oversight

Audit on Global Coordination of Benefits For Bluecross and Blueshield Plans

Published by the Office of Personnel Management, Office of Inspector General on 2011-06-08.

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:



                    AUDIT ON GLOBAL 

              COORDINATION OF BENEFITS FOR 

             BLUECROSS AND BLUE SHIELD PLANS 





                                            Report No. lA-99-00-10-055


                                             Date:         June 8 , 2011




                                                          --CAUTION-­

Till! u di! '(porl hU brcn lIi)tribulrd to Fcdcnl officials .. ho nc rC~pI)nsihlt for th Jdminl~lraliop oflbe audited program. Thisilldi!
rf(>Ort may cOll lai n propridary data wbich is protnlcd by Fftknllaw (18 U.S.c. (9115). Th Htforc, while this audit report ;8 availablt
under thf Frttdom oflnformRlion Act and m~dt lVai lablt to tbe public on Ih. OIG ",cbpagt, (lutiun ntftb to'" urrtlstd bl'fo~
••Ieuing Ih e r.portIII Iht gcnrral public u it mly cunl:!ln pruprlulry informallon that WI. rcdlCltd from tbe l'"bUrly dislrlbul.d ropy.
                       UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
                                          Washington, DC 20415


  Officr of the 

Inspector Geneml 





                                        AUDIT REPORT 




                             Federal Emp loyees Health Benefits Program 

                             Service Benefit Plan     Conlract CS 1039 

                                  BlueCross BlueShield Association 

                                            Plan Code 10

                                  Global Coordination of Benefits 

                                  BlueCross and BlueShield Plans 





                     REPORT NO. IA-99-00-IO-055            DATE :   J une 8 . 2011




                                                           Assistant Inspector General
                                                             for Audits
                               UNITED STATES OFFICE OF PERSONNEL MANAGEMENT 

                                                  Washmgton. DC 204J 5 



   Office of the
Inspet:lOr General




                                          .E XECUTIVE SUMMARY 




                                     Federal Employees Health Benefits Program 

                                     Service Benefil Plan     Contract CS 1039 

                                          BlueCross BlueShieid Association 

                                                    Plan Code 10 


                                          Global Coordination of Benefits 

                                          BlueCross and BlueShield Plans 





                             REPORT NO. IA-99-00-IO-055            DATE:      June B,   2011


      This final audit report on the Federal Employees Hea lth Benefits Program (FEHBP) operations
      at all BlucCross and BlueShie1d (BeSS) plans questions $7,742.389 in health benefit charges.
      The BlueCross BlueShield Association (Association) and/or BeSS plans agreed with $3,529,991
      and disagreed with $4,2 12,398 of the questioned charges.

       OUf limited scope audit was conducted in accordance with Govenunent Auditing Standards. The
       audit covers health benefit payments from January 1, 2009 through May 31, 20 I 0 as reported in
       the Annual Accounting Statements. Specifically, we identified claims incurred from October 1,
       2008 through May 31, 2010 that were reimbursed from January I, 2009 through May 31, 2010
       and potentially not coordinated with Medicare. We detennined that the BeSS plans did not
       properly coord inate 15,409 claim line payments with Medicare as required by the FEHBP
       contracl. As a result, the FEHBP was ove rcharged $7,742,389. When we notified the
       Association of these errors on July 1,2010, the claims were within the Medicare timely filing
       requirement and could be filed with Medicare for coord ination of benefits.




         ww .... . opm.go¥                                                                     www ... saJobs.c:o'o'
                                               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 September 30, 2010 and
                          received on October 28, 2010, 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 Healthcare and Insurance
Office 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 coverage is made available
through contracts with various health 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 1) 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
BCBS 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 of FEHBP 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 BCBS plan. Also, management of each BCBS plan is
responsible for establishing and maintaining a system of internal controls.


1
 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.




                                                          1
Findings from our previous global coordination of benefits audit of all BCBS plans (Report No.
1A-99-00-10-009, dated March 31, 2010) for contract year 2008 are in the process of being
resolved.

