oversight

Audit on Global coordination of Benefits for BlueCross and BlueShield Plans Contract Year 2007

Published by the Office of Personnel Management, Office of Inspector General on 2009-07-20.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                           u.s. OFFICE OF PERSONNEL MANAGEMENT
                                                                        OFFICE OF THE INSPECTOR GENERAL
                                                                                         OFFICE· OF AUDITS




Final Audit Report

Subject:




                  . COORI>~~i~~No;i~~l'rs
FOR
               BLUECROSS AND BLlJESlIIELDPLANS
                                           •                  c    ·       •




                     CONTRACT 'YEAR 2007



                                                 Report :No. lA~99-00-09-011


                                                            Date:        July 20, 2009




                                                                 --CAUTION-­

This audit reporl hos been di.tributed lo.Federoland non-Fedenl officials who are responsible for tbe administration oflhe audited conlraet. Tbi. .udil
report may conlain proprietary dala which is prolecled by Feden! law (18 USC 1905);.lborefore, while Ihi. audit reporl i. avail.ble under the Freedom of
lnrormalion Act, caulion .hould beuercised before relea.ing lhe report to lhe general publi~.
                        UNITED STATES OFFICE OF PERSONNEL MANAGEMENT

                                           Washington, DC 20415


   Office of the
Inspector General




                                         AUDIT REPORT



                               Federal Employees Health Benefits Program

                               Service Benefit Plan     Contract CS 1039

                                    BlueCross BlueShield Association

                                              Plan Code 10


                                    Global Coordination of Benefits

                                    BlueCross and BlueShieJd Plans





                       REPORT NO. 1A-99-00-09-0 11         DATE: July 20, 2009




        www.opm.go v                                                             www.usajobs.gov
                         UNITED STATES OFFICE OF PERSONNEL MANAGEMENT

                                            Washington. DC 20415



  Office of the.
Inspector General




                                   EXECUTIVE SUMMARY




                              Federal Employees Health Benefits Program

                              Service Benefit Plan     Contract CS 1039

                                   BlueCross BlueShield Association

                                             Plan Code 10


                                   Global Coordination of Benefits

                                   BlueCross and BlueShield Plans





                      REPORT NO. IA-99-00-09-011           DATE:      July 20, 2009


     This final audit report on the Federal Employees Health Benefits Program (FEHBP) operations
     at all BlueCross and BlueShield (BCBS) plans questions $4,387,806 in health benefit charges.
     The BlueCross BlueShield Association (Association) and/or BCBS plans agreed with $2,536,354
     and disagreed with $1,851,452 of the questioned charges.

     Our limited scope audit was conducted in accordance with Government Auditing Standards. The
     audit covered health benefit payments for contract year 2007 as reported in the Annual
     Accounting Statement. Specifically, we reviewed claims incurred from October 1,2006 through
     December 31, 2007 that were reimbursed in 2007 and potentially not coordinated with Medicare.
     We detennined that the BCBS plans did not properly coordinate 12,751 claim line payments with
     Medicare as required by the FEHBP contract. As a result, the FEHBP was overcharged
     $4,387,806. When we notified the Association of these errors on October 1, 2008, the claims
     were within the Medicare timely filing requirement and could be filed with Medicare for
     coordination of benefits.




                                                   1
        www.opm.goY                                                                     www.usajobs.goY
                                          CONTENTS

                                                                                    PAGE

        EXECUTIVE SUMMARY	                                                               i


 I.     INTRODUCTION AND BACKGROUND	                                                    1


II.     OBJECTIVE, SCOPE, AND METHODOLOGY	                                              3

III.	   AUDIT FINDING AND RECOMMENDATIONS                                               5


              Coordination of Benefits with Medicare                                    5


IV.     MAJOR CONTRIBUTORS TO THIS REPORT	                                             11


V.      SCHEDULES

        A.	    UNIVERSE AND SAMPLE OF POTENTIALLY UNCOORDINATED CLAIM
               LINES
        B.	    SUMMARY OF QUESTIONED CHARGES
                                             ,
        APPENDIX	 (BlueCross BlueShield Association reply, dated February 3, 2009, to the
                  draft audit report)
                         I. INTRODUCTION AND BACKGROUND

INTRODUCTION


This final audit report details the findings, conclusions, and recommendations resulting from our
limited scope audit of the Federal Employees Health Benefits Program (FEHBP) operations at all
BlueCross and BlueShield (BCBS) plans.

The audit was performed by the Office of Personnel Management's (OPM) Office of the Inspector
General (OIG), as established by the Inspector General Act of 1978, as amended.

BACKGROUND

The FEHBP was established by the Federal Employees Health Benefits (FEHB) Act (Public Law
86-382), enacted on September 28, 1959. The FEHBP was created to provide health insurance .
benefits for federal employees, annuitants, and dependents. OPM's Center for Retirement and
Insurance Services has overall responsibility for administration of the FEHBP. The provisions of
the FEHB Act are implemented by OPM through regulations, which are codified in Title 5,
Chapter 1, Part 890 of the Code of Federal Regulations (CFR). Health insurance covesage is
made available through contracts with various ~ealth insurance carriers.

The BlueCross BlueShield Association (Association), on behalf of participating BCBS plans, has
entered into a Government-wide Service Benefit Plan contract (CS 1039) with OPM to provide a
health benefit plan authorized by the FEHB Act. The Association delegates authority to
participating local BCBS plans throughout the United States to process the health benefit claims
of its federal subscribers. There are approximately 63 local BCBS plans participating in the
FEHBP.

The Association has established a Federal' Employee Program (FEp l ) Director's Office in
Washington, D.C. to provide centralized management for the Service Benefit Plan. The FEP
Director's Office coordinates the administration of the contract with the Association, member
BlueCross and BlueShield plans, and OPM.

