22,
2008).
[E] These Part B numbers include those who have opted to join a Part C
plan, and their Part B premiums are paid to the Part C plan. Thus,
there is overlap in the numbers and percentages for Parts B and C.
[F] These Part D numbers include those enrolled in a Part C plan that
provides Part D benefits as well as those enrolled in a Part D stand-
alone plan. Thus, there is overlap in the numbers and percentages for
Parts C and D.
[End of table]
[End of section]
Enclosure III: Key Systems and Data Processing Transactions Involved in
Withholding Medicare Premiums:
The Centers for Medicare & Medicaid Services (CMS) and the Social
Security Administration (SSA) use the same information systems within
their agencies to process Parts B, C, and D premium withholdings. The
agencies' systems interact both daily and monthly to ensure that the
correct premium amounts are withheld from beneficiaries' Social
Security payments. The agencies exchange batch transaction files within
specified dates each month.
While the same information systems are used within each agency to
process Parts B, C, and D withholdings, fewer data processing
transactions are required to process Part B withholdings than are
required to process Parts C and D withholdings. All announced Part B
premium amounts are determined by CMS each September and automatically
withheld by SSA.[Footnote 19] CMS only provides premium adjustment
amounts to SSA, such as when state Medicaid programs pay the premium,
or when there is a reduction for participation in certain Part C plans.
Data are sent daily and monthly from SSA in batch files to notify CMS
of beneficiaries' Part B premium withholding status so that CMS can
update its Medicare database.
In contrast, for Parts C and D, premium withholding is initiated only
at the request of beneficiaries through their plan sponsors. The plan
sponsors forward the withholding requests to CMS. Then, during a
certain specified window, data are exchanged daily between SSA and CMS
for SSA to process the requests. Therefore, SSA and CMS databases must
be consistent to correctly process withholdings for Parts C and D;
otherwise, data inconsistencies between the systems could result in
rejected transactions. Once the correct premium withholding amounts for
Medicare Parts B, C, and D are determined and processing by the CMS and
SSA systems is complete, the adjusted Social Security payment amounts
are sent to the Department of the Treasury (Treasury). Treasury then
processes and disburses monthly Social Security payments reflecting the
change for premium withholding. Data are also exchanged monthly for CMS
to reconcile its Medicare database with SSA's data on premiums withheld
and to compute amounts to be paid to the Parts C and D plan sponsors.
Information Systems:
Prescription plan sponsors use information systems to exchange data
with CMS, including beneficiary requests for withholding Parts C and D
premiums. CMS, SSA, and Treasury use information systems to support the
processing of Medicare Parts B, C, and D premium withholdings. A
description of the key system components used to support the premium
withholding process follows.
Plan Sponsors' Information Systems:
Medicare Advantage and Prescription Drug plan sponsors (totaling over
800) use a variety of systems and methods to provide Medicare Parts C
and D premium withholding requests to CMS.
CMS' Information Systems:
* Medicare Advantage and Prescription Drug (MARx) system: This system
is CMS' system of record that maintains all data related to beneficiary
enrollments and premiums and plan payments.
* Premium Withhold Subsystem (PWS: This system compares the actual
withholding reported by SSA with the expected withholding for each
beneficiary reported by MARx/PWS. Additionally, the PWS provides the
data required by CMS' main accounting system for CMS payment of
withheld premium funds to the plan sponsors.
* Medicare Advantage and Prescription Drug (MARx)/PWS system: This
system transmits initial enrollment and premium records to SSA, sends
updated information to SSA when changes occur, and receives
acknowledgments and updates from SSA. MARx/PWS notifies the plan
sponsors when withholding transactions have been sent to SSA for
processing and when the processing results are returned from SSA.
* Automated Plan Payment System (APPS): This is CMS' main accounting
system used to provide data to CMS' FACS system (see below), which is
used to transmit data to Treasury.
* Financial Accounting and Control System (FACS): This is CMS' system
that interfaces with Treasury for payments to plan sponsors.
SSA's Information Systems:
* Master Beneficiary Record (MBR): This database receives all actions
related to enrollment and premium withholding from Social Security
payments. MBR data are updated daily upon successful processing of the
daily input transactions.
* Medicare Database (MDB): This database is used for the collection and
maintenance of information related to Medicare, including
beneficiaries' enrollment and premium withholding information.
* SSA Title 2 System: This system is used to compute the amount of
beneficiary payments, including adjustments for premium withholdings,
using data from SSA's MDB.