Our preliminary results of the potential coordination of benefit errors were presented in detail in
a draft report, dated July 1, 2010. 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 BCBS plans on various
dates through May 11, 2011 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 of benefits 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 from January 1, 2009 through May 31, 2010 as
reported in the Annual Accounting Statements. Specifically, we identified claims incurred from
October 1, 2008 through May 31, 2010 that were reimbursed from January 1, 2009 through
May 31, 2010 and potentially not coordinated with Medicare. 2 Based on our claim error reports,
we identified 959,979 claim lines, totaling $99,293,156 in payments, that potentially were not
coordinated with Medicare. From this universe, we selected and reviewed 77,652 claim lines,
totaling $33,452,198 in payments, for coordination of benefits with Medicare. When we notified
the Association of these potential errors on July 1, 2010, 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 BCBS plan’s system
of internal controls taken as a whole.

We also conducted tests to determine whether the BCBS 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 BCBS 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 of this 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.




2
  Our initial audit scope included claims incurred on or after October 1, 2008 that were reimbursed in 2009 and
potentially not coordinated with Medicare. However, due to a recent change with the Medicare timely filing
requirement, we changed our audit scope to include claims incurred on or after October 1, 2008 that were reimbursed
from January 1, 2009 through May 31, 2010 and potentially not coordinated with Medicare. Starting in 2010, claims
with incurred dates of service on or after January 1, 2010 that are received by Medicare more than one calendar year
after the date of service could be denied by Medicare as being past the timely filing requirement.




                                                         3
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 BCBS 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.

The audit was performed at our offices in Washington, D.C.; Cranberry Township, Pennsylvania;
and Jacksonville, Florida from December 2010 through May 2011.

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 77,652 claim lines, totaling $33,452,198 in payments, from a universe of 959,979 claim
lines, totaling $99,293,156 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 of potential uncoordinated claim lines.

The determination of the questioned amount is based on the FEHBP contract, the Service 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 explain Medicare
benefits.




                                                  4
                III. AUDIT FINDING AND RECOMMENDATIONS

Coordination of Benefits with Medicare                                                    $7,742,389

The BCBS plans did not properly coordinate 15,409 claim line payments, totaling $9,661,910,
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 $7,742,389 for these claim lines.

The 2010 BlueCross and BlueShield Service Benefit Plan brochure, page 121, Primary Payer
Chart, illustrates when Medicare is the primary payer. In addition, page 24 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 states, “(a) The Carrier shall coordinate the payment of
benefits under this contract with the payment of benefits under Medicare . . . (b) The Carrier
shall not pay benefits under this contract until it has determined whether it is the primary
carrier . . . .” Also, Part III, section 3.2 (b)(1) 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, 2008 through May 31, 2010 and reimbursed from January 1,
2009 through May 31, 2010, we performed a computer search and identified 959,979 claim lines,
totaling $99,293,156 in payments, that potentially were not coordinated with Medicare. From
this universe, we selected for review a sample of 77,652 claim lines, totaling $33,452,198 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 July 1, 2010, the claims were within the Medicare timely filing
requirement and could be filed with Medicare for coordination of benefits.

Generally, Medicare Part A pays all covered costs for inpatient care in hospitals, skilled nursing
facilities and hospice care, except for deductibles and coinsurance. For each Medicare Benefit
Period, there is a one-time deductible, followed by a daily copayment beginning with the 61st
day. Beginning with the 91st 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 percent 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 determine 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 determine 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
    lines.

From these six categories, we selected for review a sample of claim lines that potentially were
not coordinated with Medicare (See Schedule A for our sample selection methodology). Based
on our review, we identified 15,409 claim lines, totaling $9,661,910 in payments, where the
FEHBP paid as the primary insurer when Medicare was the primary insurer. We estimate that
the FEHBP was overcharged $7,742,389 for these claim line payments. 3




3
 In addition, there were 9,250 claim lines, totaling $5,212,089 in payments, with COB errors that were identified
by the BCBS plans before the start of our audit (i.e., July 1, 2010) and adjusted by the Association’s response due
date (i.e., September 30, 2010) 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
                                                          205     $3,578,502          $3,578,502
Inpatient (I/P) Facility
Category B: Medicare Part A Primary for
Skilled Nursing/Home Health Care (HHC)/                 3,362       $723,330              $723,330
Hospice Care
Category C: Medicare Part B Primary for
Certain I/P Facility Charges                              125     $1,624,895              $571,380

Category D: Medicare Part B Primary for
Skilled Nursing/HHC/Hospice Care                          160       $540,606              $240,833

Category E: Medicare Part B Primary for
Outpatient (O/P) Facility and Professional              9,591     $2,217,746          $1,801,172

Category F: Medicare Part B Primary for O/P
Facility and Professional (Participation Code F)        1,966       $976,831              $827,172

                     Total                             15,409     $9,661,910          $7,742,389

Our audit disclosed the following for the COB errors:

•   For 11,013 (71 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 BCBS plans did not review and/or adjust the patient’s prior
    claims back to the Medicare effective dates.

