oversight

Audit on Global Coordination of Benefits for Bluecross and Blueshield Plans

Published by the Office of Personnel Management, Office of Inspector General on 2012-03-28.

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

                                               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 ...........................................................12

V.     SCHEDULES

       A.     UNIVERSE AND SAMPLE OF POTENTIALLY UNCOORDINATED CLAIM
              LINES
       B.     SUMMARY OF QUESTIONED CHARGES

       APPENDIX           (BlueCross BlueShield Association reply, dated October 14, 2011, 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-99-00-10-055, dated June 8, 2011) for claims reimbursed from January 1, 2009 through
May 31, 2010 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 June 21, 2011. 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 December 29, 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 July 11, 2010 through April 30, 2011 as reported
in the Annual Accounting Statements. Using our data warehouse, we performed a computer
search on the BCBS claims database to identify claims that were reimbursed from July 11, 2010
through April 30, 2011 and potentially not coordinated with Medicare. Based on our claim error
reports, we identified 318,990 claim lines, totaling $47,137,654 in payments, that potentially were
not coordinated with Medicare. From this universe, we selected and reviewed 30,933 claim lines,
totaling $19,420,185 in payments, for coordination of benefits with Medicare. When we notified
the Association of these potential errors on June 15, 2011, the claims were within the Medicare
timely filing requirement and could be filed with Medicare for coordination of benefits. 2

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.

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

2
  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
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 June 2011 through January 2012.

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 30,933 claim lines, totaling $19,420,185 in payments, from a universe of 318,990 claim
lines, totaling $47,137,654 in payments, that potentially were not coordinated with Medicare (See
Schedule A for our sample selection methodology).

The claim sample selections 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 potentially 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                                                    $8,898,131

The BCBS plans did not properly coordinate 13,447 claim line payments, totaling $10,936,392,
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 $8,898,131 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 reimbursed from July 11, 2010 through April 30, 2011, we performed a computer
search and identified 318,990 claim lines, totaling $47,137,654 in payments, that potentially
were not coordinated with Medicare. From this universe, we selected for review a sample of
30,933 claim lines, totaling $19,420,185 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 June 15, 2011, 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 the ancillary items, 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 determined that 57 of the 63 BCBS plan sites did not properly coordinate
claim charges with Medicare. Specifically, we identified 13,447 claim lines, totaling
$10,936,392 in payments, where the FEHBP paid as the primary insurer when Medicare was the
primary insurer. We estimate that the FEHBP was overcharged $8,898,131 for these claim line
payments.




                                                 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
                                                          290     $4,947,945          $4,947,945
Inpatient (I/P) Facility
Category B: Medicare Part A Primary for
Skilled Nursing/Home Health Care (HHC)/                 2,354       $595,529              $595,529
Hospice Care
Category C: Medicare Part B Primary for
Certain I/P Facility Charges                              127     $1,704,124              $426,031

Category D: Medicare Part B Primary for
Skilled Nursing/HHC/Hospice Care                           19        $40,743               $10,186

Category E: Medicare Part B Primary for
Outpatient (O/P) Facility and Professional              8,343     $2,587,361          $2,069,888

Category F: Medicare Part B Primary for O/P
Facility and Professional (Participation Code F)        2,314     $1,060,690              $848,552

                     Total                             13,447    $10,936,392          $8,898,131

Our audit disclosed the following for the COB errors:

•   For 5,517 (41 percent) of the claim lines questioned, the BCBS plans incorrectly paid these
    claims due to retroactive adjustments. Specifically, there was no special information present
    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
    claim(s) back to the Medicare effective dates. As a result, we estimate that the FEHBP was
    overcharged $3,887,806 for these COB errors.

•   For 3,891 (29 percent) of the claim lines questioned, the BCBS plans incorrectly paid these
    claims due to systematic processing errors. Specifically, the claims were not deferred on the
    FEP national claims system for Medicare COB review by the processors. As a result, the
    FEHBP was overcharged $2,555,838 for these COB errors.