The Association has also established an FEP Operations Center. The activities of the FEP
Operations Center are performed by CareFirst BCBS, located in Washington, D.C. These
activities include acting as fiscal intermediary between the Association and member plans,
verifying subscriber eligibility, approving or disapproving the reimbursement of local plan
payments ofFEHBP claims (using computerized system edits), maintaining a history file of all
FEHBP claims, and maintaining an accounting of all program funds.

Compliance with laws and regulations applicable to the FEHBP is the responsibility of the
management for the Association and each BeBS plan. Also, management of each BeBS plan is
responsible for establishing and maintaining a system of internal controls.



I Throughout this report, when we refer to "FEP" we are referring to the Service Benefit Plan lines of business at the
Plan. When we refer to the "FEHBP" we are referring to the program that provides health benefits to federal
employees.
Findings from our previous global coordination of benefits audit of all BCBS plans (Report No.
lA-99-00-08-007, dated June 25, 2008) for contract year 2006 are in the process of being
resolved.

Our preliminary results of the potential errors were presented in detail in a draft report, dated
October 1,2008. The Association's comments offered in response to the draft report were
considered in preparing our final report and are included as the Appendix to this report. Also,
additional documentation provided by the Association and BeBS plans was considered in
preparing our final report.




                                                 2

                II. OBJECTIVE, SCOPE, AND METHODOLOGY

OBJECTIVE


The objective of this audit was to determine whether the BCBS plans complied with contract
provisions relative to coordination bfbenefits with Medicare.

SCOPE

We conducted our limited scope performance audit in accordance with generally accepted
government auditing standards. Those standards require that we plan and perform the audit to
obtain sufficient and appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objective. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit objective.

The audit covered health benefit payments for contract year 2007 as reported in the BlueCross
and BlueShield FEHBP Annual Accounting Statement. Specifically, we reviewed claims
incurred from October 1, 2006 through pecember 31, 2007 that were reimbursed in 2007 and
potentially not coordinated with Medicare. Based on our claim error reports, we identified
927,387 claim lines, totaling $85,666,214 in payments, that potentially were not coordinated with
Medicare. From this universe, we selected and reviewed 58,276 claim lines, totaling $32,646,080
in payments, for coordination of benefits with Medicare. When we notified the Association of
these potential errors, the claims were within the Medicare timely filing requirement and could be
filed with Medicare for coordination of benefits.

We did not consider each BCBS plan's internal control structure in planning and conducting our
auditing procedures. Our audit approach consisted mainly of substantive tests of transactions
and not tests of controls. Therefore, we do not express an opinion on each BeBS plan's system
of internal controls taken as a whole.

We also conducted tests to determine whether the BeBS plans had complied with the contract
and the laws and regulations governing the FEHBP as they relate to coordination of benefits.
The results of our tests indicate that, with respect to the items tested, the BeBS plans did not
fully comply with the provisions of the contract relative to coordination of benefits with
Medicare. Exceptions noted in the areas reviewed are set forth in detail in the "Audit Finding
and Recommendations" section ofthis report. With respect to the items not tested, nothing came
to our attention that caused us to believe that the BCBS plans had not complied, in all material
respects, with those provisions.

In conducting our audit, we relied to varying degrees on computer-generated data provided by
the FEP Director's Office, the FEP Operations Center, and the BeBS plans. Due to time
constraints, we did not verify the reliability of the data generated by the various information
systems involved. However, while utilizing the computer-generated data during our audit
testing, nothing came to our attention to cause us to doubt its reliability. We believe that the data
was sufficient to achieve our audit objective.




                                                 3

The audit was performed at our offices in Washington, D.C.; Cranberry Township, Pennsylvania;
and Jacksonville, Florida from February 2009 through May 2009.

METHODOLOGY

To test each BCBS plan's compliance with the FEHBP health benefit provisions related to
coordination of benefits with Medicare, we selected a judgmental sample of potential
uncoordinated claim lines that were identified in a computer search. Specifically, we selected for
review 58,276 claim lines, totaling $32,646,080 in payments, from a universe of 927,387 claim
lines, totaling $85,666,214 in payments, that potentially were not coordinated with Medicare (See
Schedule A for our sample selection methodology).

The claim samples were submitted to each applicable BCBS plan for their review and response.
For each plan, we then conducted a limited review of their agreed responses and an expanded
review of their disagreed responses to determine the appropriate questioned amount. We did not
project the sample results to the universe.

The determination of the questioned amount is based on the FEHBP contract, the Servjce Benefit
Plan brochure, the Association's FEP administrative manual, and various manuals and other
documents available from the Center for Medicare and Medicaid Services that describe Medicare
benefits.




                                                4

               III. AUDIT FINDING AND RECOMMENDATIONS


Coordination of Benefits with Medicare                                                  $4,387,806

The BCBS plans did not properly coordinate 12,751 claim line payments, totaling $5,612,369,
with Medicare as required by the FEHBP contract. As a result, the FEHBP paid as the primary
insurer for these claims when Medicare was the primary insurer. Therefore, we estimate that the
FEHBP was overcharged by $4,387,806 for these claim lines.

The 2007 Blue Cross and Blue Shield Service Benefit Plan brochure, page 103, Primary Payer

Chart, illustrates when Medicare is the primary payer. In addition, page 25 of that brochure

states, "We limit our payment to an amount that supplements the benefits that Medicare would

pay under Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance),

regardless of whether Medicare pays." .


Contract CS 1039, Part II, section 2.6 s~ates, "(a) The Carrier shall coordinate the payment of
benefits under this contract with the payment of benefits under Medicare. - . (b) The C;arrier
shall not pay benefits under this contract until it has determined whether it is the primary
carrier ...." Also, Part III, section 3.2 (b)(l) states, "The Carrier may charge a cost to the
contract for a contract term if the cost is actual, allowable, allocable, and reasonable ... [and]
on request, document and make available accounting support for the cost to justify that the cost
is actual, reasonable and necessary; and (ii) determine the cost in accordance with: (A) the
terms of this contract ...."

