U.S. flag

An official website of the United States government

Dot gov

The .gov means it's official.
Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you're on a federal government site.


The site is secure.
The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.

Department of Health and Human Services

Office of Inspector General -- AUDIT

"Review of PacifiCare of Oklahoma's Modifications to Its 2001 Adjusted Community Rate Proposal Under the Benefits Improvement Protection Act of 2000," (A-06-02-00060)

June 17, 2004

Complete Text of Report is available in PDF format (358 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


Under Part C (Medicare+Choice) of the Medicare Program, Medicare+Choice organizations (MCOs) are responsible for providing all Medicare-covered services, except hospice care, in return for a predetermined capitated payment.  MCOs with plans for which payment rates increased were required to submit a revised proposal to show how they would use the increase during 2001.  MCOs were required to use the additional amounts to reduce beneficiary premiums or cost-sharing, enhance benefits, contribute to a stabilization fund for benefits in future years, or stabilize or enhance beneficiary access to providers.

PacifiCare submitted a revised proposal that reflected an increase in Medicare capitation payments of about $16.4 million for 2001.  We found that about $5.2 million of the $16.4 million increase in PacifiCare's revised proposal was not used in a required manner or was not supported.  Approximately $4.2 million was not associated with stabilizing or enhancing access to providers because PacifiCare did not renegotiate its provider contracts to increase provider payment rates as indicated in its revised proposal.  A $1 million medical cost contingency did not comply with requirements and was unsupported.  We recommended that PacifiCare refund $5,204,042 to the Centers for Medicare and Medicaid Services or, as an alternative, deposit this amount in a benefit stabilization fund for use in future years.  We also recommended that PacifiCare ensure that estimated costs in future proposals are properly supported.