•   For 3,623 (27 percent) of the claim lines questioned, the BCBS plans incorrectly paid these
    claims due to manual processing errors. In most cases, there was special information present
    on the FEP national claims system to identify Medicare as the primary payer when these
    claims were paid. However, an incorrect Medicare Payment Disposition Code was used to
    override the FEP national claims system’s deferral of these claims. The Medicare Payment
    Disposition Code identifies Medicare’s responsibility for payment on each charge line of a
    claim. According to 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


                                                   7
    incorrectly used. An incorrect entry in this field causes the claim line to be excluded from
    coordination of benefits with Medicare. As a result, we estimate that the FEHBP was
    overcharged $2,122,621 for these COB errors.

•   For 380 (3 percent) of the claim lines questioned, we could not determine the specific reasons
    why these claims were not coordinated with Medicare. We estimate that these COB errors
    totaled $318,983.

•   For 36 (0.3 percent) of the claim lines questioned, the BCBS plans incorrectly paid these
    claims due to provider billing errors. As a result, we estimate that the FEHBP was
    overcharged $12,883 for these COB errors.

Of the $8,898,131 in questioned charges, $6,791,225 (76 percent), representing 8,539 claim line
overpayments, were identified by the BCBS plans before receiving our audit request (i.e., sample
of potential COB errors) on June 15, 2011. However, since the BCBS plans had not completed
the recovery process and/or adjusted these claims by the end of our audit scope (i.e., by April 30,
2011), we are continuing to question these COB errors. 3 The remaining questioned charges of
$2,106,906 (24 percent), representing 4,908 claim line overpayments, were identified as a result
of our audit.

Association's Response:

In response to the draft report, the Association states, “After reviewing the OIG listing of
potentially uncoordinated Medicare COB claims . . . BCBSA identified $8,066,089 in claims that
were paid correctly and $6,655,154 that . . . initially paid incorrectly but the error was identified
and corrected before the response was due to OPM in the amount of $5,721,351, or the error was
identified and recovery was initiated before the audit started in the amount of $993,803 but was
still uncollected when the response was due to OPM. We agree that $1,334,355 . . . of the
questioned amount was paid in error and the error was not identified by the start of the audit.”

The Association disagrees with $14,781,248 of the questioned charges in the draft report. For
$8,066,089 of the contested amount, the Association states that the claims were paid correctly for
various reasons. For the remaining contested amount of $6,715,159, the Association states,
“$3,853,508 were initially paid correct, however subsequent Medicare updates were received.
Once the updates were processed on the FEP system, the Plans initiated recovery before the audit
started. Of this amount, $843,023 was recovered before the audit started or the report response
was due to the OIG.

For claims totaling $2,861,651, the Plans initially paid the claims incorrectly because:

•   Missed EOB during processing of FEP Direct didn’t defer
•   FEP edits were overridden
•   Processor errors

3
 Of these questioned COB errors, $3,878,274, representing 4,905 claim line overpayments, were identified by the
BCBS plans after the Association received our audit notification letter, dated March 2, 2011.


                                                        8
However, before the audit started, through post payments review controls implemented by the
Plans and BCBSA; the Plans identified the incorrect payments and initiated recovery and/or
returned the funds to the Program. As of September 30, 2011, the Plans have returned
$5,721,351 to the FEHBP.”

For the uncontested amount of $1,334,355, the Association states that “the Plans agreed that
these were claim payment errors identified as a result of this audit . . . The Plans will continue to
pursue the remaining overpayments . . . .”

Regarding corrective actions, the Association states, “The Association’s Action Plan includes
oversight and governance procedures to assure all BCBS Plans are following the corrective
action plans. To reduce the number and frequency of uncoordinated Medicare claims, the
BCBSA has implemented additional steps to our action plan . . .

