oversight

Audit on Global Coordination of Benefits for BlueCross and BlueShield Plans

Published by the Office of Personnel Management, Office of Inspector General on 2013-11-22.

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 BLUESHIELD PLANS




                                             Report No. lA-99-00-13-032


                                             Date: November 22, 2013




                                                          --<:JllJl[l()~--


This audit report has been distributed to Federal officials who are responsible fot· the administration of the audited program. This audit
t·eport may contain pt·op.-ietat·y data that is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit report is available
under the Ft·eedom of Infor mation Act and made available to the public on the OIG webpage, caution needs to be exercised before
t·eleasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.
                                                     AUDIT REPORT


                                     Federal Employees Health Benefits Program
                                     Service Benefit Plan     Contract CS 1039
                                          BlueCross BlueShield Association
                                                    Plan Code 10

                                             Global Coordination of Benefits
                                             BlueCross and BlueShield Plans




                       REPORT NO. 1A-99-00-13-032                               DATE: 11/22/13




                                                                               Michael R. Esser
                                                                               Assistant Inspector General
                                                                                 for Audits




                                                          --CAUTION--

This audit report has been distributed to Federal officials who are responsible for the administration of the audited program. This audit
report may contain proprietary data that is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit report is available
under the Freedom of Information Act and made available to the public on the OIG webpage, caution needs to be exercised before
releasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.
                                            EXECUTIVE SUMMARY



                                    Federal Employees Health Benefits Program
                                    Service Benefit Plan     Contract CS 1039
                                         BlueCross BlueShield Association
                                                   Plan Code 10

                                            Global Coordination of Benefits
                                            BlueCross and BlueShield Plans



                     REPORT NO. 1A-99-00-13-032                              DATE: 11/22/13


This final audit report on the Federal Employees Health Benefits Program (FEHBP) operations
at all BlueCross and BlueShield (BCBS) plans questions $7,797,641 in health benefit charges.
The BlueCross BlueShield Association (Association) and/or BCBS plans agreed with $3,057,218
and disagreed with $4,740,423 of the questioned charges. Regarding the contested charges, even
though the Association and/or BCBS plans disagree with our questioning of these charges in this
report, they in fact agree that the charges were not properly coordinated with Medicare and
resulted in overcharges to the FEHBP. 1

Our limited scope audit was conducted in accordance with Government Auditing Standards. The
audit covered health benefit payments from April 1, 2012 through January 31, 2013 as reported
in the plans’ Annual Accounting Statements. Specifically, we identified claims incurred on or
after March 15, 2012 that were reimbursed from April 1, 2012 through January 31, 2013 and
potentially not coordinated with Medicare. We determined that the BCBS plans did not properly
coordinate 16,406 claim line payments with Medicare as required by the FEHBP contract. As a
result, the FEHBP was overcharged $7,717,615 for these claim line payments. When we notified
the Association of the COB errors on March 1, 2013, these claims were within the Medicare
timely filing requirement and could be filed with Medicare for coordination of benefits. Based

1
  Most of the contested amount represents coordination of benefit (COB) errors where the BCBS plans initiated recovery efforts
on or after our audit notification date (i.e., February 1, 2013) but before receiving our audit request (i.e., sample of potential COB
errors) on March 1, 2013, and also completed the recovery process and adjusted or voided the claims by the audit request due
date (i.e., May 31, 2013). However, since the recoveries for these COB errors were initiated on or after our audit notification
date, we are continuing to question these overpayments in the final report.



                                                                  i
on this, since the BCBS plans are required to initiate recovery efforts immediately for the actual
COB errors, our expectation is for the plans to recover and return all of the actual COB errors to
the FEHBP. A portion of the questioned amount may be determined to be not paid in error
during the audit resolution phase.

Additionally, we identified 260 claim line payments that were not COB errors but contained
other claim payment errors, resulting in overcharges of $80,026 to the FEHBP. In total, we
determined that the BCBS plans incorrectly paid 16,666 claim lines, resulting in overcharges of
$7,797,641 to the FEHBP.




                                                 ii
                                                    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 Review .......................................................5

IV.    MAJOR CONTRIBUTORS TO THIS REPORT ...........................................................13

V.     SCHEDULES

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

       APPENDIX           (BlueCross BlueShield Association reply, dated June 23, 2013, 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 64 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-99-00-12-029, dated March 20, 2013) for claims reimbursed from June 1, 2011 through
March 31, 2012 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 March 1, 2013, and discussed with Association and BCBS plan officials
during the entrance conference on March 11, 2013. 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 October 15, 2013 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 April 1, 2012 through January 31, 2013 as
reported in the plans’ Annual Accounting Statements. Using our SAS data warehouse function,
we performed a computer search on the BCBS claims database to identify claims incurred on or
after March 15, 2012 that were reimbursed from April 1, 2012 through January 31, 2013 and
potentially not coordinated with Medicare. Based on our claim error reports, we identified
538,671 claim lines, totaling $58,784,918 in payments, that potentially were not coordinated with
Medicare. From this universe, we selected and reviewed 67,455 claim lines, totaling $24,359,022
in payments, for coordination of benefits with Medicare. When we notified the Association of
these potential errors on March 1, 2013, 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.




