Audit of the Pension Plan at a Terminated Medicare Contractor, Blue Cross and Blue Shield of Massachusetts

Blue Cross Blue Shield of Massachusetts (BCBSM) served as a Medicare contractor until their contract was terminated in 1997. Federal regulations and Medicare contract provisions require pension gains, which occur when a Medicare segment of a pension plan closes, be credited to the Medicare program. We identified about $5.3 million in excess Medicare pension assets at BCBSM at the time of contract termination. Our methodology and calculations were reviewed by the Health Care Financing Administration's pension actuarial staff. We are recommending that BCBSM remit the $5.3 million to the Medicare program.