In addition, Contract CS 1039, Part II, section 2.3(g) states, "If the Carrier or OPM determines
that a Member's claim has been paid in error for any reason ... the Carrier shall make a prompt
and diligent effort to recover the erroneous payment ...."

  For claims incurred from October 1,2006 through December 31, 2007 and reimbursed in 2007,
  we performed a computer search and identified 927,387 claim lines, totaling $85,666,214 in
  payments that potentially were not coordinated with Medicare. From this universe, we selected
  for review a sample of 58,276 claim lines, totaling $32,646,080 in payments, to determine
  whether the BCBS plans complied with the contract provisions relative to coordination of·
  benefits (COB) with Medicare. When we submitted our sample of potential COB errors to the
  Association on October 1, 2008, the claims were within the Medicare timely filing requirement
. and could be filed with Medicare for coordination of benefits.

Generally, Medicare Part A covers 100 percent of inpatient care in hospitals, skilled nursing
facilities and hospice care. For each Medicare Benefit Period, there is a one-time deductible,
followed by a daily copayment beginning with the 61 51 day. Beginning with the 91 sl day of the
Medicare Benefit Period, Medicare Part A benefits may be exhausted, depending on whether the
patient elects to use their Lifetime Reserve Days. For the uncoordinated Medicare Part A claims,
we estimate that the FEHBP was overcharged for the total claim payment amounts. When
applicable, we reduced the questioned amount by the Medicare deductible and/or Medicare
copayment.




                                                 5
Medicare Part B pays 80 percent of most outpatient charges and professional claims after the
calendar year deductible has been met. Also, Medicare Part B covers a portion of inpatient
facility charges for ancillary services such as medical supplies, diagnostic tests, and clinical
laboratory services. Based on our experience, ancillary items account for approximately 30
percent of the total inpatient claim payment. Therefore, we estimate that the FEHBP was
overcharged 25 perceQl for these inpatient claim lines (0.30 x 0.80 = 0.24 - 25 percent).

We separated the uncoordinated claims into the following six categories based on the clinical
setting and whether Medicare Part A or B should have been the primary payer.

•	 Categories A and B consist of inpatient claims that should have been coordinated with
   Medicare Part A. In a small number of instances where the BCBS plans indicated that
   Medicare Part A benefits were exhausted, we reviewed the claims to determine whether there
   were any inpatient services that were payable by Medicare Part B. For these claim lines, we
   only questioned the services covered by Medicare Part B.

•	 Categories C and D include inpatient claims with ancillary items that should have been
   coordinated with Medicare Part B. When we could not reasonably detennine the actual
   overcharge for a claim line, we questioned 25 percent of the amount paid for these inpatient
   claim lines. In a small number of instances where the BCBS plans indicated that members
   had Medicare Part B only and priced the claims according to the Omnibus Budget
   Reconciliation Act of 1990 pricing guidelines, we reviewed the claims to detennine whether
   there were any inpatient services that were payable by Medicare Part B.

•	 Categories E and F include outpatient and professional claims where Medicare Part B should
   have been the primary payer. When we could not reasonably determine the actual
   overcharge for a claim line, we questioned 80 percent of the amount paid for these claim
   Jines.

Froin these six categories, we selected for review a sample of claims lines that potentially were
not coordinated with Medicare (See Schedule A for our sample selection methodology). Based
on our review, we identified 12,751 claim lines, totaling $5,612,369 in payments, where the
FEHBP paid as the primary insurer when Medicare was the primary insurer. We estimate that
the FEHBP was overcharged $4,387,806 for these claim line payments. 2




2]n addition, there were 23,]04 claim lines, totaling $10,645,349 in payments, with COB errors that were
identified by the BCBS plans before the start of our audit (i.e., October 1,2008) and adjusted on or before the
Association's response due date (i.e., January ]6,2009) to the draft report. Since these COB errors were
identified by the BCBS plans before the start of our audit and adjusted by the Association's response due date to
the draft report, we did not question these COB errors in the final report.




                                                          6

The following table details the six categories of questioned uncoordinated claim lines:

                                                       Claim     Amount             Amount
                   Category                            Lines       Paid            Questioned
                                                                                            ,
Category A: Medicare Part A Primary for
                                                          138     $1,596,151          $1",596,151
Inpatient (lIP) Facility
Category B: Medicare Part A Primary for
Skilled Nursing/Home Health Care (HHC)/                  1,620      $428,033               $428,033
Hospice Care
Category C: Medicare Part B Primary for
Certain lIP Facility Charges                                87      $689,282               $191',225

Category D: Medicare Part B Primary for
Skilled NursingIHHC/Hospice Care                          114       $285,168                    $71,301

Category E: Medicare Part B Primary Jor
Outpatient (alP) Facility and Professi0!l31             10,327    $2,105,354          $1,694,408

Category F: Medicare Part B Primary for OIP'
Facility and Professional (Participation Code F)          465       $508,381               $406,688

                     Total                              12,751    $5,612,369              $4,387,806


Our audit disclosed the following for the COB errors:

•	 For 10,333 (81 percent) of the claim lines questioned, there was no special information on
   the FEP national claims system to identify Medicare as the primary payer when the claims
   were paid. However, when the Medicare information was subsequently added to the FEP
   national claims system, the BeBS plans did not review and/or adjust the patient's prior
   claims back to the Medicare effective dates.

•	 For 2,418 (19 percent) of the claim lines questioned, there was special information present on
   the FEP national claims system to identify Medicare as the primary payer when the claims
   were paid. An incorrect Medicare Payment Disposition Code was used for 66 percent of
   these claims. The Medicare Payment Disposition Code identifies Medicare's responsibility
   for payment on each charge line of a claim. Per the FEP Administrative Manual, the
   completion ofthis field is required on all claims for patients who are age 65 or older. We
   found that codes E, F, and N were incorrectly used. An incorrect entry in this field causes
   the claim line to be excluded from coordination of benefits with Medicare.

