Review of the Administrative Cost Component of the Adjusted Community Rate Proposal for a New York Medicare+Choice Organization

EXECUTIVE SUMMARY:

The objectives of this review were to examine the administrative cost component of the ACR proposals submitted to HCFA by a New York Medicare+Choice organization (M+CO) and to assess whether the costs were appropriate when compared to the Medicare program's general reasonable cost principles.  Unlike other entities in the Medicare program, an M+CO is not presently subject to statutes or regulations which would limit its administrative costs.  The review identified $96,994 (Medicare share) of administrative costs that would not be appropriate if the Medicare program's general reasonable cost principles were applied to M+COs.  These costs included:  (1) entertainment, meals, and employee moral expenses; (2) charitable contributions and sponsorships; (3) lobbying costs; (4) unsupported costs; (5) marketing and enrollment expenses; and (6) other costs.