Review of Pension Costs Claimed for Medicare Reimbursement by Highmark, Inc. for Fiscal Years 1998 Through 2002

EXECUTIVE SUMMARY:

Our objective was to determine the allowability of pension costs claimed for Medicare reimbursement for FY 1998 through 2002.  We found that Highmark underclaimed $1,637,414 in allowable Medicare pension costs for FY 1998 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 CAS 412 and CAS 413.  Highmark claimed pension costs of $4,813,234 for Medicare reimbursement; however, the allowable Medicare pension costs were $6,450,648.  We recommend that Highmark: (1) revise its Final Administrative Cost Proposals (FACP) to claim allowable CAS pension costs of $1,637,414 for FY 1998 through 2002 and (2) implement controls to ensure that the Medicare segments are identified in accordance with the Medicare contract and updated in accordance with CAS 412 and 413.  Highmark disagreed with our report and contends that: (1) the Office of Inspector General (OIG) assigned certain participants to incorrect segments, (2) OIG identified the incorrect amount of cost claimed on the Final Administrative Cost Proposal (FACP) by Highmark,and (3) most of OIG's findings concerning the understatement of Medicare Part B segment assets were due to a retroactive application of a recent decision handed down by the U.S. Court of Appeals concerning reassignable pension costs.