Of the $4,387,806 in questioned charges, $1,606,490 (37 percent) were identified by the BCBS
plans before the start of our audit (i.e., October 1, 2008). However, since the BCBS plans had
not completed the recovery process and/or adjusted these claims by the Association's response
due date (i.e., January 16, 2009) to the draft report, we are continuing to question these COB
errors. The remaining questioned charges of $2,781,316 (63 percent) were identified as a result
of our audit.



                                                   7
Association's Response:

In response to the draft audit report, the Association states, "After reviewing the ala Draft Audit
Report and listing of potentially uncoordinated Medicare COB claims ... we identified
$2,526,632 in claim payments that were not coordinated with Medicare after the initial claim
payment, and subsequently became claim payment errors ... Recovery has been initiated on
these overpayments and the Plans will continue to pursue these overpayments ...

To the extent that claim payment errors did occur or were not identified, these payments were
good faith erroneous benefit payments and fall within the context of CS 1039, Section 2.3(g).
Any benefit payments the Plans are unable to recover are allowable charges to the Program. In
addition, as good faith erroneous payments, lost investment income does not apply to the
payments identified in the finding.

Our analysis of payment errors indicated the following:

•	 Claims were processed incorrectly because the claims examiner failed to use the 1Jedicare
   Explanation of Benefits (MEOB) to. process the claim. This resulted in claims being paid as
   'not covered by Medicare' when the MEOB indicated that Medicare made a payment on the
   claim.

•	 Refunds were not initiated on claims that were provided to the Plan on either the retroactive
   enrollment report or the FEP Director's Office COB Self Assessment report. In some cases,
   recovery could not be initiated because when retroactive enrollment reports were received,
   the claim was already outside the Plan's provider contract time limit to recover the claims.

In order to continue to improve the FEP Program's Medicare COB processing,FEP will continue
with our current COB Action Plan, with modification as necessary ...."

Regarding the contested amount, the Association states that "the claims were paid correctly as
discussed below:

•	 Claims totaling $1,870,617 are contested because recovery had been initiated in accordance
   with CS1039, 2.3 (g) but not completed or were uncollectible at the time the Draft Audit
   Report response was provided. The majority of these claims were also paid correctly based
   upon the Medicare information that was on file at the time of initial payment. Also, at the
   time of our response to the Draft Report, some claims have already been determined to be
   uncollectible after recovery was initiated, fOUf letters were sent to the provider and no
   response from the provider was received....

•	 Claims ... are contested for 'other' reasons, including but not limited to the fact that
   Medicare was not primary on the incurred date ...

Documentation to support the contested amounts has been provided. Documentation to support
initiation of overpayment recovery before the audit has also been provided."




                                                 8
OIG Comments:

After reviewing the Association's response and additional documentation provided by the BeBS
plans, we revised the questioned charges from our draft report to $4,387,806. Based on the
Associatioll;'s response and the BeBS plans' additional documentation, we detennined that the
Association and/or plans agree with $2,536,354 and disagree with $1,851,452.

Although the Association only agrees with $2,526,632 in its response, the BeBS plans'
documentation supports concurrence with $2,536,354. For these uncontested COB errors, we
disagree with the Association's comments that the payments were good faith erroneous benefit
payments. When the Medicare infonnation was subsequently added to the claims system, the
BeBS plans did not review and/or adjust the patients' prior claims back to the Medicare
effective dates. Since the BeRS plans did not take the proper action to immediately correct the
overpayments, we do not believe the BeBS plans acted in good faith to recover these
overpayments.

Based on the Association's response and/or the BeBS plans' documentation, $1,606,490 of the
contested amount represents 6,866 COB errors where recovery efforts were initiated by the plans
before the audit started. However, the BeBS p'lans had not recovered these overpayments and
adjusted the claims by the Association's response due date to the draft report. Since these
overpayments had not been recovered and returned to the FEHBP by the Association's response
due date, we are continuing to question this amount in the final report.

For the remaining contested amount of $244,962 (three COB errors), the BeBS of Texas plan
disagrees that the claims should have been coordinated with Medicare because in each instance
the patient's Medicare coverage became effective during the inpatient stay. Since Medicare is
the primary insurer for health benefit costs incurred on and after the Medicare effective date,
even when the effective date occurs during an inpatient stay, we are continuing to question this
amount in the final report. In each instance, the FEHBP should have paid as the primary insurer
for the patient's inpatient costs incurred before the Medicare effective date, and then Medicare
should have paid as the prima~y insurer for the costs inculTed on or after the Medicare effective
date.

Recommendation 1

We recommend that the contracting officer disallow $4,387,806 for uncoordinated claim
payments and verify that the BeBS plans return all amounts recovered to the FEHBP.

Recommendation 2

Although the Association has developed a corrective action plan to reduce COB findings, we
recommend that the contracting officer instruct the Association to ensure that all BeBS plans are
following the corrective action plan.




                                                9

Recommendation 3

We recommend that the contracting officer require the Association to ensure that the BeBS plans
have procedures in place to review aU claims incurred back to the Medicare effective dates when
updated, other party liability information is added to the FEP national claims system. When
Medicare eligibility is subsequently reported, the plans are expected to immediately determine if
already paid claims are affected and, if so, to initiate the recovery process within 30 days.

Recommendation 4

We recommend that the contracting officer require the Association to revise and correct the
procedures regarding the input of Medicare Payment Disposition Codes. We also recommend
that the software used for handling claims received electronically be reviewed to verify tha,t it
creates the appropriate value for Medicare Payment Disposition Codes. These corrective actions
should ensure that the FEP system will utilize the special information when it is present to
properly coordinate these claims.




