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Audit (A-07-11-00359)

Review of Termination Claim for Postretirement Benefits Made by Blue Cross Blue Shield of Mississippi

Executive Summary

Blue Cross Blue Shield of Mississippi's (BCBS Mississippi) entire termination claim of $4.2 million in postretirement benefit (PRB) costs for the Medicare Part A contract was unallowable for Medicare reimbursement. The Centers for Medicare & Medicaid Services (CMS) reimburses a portion of its contractors' PRB costs. In claiming PRB costs, contractors must follow cost reimbursement principles contained in the Federal Acquisition Regulation and applicable Cost Accounting Standards as required by their Medicare contracts. BCBS Mississippi's termination claim was calculated based on a retroactive change in accounting practice without CMS approval. Therefore, and pursuant to BCBS Mississippi's Medicare contracts, none of the costs claimed were allowable.

We recommended that BCBS Mississippi withdraw its termination claim of $4.2 million in PRB costs associated with the Medicare Part A contracts. BCBS Mississippi did not concur with our recommendation but did not provide any additional information that would cause us to revise our finding or recommendation. We maintain that BCBS Mississippi should withdraw the full claim amount.

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