Review of Medicare Contractor's Pension Segment, Cahaba Government Benefit Administrators

EXECUTIVE SUMMARY:

The objective of this review was to determine whether Cahaba Government Benefit Administrators (Cahaba) complied with the pension segmentation requirements of the Medicare contract from January 1, 1993 through January 1, 2002.  We found that Cahaba overstated Medicare segment pension assets by $4,727,525 as of January 1, 2002.  The overstatement occurred because Cahaba:  (1) included a prepayment credit that should be reassigned to the 'Other' segment, (2) overstated net transfers of assets into the Medicare segment, (3) understated net earnings allocable to the segment, (4) overstated benefit payments, (5) overstated contributions allocable to the segment, and (6) overstated assets transferred to the successor contractor for the Medicare segment.  We recommended that Cahaba decrease the Medicare segment pension assets by $4,727,525 as of January 1, 2002.  We also recommend that Cahaba reassign a prepayment credit of $2,872,185 to the other segment.  Cahaba agreed with our report.