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
In conducting our audit, we relied to varying degrees on computer-generated data provided by
the FEP Operations Center and the BCBS plans. Through audits and a reconciliation process, we
have verified the reliability of the BCBS claims data in our data warehouse, which was used to
identify the universe of potential COB errors. The BCBS claims data is provided to us on a
monthly basis by the FEP Operations Center, and after a series of internal steps, uploaded into
our data warehouse. However, due to time constraints, we did not verify the reliability of some
of the data generated by the BCBS plans’ local claims systems. 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. and Cranberry Township,
Pennsylvania from March 2013 through September 2013.

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 67,455 claim lines, totaling $24,359,022 in payments, from a universe of 538,671 claim
lines, totaling $58,784,918 in payments, that potentially were not coordinated with Medicare (See
Schedule A for our sample selection methodology).

The sample selections were submitted to each applicable BCBS plan for their review and
response. We then conducted a limited review of the plans’ agreed responses and an expanded
review of the plans’ disagreed responses to determine the appropriate questioned amount. We
also verified on a limited test basis if the plans had initiated recovery efforts, adjusted or voided
the claims, and/or completed the recovery process by the audit request due date (i.e., May 31,
2013) for the claim payment errors in our sample. Additionally, we reviewed the status of
corrective actions that have been or are in the process of being implemented by the Association,
FEP Operations Center and/or BCBS plans, as a result of our previous global audits, to reduce
potential coordination of benefit errors. 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 2012 and 2013
Service Benefit Plan brochures, 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 Review                                             $7,797,641

The BCBS plans incorrectly paid 16,666 claim lines, resulting in overcharges of $7,797,641 to the
FEHBP. Specifically, the BCBS plans did not properly coordinate 16,406 claim line payments,
totaling $8,640,313, 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 $7,717,615 for these 16,406 claim lines. The
remaining 260 claim line payments were not coordination of benefit (COB) errors but contained
other claim payment errors, resulting in overcharges of $80,026 to the FEHBP.

The 2012 BlueCross and BlueShield Service Benefit Plan brochure, page 124, Primary Payer
Chart, illustrates when Medicare is the primary payer. In addition, page 26 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 . . . .”

Regarding reportable monetary findings, Contract CS 1039, Part III, section 3.16(b) states,
“Claim payment findings (i.e., claim overpayments) in the scope of an OIG audit are reportable
as questioned charges unless the Carrier provides documentation supporting that these findings
were already identified (i.e., documentation that the plan initiated recovery efforts) prior to audit
notification and corrected (i.e., claims were adjusted and/or voided and overpayments were
recovered and returned to the FEHBP) by the original due date of the . . . response.”

For claims incurred on or after March 15, 2012 that were reimbursed from April 1, 2012 through
January 31, 2013, we performed a computer search and identified 538,671 claim lines, totaling
$58,784,918 in payments, that potentially were not coordinated with Medicare. From this
universe, we selected for review a sample of 67,455 claim lines, totaling $24,359,022 in
payments, to determine whether the BCBS plans complied with the contract provisions relative
to COB with Medicare. When we submitted our sample of potential COB errors to the
Association on March 1, 2013, the claims were within the Medicare timely filing requirement
and could be filed with Medicare for coordination of benefits. Based on this, since the BCBS
plans are required to initiate recovery efforts immediately for the actual COB errors, our


                                                  5
expectation is for the plans to recover and return all of the actual COB errors to the FEHBP. A
portion of the questioned amount may be determined to be not paid in error during the audit
resolution phase.

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.

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 pays 80 percent 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 the 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 60 of the 62 BCBS plan sites did not properly coordinate
claim charges with Medicare. Specifically, we identified 16,406 claim lines, totaling $8,640,313
in payments, where the FEHBP paid as the primary insurer when Medicare was the primary


                                                 6
insurer. We estimate that the FEHBP was overcharged $7,717,615 for these claim line
payments. 3

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

                                                             Claim           Amount                 Amount
                      Category                                Lines             Paid              Questioned
Category A: Medicare Part A Primary for
Inpatient (I/P) Facility                                          238         $3,694,202              $3,589,299

Category B: Medicare Part A Primary for
Skilled Nursing/Home Health Care (HHC)/                         3,674            $796,552               $767,602
Hospice Care
Category C: Medicare Part B Primary for
Certain I/P Facility Charges                                        39           $394,757               $179,907

Category D: Medicare Part B Primary for
Skilled Nursing/HHC/Hospice Care                                    19           $104,279                 $27,166

Category E: Medicare Part B Primary for
Outpatient (O/P) Facility and Professional                      9,538         $2,204,731              $1,955,510

Category F: Medicare Part B Primary for O/P
Facility and Professional (Participation Code F)                2,898         $1,445,792              $1,198,131

                         Total                                 16,406         $8,640,313              $7,717,615

Our audit disclosed the following for the COB errors:

•   For 10,555 (64 percent) of the claim lines questioned, the BCBS plans incorrectly paid these
    claims due to retroactive adjustments. Specifically, there was no special information present
    in the FEP Direct 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
    Direct 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 $5,107,203 for these COB errors.

•   For 2,428 (15 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 Direct Claims System for Medicare COB review by the processors. We noted that most
    of these questioned claim lines were for HHC services that were not properly coordinated
    with Medicare. As a result, the FEHBP was overcharged $883,578 for these COB errors.

3
  In addition, there were 4,455 claim lines, totaling $2,577,240 in COB overpayments, that were identified by the
BCBS plans before our audit notification date (i.e., February 1, 2013) and adjusted and returned to the FEHBP by
the audit request due date (i.e., May 31, 2013). Since these overpayments were already identified by the BCBS
plans before our audit notification date and adjusted and returned to the FEHBP by the audit request due date, we
did not question these overpayments in the final report.