•   For 4,396 (29 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 74 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 of this 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 $7,742,389 in questioned charges, $3,235,975 (42 percent) was identified by the BCBS
plans before the start of our audit (i.e., July 1, 2010). 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., September 30, 2010) to the draft report, we are continuing to question these COB
errors. The remaining questioned charges of $4,506,414 (58 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 OIG listing of
potentially uncoordinated Medicare COB claims . . . BCBSA identified $3,220,991 . . . of the
questioned amount that was not coordinated with Medicare. For the time period covered by the
audit, FEP reported Medicare savings in excess of $25 billion. To date Plans have recovered
$1,343,596 in claim payment errors. Recovery has been initiated on the remaining
overpayments and the Plans will continue to pursue these overpayments . . .

Of the $3,220,991 in claim payments that were not coordinated with Medicare, we noted the
following:

•   Claims processors incorrectly overrode the Medicare deferral, missed the MSN when
    processing the claim, claims system did not defer the claim for review or other various
    reasons for claims totaling $2,762,293.
•   Claims were not identified by the FEP Claims System retro-active enrollment reports,
    Uncoordinated Medicare Application or FEP ad-hoc reports for Plan review for claims
    totaling $286,682; and
•   Claims were identified by the FEP Claims System retro-active enrollment reports,
    Uncoordinated Medicare Application or FEP ad-hoc reports before the audit began but were
    not worked by the Plan for claims totaling $547,181.

To reduce the number and frequency of uncoordinated Medicare claims, BCBSA has
implemented an action plan . . .

To timely identify uncoordinated Medicare claims before the new 12 month Medicare timely
filing limit has passed, FEP is also implementing the following:

•   Increase the frequency of the Uncoordinated Medicare Application update from quarterly to
    monthly by 4th quarter 2010;
•   Issue ad hoc reports to Plans on a quarterly basis that identify claims that are not included in
    the Uncoordinated Medicare Application;
•   Update the Uncoordinated Medicare Application for claims currently included in ad hoc
    reports by 2nd quarter 2011;
•   Issued an Audit Alert informing the Plan of the change and the need to work with their
    providers to ensure that claims are timely submitted to Medicare; and
•   Evaluate whether or not the quarterly Medicare match process can be moved to monthly from
    quarterly by 1st quarter 2011.

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 is not applicable to these
confirmed overpayments.




                                                 8
We contested the remaining . . . questioned uncoordinated Medicare claims as a result of the
following:

•   Claims totaling $5,168,042 were either adjusted before the audit started or recovery was
    initiated before the audit started and adjusted after the audit;
•   Recovery was initiated before the audit started on claims totaling $2,991,200, but the
    recovery process has not been completed; . . .
•   Claims totaling $491,675 were identified by the FEP Uncoordinated Medicare Application
    on July 7, 2010 and would have been adjusted by Plans before the Medicare timely filing
    limit without the OIG audit; . . .

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

OIG Comments:

After reviewing the Association’s response and additional documentation provided by the BCBS
plans, we revised the questioned charges from our draft report to $7,742,389. If COB errors
were identified by the BCBS plans before the start of our audit (i.e., July 1, 2010) and adjusted
by the Association’s response due date to the draft report (i.e., September 30, 2010), we did not
question these COB errors in the final report. Based on the Association’s response and the
BCBS plans’ additional documentation, we determined that the Association and/or plans agree
with $3,529,991 and disagree with $4,212,398 of the revised questioned charges.

Although the Association agrees with $3,220,991 in its response, the BCBS plans’ documentation
supports concurrence with $3,529,991. For these uncontested COB errors, we disagree with the
Association’s comments that the payments were good faith erroneous benefit payments. When the
Medicare information was subsequently added to the claims system, the BCBS plans did not
review and/or adjust the patients’ prior claims back to the Medicare effective dates. Since the
BCBS plans did not take the proper action to immediately correct the overpayments, we do not
believe the BCBS plans acted in good faith to recover these overpayments.

Based on the Association’s response and/or the BCBS plans’ documentation, the contested
amount of $4,212,398 represents the following items:

•   $3,235,975 of the contested amount represents COB errors where recovery efforts were
    initiated by the BCBS plans before the audit started. However, the plans 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.

