At a time of soaring deficits that has left Washington scrambling to find federal healthcare spending offsets, HHS' inspector general's office may have identified $450 million in new federal revenue.
Insurers banking prepayment interest: audit
In an audit sent to CMS Administrator Donald Berwick (PDF), Inspector General Daniel Levinson estimated that Medicare could gain hundreds of millions in interest payments from the Treasury Department if it delays early payments to Medicare Advantage insurance plans. Such early payments—typically made 45 days before they are needed to cover medical expenses—are currently invested by those insurers and HHS allows them to retain the interest, which totaled $376 million in 2007, the latest year available.
“Federal requirements governing the Medicare Advantage program do not limit the ability of MA organizations to retain investment income earned on Medicare funds,” the audit noted.
However, private insurers in the Federal Employee Health Benefits program are not allowed to retain similar investment income.
Levinson recommended that the CMS either eliminate the use of prepayments or require Medicare Advantage insurers to incorporate such expected interest earnings into their future bids.
In a letter responding to the report, Berwick rejected the report's recommendations, in part, because of the expectation that private insurers would eliminate most potential cost savings by simply increasing their bids to cover the difference.
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