                                                         7
•   For 2,221 (14 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
    in the FEP Direct 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 Direct 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 D, E, F, G and N
    were 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 $1,448,961 for these COB errors.

•   For 1,202 (7 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 $277,873 for these COB errors.

Of the $7,717,615 in questioned COB errors:

•   $3,641,502 (47 percent) represents 8,351 claim line overpayments that were identified as a
    result of our audit. We noted that the BCBS plans initiated recovery efforts for these
    overpayments after receiving our audit request (i.e., sample of potential COB errors) on
    March 1, 2013.

•   $2,831,236 (37 percent) represents 5,395 claim line overpayments where the BCBS plans
    initiated recovery efforts on or after our audit notification date (i.e., February 1, 2013) but
    before receiving our audit request (i.e., March 1, 2013), and also completed the recovery
    process and adjusted the claims by the audit request due date (i.e., May 31, 2013). However,
    since the recoveries for these overpayments were initiated on or after our audit notification
    date, we are continuing to question these COB errors.

•   $1,244,877 (16 percent) represents 2,660 claim line overpayments where the BCBS plans
    initiated recovery efforts before receiving our audit request (i.e., March 1, 2013) but had not
    recovered the overpayments and adjusted the claims by the audit request due date (i.e., May 31,
    2013). Since these overpayments had not been recovered and returned to the FEHBP by the
    audit request due date, we are continuing to question these COB errors.

Additionally, we identified 260 claim line payments that were not COB errors but contained
other claim payment errors, resulting in overcharges of $80,026 to the FEHBP. These claim
payment errors resulted from the following:

•   The BCBS plans paid 255 claim lines using the incorrect procedure allowances or pricing
    methods when pricing these claim lines, resulting in overcharges of $64,474 to the FEHBP.

•   The BCBS plans paid five claim lines using incorrect Omnibus Budget Reconciliation Act of
    1990 or 1993 pricing amounts, resulting in overcharges of $15,552 to the FEHBP.



                                                 8
Of this $80,026 in questioned claim payment errors (non-COB errors):

•   $57,563 (72 percent) represents 250 claim line overpayments that were identified as a result of
    our audit. We noted that the BCBS plans initiated recovery efforts for these overpayments
    after receiving our audit request (i.e., sample of potential COB errors) on March 1, 2013.

•   $13,483 (17 percent) represents 7 claim line overpayments where the BCBS plans initiated
    recovery efforts on or after our audit notification date (i.e., February 1, 2013) but before
    receiving our audit request (i.e., March 1, 2013), and also completed the recovery process and
    adjusted or voided the claims by the audit request due date (i.e., May 31, 2013). However,
    since the recoveries for these overpayments were initiated on or after our audit notification
    date, we are continuing to question these claim payment errors.

•   $8,980 (11 percent) represents 3 claim line overpayments where the BCBS plans initiated
    recovery efforts before receiving our audit request (i.e., March 1, 2013) but had not recovered
    the overpayments and adjusted or voided the claims by the audit request due date (i.e., May 31,
    2013). Since the overpayment had not been recovered and returned to the FEHBP by the audit
    request due date, we are continuing to question these claim payment errors.

Association's Response:

In response to the draft report, the Association states, “After reviewing the OIG listing of
potentially uncoordinated Medicare COB claims . . . We agree that $2,650,791 of the questioned
amount was paid in error and the error was not identified by the start of the audit.”

The Association disagrees with $17,610,616 of the questioned charges in the draft report. For
this contested amount, the Association states that “the BCBS Association identified the
following:

•   $10,508,680 in claims that were paid correctly;
•   $2,285,875 in claims that were initially paid incorrectly but the error was identified and
    corrected before the Audit Notification date and overpayment was recovered and returned
    before the response was due to OPM;
•   $2,696,620 in claims that were initially paid incorrectly but recovery was initiated on or after
    the Audit Notification date but before receiving the OIG sample and the overpayment was
    recovered and returned before the response was due to OPM; and
•   $2,119,441 that was initially paid incorrectly but recovery was initiated before receiving the
    OIG sample, however overpayment was not recovered and returned before the response was
    due to OPM.”

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. In addition, to reduce the number and frequency of uncoordinated Medicare
claims, BCBSA has implemented the following corrective actions which are currently in process
or under review:



                                                 9
•   Provided additional Plan guidance on mapping data from Medicare crossover claims to the
    correct Medicare Payment Disposition code.
•   The FEP claims system will be modified by December 31, 2013 to include the Medicare
    Payment Disposition code from Medicare denials. In conjunction with this change, the
    system will be modified to defer claims for additional Plan review for certain Medicare
    denial reason codes . . .

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

•   FEP updated the Plan Administrative Manual to instruct the Plans on what to do with the
    Retroactive Enrollment Report.
•   As part of the FEP Control Performance Review, FEP reviews Plan’s procedures for
    reviewing retroactive enrollment reports as well as tests transactions to ensure that all claims
    are reviewed back to the Medicare effective dates.”

OIG Comments:

After reviewing the Association’s response and additional documentation provided by the BCBS
plans, we revised the questioned charges in our draft report from $20,261,409 to $7,797,641. If
the BCBS plans identified the claim payment errors and initiated recovery efforts before our
audit notification date (i.e., February 1, 2013) and completed the recovery process (i.e., adjusted
or voided the claims and recovered and returned the overpayments to the FEHBP) by the audit
request due date (i.e., May 31, 2013), we did not question these claim payment errors
(approximately $2.6 million in COB overpayments) in the final report. Additionally, after
reviewing the BCBS plans’ supporting documentation, we also concluded that approximately
$10 million in potential COB overpayments from the draft report were not claim payment errors.