•   $941,968 of the contested amount represents COB errors that were identified by the FEP
    Operations Center’s “FEP Uncoordinated Medicare Application” on July 7, 2010 and would
    have been adjusted before the Medicare timely filing limit without the OIG audit. Since
    these COB errors were identified after the audit started, we are continuing to question this
    amount in the final report.



                                                9
•   $29,399 of the contested amount represents COB errors where recovery efforts were initiated
    by the plans after the audit started even though the plans’ responses state that the recoveries
    were initiated prior. Since the recoveries were initiated after the audit started and the
    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.

•   $5,056 of the contested amount represents three non-COB errors where the BCBS of
    Minnesota plan agrees that these claims were duplicate payments but disagrees with the
    finding because the recovery efforts were initiated prior to the start of the audit. However,
    we verified that these recoveries were actually initiated after the audit started. Since the
    recoveries were initiated after the audit started and the 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.

Recommendation 1

We recommend that the contracting officer disallow $7,742,389 for uncoordinated claim
payments and verify that the BCBS 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 BCBS plans are
following the corrective action plan.

Recommendation 3

We recommend that the contracting officer require the Association to ensure that the BCBS plans
have procedures in place to review all 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
previously 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 that 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-In-Charge
___________________________________________________________

                  , Chief

          , Senior Team Leader

Information Systems Audits Group

              , Chief

            , Senior Information Technology Specialist




                                            11
                                                                                                                                                                                        SCHEDULE A
                                                                                          V. SCHEDULES

                                                                                Coordination of Benefits with Medicare
                                                                                   BlueCross and BlueShield Plans
                                                                     Claims Reimbursed from January 1, 2009 through May 31, 2010


                                                          UNIVERSE AND SAMPLE OF POTENTIALLY UNCOORDINATED CLAIM LINES


                                                               UNIVERSE                                                                         SAMPLE
                                                                                                                                                                            Estimated
                                          Number of Number of Number of       COB Universe      Sample Selection          Number of Number of Number of                    Overcharge     Potential
              CATEGORY                     Claims   Claim Lines Patients     Total Payments      Methodology               Claims   Claim Lines Patients   Amounts Paid    Percentage    Overcharge

Category A: Medicare Part A Primary for
                                            800        804          590         $10,745,414          all patients           800        804        590        $10,745,414     100%         $10,745,414
Inpatient Facility

Category B: Medicare Part A Primary for                                                        patients with cumulative
                                            7,119     22,898        2,062        $4,278,006                                3,599      14,362      524         $3,495,949     100%          $3,495,949
Skilled Nursing/HHC/Hospice Care                                                              claims of $1,500 or more


Category C: Medicare Part B Primary for
                                            280        280          261          $3,342,044          all patients           280        280        261         $3,342,044      25%           $835,511
Certain Inpatient Facility Charges

Category D: Medicare Part B Primary for                                                        patients with cumulative
                                            295        531          190          $1,060,807                                 228        397        141         $1,033,123      25%           $258,281
Skilled Nursing/HHC/Hospice Care                                                              claims of $1,500 or more


Category E: Medicare Part B Primary for                                                        patients with cumulative
                                           18,561     36,431        5,079        $6,976,879                                9,161      21,727      794         $5,355,601      80%          $4,284,481
Outpatient Facility and Professional                                                          claims of $1,500 or more

Category F: Medicare Part B Primary for
                                                                                               patients with cumulative
Outpatient Facility and Professional       602,180   899,035       273,577      $72,890,004                                15,486     40,082      896         $9,480,067      80%          $7,584,054
                                                                                              claims of $5,000 or more
(Participation Code F)

                  Totals                   629,235   959,979                    $99,293,156                                29,554     77,652                 $33,452,198                  $27,203,689
                                                                                                                                                                                                                SCHEDULE B
                                                                                                                                                                                                                   Page 1 of 2
                                                                                             Coordination of Benefits with Medicare
                                                                                                BlueCross and BlueShield Plans
                                                                                  Claims Reimbursed from January 1, 2009 through May 31, 2010