* Medicare Day 1 Editing Application: This system receives transaction
files from CMS and performs edits to verify transaction data, such as
beneficiary identification, plan information, and coverage period.
Transactions that pass the Day 1 editing process are used to update the
MDB.
* Medicare Day 2 Editing Application: This system performs transaction
editing to ensure that sufficient benefit payments are available to
cover the premium payments. Transactions that pass the Day 2 editing
process are used to update the MBR and the MDB with the premium
withholding amounts. The premium withholding data are used for the
monthly accounting exchange with CMS.
Treasury's Information Systems:
* Financial Management Services (FMS) Applications: FMS uses two
applications--the third-of-the-month application and the cycling
application--to process monthly SSA benefit payments during four
payment cycles. These systems are relied on to process and disburse SSA
benefit payments, including adjustments to SSA benefit payments for
Medicare premium withholdings. Cycle 1 payments are generated for
receipt as third-of-the-month payments each month, and cycles 2, 3, and
4 payments are generated for receipt by a smaller number of SSA
beneficiaries later in the month, on the 2nd, 3rd, or 4th Wednesday.
* Intra-governmental Payment and Collection (IPAC) System: This is
Treasury's system that SSA uses to transfer withheld premiums to CMS.
Part B Premium Withholding:
Premiums for Medicare Part B are automatically withheld from a
beneficiary's monthly Social Security benefit payment, unless the
beneficiary chooses not to enroll in Part B or the Social Security
payment amount is insufficient (or there is no payment). SSA determines
the correct premium to apply and automatically withholds Part B
premiums from the beneficiary's monthly Social Security
payment.[Footnote 20] SSA also provides the changed monthly payment
information to CMS and Treasury's FMS.
The process for withholding Medicare Part B premiums from a
beneficiary's monthly Social Security payment requires few steps.
Specifically, the process begins when SSA enrolls the beneficiary in
Medicare Part B and ends when Treasury withholds the premium amount
from the beneficiary's payment and deposits the funds into the CMS
trust funds. Figure 1 and the narrative that follows provide an
overview of the key information systems and steps completed in
withholding Part B premiums from a beneficiary's Social Security
payment.
Figure 1: Key Systems and Steps Used to Withhold Medicare Part B
Premiums:
[See PDF for image]
This figure is an illustration of key systems and steps used to
withhold Medicare Part B premiums, as follows:
SSA:
Automatically initiates Medicare premium withholding for social
security beneficiaries;
Title 2 applications verify sufficient funds exist;
Pass edit?
- No; insufficient fund cases sent to CMS; MARx/PWS updates records;
- Yes; Update MBR and send payment adjustment to Treasury; Treasury
receives and processes benefit payment adjustments;
- Yes; Approved transactions sent to CMS on a daily basis; MARx/PWS
updates records;
- Yes; SSA send trust fund transfer document to CMS on a monthly basis;
MARx/PWS updates records.
Source: GAO analysis of CMS, SSA, and Treasury data.
[End of figure]
Detailed steps for withholding Part B premiums:
1. When a beneficiary is enrolled in Part B, SSA takes steps to
withhold the Part B premium from the beneficiary's Social Security
payment automatically after determining, on the basis of data from IRS,
whether an Income Related Monthly Adjustment Amount is required.
2. SSA's Title 2 application processes the Medicare Part B withholding
transaction to ensure that the Social Security payment is available and
sufficient to cover the premium.
3. SSA's Title 2 application updates SSA's MBR with the Medicare Part B
data, and begins premium withholdings. The application also notifies
the beneficiary and CMS to update its records of the enrollment and the
amount withheld to cover the Part B premium. If the premium cannot be
withheld from the Social Security payment, SSA notifies CMS to bill the
beneficiary directly.
4. SSA's Title 2 system transmits the revised Social Security payment
amounts to Treasury on specified dates during SSA's operating month.
5. SSA's Title 2 system produces reports for SSA's Office of Budget,
Finance and Management. These reports, as well as data from CMS, are
used to prepare a trust fund transfer document, which is forwarded to
CMS at the end of the operating month.[Footnote 21] The document
identifies the Part B premium amounts that have been transferred from
SSA's trust funds to CMS trust funds.
