Policy & Regulation News

14K in Unallowable Excess Plan Costs Claimed for Medicare

By Stephanie Reardon

TrailBlazer claimed $14,114 in unallowable fiscal intermediary and carrier contract Excess Plan costs.

- The Department of Health and Human Service (HHS) Office of Inspector General (OIG) released the results of its audit on TrailBlazer Health Enterprises, LLC (TrailBlazer) to determine if Excess Plan costs that TrailBlazer claimed for reimbursement under its fiscal intermediary and carrier contracts, and reported on its Final Administrative Cost proposals (FACPs) in the fiscal years (FYs) 2005 through 2011 were correct. During this audit it was discovered that TrailBlazer claimed $14,114 in unallowable fiscal intermediary and carrier contract Excess Plan costs on its FACPs for FYs 2005 through 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 Trailblazer 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 Trailblazer. During the audit period, Trailblazer was a subsidiary of BCBS South Carolina and allocated Excess Plan costs to Trailblazer. TrailBlazer claimed Excess Plan costs of $1,057,457 for Medicare reimbursement for FYs 2005 through 2011. Although OIG’s report is addressed to Palmetto GBA, they associate the term TrailBlazer with their finding and recommendation.

However, it was discovered that BCBS South Carolina and CGS calculated Trailblazer’s Excess Plan costs on the premise that Excess Plan was an NQDBP. The audit determined that the allowable Excess Plan costs for this period were $1,043,343. The difference, $14,114, represented unallowable fiscal intermediary and carrier contract Excess Plan costs that TrailBlazer claimed on its FACPs for FYs 2005 through 2011.

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  • “TrailBlazer 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 report reads. “TrailBlazer should have identified its Excess Plan costs in accordance with the regulations for a deferred compensation plan and should then have calculated those costs in accordance with the FAR and CAS 415.”

    The OIG recommended that TrailBlazer revise its FACPs for FYs 2005 through 2011 to reduce its claimed Medicare Excess Plan costs by $14,114.

    In written comments, Palmetto did not agree with OIG’s recommendation. Palmetto said that the change it made in its Excess Plan was unintentional. Palmetto 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 plan, Palmetto suggested it would correct its 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. Palmetto 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.