Palmetto Government Benefits Administrator, LLC, Claimed Some Unallowable Excess Plan Costs Through Its Incurred Cost Proposals

Why OIG Did This Audit

The Centers for Medicare & Medicaid Services (CMS) reimburses Medicare contractors for a portion of their nonqualified plan costs.

The Department of Health and Human Services, Office of Inspector General (OIG), Office of Audit Services, Region VII pension audit team reviews the cost elements related to qualified defined-benefit, postretirement benefit, and any other pension-related cost elements claimed by Medicare contractors through Incurred Cost Proposals (ICPs).

Previous OIG audits found that Medicare contractors did not always comply with Federal requirements when claiming nonqualified plan costs for Medicare reimbursement.

Our objective was to determine whether the calendar years (CYs) 2015 and 2016 Excess Plan costs that Palmetto Government Benefits Administrator, LLC (Palmetto), claimed for Medicare reimbursement, and reported on its ICPs, were allowable and correctly claimed.

How OIG Did This Audit

We reviewed $1.4 million of Excess Plan costs that Palmetto claimed for Medicare reimbursement on its ICPs for CYs 2015 and 2016.

What OIG Found

Palmetto claimed Excess Plan costs of $1.4 million for Medicare reimbursement, through its ICPs, for CYs 2015 and 2016; however, we determined that the allowable Excess Plan costs during this period were $980,530. The difference, $406,791, represented unallowable Medicare Excess Plan costs that Palmetto claimed on its ICPs for CYs 2015 and 2016. Palmetto claimed these unallowable Medicare Excess Plan costs primarily because it used incorrect indirect cost rates when claiming those costs for Medicare reimbursement.

What OIG Recommends and Auditee Comments

We recommend that Palmetto work with CMS to ensure that its final settlement of contract costs reflects a decrease in Medicare Excess Plan costs of $406,791 for CYs 2015 and 2016.

Palmetto did not directly refer to the monetary amount in our recommendation but did say that it would work with CMS to ensure that its final settlement of contract costs is appropriate.

Nothing in Palmetto's comments caused us to change our finding or recommendation. Thus, we continue to recommend that Palmetto work with CMS to ensure that its final settlement of contract costs reflects a decrease in Medicare Excess Plan costs of $406,791 for CYs 2015 and 2016.