Department of Health and Human Services

Office of Inspector General -- AUDIT

"Review of Medicare Termination and Severance Costs Claimed by United HealthCare Insurance Company," (A-01-02-00508)

November 18, 2003

Complete Text of Report is available in PDF format (1.11 mb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


The objective of this review was to determine whether  the termination and severance costs related to Medicare contract termination and claimed by United HealthCare were allowable, allocable, and reasonable in accordance with Medicare contract provisions and instructions, Federal regulations, and company policies.  Through June 2002, United HealthCare claimed total contract termination costs of $10,806,497 ($8,554,948 for termination costs and $2,251,549 for severance costs).  We found that $2,527,776 in termination costs and $366,234 in severance costs were unallowable.  United HealthCare did not get CMS approval, but still claimed subcontract lease costs related to periods after the contract termination date.  In addition, certain termination costs were not reasonable and therefore not allowable for reimbursement per the Federal Acquisition Regulations.  We recommend financial adjustments for the $2,527,776 in termination costs and $366,234 in severance costs.