Parts C and D Premium Withholding:
When beneficiaries elect to have their Medicare Parts C and D premium
payments withheld from their monthly Social Security payments, multiple
entities must work together to ensure that correct premium amounts are
withheld. Medicare Advantage (Part C) plans and Prescription Drug
Coverage (Part D) sponsors are required to notify CMS when
beneficiaries elect to have premiums withheld. CMS is responsible for
forwarding the information to SSA, which then processes premium
withholdings from the beneficiaries' payments. SSA provides the changed
payment information to Treasury's FMS and the monthly premium
withholdings to CMS. CMS then submits a payment file to Treasury, and
Treasury initiates wire transfers to the plan sponsors.
The process of withholding Medicare Parts C and D premiums from
beneficiaries' monthly Social Security payments requires many steps.
Specifically, the process begins when beneficiaries select plans and
notify their plan sponsors that they want their premiums withheld, and
ends when Treasury pays the plan sponsors based on data provided by
CMS. Figure 2 and the narrative that follows provide an overview of the
key information systems and steps completed in withholding Parts C and
D premiums from a beneficiary's Social Security payment.
Figure 2: Key Systems and Steps Used to Withhold Medicare Parts C and D
Premiums:
[See PDF for image]
This figure is an illustration of key systems and steps used to
withhold Medicare Parts C and D premiums. A detailed explanation of the
illustration is provided below.
Source: GAO analysis of CMS, SSA, and Treasury data.
[End of figure]
Detailed steps for withholding Parts C and D premiums:
1. A beneficiary contacts the plan sponsor and elects to have the Part
C or D premium withheld from his or her monthly Social Security
payment.
2. The plan sponsor submits the beneficiary's premium withholding
request to CMS' MARx system, which transmits the information to MARx/
PWS.
3. MARx/PWS creates and transmits a daily file to SSA (during the
window when SSA accepts such files) that contains new premium
withholding transactions. MARx alerts the plan sponsor that the
transaction has been sent to SSA.
4. SSA's Day 1 editing application performs edits on the transaction to
verify the beneficiary's identification and plan coverage. Transactions
that pass SSA's Day 1 edits are updated in SSA's MDB and then sent to
SSA's Day 2 editing application for further processing. Transactions
that do not pass Day 1 edits are rejected and included on a response
file that is sent to CMS within 48 hours.
5. MARx/PWS receives the rejected transactions, and CMS attempts to
resolve the problem. If the problem is resolved, the corrected
transaction is sent back to SSA. If the problem is not resolved, the
transaction is sent back to the plan sponsor to direct bill for the
premiums.
6. SSA uses its Day 2 editing application to perform edits to ensure
that the Social Security payment is available and sufficient to cover
the premiums. Transactions that pass SSA's Day 2 processing are updated
in SSA's MBR and MDB and are sent to CMS, and SSA mails notices to
beneficiaries on the payment adjustments due to premium withholdings.
Medicare Parts C and D transactions that do not pass Day 2 processing
are sent back to CMS through MARx/PWS. CMS then notifies plan sponsors
that they should direct bill for the premiums.
7. SSA transmits benefit payment adjustments to Treasury on specified
dates, by payment cycle, that reflect Medicare Parts C and D premium
withholdings.
8. Treasury receives and processes the payment adjustments and notifies
SSA. Afterwards, SSA sends CMS a file containing Medicare Parts C and D
premium withholdings for the month and transfers the withheld premiums
to CMS via IPAC.
9. MARx/PWS calculates the monthly Medicare payment for each plan,
adjusting payments for premium withholdings for each beneficiary. PWS
then performs a monthly comparison of the actual amounts withheld by
SSA with the calculated (expected) amount in MARx/PWS. If no
discrepancy is identified, PWS adds the withheld amounts to the total
plan payment to be included on the payment files passed to the APPS and
reported to the plan sponsors. If a discrepancy is identified, the
collected funds remain with CMS until the discrepancy is resolved.
10. APPS sends the payment file to FACS, then FACS sends the file to
Treasury for payment to plan sponsors.
[End of section]
Enclosure IV: CMS Forms and Guidance on Premium Withholding:
Since 2006, CMS has implemented changes to its Part D online enrollment
form and has provided guidance to plan sponsors that addresses the
length of time it may take before Parts C and D premium withholding
requests are reflected in beneficiaries' Social Security payments.
CMS Part D Online Enrollment Form:
In November 2006, CMS set its Part D online enrollment form's payment
method default to direct bill and added advisory language regarding
premium withholding. The initial screen a beneficiary now sees
concerning payment options is illustrated below.
Your Plan Premium Payment Option:
You can pay your Medicare drug plan directly for your monthly premium,
or have the monthly premium automatically deducted from your Social
Security check. If you choose to pay directly, you can pay by mail or
by electronic Funds Transfer (EFT). Generally you must stay with the
option you choose for the rest of the year.
