Submitting OIG:
Report Description:
During our audit period, CGS was a subsidiary of Blue Cross Blue Shield of South Carolina (BCBS South Carolina), whose home office is in Columbia, South Carolina. CGS performed Medicare work upon being awarded the MAC contracts for Medicare Durable Medical Equipment (DME) Jurisdiction C and Medicare Parts A and B Jurisdiction 15 (including home health and hospice services), effective September 27, 2006, and July 8, 2010, respectively. , CGS continues to perform Medicare work for DME Jurisdiction C (re-awarded August 31, 2012) and Medicare Parts A and B Jurisdiction 15. BCBS South Carolina sponsors a PRB plan, called the BCBS South Carolina Postretirement Health and Life Insurance Programs, which is offered to CGS employees. The purpose of this PRB plan is to provide retiree health and life insurance benefits to eligible retirees and their dependents. CGS claimed PRB costs using the accrual basis of accounting and funded those accrual costs through a Voluntary Employee Benefit Association (VEBA) trust in conjunction with a 401(h) account. The disclosure statement that CGS submits to CMS states that CGS uses pooled cost accounting. Medicare contractors use pooled cost accounting to calculate the indirect cost rates (whose computations include pension and PRB costs) that they submit on their ICPs. Medicare contractors use the indirect cost rates to calculate the contract costs that they report on their ICPs. In turn, CMS uses these indirect cost rates in determining the final indirect cost rates for each contract. Medicare Reimbursement of Postretirement Benefit CostsCMS reimburses a portion of the Medicare contractors’ annual PRB costs, which are funded by contributions that contractors make to their dedicated trust funds. The PRB costs are included in the computation of the indirect cost rates and reported on the ICPs. In turn, CMS uses indirect cost rates in reimbursing costs under cost-reimbursement contracts. Federal regulations (FAR 31.205-6(o)) require that to be allowable for Medicare reimbursement, PRB costs must be (1) measured, assigned, and allocated in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 715-60 (formerly Statement of Financial Accounting Standards (SFAS) 106) and (2) funded as specified by part 31 of the FAR. In claiming costs, contractors must follow cost reimbursement principles contained in the FAR and the Medicare contracts.
Date Issued:
Wednesday, August 25, 2021
Agency Reviewed / Investigated:
Submitting OIG-Specific Report Number:
A-07-21-00613
Component, if applicable:
Centers for Medicare & Medicaid Services
Type of Report:
Audit
Questioned Costs:
$2,239,967
Funds for Better Use:
$0
Number of Recommendations:
1