Review of PacifiCare of Colorado's Modifications To Its 2004 Adjusted Community Rate Proposal Under The Medicare Prescription Drug, Improvement, and Modernization Act

EXECUTIVE SUMMARY:

Our objective was to determine whether PacifiCare of Colorado's (PacifiCare) use of its Medicare Prescription Drug, Improvement, and Modernization Act (MMA) payment increase was adequately supported and allowable pursuant to the MMA.  Of the $5,148,375 capitation payment increase in PacifiCare's revised proposals, $5,013,375 was adequately supported and allowable pursuant to the MMA.  The remaining $135,000 was adequately supported; however, PacifiCare did not use these funds to enhance access to providers under plan 002 as stated in its revised proposal.  Instead, PacifiCare used the funds to enhance access to providers by opening a new medical facility serving beneficiaries enrolled in plans 006 and 007.  Since plan 002 enrollees did not benefit from the $135,000 of increased capitation payments, PacifiCare's use of the payments was unallowable.  We recommended that PacifiCare refund to the Federal Government $135,000, representing the portion of the MMA payment increase that was not used pursuant to the MMA.  PacifiCare generally agreed with the facts presented in the report but disagreed with the finding and recommendation related to the use of the $135,000.