Audit of Medicare Contractor's Segmented Pension Cost, Blue Cross and Blue Shield of Michigan, Inc.

This final audit report points out that Blue Cross and Blue Shield of Michigan, Inc. (intermediary) understated Medicare's pension assets by $4.4 million in the updating of the Medicare segment assets from 1986 through 1990. The understatement occurred because the intermediary (1) recognized only parts of the annual asset gains and losses and (2) did not adjust for distortions caused by participant transfers in and out of the Medicare segment. We recommended that the intermediary increase the Medicare segment pension assets by an additional $4.4 million as of January 1990. Intermediary and Health Care Financing Administration officials concurred.