Summary

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. 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.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Implemented" or "Not implemented" based on our follow up work.

Recommendations for Executive Action