HHS awards $467M contract for Medicare Administrative Services to National Government Services, Inc

Contract Overview

Contract Amount: $467,327,872 ($467.3M)

Contractor: National Government Services, Inc.

Awarding Agency: Department of Health and Human Services

Start Date: 2020-08-01

End Date: 2026-07-31

Contract Duration: 2,190 days

Daily Burn Rate: $213.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: COST PLUS AWARD FEE

Sector: Healthcare

Official Description: J6 A/B MAC SERVICES

Place of Performance

Location: INDIANAPOLIS, MARION County, INDIANA, 46250

State: Indiana Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $467.3 million to NATIONAL GOVERNMENT SERVICES, INC. for work described as: J6 A/B MAC SERVICES Key points: 1. Contract awarded through full and open competition, suggesting a competitive bidding process. 2. The contract type is Cost Plus Award Fee, which incentivizes performance but can lead to higher costs. 3. The duration of the contract is 2190 days, indicating a long-term commitment for essential services. 4. The awardee, National Government Services, Inc., is a significant player in government contracting. 5. The contract supports critical functions within the Centers for Medicare and Medicaid Services. 6. The North American Industry Classification System (NAICS) code 524114 points to Direct Health and Medical Insurance Carriers.

Value Assessment

Rating: good

The contract value of $467 million over approximately six years suggests a substantial investment in Medicare administrative services. Benchmarking this against similar large-scale contracts for health insurance carriers and administrative support is crucial. The Cost Plus Award Fee structure allows for performance-based incentives, but requires careful monitoring to ensure costs remain reasonable and aligned with achieved outcomes. Without specific performance metrics and award fee payouts, a precise value-for-money assessment is challenging, but the competitive award process is a positive indicator.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit a bid. The presence of four bidders (no) suggests a healthy level of competition for this significant contract. A competitive process generally leads to better price discovery and potentially more favorable terms for the government compared to sole-source or limited competition awards.

Taxpayer Impact: The full and open competition ensures that taxpayer dollars are likely being used more efficiently by driving down costs through a competitive bidding environment.

Public Impact

Beneficiaries of Medicare services will continue to receive administrative support, ensuring the smooth operation of the program. The contract directly supports the Centers for Medicare and Medicaid Services (CMS) in its mission to administer federal healthcare programs. The geographic impact is national, as Medicare serves beneficiaries across the United States. The contract likely has implications for the healthcare insurance and administrative services workforce, potentially creating or sustaining jobs.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Award Fee contracts can sometimes lead to higher overall costs if not managed tightly.
The long duration of the contract may reduce flexibility to adapt to changing healthcare landscapes or technological advancements.
Reliance on a single contractor for such a critical function carries inherent risks if performance falters.

Positive Signals

Awarded through full and open competition, indicating a robust bidding process.
The contract has a defined performance period with potential award fees, incentivizing good performance.
The contractor is established in the government contracting space, suggesting experience with federal requirements.

Sector Analysis

This contract falls within the Health Insurance and Medical Carriers sector, a critical component of the broader healthcare industry. The market for government health insurance administration is substantial, with significant spending allocated to managing programs like Medicare and Medicaid. This contract represents a key piece of that spending, ensuring the operational continuity of essential services. Comparable spending benchmarks would involve analyzing other large federal contracts for similar administrative functions within HHS and other agencies.

Small Business Impact

The provided data indicates that small business participation (sb) was not a stated set-aside for this contract (false). There is no explicit information on subcontracting plans for small businesses. Further analysis would be needed to determine if National Government Services, Inc. has a subcontracting plan in place that benefits the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily reside with the Centers for Medicare and Medicaid Services (CMS), the awarding agency. As a Cost Plus Award Fee contract, performance metrics and financial expenditures would be subject to regular review and auditing. Transparency is generally maintained through contract awards databases and agency reporting, though specific performance details may be proprietary. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Medicare Administrative Contractors (MACs)
Federal Health Insurance Programs
Centers for Medicare and Medicaid Services Contracts
Healthcare Services Administration
Government Health Insurance Carriers

Risk Flags

Cost Plus Award Fee structure requires diligent oversight.
Long contract duration may limit adaptability.
Potential for cost overruns if performance incentives are not managed effectively.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $467.3 million to NATIONAL GOVERNMENT SERVICES, INC.. J6 A/B MAC SERVICES

Who is the contractor on this award?

The obligated recipient is NATIONAL GOVERNMENT SERVICES, INC..

Which agency awarded this contract?

Awarding agency: Department of Health and Human Services (Centers for Medicare and Medicaid Services).