To ensure that Plans review all claims incurred back to the Medicare effective date:

•   The FEP Operations Center produces the Retroactive Enrollment reports daily, which
    identifies individuals who are eligible for Medicare A and/or B. This file is reviewed daily
    by the Plans, who are required to go back and review all claims for this member.
•   FEP updated the Plan Administrative Manual to instruct the Plans on what to do with the
    Retroactive Enrollment Report.”

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 $8,898,131. If the BCBS plans
identified and adjusted the COB errors by April 30, 2011, which was the end of our audit scope,
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 $1,529,042 and disagree with $7,369,089 of the revised questioned charges.
Although the Association agrees with $1,334,355 in its response, the BCBS plans’
documentation supports concurrence with $1,529,042.

Based on the Association’s response and/or the BCBS plans’ documentation, the contested
amount of $7,369,089 represents the following items:

•   $5,809,617 of the contested amount represents COB errors where the BCBS plans initiated
    recovery efforts before receiving our audit request (i.e., June 15, 2011), and recovered the
    overpayments and adjusted the claims by the response due date to the audit request (i.e.,
    September 16, 2011). However, since these overpayments had not been recovered and
    returned to the FEHBP by the end of the audit scope (i.e., April 30, 2011), we are continuing to
    question this amount in the final report.

•   $981,608 of the contested amount represents COB errors where the BCBS plans initiated
    recovery efforts before receiving our audit request, but have not recovered the overpayments
    and adjusted the claims. Since these overpayments had not been recovered and returned to the


                                                  9
    FEHBP by the end of the audit scope, we are continuing to question this amount in the final
    report.

•   $407,977 of the contested amount represents COB errors where the BCBS plans initiated
    recovery efforts for the overpayments. However, when responding to our audit request, the
    BCBS plans state that these claims were paid correctly. Since the BCBS plans did not provide
    sufficient documentation to support these contested items, we are continuing to question this
    amount in the final report.

•   $169,887 of the contested amount represents COB errors where Medicare rejected claims
    because providers did not bill Medicare correctly for covered services. As a result, the FEHBP
    paid primary for these services instead of Medicare. The BCBS plans state that these claims
    were paid correctly, since the member’s Medicare Explanation of Benefits included a rejection
    code for these services. Since the BCBS plans did not provide sufficient documentation to
    support that the FEHBP should have paid these claims as the primary insurer, instead of as
    secondary insurer, we are continuing to question this amount in the final report.

Recommendation 1

We recommend that the contracting officer disallow $8,898,131 for uncoordinated claim
payments and verify that the BCBS plans return all amounts recovered to the FEHBP (See
Schedule B for a summary of these questioned uncoordinated claim payments by BCBS plan).

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. We also recommend that the contracting officer ensure that
the Association’s additional corrective actions for improving the prevention and detection of
uncoordinated claim payments are being implemented. These additional corrective actions are
included in the Association’s response to the draft report.

Recommendation 3

Since the highest percentage of the COB errors resulted from retroactive adjustments, we
recommend that the contracting officer require the Association to ensure that the BCBS plans are
reviewing all claims incurred back to the Medicare effective dates when the other party liability
information is updated in 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.




                                               10
Recommendation 4

Due to the significant number of retroactive COB adjustments, we recommend that the
contracting officer require the Association to ensure that the FEP Operations Center is utilizing
the Medicare Data Exchange Agreement that requires a quarterly exchange of enrollment data
between Medicare and the FEHBP. We also recommend that the contracting officer require the
Association to ensure that the enrollment data provided by Medicare is updated in a timely
manner in the FEP national claims system.

Recommendation 5

Due to the significant number of manual processing errors, we recommend that the contracting
officer require the Association to direct the FEP Operation Center to input a field(s) in the FEP
national claims system to collect Remittance Advice Remark Codes (RARC) and Claim
Adjustment Reason Codes (CARC) from the BCBS plans. These Medicare generated codes
(RARC and CARC) provide the reason Medicare denied a claim payment. The Association
should also have the FEP Operations Center and BCBS plans utilize the RARC and CARC
field(s) when implementing the Medicare Disposition Code corrective actions.

Recommendation 6

We recommend that the contracting officer require the Association to have the FEP Operations
Center identify the reason(s) why the FEP national claims system continues to allow claims that
require Medicare COB to bypass COB edits. After identifying the reason(s) why, the FEP
Operations Center should implement corrective edits in the system.




                                                11
              IV. MAJOR CONTRIBUTORS TO THIS REPORT

Experience-Rated Audits Group

              , Lead Auditor

                , Auditor

              , Auditor

                  , Auditor
_______________________________________________________

                  , Chief

Information Systems Audits Group

              , Chief

                   , Information Technology Project Manager

            , Senior Information Technology Specialist




                                            12
                                                                                                                    V. SCHEDULES                                                                                             SCHEDULE A



                                                                                                       Coordination of Benefits with Medicare
                                                                                                           BlueCross and BlueShield Plans
                                                                                             Claims Reimbursed from July 11, 2010 through April 30, 2011


                                                                                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
                                                         467         471           383                 $6,811,362          all patients selected           467         471          383          $6,811,362     100%          $6,811,362
Inpatient Facility

Category B: Medicare Part A Primary for Skilled                                                                       patients with cumulative claims
                                                        3,000       9,883          1,050               $2,069,713                                         1,266       5,493         248          $1,662,392     100%          $1,662,392
Nursing/HHC/Hospice Care                                                                                                    of $1,500 or more


Category C: Medicare Part B Primary for Certain
                                                         139         139           121                 $1,807,196          all patients selected           139         139          121          $1,807,196      25%            $451,799
Inpatient Facility Charges

Category D: Medicare Part B Primary for Skilled                                                                       patients with cumulative claims
                                                         87          150            59                   $248,229                                          48           55           29           $220,624       25%             $55,156
Nursing/HHC/Hospice Care                                                                                                    of $2,500 or more


Category E: Medicare Part B Primary for                                                                               patients with cumulative claims
                                                        9,709       16,595         3,132               $4,135,592           of $1,500 or more
                                                                                                                                                          4,468       9,596         514          $3,077,717      80%          $2,462,174
Outpatient Facility and Professional

Category F: Medicare Part B Primary for
                                                                                                                      patients with cumulative claims
Outpatient Facility and Professional (Participation    212,078     291,752        114,202             $32,065,562                                         6,291       15,179        636          $5,840,894      80%          $4,672,715
                                                                                                                            of $4,000 or more
Code F)

                      Totals                           225,480     318,990                            $47,137,654                                        12,679       30,933                    $19,420,185                  $16,115,598
                                                                             Coordination of Benefits with Medicare                                                                   SCHEDULE B
                                                                                BlueCross and BlueShield Plans                                                                           Page 1 of 2
                                                                   Claims Reimbursed from July 11, 2010 through April 30, 2011

