Audit of Administrative Costs - Medicare Parts A and B--Blue Cross and Blue Shield of Michigan, A-05

Office Of hspector General DEPARTMENT OF HEALTH& HUMAN SERVICES ,. Memorandum ‘ml 25 NW Date * >“:% ~ -June Gibbs Brown A&From Inspector Gener Audit of Admin@ ve Costs - Medicare Parts A and B--Blue Cross and Blue Shield of Subject Michigan (A-05 -94-OO064) To Bruce C. Vladeck Administrator Health Care Financing Administration This memorandum is to alert you to the issuance on June 27, 1996 of our final report. A copy is attached. The audit covered the costs claimed on Blue Cross and Blue Shield of Michigan’s (BCBSM) final administrative cost proposals for Parts A and B of the Medicare program for Fiscal Years 1990 through 1993. Of the total claimed, we are recommending financial adjustments of $15,609,718 becauseBCBSM: o claimed $2,361,864 for unallowable strategic planning costs. These costs did not directly benefit the Medicare program. o failed to reduce its total allowable costs by $2,056,288 for complementary credits due the Medicare program from BCBSM’s Medicare secondary payer activities. o charged Medicare $1,318,296 for unallowable productivity investments. These costs were in excess of the Health Care Financing Administration’s (HCFA) funding limits. o allocated $1,227,107 to the Medicare program for implementation and maintenance of a claims processing system contrary to a memorandum of advanced understanding with HCFA. o overstated Medicare costs by $594,913 for various items which were unreasonable, unallowable, not in ...