Review of Pension Costs Claimed for Medicare Reimbursement By Blue Cross Blue Shield of South Carolina for Fiscal Years 1994 Through 2002

EXECUTIVE SUMMARY:

Our objective was to determine the allowability of pension costs that South Carolina claimed for Medicare reimbursement for fiscal years (FY) 1994 through 2002.  We found that South Carolina underclaimed $366,306 in Medicare pension costs for FYs 1994 through 2002 because it did not identify its Medicare segments in accordance with its Medicare contract and did not update its Medicare segment assets in accordance with Cost Accounting Standards (CAS) 412 and 413.  South Carolina claimed pension costs of $24,460,796 for Medicare reimbursement; however, the allowable Medicare pension costs were $24,827,142.  We recommend that South Carolina revise its Final Administrative Cost Proposals (FACP) for FYs 1994 through 2002 to claim additional CAS pension costs of $366,306.  Additionally, South Carolina should implement procedures to (1) ensure that its Medicare segments are identified in accordance with the Medicare contract and (2) update its Medicare segment assets in accordance with CAS 412 and 413.  South Carolina disagreed with the draft report finding and recommendation because the CAS allowable pension costs were determined by prorating the calendar year CAS allowable amounts to arrive at the fiscal year amount.  South Carolina stated that the previous pension review did not reflect this adjustment and its method of applying the CAS amount has been consistently applied.