Review of the Administrative Cost Component of the Adjusted Community Rate Proposals for a Pennsylvania Plan

EXECUTIVE SUMMARY:

Presently, there is no statutory or regulatory authority governing allowability of costs in the adjusted community rate (ACR) process, unlike other areas of the Medicare program.  Our review showed that if cost principles applicable to Medicare's fee-for-service program were applied to Medicare+Choice organizations, $37,649 of the Plan's administrative costs should not have been included when computing the ACRs.   These administrative costs included donations, gifts, political contributions, memberships, sponsorships, entertainment, parties, alcoholic beverages, broker commissions, and promotional giveaways.  Because of a lack of criteria for inclusion of administrative costs on the ACR proposal, there are no recommendations addressed to the Plan.  Instead, based on the results of our nationwide review, we will be making recommendations to CMS concerning the ACR process.

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