Summary
In a fiscal year 1999 accountability report to Congress, the Health Care Financing Administration (HCFA) made several clerical errors in the accounting of Medicare trust funds, which caused the Hospital Insurance (HI) Trust Fund to be overinvested by about $14 billion and the Supplementary Medical Insurance (SMI) Trust Fund to be underinvested by about $18 billion. Because of these errors, the HI Trust Fund earned excess interest and the SMI Trust Fund lost interest. GAO found that these errors went undetected for a year because of internal control weaknesses. Inadequate training and supervision and ineffective reconciliations were key factors that allowed the errors to go undetected. HCFA took corrective action, however, as soon as the errors were discovered.
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.
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Recommendations for Executive Action
Recommendation: To ensure that adequate controls are in place to safeguard Medicare assets, the HCFA Chief Financial Officer should further enhance the monthly Medicare benefit adjustments procedures to include monthly analysis of the transfer account ending balances to detect anomalies.
Agency Affected: Department of Health and Human Services: Health Care Financing Administration: Office of the Chief Financial Officer
Status: Implemented
Comments: Since GAO reported, CMS has revised its procedures for preparing monthly Medicare benefit adjustment spreadsheets to include monthly reconciliations to help identify anomalies in ending balances of transfer accounts.
Recommendation: To ensure that adequate controls are in place to safeguard Medicare assets, the HCFA Chief Financial Officer should formalize the written procedures for preparing the monthly Medicare benefit adjustment spreadsheet and incorporate them in official HCFA policy guidance.
Agency Affected: Department of Health and Human Services: Health Care Financing Administration: Office of the Chief Financial Officer
Status: Implemented
Comments: In 2002, CMS developed and issued a comprehensive accounting procedures manual to direct staff in performing routine accounting and financial reporting activities for Medicare. This manual includes procedures for preparing the monthly Medicare benefit adjustment spreadsheets and monthly reconciliations that are intended to help identify anomalies in ending balances of Medicare trust fund transfer accounts. As a result of CMS actions, internal controls have been strengthened which should help prevent further errors in the Medicare trust funds.
Recommendation: To ensure that adequate controls are in place to safeguard Medicare assets, the HCFA Chief Financial Officer should conduct training for those staff responsible for preparing, processing, and reviewing the monthly benefit adjustment and any staff whose job performance is directly related to the daily transfer account transactions.
Agency Affected: Department of Health and Human Services: Health Care Financing Administration: Office of the Chief Financial Officer
Status: Implemented
Comments: In 2002, CMS started to use the procedures included in its comprehensive accounting procedures manual to train staff responsible for preparing the monthly Medicare benefit adjustment and reconciliations. In addition, the manual provides staff with a reference guide to use in performing the routine accounting and reporting procedures related to the Medicare trust funds.
Recommendation: To further strengthen the controls in place to safeguard Medicare assets, the Commissioner of the Public Debt formalize BPD's informal procedures for reviewing certain reports and related documents for the Medicare transfer accounts to ensure that HCFA's requests to adjust the balances of the transfer accounts and trust funds are reasonable.
Agency Affected: Department of the Treasury: Bureau of the Public Debt
Status: Implemented
Comments: Since GAO reported, BPD has formally documented procedures to check the reasonableness of trust fund adjustments requested by CMS in its Standard Operating Procedures manual. As a result, internal controls have been strengthened which should help prevent further errors in the Medicare trust funds.