                                                                             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 Site   Plan                                       m      Amount       Claim    Amount      m     Amount     m     Amount       Claim   Amount       Claim    Amount        Claim   Amount
Number      State                Plan Name            Lines Questioned     Lines Questioned Lines Questioned Lines Questioned       Lines Questioned     Lines Questioned       Lines  Questioned
  003       NM      BCBS of New Mexico                  4        $39,402     1          $4,200 1          $1,598 0             $0     45       $21,299     3          $1,145     54        $67,643
  005        GA     WellPoint BCBS of Georgia          17       $275,234     68        $20,571 2          $4,504 10          $328    745      $135,942     44        $15,859     886      $452,438
  006       MD      CareFirst BCBS                      3        $13,601     38         $9,210 3         $16,193 0             $0     19       $21,826     5          $4,009     68        $64,839
  007        LA     BCBS of Louisiana                  16       $138,350     28         $8,181 4         $11,719 0             $0    439       $72,145     44       $104,793     531      $335,187
  009        AL     BCBS of Alabama                     5        $60,192     1          $1,765 3          $5,061 0             $0     41       $76,992     17        $15,878     67       $159,889
  010        ID     BC of Idaho Health Service          1        $39,650     0               $0 0             $0 0             $0     28        $5,312     0               $0    29        $44,962
  011       MA      BCBS of Massachusetts               1        $15,915     60         $4,918 1          $2,663 0             $0     71        $8,086     0               $0    133       $31,582
  012        NY     BCBS of Western New York            0             $0     0               $0 0             $0 0             $0     0             $0     0               $0     0              $0
  013        PA     Highmark BCBS                       2        $88,396     0               $0 4         $6,748 0             $0    329       $57,707     11        $24,293     346      $177,144
  015        TN     BCBS of Tennessee                   3        $32,351     0               $0 0             $0 0             $0    143       $30,071    109        $28,915     255       $91,336
  016       WY      BCBS of Wyoming                     0             $0     0               $0 0             $0 0             $0     0             $0     0               $0     0              $0
  017        IL     BCBS of Illinois                   23       $220,611    100        $10,381 7         $22,598 0             $0    664      $159,116     4          $5,433     798      $418,140
  021        OH     WellPoint BCBS of Ohio              2         $6,721     2         $10,200 5         $15,115 6         $6,347     15        $4,353    121        $28,128     151       $70,864
  024        SC     BCBS of South Carolina              9        $74,541     1          $1,890 2         $36,801 0             $0    227       $33,275     0               $0    239      $146,508
  027        NH     WellPoint BCBS of New Hampshire     0             $0     16         $1,787 2         $10,341 0             $0     0             $0     11         $9,264     29        $21,392
  028        VT     BCBS of Vermont                     1        $10,584     0               $0 0             $0 0             $0     0             $0     0               $0     1        $10,584
  029        TX     BCBS of Texas                      56     $1,147,609    256        $30,437 22        $82,867 0             $0   1,423     $394,181    220        $92,085    1,977   $1,747,178
  030        CO     WellPoint BCBS of Colorado          7       $101,754     22         $2,281 5          $7,659 0             $0    373       $87,891     33         $6,689     440      $206,274
  031        IA     Wellmark BCBS of Iowa               0             $0     14         $1,629 1          $2,365 0             $0     2         $1,644     3          $5,031     20        $10,669
  032        MI     BCBS of Michigan                    1         $3,427     44         $5,552 4          $9,602 0             $0     0             $0     25        $21,736     74        $40,317
  033        NC     BCBS of North Carolina              5       $137,845    124        $18,147 8         $20,565 0             $0    344       $66,886     30        $21,449     511      $264,892
  034        ND     BCBS of North Dakota                0             $0     0               $0 0             $0 0             $0     8        $26,061     0               $0     8        $26,061
  036        PA     Capital BC                          1        $26,611     0               $0 4         $8,401 0             $0     0             $0     0               $0     5        $35,012
  037       MT      BCBS of Montana                     1        $12,484     0               $0 0             $0 0             $0     0             $0     0               $0     1        $12,484
  038        HI     BCBS of Hawaii                      0             $0     0               $0 0             $0 0             $0     0             $0     0               $0     0              $0
  039        IN     WellPoint BCBS of Indiana           4       $193,336     18        $29,779 0              $0 1           $825    235       $76,269     0               $0    258      $300,210
  040        MS     BCBS of Mississippi                 1         $3,285    152        $14,025 0              $0 0             $0     4         $4,254    214        $70,698     371       $92,263
  041        FL     BCBS of Florida                     1        $21,603    237        $30,796 4          $7,621 0             $0    115       $18,659    362       $111,499     719      $190,178
  042       MO      BCBS of Kansas City                 0             $0     0               $0 0             $0 0             $0     0             $0     4          $4,990      4         $4,990
  043        ID     Regence BS of Idaho                 0             $0     0               $0 0             $0 0             $0     2           $561     0               $0     2           $561
  044        AR     Arkansas BCBS                       0             $0     39         $3,999 4          $4,688 0             $0     22        $4,043     2         $17,392     67        $30,122
  045        KY     WellPoint BCBS of Kentucky          4        $34,187     65        $14,742 2          $3,651 0             $0     46       $11,946     58        $22,906     175       $87,432
  047        WI     WellPoint BCBS United of Wisconsin 6         $63,404     1          $2,600 1          $3,743 0             $0    275       $96,867     95        $21,106     378      $187,720
  048        NY     Empire BCBS                        20       $361,247     73        $29,471 3          $6,568 0             $0    239       $46,430    128         $9,216     463      $452,932
  049        NJ     Horizon BCBS of New Jersey          0             $0     66         $3,230 5         $37,123 0             $0     60       $14,501    387        $26,354     518       $81,207
                                                                               Coordination of Benefits with Medicare                                                                SCHEDULE B
                                                                                  BlueCross and BlueShield Plans                                                                        Page 2 of 2
                                                                     Claims Reimbursed from July 11, 2010 through April 30, 2011