                                                                                             SUMMARY OF QUESTIONED CHARGES
                                                              COB Category A           COB Category B       COB Category C        COB Category 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  Questioned   Lines    Questioned    Claim Lines Questioned    Lines    Questioned
 003       NM         BCBS of New Mexico                        2         $6,189         0           $0        0           $0        0          $0       3           $761           0            $0        5            $6,950
 005        GA        WellPoint BCBS of Georgia                12       $174,378        36      $13,748       15      $82,339        0          $0     633       $162,081          86       $17,991      782         $450,537
 006       MD         CareFirst BCBS                            4        $69,989        49      $11,152        8      $44,453        0          $0     121        $45,483          10        $7,320      192         $178,397
 007        LA        BCBS of Louisiana                         5        $35,894         0           $0        0           $0        0          $0      64        $19,475          13       $10,235       82           $65,604
 009        AL        BCBS of Alabama                           1        $13,100         0           $0        3        $6,194       0          $0      38        $61,410          78        $4,660      120           $85,364
 010        ID        BC of Idaho Health Service                0             $0         0           $0        0           $0        0          $0       0             $0           0            $0        0                $0
 011       MA         BCBS of Massachusetts                     0             $0        98       $8,244        2      $15,359        0          $0     133        $16,333           1        $4,624      234           $44,560
 012        NY        BCBS of Western New York                  0             $0         0           $0        1        $4,280       0          $0       0             $0           0            $0        1            $4,280
 013        PA        Highmark BCBS                             0             $0         0           $0        1         $130        0          $0      26         $3,387           0            $0       27            $3,517
 015        TN        BCBS of Tennessee                         4       $133,839        61      $15,397        1        $2,393       0          $0     322       $107,468           0            $0      388         $259,097
 016       WY         BCBS of Wyoming                           0             $0         0           $0        0           $0        0          $0      28        $13,759           0            $0       28           $13,759
 017        IL        BCBS of Illinois                          9       $185,004       160      $16,120        0           $0        0          $0     499       $122,057         163       $25,989      831         $349,170
 021        OH        WellPoint BCBS of Ohio                    9       $154,302       182      $47,874        4      $11,814       23     $52,162      65        $12,034         425       $74,693      708         $352,879
 024        SC        BCBS of South Carolina                    4        $35,899         0           $0        2        $6,130       1      $1,098      27        $10,565           0            $0       34           $53,692
 027        NH        WellPoint BCBS of New Hampshire           3        $30,662         0           $0        2        $7,223       9     $52,145       1             $7           0            $0       15           $90,037
 028        VT        BCBS of Vermont                           0             $0         0           $0        0           $0        0          $0       0             $0           0            $0        0                $0
 029        TX        BCBS of Texas                            23       $630,755       158      $13,759       17      $44,087       23        $418    1,854      $200,774         143       $33,156     2,218        $922,949
 030        CO        WellPoint BCBS of Colorado                6        $59,234       129      $31,123        2        $4,438       9     $11,460     104        $13,298           7        $4,612      257         $124,165
 031        IA        Wellmark BCBS of Iowa                     0             $0         0           $0        0           $0        1      $1,521      69         $4,994          10         $166        80            $6,681
 032        MI        BCBS of Michigan                          4       $100,776       122      $17,865        5      $10,560       14        $488       2         $1,400           5        $4,285      152         $135,374
 033        NC        BCBS of North Carolina                    5        $70,233       423      $54,271        3        $3,657       0          $0      44         $3,751         108       $23,335      583         $155,247
 034        ND        BCBS of North Dakota                      0             $0         0           $0        0           $0        0          $0       0             $0           0            $0        0                $0
 036        PA        Capital BC                                3        $24,779        39       $4,194        2        $4,571       0          $0       0             $0           0            $0       44           $33,544
 037       MT         BCBS of Montana                           0             $0         0           $0        0           $0        0          $0       0             $0           0            $0        0                $0
 038        HI        BCBS of Hawaii                            0             $0         0           $0        1        $2,446       0          $0       0             $0           0            $0        1            $2,446
 039        IN        WellPoint BCBS of Indiana                 2        $24,611        67      $30,513        4      $61,001        3     $19,804     106        $32,867           2         $542       184         $169,338
 040        MS        BCBS of Mississippi                       1        $61,477         0           $0        1        $4,197       6      $3,383     131        $71,536          22       $12,518      161         $153,111
 041        FL        BCBS of Florida                           6        $57,322        89      $30,277        0           $0        1        $618     803        $74,776         318      $332,885     1,217        $495,878
 042       MO         BCBS of Kansas City                       1         $7,321         0           $0        2         $439        0          $0     104        $84,311           4        $8,305      111         $100,376
 043        ID        Regence BS of Idaho                       0             $0         0           $0        0           $0        0          $0       5           $250           0            $0        5             $250
 044        AR        Arkansas BCBS                             0             $0         0           $0        0           $0        0          $0       0             $0           1         $192         1             $192
 045        KY        WellPoint BCBS of Kentucky                4       $132,200        93       $7,835        0           $0        8     $10,688       0             $0           9        $7,458      114         $158,181
 047        WI        WellPoint BCBS United of Wisconsin        2        $74,912        66       $6,689        8      $56,795        3      $3,578      13         $3,013          86       $26,876      178         $171,863
 048        NY        Empire BCBS                              14       $250,579        89       $9,886        9      $43,207        0          $0     769        $97,934           6        $6,463      887         $408,069
                                                                                                                                                                                                               SCHEDULE B
                                                                                            Coordination of Benefits with Medicare                                                                                Page 2 of 2
                                                                                               BlueCross and BlueShield Plans
                                                                                 Claims Reimbursed from January 1, 2009 through May 31, 2010

