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Audit (A-07-07-00243)

02-27-2009
Review of the Qualified Pension Plan at CareFirst of Maryland, Incorporated, a Terminated Medicare Contractor, for the Period January 1, 2002, to December 31, 2005

Executive Summary

CareFirst of Maryland, Incorporated (CareFirst), overstated the Medicare segment assets by $11,000 as of December 31, 2005, because it overstated net investment earnings for the Medicare segment. In addition, CareFirst understated Medicare's share of the Medicare segment excess pension assets by $512,000 because it did not fully comply with Federal requirements in its calculation. Medicare pays a portion of contractors' contributions to their pension plans. Because Medicare contracts specifically prohibit any profit (gain) from Medicare activities, contractors must credit to the Medicare program those pension gains (excess pension assets) that occur when a Medicare segment terminates.

We recommended that CareFirst decrease Medicare segment pension assets as of December 31, 2005, by $11,000; increase Medicare's share of the excess Medicare segment pension assets as of December 31, 2005, by $512,000; and refund to the Federal Government $4.3 million, which we calculated to be Medicare's share of the Medicare segment excess pension assets as of the termination of the Medicare contracts. CareFirst concurred with our first recommendation but disagreed with our second and third recommendations and with the applicability of some of the criteria that we used. We found nothing in the comments that would cause us to change our findings and recommendations.

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