Based on the Association’s response and the BCBS plans’ additional documentation, we
determined that the Association and/or plans agree with $3,057,218 and disagree with
$4,740,423 of the revised questioned charges. Although the Association only agrees with
$2,650,791 in its response, the BCBS plans’ documentation supports concurrence with
$3,057,218. It should be noted that while the Association and/or BCBS plans disagree with our
questioning of $4,740,423 in this report, they do not disagree that these charges were not
properly coordinated with Medicare and resulted in overcharges to the FEHBP.

Based on the Association’s response and/or the BCBS plans’ documentation, the contested
amount of $4,740,423 represents the following items:

•   $2,844,719 ($2,831,236 for COB errors plus $13,483 for non-COB errors) of the contested
    amount represents claim overpayments where the BCBS plans initiated recovery efforts on or
    after our audit notification date (i.e., February 1, 2013) but before receiving our audit request
    (i.e., March 1, 2013), and also completed the recovery process and adjusted or voided the
    claims by the audit request due date (i.e., May 31, 2013). However, since the recoveries for
    these overpayments were initiated on or after our audit notification date, we are continuing to
    question this amount in the final report.



                                                 10
•   $1,253,857 ($1,244,877 for COB errors plus $8,980 for non-COB errors) of the contested
    amount represents claim overpayments where the BCBS plans initiated recovery efforts before
    receiving our audit request (i.e., March 1, 2013) but had not recovered the overpayments
    and/or adjusted or voided the claims by the audit request due date (i.e., May 31, 2013). Since
    these overpayments had not been recovered and returned to the FEHBP by the audit request
    due date, we are continuing to question this amount in the final report.

•   $641,847 of the contested amount represents claim lines that the BCBS plans agree were
    COB errors. However, since all recovery efforts have been exhausted, the plans state that
    these claim payments are uncollectible. The plans did not provide sufficient documentation
    to support that all recovery efforts have been exhausted. Therefore, we are continuing to
    question this amount in the final report.

Recommendation 1

We recommend that the contracting officer disallow $7,717,615 for the 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 provide evidence or
supporting documentation ensuring 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 provide evidence or supporting
documentation ensuring that all BCBS plans are using the daily retroactive enrollment reports
and reviewing all claims incurred back to the Medicare effective dates when the other party
liability information is updated in the FEP Direct 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.




                                               11
Recommendation 4

Due to the significant number of retroactive COB adjustments, we recommend that the
contracting officer require the Association to provide evidence or supporting documentation
ensuring that the FEP Operations Center continues to utilize 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 provide
evidence or supporting documentation ensuring that the enrollment data provided by Medicare is
updated in a timely manner in the FEP Direct Claims System.

Recommendation 5

Due to the significant number of manual processing errors, we recommend that the contracting
officer require the Association to provide evidence or supporting documentation after the FEP
Operations Center includes the field(s) in the FEP Direct 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. (Note: Based on the Association’s draft report response, the FEP Direct
Claims System will be modified to include the Medicare Disposition Code for Medicare denials.)

Recommendation 6

We recommend that the contracting officer require the Association to have the FEP Operations
Center identify the reason(s) why the FEP Direct Claims System continues to allow claims (such
as home health care 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.
The contracting officer should also require the Association to provide evidence or supporting
documentation ensuring that the applicable corrective edits have been implemented.

Recommendation 7

We recommend that the contracting officer disallow $80,026 for the non-COB claim payment
errors and verify that the BCBS plans return all amounts recovered to the FEHBP (See
Schedule B for a summary of these questioned non-COB claim payment errors by BCBS plan).




                                              12
              IV. MAJOR CONTRIBUTORS TO THIS REPORT

Experience-Rated Audits Group

            , Lead Auditor

               , Auditor
_______________________________________________________

                   , Chief

Information Systems Audits Group

                   , Information Technology Project Manager

            , Senior Information Technology Specialist

              , Information Technology Specialist




                                             13
                                                                                                                                                                                                          SCHEDULE A
                                                                                                      V. SCHEDULES

                                                                                          Coordination of Benefits with Medicare
                                                                                              BlueCross and BlueShield Plans
                                                                              Claims Reimbursed from April 1, 2012 through January 31, 2013


                                                                  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                   Overcharge     Potential
              CATEGORY                     Claims     Claim Lines Patients        Total Payments      Methodology              Number of Claims   Claim Lines     Patients   Amounts Paid    Percentage    Overcharge

Category A: Medicare Part A Primary for
                                             512         515         397              $6,488,518      all patients selected         512              515           397          $6,488,518     100%         $6,488,518
I/P Facility

Category B: Medicare Part A Primary for                                                             patients with cumulative
                                            4,102      14,291        1,338            $2,632,955 claims of $1,000 or more           2,565           10,380         504          $2,318,488     100%         $2,318,488
Skilled Nursing/HHC/Hospice Care

Category C: Medicare Part B Primary for
                                             82          82           59              $1,544,510      all patients selected          82               82            59          $1,544,511      25%           $386,128
Certain I/P Facility Charges

Category D: Medicare Part B Primary for                                                             patients with cumulative
                                             88          161          52                $267,012 claims of $2,500 or more            46               46            31           $250,417       25%            $62,604
Skilled Nursing/HHC/Hospice Care