                                                                                             SUMMARY OF QUESTIONED CHARGES
                                                             COB Category A           COB Category B        COB Category C        COB Category 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  Questioned   Lines    Questioned    Claim Lines Questioned    Lines    Questioned
 049        NJ        Horizon BCBS of New Jersey               7        $56,974       273       $30,970        3        $8,874      14     $15,032     409       $104,466          19       $16,342      725        $232,658
 050        CT        WellPoint BCBS of Connecticut            0             $0        64       $14,825        1      $13,570        0          $0      49         $2,594           1         $114       115          $31,103
 052        CA        WellPoint BC of California              29       $443,162       155       $91,243        5      $27,726        4      $4,753     527       $131,230          40       $44,303      760        $742,417
 053        NE        BCBS of Nebraska                         2         $4,126         0           $0         0           $0        0          $0     146        $13,280          11         $849       159          $18,255
 054       WV         Mountain State BCBS                      0             $0        57        $6,446        0           $0        0          $0      17         $1,681           0            $0       74           $8,127
 055        PA        Independence BC                          2        $79,923        72        $8,102        4      $40,198        9     $20,102      55        $16,627           0            $0      142        $164,952
 056        AZ        BCBS of Arizona                          2        $14,253       127       $14,069        3        $2,611       4      $5,661     139        $11,162         105       $15,305      380          $63,061
 058        OR        Regence BCBS of Oregon                   0             $0       103       $13,202        0           $0        8      $6,378     129        $11,665           0            $0      240          $31,245
 059       ME         WellPoint BCBS of Maine                  0             $0        32        $6,018        0           $0        8      $8,355      22         $4,840           4         $721        66          $19,934
 060        RI        BCBS of Rhode Island                     0             $0        19       $16,417        0           $0        0          $0       0             $0           0            $0       19          $16,417
 061        NV        WellPoint BCBS of Nevada                 3       $157,318         0           $0         0           $0        2      $2,375      65        $24,011           5         $509        75        $184,213
 062        VA        WellPoint BCBS of Virginia               3        $60,363        55       $16,121        2      $28,340        2      $8,450       0             $0         181       $56,429      243        $169,703
 064        NY        Excellus BCBS Rochester                  0             $0         0           $0         1        $2,195       0          $0       0             $0           0            $0        1           $2,195
 066        UT        Regence BCBS of Utah                     0             $0       151       $28,558        0           $0        0          $0      20         $5,674           0            $0      171          $34,232
 067        CA        BS of California                         0             $0         0           $0         0           $0        0          $0     651        $49,136           1          $48       652          $49,184
 069       WA         Regence BS                               0             $0         0           $0         0           $0        0          $0      34         $1,991           1            $5       35           $1,996
 070        AK        BCBS of Alaska                           0             $0         0           $0         0           $0        0          $0     100        $27,129           0            $0      100          $27,129
 074        SD        Wellmark BCBS of South Dakota            0             $0         0           $0         0           $0        0          $0       0             $0           0            $0        0               $0
 075       WA         Premera BC                               5        $40,591         9       $20,654        3        $7,154       0          $0     100        $11,304           2          $59       119          $79,762
 076       MO         WellPoint BCBS of Missouri               3        $12,921         2        $6,182        3        $4,171       8     $12,365      52         $9,247          10        $5,641       78          $50,527
 078       MN         BCBS of Minnesota                        1        $14,115         0           $0         0           $0        0          $0       6        $10,169          19       $25,548       26          $49,832
 079        NY        Excellus BCBS of Central New York        0             $0         0           $0         0           $0        0          $0      16         $1,696           1         $173        17           $1,869
 082        KS        BCBS of Kansas                           0             $0        16        $1,208        0           $0        0          $0       0             $0           0            $0       16           $1,208
 083        OK        BCBS of Oklahoma                         7        $61,481         0           $0         2        $1,677       0          $0     656        $99,948          30       $22,122      695        $185,228
 084        NY        Excellus BCBS of Utica-Watertown         0             $0         0           $0         0           $0        0          $0     168        $16,016           5        $3,062      173          $19,078
 085        DC        CareFirst BCBS                          16       $293,982       366      $130,367        4      $18,427        0          $0     215        $70,605          34       $29,636      635        $543,017
 088        PA        BC of Northeastern Pennsylvania          0             $0         0           $0         0           $0        0          $0       0             $0           0            $0        0               $0
 089        DE        BCBS of Delaware                         0             $0         0           $0         0           $0        0          $0       0             $0           0            $0        0               $0
 092        DC        CareFirst BCBS (Overseas)                1         $5,840         0           $0         1         $723        0          $0      51        $12,977           0            $0       53          $19,540