                                                                               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 Site   Plan                                         m      Amount       Claim    Amount      m     Amount     m     Amount        Claim   Amount    Claim   Amount      Claim   Amount
Number      State                Plan Name              Lines Questioned     Lines Questioned Lines Questioned Lines Questioned        Lines Questioned Lines Questioned     Lines  Questioned
  050        CT     WellPoint BCBS of Connecticut         0             $0     2         $11,780 0              $0 0             $0      14        $2,160 47        $17,177   63        $31,116
  052        CA     WellPoint BC of California           15       $389,630     89        $46,071 10        $58,572 0             $0     270       $85,873 3          $4,171 387        $584,317
  053        NE     BCBS of Nebraska                      0             $0     42         $4,491 0              $0 0             $0      21        $1,233 0               $0  63         $5,724
  054       WV      Mountain State BCBS                   3        $10,510     0               $0 1         $1,532 0             $0      8         $9,549 0               $0  12        $21,592
  055        PA     Independence BC                       9       $237,623    154        $17,752 0              $0 0             $0     109       $63,957 0               $0 272       $319,332
  056        AZ     BCBS of Arizona                       5        $74,662    126        $19,865 0              $0 0             $0      0             $0 1          $4,094 132         $98,621
  058        OR     Regence BCBS of Oregon                1        $42,599     82        $10,140 1          $1,115 1         $2,061      16        $5,438 60        $18,185 161         $79,539
  059       ME      WellPoint BCBS of Maine               0             $0     0               $0 2         $7,125 0             $0      17        $2,793 8          $3,096   27        $13,014
  060        RI     BCBS of Rhode Island                  0             $0    142        $18,517 0              $0 0             $0      0             $0 0               $0 142        $18,517
  061        NV     WellPoint BCBS of Nevada              2        $14,658     0               $0 0             $0 0             $0      9         $1,335 5          $1,321   16        $17,314
  062        VA     WellPoint BCBS of Virginia            1        $21,042     0               $0 5         $7,873 0             $0      40       $13,469 1             $43   47        $42,427
  064        NY     Excellus BCBS Rochester               0             $0     0               $0 0             $0 0             $0      0             $0 0               $0   0              $0
  066        UT     Regence BCBS of Utah                  3        $19,812     13           $703 0              $0 0             $0      64        $8,994 7          $9,941   87        $39,450
  067        CA     BS of California                      0             $0     0               $0 0             $0 0             $0     902      $102,766 86         $4,174 988        $106,939
  069       WA      Regence BS                            0             $0     0               $0 0             $0 0             $0      1           $116 8          $2,569    9         $2,684
  070        AK     BCBS of Alaska                        1        $21,425     0               $0 0             $0 0             $0      48       $11,078 13         $3,655   62        $36,158
  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                           12       $141,036     2          $5,400 1          $2,500 1           $626     204       $76,597 6          $8,447 226        $234,608
  076       MO      WellPoint BCBS of Missouri           24       $516,694     53        $86,145 2          $2,882 0             $0      99       $21,767 0               $0 178       $627,488
  078       MN      BCBS of Minnesota                     4       $103,605     31         $4,419 0              $0 0             $0      41       $11,493 34        $18,351 110        $137,867
  079        NY     Excellus BCBS of Central New York     0             $0     0               $0 0             $0 0             $0      0             $0 1             $18    1            $18
  082        KS     BCBS of Kansas                        2        $32,049     0               $0 0             $0 0             $0      17        $2,891 0               $0  19        $34,939
  083        OK     BCBS of Oklahoma                      4        $22,816     32         $2,967 2          $6,391 0             $0     356       $56,799 0               $0 394        $88,972
  084        NY     Excellus BCBS of Utica-Watertown      0             $0     0               $0 0             $0 0             $0      0             $0 0               $0   0              $0
  085        DC     CareFirst BCBS                        7       $142,730     75        $48,282 5          $9,326 0             $0      80       $98,438 62        $75,847 229        $374,622
  088        PA     BC of Northeastern Pennsylvania       0             $0     2         $13,512 0              $0 0             $0      0             $0 0               $0   2        $13,512
  089        DE     BCBS of Delaware                      3        $34,711     65        $43,865 0              $0 0             $0      22        $2,850 0               $0  90        $81,426
  092        DC     CareFirst BCBS (Overseas)             0             $0     18         $1,830 1            $520 0             $0      91       $13,979 42         $8,596 152         $24,926