Category E: Medicare Part B Primary for                                                             patients with cumulative
                                           12,300      22,281        3,217            $5,326,037 claims of $1,000 or more           7,446           15,069         817          $4,595,052      80%         $3,676,042
Outpatient Facility and Professional
Category F: Medicare Part B Primary for
                                                                                                    patients with cumulative
Outpatient Facility and Professional       319,178     501,341      157,657          $42,525,886 claims of $3,500 or more          15,297           41,363         1,107        $9,162,036      80%         $7,329,629
(Participation Code F)

                  Totals                   336,262     538,671                       $58,784,918                                   25,948           67,455                     $24,359,022                 $20,261,409
                                                                                                    Coordination of Benefits with Medicare                                                                                           SCHEDULE B
                                                                                                       BlueCross and BlueShield Plans                                                                                                  Page 2 of 3
                                                                                         Claims Reimbursed from April 1, 2012 through January 31, 2013

                                                                                                     QUESTIONED CHARGES BY PLAN


                                                                      COB Category A    COB Category B  COB Category C  COB Category D    COB Category E        COB Category F       Total COB Errors     Non-COB Errors   TOTAL QUESTIONED
Plan Site Plan                                                     Claim    Amount     Claim Amount Claim Amount Claim Amount Claim             Amount        Claim   Amount        Claim     Amount    Claim   Amount      Claim   Amount
                                     Plan Name
Number State                                                        Lines Questioned Lines Questioned Lines Questioned Lines Questioned Lines Questioned      Lines Questioned      Lines    Questioned Lines Questioned    Lines  Questioned
   003    NM BlueCross BlueShield of New Mexico (HCSC)                0             $0 27        $2,449  0           $0  0           $0 50          $5,337       5        $1,342      82          $9,128 0              $0    82         $9,128
   005    GA WellPoint BlueCross BlueShield of Georgia                8       $224,370 106      $18,887  1       $3,326  0           $0 951       $156,881     377      $187,057    1443       $590,520 5          $2,244 1448        $592,764
   006    MD CareFirst BlueCross BlueShield (Maryland Service Area) 11         $71,621 360      $87,061  2      $34,730  0           $0 445        $60,260      68       $49,791     886       $303,462 0               $0   886      $303,462
   007    LA BlueCross BlueShield of Louisiana                        0             $0 170      $24,993 16      $46,206  0           $0 33         $11,191      76       $36,056     295       $118,445 2         $10,020    297      $128,465
   009    AL BlueCross BlueShield of Alabama                         13       $218,527   0           $0  2       $2,075  0           $0 306        $35,917      13       $10,410     334       $266,929 0               $0   334      $266,929
   010     ID BlueCross of Idaho Health Service                       1         $4,850   0           $0  0           $0  0           $0 71         $14,158       0             $0     72         $19,008 0              $0    72       $19,008
   011    MA BlueCross BlueShield of Massachusetts                    2        $23,993 49        $5,986  5      $64,646  0           $0 113        $14,437     101       $11,129     270       $120,191 0               $0   270      $120,191
   012    NY BlueCross BlueShield of Western New York                 1         $8,607   0           $0  0           $0  0           $0   0              $0      0             $0     1           $8,607 0              $0    1          $8,607
   013    PA Highmark BlueCross BlueShield                            0             $0   0           $0  0           $0  0           $0 218        $30,164       0             $0    218         $30,164 4           $452    222       $30,616
   015    TN BlueCross BlueShield of Tennessee                        7        $64,720 36        $4,973  0           $0  0           $0 547       $120,909      57       $48,872     647       $239,474 2            $896    649      $240,370
   016    WY BlueCross BlueShield of Wyoming                          0             $0 43       $10,483  0           $0  0           $0   0              $0      0             $0     43         $10,483 0              $0    43       $10,483
   017     IL BlueCross BlueShield of Illinois (HCSC)                10       $127,381 20        $3,432  0           $0  0           $0 365        $67,857      74       $18,729     469       $217,399 2          $1,133    471      $218,532
   021    OH WellPoint BlueCross BlueShield of Ohio                  10       $134,372 220      $49,874  0           $0  7       $5,255 133        $13,014      62       $10,654     432       $213,169 0               $0   432      $213,169
   024    SC BlueCross BlueShield of South Carolina                   1        $28,279 59        $5,272  0           $0  0           $0 231       $103,075      19       $31,749     310       $168,375 0               $0   310      $168,375
   027    NH WellPoint BlueCross BlueShield of New Hampshire          1        $18,697 46        $4,651  0           $0  0           $0 35          $6,732      15        $2,338      97         $32,418 1           $978     98       $33,396
   028    VT BlueCross BlueShield of Vermont                          0             $0   0           $0  0           $0  0           $0   9           $446       0             $0      9            $446 0              $0     9           $446
   029    TX BlueCross BlueShield of Texas (HCSC)                    28       $315,460 183      $15,678  4       $7,688  0           $0 1056      $205,061     112       $32,842    1383       $576,728 199       $43,383 1582        $620,112
   030    CO WellPoint BlueCross BlueShield of Colorado               2        $57,974 46       $17,429  0           $0  9       $7,974 52          $4,372       8        $9,549     117         $97,299 0              $0   117       $97,299
   031     IA Wellmark BlueCross BlueShield of Iowa                   2        $14,617 17       $50,629  1      $12,139  1       $5,177 229        $62,692      18        $6,589     268       $151,843 0               $0   268      $151,843
