New York State Health Insurance Program – Incorrect Payments by CVS Caremark for Medicare Rx Drug Claims That Were Improperly Paid Under the Commercial Plan

Issued Date
September 13, 2023
Civil Service, Department of


To determine whether CVS Caremark paid claims under the correct prescription drug plan. The audit covered the period from January 2015 through March 2022.

About the Program

The New York State Health Insurance Program (NYSHIP), administered by the Department of Civil Service (Civil Service), is one of the nation’s largest public sector health insurance programs. NYSHIP covers over 1.2 million active and retired State, participating local government, and school district employees, and their dependents. The Empire Plan is the primary health benefits plan for NYSHIP, serving about 1.1 million members.

Civil Service contracts with CaremarkPCS Health, L.L.C. (CVS Caremark) to administer the prescription drug program for the Empire Plan. This program includes the Empire Plan Medicare Rx drug plan (Medicare Rx Plan) for retired members and their dependents who have Medicare, and a Commercial Plan for members and their dependents who do not have Medicare. Claims paid under the Medicare Rx Plan are eligible for enhanced drug manufacturer discounts and federal subsidies that are not available for claims paid under the Commercial Plan. Accordingly, ensuring that claims for Medicare-enrolled individuals are paid under the Medicare Rx Plan allows for a significant cost avoidance for the State.

CVS Caremark communicates with the Centers for Medicare & Medicaid Services (CMS) to ensure Medicare enrollment information is accurate so claims are paid under the correct plan (Medicare Rx or Commercial). CVS Caremark also relies on information from Civil Service’s health insurance enrollment system to determine which plan should pay member claims.

Key Findings

For the audit period, we identified claims totaling $12,358,531 that were incorrectly paid under the Commercial Plan instead of the Medicare Rx Plan. We found the misprocessing of claims was largely due to data transfer issues between Civil Service, CVS Caremark, and CMS. During the audit period, Civil Service and CVS Caremark were able to identify the issue and develop a process to reconcile the data in their respective systems to reduce the risk of processing and paying claims under the incorrect plan.

Key Recommendations

To Civil Service and CVS Caremark:

  • Review the $12,358,531 in claims identified in this report as incorrectly paid under the Commercial Plan to determine which claims to reprocess under the Medicare Rx Plan.
  • Consider and evaluate additional controls, as needed, to prevent the processing and payment of claims under the incorrect plan and continue to perform periodic reconciliations.

To CVS Caremark:

  • Reprocess under the Medicare Rx Plan those claims that were identified as incorrectly paid under the Commercial Plan, as warranted.

Andrea Inman

State Government Accountability Contact Information:
Audit Director: Andrea Inman
Phone: (518) 474-3271; Email: [email protected]
Address: Office of the State Comptroller; Division of State Government Accountability; 110 State Street, 11th Floor; Albany, NY 12236