                                               10

              IV. MAJOR CONTRIBUTORS TO THIS REPORT

Experience-Rated Audits Group

               Auditor-In-Charge

                Auditor

               Auditor


                    Chief


Infonnation Systems Audits Group

               Chief

              Senior Information Technology' Specialist




                                             11

                                                                                                                                                          SCHEDULE A
                                                                            v. SCHEDULES
                                                                  Coordination of Benefits with Medicare

                                                                     BlueCross and BlueShield Plans

                                                                       Claims Reimbursed in 2007


                                              UNIVERSE AND SAMPLE OF POTENTIALLY UNCOORDINATED CLAIM LINES

                                                             UNIVERSE                                                            SAMPLE
                                           Number of Number of Number of                          Sample Selection       Number of Number of Number of
                CATEGORY                    Claims   Claim Lines  Patients Total Payments          Methodology            Claims   Claim Lines Patients   Amounts Paid
Category A: Medicare Part A Primary for                                                       patients with cumulative
Inpatient Facility                           737        741         582           $8,788,288 claims of $500 or more        726        730        571          $8,785,317

Category B: Medicare Part A Primary for
Skilled NursingIHome Health Care!Hospice                                                      patients with cumulative
Care                                         3,433     12,478      1,261          $2,617,207 claims of $2,500 or more      935       4,535       170          $1,900,896
                                                                                                     ,

Category C: Medicare Part B Primary for                                                       patients with cumulative
Certain Inpatient Facility Charges            291       291         246           $2,655,689 claims of$2,500 or more       278        278       233           $2,635,016

Category D: Medicare Part B Primary for
Skilled NursingIHome Health Care!Hospice                                                    patients with cumulative
Care                                          237       464         161            $764,952 Claims of $2,500 or more       162        320        97            $699,341

Category E: Medicare Part B-Primary for                                                       patients with cumulative
Outpatient Facility and Professional        26,603     54,683      5,843          $9,841,495 claims of $1 ,000 or more    16,310     38,705     1,475         $8,713,682

Category F: Medicare Part B Primary for
Outpatient Facility and Professional                                                          patients with cumulative
(Participation Code F).                     520,167    858,730    208,631        $60,998,583 claims of $10,000 or more    5,898      13,708      348          $9,911,828

                  Total                     551,468    927,387    216,724    $    85,666,214              ,               24,309     58,276     2,894     $   32,646,080
                                                                                                                                                                                               SCHEDULE B
                                                                                                                                                                                                  Page I ofJ

                                                                                    Coordination of Benefits with Medicare
                                                                                       BlueCross and BlueShield Plans
                                                                                         Claims Reimbursed in 2007

                                                                                   SUMMARY OF QUESTIONED CHARGES
                                                       COB Category A         COB Category B      COB Category C       COB Category D         COB Cateeorv E            COB CateJ!orv F       ALL COB CateJ!ories
Plan                                                Claim      Amount       Claim     Amount     Claim    Amount      Claim    Amount      Claim     Amount                      Amount      Claim     Amount
Site -# Plan State                 Plan Name        Lines     Ouestioned    Lines   Questioned   Lines  Questioned    Lines  Questioned    Lines    Ouestioned     Claim Lines Ouestioned    Lines    Questioned
003       NM         BCBS ofNew Mexico                I     $       3,348     0     $      -       0                   0             -                    2.952                        ·      [5             6,300
                                                                                                         $                   $              14      $
                                                                                                                                                                       °      $                      $

005        GA        WeliPoint BCBS of Geo nri a     \8     $     225,545    \2     $   28,528     1     $     666     0     $       -     938      $   254,248        0      $        ·      969    $     508,987

006       MD         CareE,st BCBS                    0     $         -       0     $      -       4     $   10,025    0     $       ·     218      $    36,[96        2      $      9,715    224    $      55,936

007        LA        BCBS of Louisiana                4     $      27,507     0     $      -       1     $    5,248    0     $       -      2[      $     3,304        9      $      1,394    35     $      37,453

009        AL        BCBS of Alabama                  1     $      18,800     0     $      .       0     $      ·            $       ·     410      $    77,9 II       0      $        -      411    $      96,111
010        ID        BC of Idaho Heahh Service        0     $         -       0     $      -       0     $      -
                                                                                                                       °
                                                                                                                       0     $       -       1      $        79        0      $        -       1     $          79

Oil       MA         BCBS of Massachusetts            0     $         -       8     $      648     1     $     113     0     $       -       5      $     1,679        0      $        ·      14     $       2,440

012        NY        BCBS of Westem New York          2     $      23,653     0     $      -       0     $      ·      0     $       -       2      S        83        0      $        -       4     $      23,736

013        PA        Hi~hmark BCBS                    1     $       4,32[    55     $   10,078     9     $   13,136    0     $       ·      107 .   S    72.254        4      $       256     176    $     100,045

015       TN         BCBS of Tennessee               4      $      23,746    0      $      -       0     $             0     $       -      [7      $     3,694        0      $        -      21     $      27440
0[6       WY         BCBS ofWvominJ!                 0      $         -      0      $      -       0     $             0     $       -      38      $     6,574        0      $        ·      38     $       6,574

017        11        BCBS of Illinois                 1     $       8,669    98     $   13.128     4     $    4,166    0     $       -     444      $    72,255       27      $     21,720    574    $     119,938

021       OH         Ohio WeliPoint BCBS             7      $      60,[24    111    $   41,418     5     $   10,816    24    $    29,084    127     S    20,861        13     $     10,200    287    $     172,503

024        SC        BCBS of South Carol ina         o·     S         -      0      $      .       0     $             0     $       ·      15      $     2,639        0      $        -      15     $       2,639

027       Nfl        New Hamoshire WellPoint BCES    0      $         -      0      $      -       0     S             2     $     2,943    0       $       .          0      S        -       2     $       2,943