What is the total obligated amount?

The obligated amount is $467.3 million.

What is the period of performance?

Start: 2020-08-01. End: 2026-07-31.

What is the historical spending pattern for Medicare Administrative Services contracts awarded by CMS?

Historical spending on Medicare Administrative Services (MAC) contracts by CMS has been substantial and consistent, reflecting the ongoing need to manage and process Medicare claims and provide beneficiary support. These contracts are typically awarded through competitive processes and cover large geographic regions. Over the years, CMS has evolved its MAC program, consolidating regions and updating contract vehicles to improve efficiency and oversight. The total annual spending on MAC services can run into billions of dollars, with individual contract values often in the hundreds of millions, similar to the J6 A/B MAC SERVICES contract. Analyzing past awards for similar services, including the number of bidders, contract types, and final award values, provides context for the current $467 million award, suggesting it aligns with the scale of previous investments in this critical area.

How does the Cost Plus Award Fee (CPAF) structure typically impact contractor performance and government costs for administrative services?

The Cost Plus Award Fee (CPAF) contract structure is designed to incentivize contractor performance by allowing for reimbursement of allowable costs plus a fee that is composed of a fixed base fee and an award amount. The award amount is determined by the government based on the contractor's achievement of specific performance objectives and quality standards. For administrative services like those provided under the J6 A/B MAC SERVICES contract, CPAF can encourage high levels of service delivery, efficiency, and accuracy. However, it also requires robust government oversight to ensure that performance metrics are clearly defined, objectively measured, and that the award fee is appropriately justified. Without stringent oversight, there's a risk that costs could escalate beyond initial projections if the award fee component is consistently maximized without commensurate value.

What are the key performance indicators (KPIs) typically used to evaluate contractors for Medicare Administrative Services?

Key Performance Indicators (KPIs) for Medicare Administrative Services contracts typically focus on operational efficiency, accuracy, timeliness, and beneficiary/provider satisfaction. Common KPIs include claims processing accuracy rates, turnaround times for claims adjudication and payment, call center response times and resolution rates, fraud detection rates, and adherence to program integrity standards. For a Cost Plus Award Fee contract, these KPIs would be explicitly defined in the contract's Performance Work Statement (PWS) and serve as the basis for determining the award fee. CMS would monitor these metrics closely to ensure National Government Services, Inc. is meeting or exceeding expectations, thereby justifying the award fee component of their compensation and ensuring the effective administration of Medicare.

What is the track record of National Government Services, Inc. in managing large federal healthcare contracts?

National Government Services, Inc. (NGS) has a significant track record in managing large federal healthcare contracts, particularly those related to Medicare. As a subsidiary of Evernorth (part of Cigna), NGS has been a long-standing Medicare Administrative Contractor (MAC) for various jurisdictions, handling claims processing, customer service, and other administrative functions for Medicare beneficiaries and providers. Their experience spans decades, demonstrating a capacity to manage complex operations and comply with federal regulations. While specific performance details for all past contracts are not publicly detailed, their continued awards by CMS suggest a generally satisfactory performance history and a deep understanding of the Medicare program's intricacies. This extensive experience is a key factor in their ability to secure and manage substantial contracts like the J6 A/B MAC SERVICES award.

How does the geographic scope of this contract (Indiana) compare to other MAC contracts?

The J6 A/B MAC SERVICES contract covers Indiana (SN: INDIANA), which is one of the defined jurisdictions for Medicare Administrative Contractors (MACs). CMS historically divided the country into various MAC jurisdictions, each managed by a separate contractor. While some MAC contracts cover multiple states or larger regions, others focus on a single state or a smaller group of states. The specific geographic scope of Indiana for this contract is typical for a MAC award, allowing for focused management of Medicare operations within that state. The number of MAC jurisdictions and their boundaries have evolved over time as CMS seeks to optimize administrative efficiency and cost-effectiveness. This contract's focus on Indiana is consistent with the agency's strategy of assigning specific geographic responsibilities to MACs.

Industry Classification

NAICS: Finance and Insurance › Insurance Carriers › Direct Health and Medical Insurance Carriers

Product/Service Code: SOCIAL SERVICES › SOCIAL SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: 75FCMC19R0002

Offers Received: 4

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Elevance Health, Inc.

Address: 220 VIRGINIA AVE, INDIANAPOLIS, IN, 46204

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $649,761,431

Exercised Options: $555,095,976

Current Obligation: $467,327,872

Actual Outlays: $362,548,234

Subaward Activity

Number of Subawards: 12

Total Subaward Amount: $5,911,205

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline