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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Review of Administrative Costs Included in the Adjusted Community Rate Proposal for a Missouri Medicare+Choice Organization," (A-07-00-00114)

July 12, 2001

Complete Text of Report is available in PDF format (648 KB). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


Unlike other areas of the Medicare program, there is no statutory or regulatory authority governing the allowability of costs in determining adjusted community rates (ACRs) for Medicare+Choice organizations (M+CO).  This review of a Missouri M+CO was made to determine if the administrative costs were reasonable, necessary, and allocable when compared to Medicare's general principle of paying only reasonable costs.  We found, however that the ACR included $151,049 for the costs of promotional giveaways, donations, sponsorships, lobbying, and entertainment.  The results of this review, along with the results of similar reviews of other M+CO organizations are being shared with the Centers for Medicare and Medicaid Services so that appropriate legislative changes can be considered.