028        VT        BCBS ofVennont                  0      $                0      $              0     $      -      0     S       -       1      S        68        0      $        ·       1     $         68

029        TX        BCBS ofTexas                    13     $     309,638   313     $   46.121     5     $    7,790    0     $       ·     3027     $   362442        93      $     72,362   3,451   $     798,353

030        CO        Colorado WellPoinl BCBS          2     $      21,227    0      $              0     $      -      0     $       -      134     $    39,144        7      $      4,242    143    $      64,613

031        [A        Wellmark BCBS ofIowa            3      $      12,883    97     $   34)31      0     $      -      0     $              0       $       .          0      $        -      100    $      47,214

032        MI        BCBS of Michigan                 3     $      25,441    45     $    8,359     5     $   14,033    0     .$                     $                  2      $        58     55     $      47,891

033       NC         BCBS of North Carolina          12     $     115,630    101    $    8,901     4     $   22,557    0     $
                                                                                                                                            °
                                                                                                                                           459      $    52,156        0      $        -      576    $     199,244

034       ND         BCBS of North Dakota             I     $      18,285     0     $      -       0     $      -      0     $              13      $       615        0      S        -      14     $      [8,900

036        PA        CaoiblBC                         0     $         -      26     $    2,608     1     $    1,008    0     $              14      $     2,364        0      $               41     $       5,980

037       MT         BCBS of Montana                  0     $         -      126    $   32,427           $      ·      0     $                              -          0      $        -      126    $      32,427

038        HI        BCBS of Hawaii                  0      $         -      6      $   24,221
                                                                                                  °0     $      -      0     $
                                                                                                                                            °
                                                                                                                                            0
                                                                                                                                                    $

                                                                                                                                                    $       -          0      $        -       6     $      24,221

039        IN        Indiana Wel1Point BCBS          2      S      11,662    0      S              6     $    7,716     I    $     1,050    84      $     3072         13     $      3578     106    $      27,078

040       MS         BCES of Mlssissiooi             3      $      [0,841    4      $      360     I     $    2,698    0     $              83      $     7,998        0      $        -      91     $      21,897
                                                                                                                                                                                                           SCHEDULEB
                                                                                                                                                                                                              Page 2 ofl
                                                                                         Coordination of Benefits with Medicare
                                                                                            BlueCross and BlueShield Plans
                                                                                              Claims Reimbursed in 2007

                                                                                        SUMMARY OF QUESTIONED CHARGES
                                                            COB Category A         COB Calegory a       COB Category C         COB CatellOry D            COB Category E            COB Category F        ALL COB Categories
 Plan                                                    Claim      Amount       Claim     Amount      Claim    Amount        Claim    Amount          Claim      Amount                     Amount      Claim     Amount
Site # Plan State                 Plan Name              Lines     Questioned    Lines   Questioned    Lines   Questioned     Lines  Ouest;oned        Lines    Ouestioned     Claim Lines Questioned    Lines    Questioned

041        FL       BCeS of Florida                        6     $      73,045     0     $       -       I     $     9,025     0        $     ·         199    $     15,373        21     $     48,090    227    $     145,533

 042      MO        BCES ofKansas CiIV .                   0     $         -       0     $               0     $                2       $    3,494      20     $      1,475        0      $               22     $       4,969

043        lD       Regence BS ofldaho                     0     $         -       0     $       -       0     $                0       $                1     $         79        0      S                I     $           79

044       AR        Arkansas BCBS                          3     $      31,526     0     $              0      $               28       $     766       190   $      12,674        20     $      4,262    241    $      49,228

045       KY        Kentuckv WellPoint BCBS                0     $                61     $    16,905     3     $     18,885     2       $    3,207      15     $        411        2      $      3,896    83     $      43,304

047       WI        WeliPoint BCBS United of Wisconsin     2     $      21,796     0     $               1     $     2,518      2       $          9    386   $      61,341        16     $     28,031    407    $     113,695

 048      NY        Empire BCBS                            8     $      63,707    61     $    7,023      3     $     5,483     0        $      -        673   $      74,651        40     $     25,409    785    $     176,273

049       NJ        Horizon BCBS of New Jersey             0     $         -      63     $    2,944      4     $     6,973     0        $      -        97     $     46,524        1      $     40,858    165    $      97,299

 050      CT        Connecticut WellPoint BCBS             0     $         .       0     $       .       0     $                0       $      ·         0     $                   0      $                0     $

 052      CA        WeliPoint Be ofCaJifomia              II     S     116,571    103    $    15,948     4     S     11,616     I       $    1,800      159    $     60,852        0      $               278    $     206,787
                                                                                                                                    ,
 053      NE        BCBS of Nebraska                       1     $         564     0      $      -       1     S       176      0       $      -        48     $     22,469        0      $               50     $      23,209

 054      WV        Mountain State BCBS                    1     $      37,196    60      $   7,861      I     $       811      0       $                4     $      3,254        0      $        -      66     $      49.122

 055      PA        Independence BC                        0     $         -       0     $       -       I     $      1,571     5       $    3848        0     $        .          0      $        -       6     $         5419

056       AZ.       BCES of Arizona                        2     $       9,924     0     $               0     $        -       0       $      -        367    $     80,914        24     $     14.121    393    $     104,959

058       OR        Regence BCBS of Oregon                 1     $       1,265    25      $   4,654      2     $     3,313     27       $    5,626       0     $        -          24     $     24,181    79     $      39,039

059       ME        Mame WellPoint BCBS                    0     $                67     $    3,566      I     $      1,001     2       $     975        0     $                   0      $               70     $         5,542

060        RI       BeBS of Rhode Island                   1     $       3,241     0      $      -       0     $                0       $      -        42     $      3,259        0      $        -      43     S         6,500

061       NV        Nevada WeliPoint BCBS                  I      $     35,483     0     $       .       0     S        -       0       $                0     $         -         0      $        -       I     $      35,483

