Review of Pension Costs Claimed for Medicare Reimbursement by Empire Blue Cross Blue Shield for Fiscal Years 1999 Through 2006

Empire Blue Cross Blue Shield (Empire), a CMS contractor, correctly calculated and claimed zero pension costs for Medicare reimbursement for fiscal years (FY) 1999 through 2004; however, it claimed $794,333 of unallowable Medicare pension costs for FYs 2005 and 2006.  This error occurred primarily as a result of the increase in the Medicare segment actuarial value of assets.  This increase caused the assignable pension costs to be zero for both FYs.  As a result, Empire claimed $794,333 of unallowable pension costs for Medicare reimbursement for FYs 2005 and 2006.

We recommended that Empire revise its Final Administrative Cost Proposals for FYs 2005 and 2006 or otherwise credit CMS to reduce its claimed pension costs by $794,333.  Empire's Medicare contract was transferred to National Government Systems (NGS) effective January 1, 2007.  NGS concurred with the finding and recommendation and stated that it would effectuate payment at the time of a settlement with CMS.