Administrative Costs Claimed Under Part A of the Medicare Program for the Period October 1, 1990 through September 30, 1993, Blue Cross Blue Shield United of Wisconsin, Milwaukee, Wisconsin

The primary purpose of our audit was to determine whether the Medicare Part A administrative costs claimed, totaling $50,528,129 was reasonable, allowable and allocable in accordance with Part 31 of the Federal Acquisition Regulation, as interpreted and modified by the terms and conditions of the Medicare contract and its Appendices. Of the costs claimed of $50,528,129, we consider $50,111,605 to be acceptable and recommend $416,524 for financial adjustment.

Costs recommended for financial adjustment pertain to understated complementary insurance credits. The Medicare contract and Medicare Intermediary Manual require that complementary insurance credits be determined through a cost allocation method and do not allow a standard charge methodology for insurers that routinely request Medicare claims information. From fiscal year 1986 through our audit period, Blue Cross & Blue Shield United of Wisconsin (BCBSUW) has credited the Medicare program using a standard charge of $.35 for each Medicare claim transferred to its complementary insurance program. Officials of BCBSUW could not provide cost allocation documentation supporting the initial rate calculation of $.35 or to show the rate remains applicable during the current audit period.