Audit of Administrative Costs Claimed Under Parts A and B of the Health Insurance for the Aged and Disabled Program--Blue Cross and Blue Shield of Minnesota

This audit of Blue Cross and Blue Shield of Minnesota (BCBSM) covered Medicare Part A and Part B administrative costs of $44.6 million claimed during the period October 1, 1994 through July 31, 1999. The audit also included the contractor's termination costs claim submitted to HCFA in July 2000. We recommended a financial adjustment of $1,037,090 because (i) costs for employee retention exceeded the HCFA approved amount by $932,052 and (ii) termination costs of $105,038 were inappropriately included on the Final Administrative Cost Proposal instead of on a separate voucher. BCBSM officials concurred with the recommendation. In addition, we recommended set aside for HCFA adjudication $173,853 of termination costs which consisted of severance payments to employees who retired rather than accept positions offered with the replacement contractor. The BCBSM did not concur with this recommendation.