                                TOTALS                  290     $4,947,945 2,354       $595,529 127       $426,031 19          $10,186 8,343   $2,069,888 2,314    $848,552 13,447      $8,898,131
October 14, 2011
Page 2


Blue Cross Blue Shield Association (BCBSA) Response to Recommendation 1
and 3:

After reviewing the OIG listing of potentially uncoordinated Medicare COB claims
totaling $16,115,598, BCBSA identified $8,066,089 in claims that were paid correctly
and $6,655,154 that was either; initially paid incorrectly but the error was identified
and corrected before the response was due to OPM in the amount of $5,721,351, or
the error was identified and recovery was initiated before the audit started in the
amount of $993,803 but was still uncollected when the response was due to OPM.
We agree that $1,334,355 or 8 percent of the questioned amount was paid in error
and the error was not identified by the start of the audit.

We disagree with $14,781,248 in improper claim payments. For claims totaling
$8,066,089, the initial payment was correct based on the following reasons:

   Medicare Part A was secondary for claim payments totaling $375,808;
   Medicare Part B was secondary for claim payments totaling $75,551;
   Medicare Part A was exhausted for claim payments totaling $82,668;
   There were no Medicare Part B charges for claim payments totaling $53,618;
   The Provider opted out of Medicare pricing for claim payments totaling $119,548;
   Medicare benefits were exhausted and the member has used all available
    services during a benefit period for outpatient services for claim payments
    totaling $105,419;
   Medicare denied the charges for claim payments totaling $4,515,986;
   Services were provided by a non covered Medicare Home Health or Long Term
    Care provider for claim payments totaling $84,706;
   Services were provided by a government facility not paid by Medicare (VA; DOD,
    UHSFP) for claim payments totaling $524,204;
   Services were provided by a non-covered Indian Health Service (IHS) facilities
    for claim payments totaling $1,208;
   Services were provided by a non-covered Medicare provider for claim payments
    totaling $491,448;
   The claim was coordinated with Medicare; however the claim line identified in the
    sample was not covered for claim payments totaling $480,768;
   The claim was priced according to Case Management guidelines for claim
    payments totaling $63,019;
   FEP paid the member’s Medicare cost sharing (coinsurance or deductible) for
    claim payments totaling $88,420; and
   The claim was paid correctly for other reasons for claim payments totaling
    $1,003,718.

For the remaining $6,715,159 claims, $3,853,508 were initially, paid correct,
however subsequent Medicare updates were received. Once the updates were
October 14, 2011
Page 3

processed on the FEP system the Plans initiated recovery before the audit started.
Of this amount $843,023 was recovered before the audit started or the report
response was due to the OIG.

For claims totaling, $2,861,651, the Plans initially paid the claims incorrectly
because:
    Missed EOB During processing or FEP Direct didn’t defer
    FEP edits were overridden
    Processor errors

However, before the audit started, through post payments review controls
implemented by the Plans and BCBSA; the Plans identified the incorrect payments
and initiated recovery and/or returned the funds to the Program. As of September
30, 2011, the Plans have returned $5,721,351 to the FEHBP.

For the remaining $1,334,355 questioned in the draft report the Plans agreed that
these were claim payment errors identified as a result of this audit. The errors
resulted from the following reasons:

   $341,713 of these claims were paid incorrectly because the claims processor did
    not use the Medicare Summary Notice submitted by the provider to process the
    claim correctly;
   $13,403 of these claims were paid incorrectly because the claim was not worked
    timely from the retroactive enrollment report or the FEP on-line uncoordinated
    Medicare application;
   $96,288 of these claims were paid incorrectly because the claim was not
    included on the retroactive enrollment report, FEP on-line uncoordinated
    Medicare application or FEP adhoc reports, and therefore the Plan was not
    aware that the claim needed to be adjusted;
   $36,487 of these claims were paid incorrectly because the Medicare EOB was
    missed when processing the claim;
   $63,302 of these claims were paid incorrectly because the processor incorrectly
    overrode the Medicare deferral;
   $244,258 of these claims were paid incorrectly because of manual coding errors;
   $101,599 of these claims were paid incorrectly because a system coding error
    caused claim to pay incorrectly;
   $155,746 of these claims were paid incorrectly because the FEP claims system
    did not defer the claim;
   $33,468 were paid incorrectly because the appropriate documentation was not
    available at the time of processing; and
   $248,091 in claim payments were paid incorrectly for other reasons.

The Plans will continue to pursue the remaining overpayments as required by CS
1039, Section 2.3(g) (l).
October 14, 2011
Page 4

`
The Association’s Action Plan includes oversight and governance procedures to
assure all BCBS Plans are following the corrective action plans. In addition, to
reduce the number and frequency of uncoordinated Medicare claims, BCBSA has
implemented additional steps to our action plan that includes the following:

   Work with top 10 poor performing Plans to develop and implement an action plan
    to improve performance. We expect to be on target to have the action plans in
    place by fourth quarter 2011.
   Modify FEP post payment review processes to match with OIG global audit
    claims listings where appropriate. We have completed the analysis of the OIG
    and are on target to update the current FEP Uncoordinated Medicare application
    by second quarter 2012.
   Identify new Medicare COB pre-payment edits to implement in the FEP Claims
    System. Two additional system modifications have been identified that would
    also reduce the Medicare COB findings that deal with inpatient facility Part B
    charges as well as changes related to payment of Home Health and Skill Nursing
    Facility Medicare claims. All new edits are to be completed by fourth quarter
    2012.
   Enhance pre-payment editing of Home Health claims with no Medicare A
    coordination that may be eligible for Medicare B coordination to be completed by
    January 2012.
   Modify existing pre-payment compatibility editing to increase clarity around
    Medicare Payment Disposition usage to be completed by January 2012.
   Provide additional Plan guidance on mapping data from Medicare crossover
    claims to the correct Medicare Payment Disposition to be completed by January
    2012.
   Create new Explanation of Benefit Remarks to more accurately explain denials
    due to no Medicare coordination to be completed by January 2012.


Recommendation 2:

OPM OIG recommended that BCBSA provide support for each COB error that is
identified during the audit (even if identified and/or adjusted prior to this audit by the
BCBS Association and/or a BCBS Plan).

BCBSA Response:

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, and
agreed by each Plan location.