                            Totals                           205     $3,578,502      3,362     $723,330      125     $571,380      160    $240,833    9,591    $1,801,172       1,966      $827,172   15,409       $7,742,389
                                                                                              APPENDIX 



                                                                         BlueOoss 81ueShieid
                                                                         Association
                                                                         AD As$.odaIiODof II1dependenl
                                                                         Btue CI-oM .nd lltu., Sl:lleid Plan.




                                                                         Federal Employee Program
Seplember 30, 2010                                                       1:1 10 G Street, N.W.
                                                                         Washington, D.C. 20005
                                                                         202.942.1000
          I                                                              Fax 202.942.1125
Experience-Rated Audits Grou p
Office of the Inspector Genera l
U.S. Office of Personnel Management
1900 E Slreel, Room 6400
Washington , DC 20415-1100


Reference : 	        OPM DRAFT AUDIT REPORT
                     Tier X Global Coordination of Benefits
                     Audit Report #1 A -99-00 -1 0-055




This is in response to the above· referenced U.S. Office of Personnel Management
(OPM) Draft A udit Report concerning the Global Coordination of Benefits Aud it for
claims paid (fom January 1, 2009 throug h May 31, 2010. Our comments concerni ng
the findings in the report are as follows :

A11 . 	 Coordination of Benefits with Medicare
        Questioned Amount                                              $27,2 03,,689


The OP M OIG submitted their sample of potential Medicare Coord ination of Benefits
errors to the Blue Cross Blue Sh ield Association (BCSS) on July 1, 2010. The
BCSS Assoc iation andfor the BCSS Plans were requested to review these potential
errors and provide response s by September 30,2010. These listings includ ed ctaims
incurred on or after October 1, 2008 and reimbu rsed from January 1, 2009 throug h
May 31,2010. OPM OIG identified 959 ,979 claim lines. tota ling $99,293 ,156 in
payme nts , which potentially were not coordinated with Med icare. From th is universe,
OPM OIG selected for re ....iew a sample of 77 ,652 claim lines, totaling $33,452 ,198 in
payments with a potential overch arge of $27 ,203,689 to the Federa l Emp loyee
Health Benefit Prog ram .


Blue Cross Blue Shield Association (BCBSA) Response :

After reviewing the DIG listing of potentially uncoordinated Medicare COB claims
totaling $27,203 ,689, BeBSA identified $3,220,991 or 11 .8 percent of the questioned
amount that was not coord inated with Medicare. For the time period covered by the
Page 2


audit, FEP reported Medicare savings in excess of $25 billion . To date Plans have
recovered $1 ,343,596 in claim payment errors. Recovery has been initiated on the
remaining overpayments and the Plans w ill continue to pursue these overpayments
as requ ired by CS 1039, Section 2.3 (g)(l).