   032    MI BlueCross BlueShield of Michigan                         1        $12,707 74        $8,080  0           $0  0           $0 83         $13,740      83       $53,326     241         $87,853 0              $0   241       $87,853
   033    NC BlueCross BlueShield of North Carolina                   8       $309,678 248      $26,063  3       $4,279  0           $0 306        $68,803      95       $66,026     660       $474,849 10         $4,987    670      $479,837
   034    ND BlueCross BlueShield of North Dakota                     0             $0 19        $4,468  0           $0  0           $0 14          $2,650      38        $5,444      71         $12,563 0              $0    71       $12,563
   036    PA Capital BlueCross                                        2        $11,985 39        $4,164  0           $0  0           $0 36         $16,500      14        $7,317      91         $39,966 0              $0    91       $39,966
   037    MT BlueCross BlueShield of Montana                          0             $0   0           $0  0           $0  0           $0 24          $2,166       0             $0     24          $2,166 0              $0    24         $2,166
   038     HI BlueCross BlueShield of Hawaii                          0             $0   0           $0  0           $0  0           $0   0              $0      1          $132       1            $132 0              $0     1           $132
   039     IN WellPoint BlueCross BlueShield of Indiana               1         $4,501 92       $14,395  0           $0  0           $0 166        $15,317      14        $4,498     273         $38,712 0              $0   273       $38,712
   040    MS BlueCross BlueShield of Mississippi                      2        $16,415 123      $13,915  0           $0  0           $0 24         $15,195      36       $17,311     185         $62,837 0              $0   185       $62,837
   041    FL BlueCross BlueShield of Florida                          8       $226,791 168      $54,548  0           $0  0           $0 336        $96,521     304      $279,116     816       $656,977 19         $2,507    835      $659,484
   042    MO BlueCross BlueShield of Kansas City (Missouri)           0             $0   0           $0  0           $0  0           $0 22          $6,018       5        $4,245      27         $10,263 0              $0    27       $10,263
   043     ID Regence BlueShield of Idaho                             0             $0   0           $0  0           $0  0           $0 16          $1,570       0             $0     16          $1,570 0              $0    16         $1,570
   044    AR BlueCross BlueShield of Arkansas                         2        $23,546 14        $2,179  0           $0  0           $0 54          $4,810       0             $0     70         $30,536 0              $0    70       $30,536
   045    KY WellPoint BlueCross BlueShield of Kentucky               2         $9,041 80        $6,790  0           $0  0           $0 47         $42,449      40       $16,827     169         $75,107 0              $0   169       $75,107
   047    WI WellPoint BlueCross BlueShield United of Wisconsin       5       $112,048 48       $10,826  0           $0  0           $0 168        $56,807      18       $12,188     239       $191,869 0               $0   239      $191,869
   048    NY Empire BlueCross BlueShield (WellPoint)                 10       $129,069   8       $1,045  1       $1,153  1       $2,160 435        $66,953     382       $29,916     837       $230,295 0               $0   837      $230,295
   049     NJ Horizon BlueCross BlueShield of New Jersey              3        $16,522   0           $0  0           $0  0           $0 204        $41,768       8        $7,574     215         $65,864 2         $4,760    217       $70,624
   050    CT WellPoint BlueCross BlueShield of Connecticut            3        $25,303 59        $5,054  0           $0  0           $0 46          $8,771       0             $0    108         $39,129 0              $0   108       $39,129
   052    CA WellPoint BlueCross of California                       12        $98,288 174      $28,449  0           $0  0           $0 133        $66,574      80       $30,413     399       $223,723 0               $0   399      $223,723
   053    NE BlueCross BlueShield of Nebraska                         1        $87,668   6       $1,096  0           $0  0           $0 56         $10,206       0             $0     63         $98,969 0              $0    63       $98,969
   054    WV Mountain State BlueCross BlueShield                      0             $0   0           $0  0           $0  0           $0   2           $144       1          $299       3            $444 0              $0     3           $444
   055    PA Independence BlueCross                                   2        $35,360 13        $1,691  0           $0  0           $0   6         $6,401       0             $0     21         $43,451 0              $0    21       $43,451
   056    AZ BlueCross BlueShield of Arizona                          0             $0 139      $15,747  0           $0  0           $0 584        $60,582       2       $11,929     725         $88,258 0              $0   725       $88,258
   058    OR Regence BlueCross BlueShield of Oregon                   2        $33,299   9       $1,392  0           $0  0           $0 98         $14,538      13        $2,295     122         $51,524 4         $3,416    126       $54,939
   059    ME WellPoint BlueCross BlueShield of Maine                  0             $0 59        $7,456  1         $767  1       $6,600 10            $597      70       $10,334     141         $25,754 0              $0   141       $25,754
   060     RI BlueCross BlueShield of Rhode Island                    0             $0 77       $16,132  0           $0  0           $0   4         $5,091       0             $0     81         $21,223 7         $1,052     88       $22,275
   061    NV Wellpoint BlueCross BlueShield of Nevada                 1         $3,937 31        $3,075  0           $0  0           $0 17          $3,173      19       $10,007      68         $20,192 0              $0    68       $20,192
                                                                                                      Coordination of Benefits with Medicare                                                                                          SCHEDULE B
                                                                                                         BlueCross and BlueShield Plans                                                                                                 Page 3 of 3
                                                                                           Claims Reimbursed from April 1, 2012 through January 31, 2013

                                                                                                       QUESTIONED CHARGES BY PLAN


                                                                     COB Category A    COB Category B  COB Category C  COB Category D    COB Category E     COB Category F            Total COB Errors     Non-COB Errors   TOTAL QUESTIONED
Plan Site Plan                                                     Claim   Amount     Claim Amount Claim Amount Claim Amount Claim             Amount     Claim   Amount             Claim     Amount    Claim   Amount      Claim   Amount
                                      Plan Name
Number State                                                       Lines Questioned Lines Questioned Lines Questioned Lines Questioned Lines Questioned Lines Questioned             Lines    Questioned Lines Questioned    Lines  Questioned
   062    VA WellPoint BlueCross Blue Shield of Virginia             5        $36,260 63       $20,330  0           $0  0           $0 130        $17,831 264        $47,857          462       $122,278 0               $0   462      $122,278
   064    NY Excellus BlueCross BlueShield of the Rochester Area     0             $0   0           $0  0           $0  0           $0 13          $1,234 8             $909           21          $2,143 0              $0    21         $2,143
   066    UT Regence BlueCross BlueShield of Utah                    0             $0 142      $12,365  0           $0  0           $0 70          $9,371 51          $9,423          263         $31,159 0              $0   263       $31,159
   067    CA BlueShield of California                                0             $0 78        $3,360  0           $0  0           $0 369        $51,277 195        $17,186          642         $71,822 1           $971    643       $72,793
   068    PR Triple-S Salud, Inc. of Puerto Rico                     0             $0   0           $0  0           $0  0           $0   1         $1,929 0                $0          1           $1,929 0              $0    1          $1,929
   069    WA Regence BlueShield of Washington                        0             $0   0           $0  0           $0  0           $0 46          $4,989 6             $543           52          $5,532 0              $0    52         $5,532
   070    AK BlueCross BlueShield of Alaska                          1         $8,299   0           $0  0           $0  0           $0 57         $42,255 2           $3,939           60         $54,493 1         $1,184     61       $55,677
   074    SD Wellmark BlueCross BlueShield of South Dakota           0             $0   0           $0  0           $0  0           $0   0              $0 0               $0          0               $0 0              $0    0              $0
   075    WA Premera BlueCross                                       2        $36,883   1       $2,580  0           $0  0           $0 61          $7,782 23          $6,808          87          $54,054 1         $2,043     88       $56,097
   076    MO WellPoint BlueCross BlueShield of Missouri              3        $43,903 172      $39,440  1         $302  0           $0 29          $7,543 7           $3,552          212         $94,741 0              $0   212       $94,741
   078    MN BlueCross BlueShield of Minnesota                       3        $41,533   0           $0  0           $0  0           $0 172        $87,929 4          $10,162          179       $139,623 0               $0   179      $139,623
   082    KS BlueCross BlueShield of Kansas                          0             $0   0           $0  0           $0  0           $0 30          $2,294 1          $11,074           31         $13,369 0              $0    31       $13,369
   083    OK BlueCross BlueShield of Oklahoma (HCSC)                14       $158,598 16        $2,401  2       $2,595  0           $0 115        $17,519 37         $10,548          184       $191,661 0               $0   184      $191,661
   085    DC CareFirst BlueCross BlueShield (DC Service Area)       47       $772,611 333     $157,708  0           $0  0           $0 470       $107,098 72         $49,826          922      $1,087,244 0              $0   922    $1,087,244
   088    PA BlueCross of Northeastern Pennsylvania                  1        $21,587   7       $1,056  0           $0  0           $0 32          $3,251 0                $0          40         $25,893 0              $0    40       $25,893
   089    DE BlueCross BlueShield of Delaware                        0             $0   0           $0  0           $0  0           $0 208        $53,361 0                $0         208         $53,361 0              $0   208       $53,361
   092    DC CareFirst BlueCross BlueShield (Overseas Area)          0             $0   0           $0  0           $0  0           $0   0              $0 0               $0           0              $0 0              $0     0             $0

                                     TOTALS                         238     $3,589,299 3,674    $767,602   39     $179,907   19     $27,166 9,538    $1,955,510 2,898   $1,198,131   16,406   $7,717,615   260   $80,026    16,666     $7,797,641
                                                                      ... 

                                                                       Blu eCross BlueSbield
                                                                       Association
                                                                       An Association of Independent
June 23 , 2013                                                         Blue Cross and Blue Shield Plans
                                                                       Federal Employee Program
                                                                       13 10 G. Street, NW
                                                                       Washington, DC 20005
                                                                       202.942.1000
                                                                       Fax 202.942.1125
Experience-Rated Audits Group
Office of the Inspector General
U.S . Office of Personnel Management
1900 E Street, Room 6400
Washington, D.C. 20415-1100

Reference: 	        OPM DRAFT AUDIT REPORT
                    Tier XIII Global Coordination of Benefits
                    Audit Report #1A-99-00-13-032

Dear

T his is in response to the above - referenced U.S . Office of Person nel Management
(OPM) Draft Aud it Report concerning the Global Coordination of Benefits Audit for
claims paid from April 1, 2012 through January 31, 2013. Our comments concerning
the fi ndings in the report are as follows:

Recommendation 1 and 3:

Coordination of Benefits with Medicare Questioned Amount             $20.261.409

The OPM O IG subm itted their sample of potential Med icare Coord ination of Benefits
errors to the Blue Cross Blue Sh ield Association (BCBS) on March 1, 2013 . The
BCBS Association and/or the BCBS Plans were requested to rev iew these potential
errors and provide responses by May 31, 2013. These listings included claims
incurred on or after March 31,2012 and reimbursed from April 1, 2012 through
January 31, 2013. OPM OIG identified 538 ,67 1 claim lines, totaling $58,784,9 18 in
payments, which potentially were not coord inated with Med icare . From th is universe,
OPM O IG selected for review a sample of 67,455 cla im lines, totaling $24 ,359,022 in
payments w ith a potential overpayment of $20,261,409 to the Federal Employee
Health Benefit Program (FEHBP).