 062      VA        Virginia WellPoint BCBS                4     $      11.986     3     $    16,783     1     $      1,775     9       $    9,424      16     $        943        68     $      5,594    101    $      46505

 066      UT        Regence BCBS of Utah                   I     $      23.840     7      $    2,936     0     $        ·       3       $    2,913       4     $       1,467       31     S      7,817    46     $      38,973

 067      CA        BS of California                       0     .$        .       0      $              0     $        -       0       $      -        953    $     52,849        0      $        -      953    $      52.849

069       WA        Regence BS of Washington               0      $        -       0      $              0     $        -       0       $      ·         0     $        -          0      $                0     $           -
 070      AK        BCBSof Alaska                          1      $        992     0      $              0     $        -       0       $'              32     $      3,272        29     $     42,774    62     .I>    47,038

 074      SD        Wellmark BCBS of South Dakota          0     .$                0      $      -       0     $                0       $      -         0     .I>       -         0      $        -       0     .I>         -
 075      WA        Premera BC                             I      $     2\.149     3      $   17,600     0     $        ·       0       $               30     .I>     4,053        3     .I>    9,2i6    37     .I>    52,018

 076      MO        WellPoint BCBS of MlSSOUri             8      $     89,147     16     $   19,495     12    $     ]9,034     1       $    1,727      413    $     13l,409       5      $     27,020    455    .I>   287.832

 078      MN        BCBS of Minnesota                      1      $      8,719     0      $      -       0     .I>      -       0       $      ·        36     $      17,895       0      $        -       37    .I>    26,614

 079      NY        BCaS of Central NY                     1      $     91,905     0      $              0     .I>      ·       0       $      -         3     $        691        0      $                4     $      92 596
                                                                                                                                                                                                         SCHEDULE B
                                                                                                                                                                                                               Page 3 00
                                                                                         Coordination of Benefits with Medicare

                                                                                            BlueCross and BlueShieid Plans

                                                                                              Claims Reimbursed in 2007


                                                                                        SUMMARY OF QUESTIONED CHARGES
                                                         COB Category A           COB Category B         COB Category C        COB Category D         COB Category E              COB CategoTY F       ALL COB Categories
 Plan                                                 Claim      Amount         Claim     Amount        Claim    Amount       Claim    Amount      Claim     Amount                        Amount     Claim     Amount
Site # Plan State                  Plan Name          Lines     Ouestione{l     Lines   Questioned      Lines   Questioned    Lines  Questioned    Lines    Questioned       Claim Lmes Questioned    Lines    Questioned

082       KS        BCBS of Kansas                      0      1>         -       0      $        -       0     $       -       0    $       -       I      1>        230        2     $       228      3        S         458

083       OK        BCSS of Oklahoma                    3      $       12,505    25      S      8,876     2     $   ,2,706      0    S       -      191     $      55,408        8     $       848     229       1>     80,343

084       NY        BCSS of Utica.Watertown             0      $          -      27      .$     3,082     0     $       -      0     S       ·       I      S         [02        0     $        -       28       1>      3,184

085       DC        CareFirst BCBS                      3      .$     20,270     97      S     49,232     3     $     6,366     5    $'    4,435    272     .$     20,127        [     $       SIS     381       1>    101.24S

088       PA        BC of Northeastern Pennsylvania     0      1>         -       0      $        -       0     $              0     $       -       I      $          30        0     $        -        1       1>         30

089       DE        BCSS of Delaware                    0      $          -       0      .$       -       0     $              0     $       ·       0      S         .          0     $        -       0        1>         .
092       DC        CareFirsl BCBS (Overseas)           0      $          .       0      $        .       0     $              0     1>      ·       I      $          68        0     $        .        1      $           68

                          Totals                      138      S    1,596,151   1,620    S    428,033    87     S   191,225   114' $      71,301   10,327   $    1,694,408     465     S    406,688   12,751    S     4,387,806
                                                                                               APPENDIX



                                                                BlueCross BlueShield
                                                                Association
                                                                An Assodlltion of Independent
                                                                ll1ue Cro....s aJld Blue Shield Plans
February 3, 2009

                    I Group Chief
Experience·Rated Audits Group
Office of the Inspector General
U.S. Office of Personnel Management
1900 E Street, Room 6400
Washington, DC 20415-1100

Reference:	         OPM DRAFT AUDIT REPORT
                    Tier VIII Global Coordjnation of Benefits
                    Audit Report #1A·99·00-09-011
                    (Report dated and received 10/1/08)

Dear

This is in response to the above referenced U.S. Office of Personnel
Management (OPM) Draft Audit Report concerning the Global
Coordination of Benefits Audit for claims paid in 2007. Our comments .
concerning the findings in the report are as follows:

Ali.	 Coordination of Benefits with Medicare
       Questioned Amount - $26,408,610

       The aPM DIG submitted their sample of potential COB errors to the
       BeSS Association on October 1, 2008. The BCSS Association and/or
       BeSS plans were requested to review these potential COB errors and
       provide responses by January 16, 2009. For claims incurred from
       October 1, 2006 through December 31, 2007 and reimbursed in 2007,
       aPM OIG identified 58,276 claim lines totaling $26,408,610 in potential
       uncoordinated claims.

       Btue Cross Blue Shield Association Preliminary Response:

       After reviewing the OIG Draft Audit Report and listing of potentially
       uncoordinated Medicare COB claims totaling $26,408,610, we identified
       $2,526,632 in claim payments that were not coordinated with Medicare
       after the initial claim payment, and sUbsequently became claim payment
       errors (or 10 % of the amount identified as potentIal COB errors).
       Recovery has been initiated on these overpayments and thH Plans will
       continue to pursue these overpayments as required by CS 1039, Section
       '") ' j I ~ )(1)
       ... 0.)	\9 '
February 2, 2009
Page 2 of 4

      To the extent that claim payment errors did occur or were not identified,
      these payments were good faith erroneous benefit payments and fall
      within the context of CS 1039, Section 2.3 (g). Any benefit payments the
      Plans are unable to recover are allowable charges to the Program. In
      addition, as good faith erroneous payments, lost investment income does
      not apply to the payments identified in the finding.