Of the $3,220,991 in claim payments that were not coordinated with Medicare, we
noted the following:

• 	 Claims processors incorrectly overrode the Medicare deferral, missed the MSN
    when processing the claim, claims system did not defer the claim for review or
    other various reasons for claims totaling $2,762,293 .
• 	 Claims were not identifie d by the FEP Claims System retro-active enroUment
    reports, Uncoordinated Medicare Application or FE? ad-hoc reports for Plan
    review for claims tota ling $286,682; and
• 	 Claims were identified by the FEP Claims System retro·active enrottment reports ,
    Uncoordinated Medicare App lication or FEP ad-hoc reports before the audit
    began but were not worked by the Plan for claims totaling $547 ,181,

To reduce the number and frequency of uncoordinated Medicare claims, SCBSA
has implemented an action plan that includes the following:

• 	 Monitoring of the top 10 Plans that represent 60 percent of the uncoordinated
    claims in this audit. Although some of these Plans have shown significant
    improvement over the years, add itional focus will reduce the number of
    uncoordinated claims in future audits;
• 	 Causal analys is of Medicare COB errors identified during the OIG audits and
    through FEP generated reports to im plement tra ining and system edits as
    needed;
• 	 Continuous monitoring and eva luation of the Medicare COB retro-active
    enrollment reports to ensure that the appropriate claims are being identified for
    adjustment by Plans;
• 	 Continuous evaluation of our current COB monitoring report logic to ensure that
    uncoordinated Medicare claims are time ly identified;
• 	 Continuous mon itoring of Plans' completion of the Uncoordinated Medicare
    app lication to ensure that uncoordinated Medicare claims are addressed timely ;
• 	 Continuous review of Plan ~ disagree ~ responses to the Uncoordinated Medicare
    application to ensu re that the Plans respond correctly;
• 	 Implementation of an edit to defer all facility claims with Medicare S Revenue
    Codes where the member does not have Part A but has Part S, by fourth quarter
    2010. The FEP claims system currently only identifies the claim as a Wpotential
    claim" that can be coord inated with Medicare Part S;
• 	 Modification of FEP claims system edits for home health, hospice and skill
    nursing facility claims to defer the claim based upon whether the member has
Page 3


    Medicare, the place of service and the revenue code instead of the type of bill, by
    fourth quarter 2010;
• 	 Modification of the FEP clai ms system to requ ire Plans to specifically indicate
    that facility cla ims not coo rd inated with Medicare Part A are supported by a
    Medicare Denial Notice; and
• 	 Updating of the FEP Administrative Manual 10 cla rify Medicare coordination
    requirements and the use of Medicare Payment Disposition Code ~F", which
    bypasses the FEP Claims System Medicare deferrals.

To timely identify uncoordina ted Medicare claims before the new 12 month Medicare
timely filing limit has passed, FEP is also implementing the following :

• 	 Increase the frequency of the Uncoordinated Medicare Application update from
    quarterly to monthly by 4th quarter 2010:
• 	 Issue ad hoc reports to Plans on a quarterly basis thai identify claims that are not
    included in the Uncoordinated Med icare Application;
• 	 Update the Uncoordinated Medicare Application for claims currently included in
    ad hoc reports by 2nd quarter 2011:
• 	 Issued an· Audit Alert informing the Plan of the change and the need to work with
    their providers to ensure that claims are timely submitted to Medicare; and
• 	 Eva luate whether or not the quarterly Medicare match process can be moved to
    monthly from quarterly by 1S1 quarter 2011 ;

To the extent that claim payment errors did occu r 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 fa ith erroneous payments,
lost investment income is not applicable to these confirmed overpayments.

We contested the remainin g $23,982,698 in questioned uncoordinated Medicare
claims as a result of the following :

• 	 Claims totaling 55,168,042 were either adjusted before the audit started or
    recovery was initiated before the audit started and adjusted after the audit;
• 	 Recovery was initiated before the audit started on clai ms totaling $2,991 ,200, but
    the recovery process has nol been completed;
• 	 Med icare Part A or B was secondary on claims totaling $1,382 ,983;
• 	 Services were not covered or denied by Medicare for claims totaling $8,831,414 ;
• 	 The provider was VA, DOD, IHS or not covered by Medicare on claims totaling
   $1 ,7 13,266;
• 	 Claims totaling $4 91.675 were identified by the FEP Uncoordinated Medicare
    Application on July 7, 201 0 and w ould have been adjusted by Plans before the
    Medicare timely fili ng limit without the OIG audit;
Page 4


• 	 Claims totaling 5513.1 18 were case managed or were contested for various
    other reasons; and
• 	 Claims total ing $2,891 ,675 were contested for other miscellan eous reasons .

Documentation to support the contested amounts and the initiation of overpayment
recovery before the audit has been provided. In addition, we have attached a
schedule listed as Attachment A that shows the amount questioned, contested ,
reaso n co ntested and amount recovered by each Plan location ,

We appreciate the opportunity to provide our response to this Draft Audit
Report and wou ld        that our comments be included in their entirety as
              I




Attachment

cc: