Palmetto Government Benefits Administrator, LLC, Claimed Unallowable Medicare Excess Plan Costs for Fiscal Years 2005 Through 2011

The Centers for Medicare & Medicaid Services reimburses a portion of its contractors' nonqualified defined-benefit plan costs. We examined the Blue Cross Blue Shield of South Carolina Excess Plan Medicare segment and Other segment costs (referred to in this report as "Excess Plan costs") that Palmetto Government Benefits Administrator, LLC (Palmetto), claimed for Medicare reimbursement on its Final Administrative Cost Proposals (FACPs).

Palmetto claimed Excess Plan costs of $1.6 million for Medicare reimbursement for fiscal years (FYs) 2005 through 2011; however, we determined that the allowable Excess Plan costs during this period were $336,000. The difference, $1.3 million, represented unallowable fiscal intermediary and carrier contract Excess Plan costs that Palmetto claimed on its FACPs for FYs 2005 through 2011. Palmetto claimed these unallowable Excess Plan costs because it based its claims for Medicare reimbursement on an incorrectly calculated amount that, because of the incorrect classification of the Excess Plan as a pension plan, did not comply with Federal regulations.

We recommend that Palmetto revise its FACPs for FYs 2005 through 2011 to reduce its claimed Medicare Excess Plan costs by $1.3 million. Palmetto did not concur with our recommendation.