THE INSPECTOR GENERAL

The objective of this audit was to determine whether the Social Security Administration (SSA) recovered Medicare premiums withheld from retirement or disability payments made after a beneficiary’s death and remitted to the Centers for Medicare and Medicaid Services (CMS).

Individuals receiving title II Social Security retirement benefits or who have been receiving disability benefits for 24 months may be entitled to Medicare, a health insurance program administered by CMS. If an individual elects Medicare Part B coverage (medical insurance), SSA withholds a premium from the beneficiary’s monthly benefit payment and forwards it to CMS to pay for the coverage. For Calendar Year (CY) 2002, the Part B monthly Medicare premium is $54.

When SSA does not receive timely notification of a beneficiary’s death, it may continue to issue benefit payments and remit monthly Medicare premiums for months, or even years, after the month of death. For example, SSA did not learn of one beneficiary’s death for 21 years. During this period, SSA deducted and remitted about $7,000 in Medicare premiums to CMS. In another case, SSA did not learn of a beneficiary’s death for 10 years and remitted about $3,500 in Medicare premiums to CMS.

To accomplish our objective, we interviewed SSA Headquarters personnel responsible for remitting Medicare premiums withheld from beneficiaries’ monthly benefit payments to CMS. Additionally, we attempted to review SSA’s procedures and practices for recovering Medicare premiums remitted to CMS after a beneficiary’s death; however, we determined that SSA had no such procedures. We also interviewed CMS personnel to determine its procedures and practices for returning Medicare premiums SSA remits after beneficiaries’ deaths. To determine the dollar value of payments from which SSA remitted Medicare premiums to CMS after the beneficiaries’ deaths, we obtained a data extract from the Master Beneficiary Record (MBR) of over 3 million title II beneficiaries that died in CYs 1998 through 2001 and received at least one benefit payment after their deaths. Using the monthly Medicare premium amount for the relevant year, we calculated the dollar value SSA remitted to CMS for these 3 million beneficiaries, assuming the Agency made only 1 payment after each individual’s death.

The SSA entity reviewed was the Office of the Deputy Commissioner for Finance, Assessment and Management. We conducted our audit from August through December 2001 in accordance with generally accepted government auditing standards.

We based this estimate on the premise that SSA remitted only 1 month of Medicare premiums to CMS after the beneficiaries’ deaths. However, we recognize that SSA does not always immediately learn of a beneficiary’s death. As a result, SSA occasionally sends payments for months or even years before receiving death notification. Therefore, the amount of Medicare premiums not reimbursed by CMS for CYs 1998 through 2001 may be larger than the figure we reported, and we present this calculation only as an illustration of the potential magnitude of this problem. We understand the overall cost to the Government is not impacted, but for reasons of accountability and accuracy, we believe SSA should recover Medicare premiums remitted to CMS after beneficiaries’ deaths.

Because SSA did not recover the Medicare premiums, its title II trust funds also lost the opportunity to earn interest because of lower fund balances available to invest in U.S. Treasury securities. For example, as shown in Table 1, we estimate SSA lost the opportunity to earn over $15 million in interest for CYs 1998 through 2001. Furthermore, SSA has not recovered Medicare premiums for more than just the 4 years we reviewed. SSA Headquarters staff told us the Agency has not had a process to systematically recover Medicare premiums since the program was enacted in 1965. Accordingly, unrecovered Medicare premiums and the lost opportunity for SSA to earn interest could total hundreds of millions of dollars.

If SSA does not take a proactive role in recovering Medicare premiums, the Social Security title II trust funds will continue to lose millions of dollars in the future. If SSA fails to implement a process to recover Medicare premiums remitted to CMS after a beneficiary’s death, we estimate title II trust funds would lose at least $208 million in unrecovered Medicare premiums and also lose the opportunity to earn an additional $95 million in interest over the next 5 years.

If SSA does not take a proactive role in recovering Medicare premiums paid after beneficiaries’ deaths, the Social Security title II trust funds will lose millions of dollars in the future. Furthermore, these trust funds will continue to lose the opportunity to earn interest because of lower fund balances available to invest in U.S. Treasury securities. We believe SSA has a special fiduciary responsibility to effectively manage and maintain the integrity of the Social Security trust funds. Accordingly, we encourage SSA to expeditiously implement an automated process whereby the Agency can systematically and routinely recover Medicare premiums remitted to CMS after a beneficiary’s death.

We recommend that SSA:

1. Establish a committee of SSA and CMS officials to discuss procedures and practices for recovering Medicare premiums and work toward a joint resolution of the issue.
   
   
2. Develop and implement an automated process to ensure that SSA systematically and routinely recovers Medicare premiums remitted to CMS after a beneficiary’s death.
   
   
3. Calculate the amount of unrecovered Medicare premiums SSA has withheld from deceased beneficiaries and remitted to CMS. We believe SSA should go back as far as data are available to determine this amount.
   
   
4. Analyze the practicality and feasibility of CMS transferring the unrecovered Medicare premiums to SSA.
   
   
5. If the transfer of unrecovered Medicare premiums is determined to be practical and feasible, establish an accounts receivable amount due from CMS for premiums remitted after beneficiaries’ deaths. The amount should include premiums already remitted to CMS and those SSA may continue to remit after beneficiaries’ deaths until a system is in place to prevent such occurrences.

SSA agreed with our recommendations. It stated the Agency will establish an interagency committee/workgroup to discuss procedures and practices for recovering Medicare premiums and work toward a joint resolution of the issue. SSA stated the Office of Systems will implement an automated process for recovering Medicare premiums related to title II payments made after death. SSA estimates this process will be implemented within Title II Redesign, release 3, in August 2003. The full text of SSA’s comments is included in Appendix A.

We believe SSA’s response and planned actions adequately address our recommendations. However, we are concerned with the delay in implementing an automated process for recovering Medicare premiums related to title II payments made after death. In the meantime, title II trust funds will lose millions of dollars in unrecovered Medicare premiums and the opportunity to earn interest. We encourage SSA to find an interim method for recovering Medicare premiums until it can implement the Title II Redesign, release 3, in August 2003.

Appendix A

Agency Comments

We appreciate OIG’s efforts in conducting this review. Our comments on the report are attached. Staff questions can be referred to Odessa J. Woods on extension 50378.

Proposed Comments

OIG Contacts and Staff Acknowledgments

Staff Acknowledgments

In addition to those named above:

The Office of Audit (OA) conducts comprehensive financial and performance audits of the Social Security Administration’s (SSA) programs and makes recommendations to ensure that program objectives are achieved effectively and efficiently. Financial audits, required by the Chief Financial Officers Act of 1990, assess whether SSA’s financial statements fairly present the Agency’s financial position, results of operations, and cash flow. Performance audits review the economy, efficiency, and effectiveness of SSA’s programs. OA also conducts short-term management and program evaluations focused on issues of concern to SSA, Congress, and the general public. Evaluations often focus on identifying and recommending ways to prevent and minimize program fraud and inefficiency.

OEO supports the OIG by providing information resource management; systems security; and the coordination of budget, procurement, telecommunications, facilities and equipment, and human resources. In addition, this office is the focal point for the OIG’s strategic planning function and the development and implementation of performance measures required by the Government Performance and Results Act. OEO is also responsible for performing internal reviews to ensure that OIG offices nationwide hold themselves to the same rigorous standards that we expect from SSA, as well as conducting investigations of OIG employees, when necessary. Finally, OEO administers OIG’s public affairs, media, and interagency activities, coordinates responses to Congressional requests for information, and also communicates OIG’s planned and current activities and their results to the Commissioner and Congress.

The Office of Investigations (OI) conducts and coordinates investigative activity related to fraud, waste, abuse, and mismanagement of SSA programs and operations. This includes wrongdoing by applicants, beneficiaries, contractors, physicians, interpreters, representative payees, third parties, and by SSA employees in the performance of their duties. OI also conducts joint investigations with other Federal, State, and local law enforcement agencies.

The Counsel to the Inspector General provides legal advice and counsel to the Inspector General on various matters, including: 1) statutes, regulations, legislation, and policy directives governing the administration of SSA’s programs; 2) investigative procedures and techniques; and 3) legal implications and conclusions to be drawn from audit and investigative material produced by the OIG. The Counsel’s office also administers the civil monetary penalty program.