$10K in Unallowable Excess Plan Costs Claimed for Medicare
Due to the incorrect classification of the Excess Plan as a pension plan, CGS claimed unallowable Excess Plan costs.
- The Department of Health and Human Service (HHS) Office of Inspector General (OIG) released the results of its audit on CGS Administrators, LLC (CGS) to determine if fiscal year (FY) 2011 Excess Plan costs claimed for reimbursement under its fiscal intermediary and carrier contracts, and reported on its Final Administrative Cost proposal (FACP), were correct. During this audit it was discovered that CGS claimed unallowable Excess Plan costs of approximately $10,000 for Medicare reimbursement for fiscal year 2011.
The Centers for Medicare & Medicaid Services (CMS) reimburses a portion of its contractors’ nonqualified defined-benefit plan (NQDBP) costs, if the contractor follows cost reimbursement principles contained in the Federal Acquisition Regulation (FAR), Cost Accounting Standards (CAS), and the Medicare contracts. Previous reports have found that Medicare contractors did not always correctly identify NQDBP costs.
Although CGS employees are not eligible to participate in the Excess Plan, Blue Cross Blue Shield of South Carolina (BCBS South Carolina), as the parent company, is permitted to allocate Excess Plan costs to CGS. During the audit period, CGS was a subsidiary of BCBS South Carolina and allocated Excess Plan costs to CGS. CGS claimed Excess Plan costs of $13,363 for Medicare reimbursement for FY 2011.
However, it was discovered that BCBS South Carolina and CGS calculated CGS’s Excess Plan costs on the premise that the Excess Plan was an NQDBP. The audit determined that the allowable Excess Plan costs for this period were $3,039. The difference, $10,324, represented unallowable fiscal intermediary and carrier contract Excess Plan costs that CGS claimed on its FACP for FY 2011.
“CGS’s claimed Excess Plan costs are unallowable because the costs were not calculated in accordance with Federal regulations.” The report reads. “CGS claimed these unallowable Excess Plan costs because it based its claims for Medicare reimbursement on an incorrectly calculated amount that, due to the incorrect classification of the Excess Plan as a pension plan, did not comply with Federal regulations.”
The OIG recommended that CGS revise its FACP for FY 2011 to reduce its claimed Medicare Excess Plan costs by $10,324. In written comments responding to the report, CGS agreed with the calculations of the impact to CGS expenses charged to the FACP. However, the CGS disagreed with the OIG’s recommendation.
BCBS South Carolina said that the change it made in its Excess Plan was unintentional. BCBS South Carolina also said that because it was amending the Excess Plan document to make the plan compliant with the FAR as a pension plan, it would be burdensome to have to account for the Excess Plan as initially compliant with the FAR, then as noncompliant for a time period, and then as compliant once again.
As an alternative to the OIG’s recommendation, BCBS South Carolina suggested that it would correct it’s change to the Excess Plan by amending it retroactively and restoring the offer of a benefit that is payable for life at the option of the employee. BCBS South Carolina also stated that it had established a policy that its defined-benefit plans may not be amended without considering the CAS effects, so as to avoid any future unintended changes to its plans.
In response to the alternative plan, the OIG suggested a consult with CMS to explore whether a retroactive plan amendment is permissible and what effects such an amendment would have on future cost accounting periods.