      Our analysis of payment errors indicated the following:

      •	 Claims were processed incorrectly because the claims examinerfaiJed
         to use the Medicare Explanation of Benefits (MEOB) to process the
         claim. This resulted in claims being paid as "not covered by Medicare"
         when theMEOB indicated that Medicare""made a paymenton the
         claim.

      •	 Refunds were not initiated on claims that were provided to the Plan on
         either the retroactive enrollment report or the FEP Director's Office
         COB Self Assessment report. In some cases, recovery could not be
         initiated because when retroactive enrollment reports were received,
         the claim was already outside the Plan's provider contract time limit to
         recover the claims.

      In order to continue to improve the FEP Program's Medicare COB
      processing, FEP will continue with our current COB Action Plan, with
      modification as necessary, to include the following:

      •	 Monitoring of Medicare COB activity via the new on-line processing
           appHcation that requires all Plans to update their COB Self
           Assessment reports directly on the FEP Claims system. This will allow
           easier monitorIng of Plan's COB activities by the FEP Director's Office
           as well as Plan Management and Audit staff.
      •	 Modification of the FEP Administrative Manual to provide better
           guidance on when the Medicare Participation ifF" code should be used
           as well as when certain home health, skilled nursing and hospice
           claims should be coordinated.
      •	 Evaluation of the feasibility of implementing a deferral for inpatient
           facility Medicare Part A claims over a certain dollar threshold that are
           coordinated with a Medicare Participation code "F" - not covered by
           ~v1edicare. If implemented, the deferral will require Plan Claims
           Management to approve processing of the claim.
      II'	 Provide Plan training as necessary.

      \Nith respect to the remaining $23,882,355, our review indicated Ulat the.
      cj~jms  were paid correctly as discussed below:
February 2, 2009
Page 3 of 4

      •	 Claims totaling $1',870,617 are contested because recovery had been
         initiated in accordance with CS1039, 2.3 (g) but not completed or were
         uncollectible at the time the Draft Audit Report response was provided.
         The majority of these claims were also paid correctly based upon the
         Medicare information that was on file at the time of initial payment.
         Also, at the time of our response to the Draft Report, some claims have
         already been determined to be uncollectible after recovery was
         initiated, four letters were sent to the provider and no response from
         the provider was received.                                      .
      •	 Claims totaling $9,740,892 are contested because the claims were
         adjusted before the response to the Draft Audit Report was submitted.
         Approximately $4,300,000 of the amount adjusted was adjusted before
         July·31-j "2008·," with many having been"adjusted ;n first-quarter 2008: .
         The majority of these claims were paid correctly based upon- the
         Medicare information"that was on fife at the time of initial payment.
         Recovery was initiated and the claims were subsequently adjusted and
         funds returned to the Program once the claim errors were identified
         through retroactive enrollment notices or the FEP Director's Office
          COB Self Assessment Reports.
      •	 Claims totaling $942,926 did not require coordination because the
          Medicare benefits were exhausted at the time of payment or Medicare
         was secondary.
      •	 Claims totaling $7,688,635 are contested because the services were
          not covered by Medicare.
      •	 Claims totaling $3,164,276 are contested for "other" reasons, including
          but not limited to the fact that Medicare was not primary on the
          incurred date, only the deductible or coinsurance was paid for a VA,
          Indian Health or DOD facility, or the claim was coordinated correctly.
      •	 Claims totaling $475,009 are contested because the services were
          provided by a non Medicare approved provider.

      Our evaluation of claims that were contested because services were not
      covered noted the following:

      •	 Non-covered drug claims were incorrectly included in the audit sample.
         Medicare Part 8 only covers the folloWing:" drug infusions, antigens,
         osteoporosis drugs, drugs for end stage renal disease, blood clotting
         factors, inject able drugs, immunosuppressive drugs, oral cancer drugs
         and oral anti-nausea drugs. Also, these drugs are only covered under
         certak'l circumstances. None of the drugs included in the COB Tier 8
         audit were in the category of drugs that Medicare Part B covers.
         Supporting documentation has been provided.

      iii   The audit sample inCluded nursing services, speech therapy, physical
            med-icine therapy, physical therapy, and durable medical equipment
February 2,2009
Page 4 of 4

         claims that are only covered by Medicare Part B when the services are
         provided by a Medicare approved provider, when the services are
         approved by the members' physician in advance, when the service is
         provided in the appropriate setting (Le., home), or if determined to be
         medically necessary. Also, in the case of some services, such as
         physical or speech therapy, service limits apply.

      Because the drug name, the physician authorization, determination of
      medical necessity or whether or not the member has reached the
      Medicare limit maximum is not included on the FEP Claims system, it
      cannot be automatically assumed that the claims were paid incorrectly.

      Documentation to ·support the contested ·amounts has been provided;
      Documentation to support initiation of overpayment recovery before the
      audit has also been provided. In addition, we have attached a schedule
      listed as Attachment A th~t shows the amount questioned, contested, ­
      reason contested and amount recovered by each Plan location. The
      Plans will continue to pursue the remaining amounts as required by CS
      1039, Section 2.3 (9)(1). Any benefit payments the Plan is unable to
      recover are allowable charges to the Program. In addition, as good faith
      erroneous payments, lost investment income does not apply to the
      payments identified in the finding.

We appreciate the opportunity to provide our response to this Draft Audit
Report and would request that our comments be included in their entirety
as part of the Final Aud it Report.

Sincerely,




 irector

Program Assurance


Attachment

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