If you qualify for extra help with your Medicare prescription drug
coverage costs, Medicare may cover all or some portion of your plan
premium. Please choose if you want to pay your remaining premium, if
there is any, directly to your plan.
Do you want to pay your premium directly to your plan (this can include
an automatic monthly deduction from your bank account)?
Yes: [Check];
No: [Empty].
If you currently have Medicare drug plan premiums withheld from your
Social Security benefit: Please be advised that it may take up to two
or three months before deductions for your old plan stop. This means
that you may have two or three monthly premiums from your old plan
withheld from your Social Security benefit until the deductions stop.
When the deductions stop, you will receive a refund for the premiums
that were withheld for your old plan.
Source: [hyperlink, http://www.medicare.gov].
[End of illustration]
If beneficiaries want to select the premium withholding option, they
must click the "No" button and then the screen appears as shown on the
next page.
Your Plan Premium Payment Option:
You can pay your Medicare drug plan directly for your monthly premium,
or have the monthly premium automatically deducted from your Social
Security check. If you choose to pay directly, you can pay by mail or
by electronic Funds Transfer (EFT). Generally you must stay with the
option you choose for the rest of the year.
If you qualify for extra help with your Medicare prescription drug
coverage costs, Medicare may cover all or some portion of your plan
premium. Please choose if you want to pay your remaining premium, if
there is any, directly to your plan.
Do you want to pay your premium directly to your plan (this can include
an automatic monthly deduction from your bank account)?
Yes: [Empty];
No: [Check].
You have chosen "No" and agree to have the monthly premium for this
Medicare drug plan automatically deducted from your Social Security
benefit. Please be advised that it may take up to two or three months
before deductions begin.
[Begin highlighted portion] If it takes two months for deductions to
begin, two monthly premiums will be withheld in a lump sum from your
Social Security benefit.
If it takes three months for deductions to begin, three monthly
premiums will be withheld in a lump sum from your Social Security
benefit. You will never have a deduction that is more than three months
worth of premiums. [End highlighted portion]
If you currently have Medicare drug plan premiums withheld from your
Social Security benefit: Please be advised that it may take up to two
or three months before deductions for your new plan begin. This means
that you may have two or three monthly premiums from your old plan
withheld from your Social Security benefit until the deductions begin.
[Begin highlighted portion] When the deductions begin for your new
plan, there will be an adjustment for any premiums withheld from your
old plan, as well as the deduction for your new plan.
If you have assistance other than extra help from SSA or your State
Medicaid: When another organization, such as a State Pharmacy
Assistance Program, pays a portion of your drug plan premium and you
choose to have automatic premium withholding from your SSA benefits,
the entire premium amount will be deducted. Your drug plan will then
send you a refund for the overpayment of premiums. If you do not wish
to have the entire premium deducted from your SSA benefits, you can
choose to pay any balance for your premium directly to the plan (this
will mean you would pay only your portion of the premium and the other
organization would pay its portion).
Are you sure you want to have your premiums automatically deducted from
your Social Security check? If you choose "No" the plan will send you a
bill each month, which you can pay by mail or by electronic funds
transfer (EFT). Please select an answer below: [End highlighted
portion]
Yes:
No:
Source: [hyperlink, http://www.medicare.gov] (highlighting added).
[End of illustration]
After the "No" button is selected, the text on the form expands to
include the cautionary language highlighted above. To elect the premium
withholding option, beneficiaries now must click on "Yes" at the bottom
of the screen.
CMS Guidance to Plans on Premium Withholding:
In 2007, CMS made changes to the model enrollment application form
provided in its guidance to plans. Earlier, during 2006, CMS had
provided a new call center script and other materials concerning the
selection of the premium withholding payment option.
Model Enrollment Form: Payment Method Section:
Below is the section from the CMS model enrollment application form
that was provided to private plans in June 2007. The highlighted
portion indicates the new cautionary language that was added to the
form.
Paying Your Plan Premium:
You can pay your monthly plan premium by mail each month . You can
also choose to pay your premium by automatic deduction from your Social
Security Check each month.
If you qualify for extra help with your Medicare prescription drug
coverage costs, Medicare will pay all or part of your plan premium. If
Medicare pays only a portion of this premium, we will bill you for the
amount that Medicare does not cover.
If you don't select a payment option, you will receive a bill each
month .
Please select a premium payment option:
Receive a bill ; ;
