Audit of Medicare Administrative Costs Claimed by Blue Cross Blue Shield of Arizona for the Period October 1, 2004, Through September 30, 2006

Our objective was to determine whether the administrative costs that Blue Cross Blue Shield of Arizona (Arizona) claimed in its Final Administrative Cost Proposals were allowable, allocable, and reasonable in accordance with part 31 of the Federal Acquisition Regulation and the Medicare contract.  Of the $13,944,069 claimed by Arizona, $13,234,541 was allowable, allocable, and reasonable. The remaining $709,528 represents pension costs that we did not audit; we plan to review these costs in a separate audit. Consequently, this report contains no recommendations.