Report of Examination of the Administrative Costs Incurred Under the Health Insurance for the Aged and Disabled (Medicare) Part A Blue Cross and Blue Shield of New Jersey for the Period October 1, 1994 Through September 30, 1997

EXECUTIVE SUMMARY:

This report provides the results of an audit of administrative costs claimed by Blue Cross and Blue Shield of New Jersey (BCBSNJ) for Medicare Part A during the period October 1, 1994 through September 30, 1997.  The objectives of the audit were to (1) ascertain whether BCBSNJ's final administrative cost proposals presented fairly the costs of program administration, (2) determine if the administrative costs claimed by BCBSNJ are reasonable, allocable, and allowable in accordance with Part 31 of the Federal Acquisition Regulation, the Intermediary Manual and the Medicare contract and (3) determine if BCBSNJ had effective systems of internal controls, accounting, and reporting for administrative costs incurred under the program.  During the period BCBSNJ submitted Final Administrative Cost Proposals claiming costs of $24,520,134.  We are questioning cost of $135,124.  The audit was performed by Leon Snead and Company, P.C., under contract with the Department of Health and Human Services (DHHS), Office of Inspector General (OIG).