Review of Medicare Contractor's Pension Segmentation, CareFirst of Maryland

This final audit report points out that CareFirst of Maryland, a Medicare contractor, understated Medicare segment pension assets by $6.8 million as of January 1, 2002.  This occurred because CareFirst; (1) made an improper reallocation of pension assets on January 1, 1996 ($4.3 million understatement), (2) incorrectly identified benefit payments ($0.1 million overstatement), and (3) used an incorrect asset base in calculating earnings and expenses ($2.6 million understatement).  We recommended that CareFirst increase its Medicare segment assets by $6.8 million as of January 1, 2002.  CareFirst concurred with our recommendation.