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. During our audit period, CMS and BCBS South Carolina entered into an agreement called the “Advance Agreement on the Computation of Nonqualified Defined-Benefit Pension Plan Costs for Periods Beginning January 1, 2015” (agreement). This agreement allowed BCBS South Carolina to change its accounting methodology from a pay-as-you-go to an accrual method. This agreement also closed costs prior to January 1, 2015. Starting with January 1, 2015, the SERP III plan would, under the terms of the agreement, identify its segments by individual participant. These segments allocate to each of the BCBS South Carolina’s Medicare subsidiaries: Palmetto Government Benefits Administrator, LLC; Companion Data Services, LLC; and CGS. This report addresses CGS’s compliance with the provisions of the Federal requirements and its Medicare contracts in claiming SERP III costs. 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 plan, PRB plan, SERP III, and Excess Plan 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. BCBS South Carolina sponsors a SERP III plan. The purpose of this deferred compensation plan is to supplement participants’ benefits payable under BCBS South Carolina’s retirement plans. This plan is provided to a limited group of management employees who are responsible for earnings and long-term growth of the company. BCBS South Carolina allocated costs to the CGS Medicare segment. The Medicare contracts require CGS to calculate the SERP III costs in accordance with the FAR and CAS 412 and 413. The FAR and the CAS require that the costs for nonqualified plans be measured under either the accrual method or the pay-as-you-go method. Under the accrual method, the allowable costs are based on the annual contributions that the employer deposits into its trust fund. For nonqualified plans that are not funded through the use of a funding agency, costs are to be accounted for under the pay-as-you-go method. This method is based on the actual benefits paid to participants, which are comprised of lump-sum payments and annuity payments. CGS claimed SERP III costs on an accrual basis. At CMS’s request, CliftonLarsonAllen, LLP (Allen), performed audits of the ICPs that CGS submitted for CYs 2015 and 2016. The objectives of these ICP audits were to determine whether costs were allowable in accordance with the FAR, the CAS, and the Department of Health and Human Services Acquisition Regulation System.
Date Issued:
Wednesday, August 18, 2021
Agency Reviewed / Investigated:
Submitting OIG-Specific Report Number:
A-07-21-00608
Component, if applicable:
Centers for Medicare & Medicaid Services
Type of Report:
Audit
Questioned Costs:
$6,705
Funds for Better Use:
$0
Number of Recommendations:
1