Furthermore, although the BCBS Association has developed corrective actions to
red uce COB findings , O PM OIG recommended that the contracting officer instruct
the BCBS Association to ensure that all BCBS Plans are follow ing the corrective
action plan . Also, the BCBS Association should continue to identify additional
corrective actions to further red uce COB findings.
June 23, 2013
Page 2

Blue Cross Blue Shield Association (BCBSA) Response to
Recommendation 1, 2 and 3:

After reviewing the OIG listing of potentially uncoordinated Medicare COB claims
totaling $20,261,408, the BCBS Association identified the following:

   	 $10,508,680 in claims that were paid correctly;
   	 $2,285,875 in claims that were initially paid incorrectly but the error was
      identified and corrected before the Audit Notification date and overpayment
      was recovered and returned before the response was due to OPM;
   	 $2,696,620 in claims that were initially paid incorrectly but recovery was
      initiated on or after the Audit Notification date but before receiving the OIG
      sample and the overpayment was recovered and returned before the
      response was due to OPM; and
   	 $2,119,441 that was initially paid incorrectly but recovery was initiated before
      receiving the OIG sample, however overpayment was not recovered and
      returned before the response was due to OPM.

We agree that $2,650,791 of the questioned amount was paid in error and the error
was not identified by the start of the audit.

We disagree with $17,610,616 in improper claim payments. For claims totaling
$10,508,680 the initial payment was correct based on the following reasons:

   	 Medicare Part A/Part B was secondary (e.g., FEHBP primary, ESRD
      Medicare waiting period) for claim payments totaling $338,669;
   	 Medicare Part A/Part B benefit for period was exhausted for claim payments
      totaling $1,659,860;
   	 There were no Medicare Part B charges for claim payments totaling
      $249,360;
   	 The Provider opted out of Medicare pricing and FEHBP paid primary for claim
      payments totaling $133,274;
   	 Medicare denied the charges due to non-covered Medicare Home health
      provider for claim payments totaling $340,489;
   	 Medicare denied charges due to non-covered Medicare Long Term Care
      provider for claim payments totaling $3,906;
   	 Medicare denied charges due to non-covered Medicare provider for claim
      payments totaling $719,955;
   	 Medicare denied charges due to member being in hospice status for claim
      payments totaling $178,497;
   	 Medicare denied the charges for claim payments totaling $4,384,287;
   	 Services were provided by a non-covered Indian Health Service (IHS)
      facilities for claim payments totaling $7,268;
June 23, 2013
Page 3

     The claim was coordinated with Medicare; however the claim line identified in
      the sample was not covered for claim payments totaling $826,538;
    Claim was priced according to case management guidelines for claim
      payments totaling $319,928;
    FEP paid the member’s Medicare cost sharing (coinsurance or deductible) for
      claim payments totaling $330,502;
    Medicare Government facility not paid by Medicare - Veteran Affairs (VA),
      Dept. of Defense (DD), Uniform Health Services Family Health Plan (FM),
      Military Facility (MF) - for claim payments totaling $257,982;
   	 Member did not meet Home Health/Skilled Nursing three day stay for claim
      payments totaling $156,137;
    Member not home bound for claim payments totaling $14,870; and
    The claim was paid correctly for other reasons for claim payments totaling
      $587,160.

For claims totaling $9,752,727, the Plans initially paid these claims incorrectly largely
because of the following reasons:
    Appropriate documentation was not available at the time of processing;
    Processor errors;
    Provider billing errors; and
    Local system errors.

For $4,405,315 or 45 percent of these claims, through post payments review
controls implemented by the Plans and BCBS Association, the Plans identified the
incorrect payments before the Audit Notification date and initiated recovery and/or
returned the funds to the Program.

For $2,696,621 or 28 percent of these claims, the Plans initiated recovery after the
Audit Notification date but before receiving the OIG sample.

For the remaining $2,650,791 questioned in the draft report, 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 as required by CS 1039,
Section 2.3(g) (l).

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 the following corrective actions which are currently in process or under
review:

   	 Provided additional Plan guidance on mapping data from Medicare crossover
      claims to the correct Medicare Payment Disposition code.
June 23, 2013
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   	 The FEP claims system will be modified by December 31, 2013 to include the
      Medicare Payment Disposition code from Medicare denials. In conjunction
      with this change, the system will be modified to defer claims for additional
      Plan review for certain Medicare denial reason codes.

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 to by each Plan location.

Recommendation 4:

OPM OIG recommended 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.

BCBSA Response:

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

	 FEP updated the Plan Administrative Manual to instruct the Plans on how to work
   the Retroactive Enrollment Report.
	 As part of the FEP Control Performance Review, FEP reviews Plans procedures
   for reviewing retroactive enrollment reports as well as tests transactions to
   ensure that all claims are reviewed back to the Medicare effective dates.

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




Managing Director
FEP Program Assurance

Attachments