Audit of Postretirement Benefits Costs Claimed for Medicare Reimbursement by Blue Cross Blue Shield of Texas

EXECUTIVE SUMMARY:

Blue Cross Blue Shield of Texas was a Medicare contractor until its contract was terminated in 1999 and, as such, was allowed to claim reimbursement for its Medicare employees' pension costs.  Our audit objective was to determine whether $6,000,000 for postretirement benefit (PRB) costs claimed in the period subsequent to the contract's termination were allowable for Medicare reimbursement.  We determined that, contrary to requirements, the PRB claim represented (1) an unauthorized retroactive change in accounting practice, (2) an immediate recognition of the transition obligation, and (3) a request for reimbursement for deposits made to a revocable trust fund.  Therefore, we recommended that Blue Cross Blue Shield of Texas withdraw its claims for the $6,000,000.