HHS awards $20.4M contract to Palmetto GBA for Medicare Part D TPA support

Contract Overview

Contract Amount: $20,356,798 ($20.4M)

Contractor: Palmetto GBA, LLC

Awarding Agency: Department of Health and Human Services

Start Date: 2021-07-26

End Date: 2026-08-07

Contract Duration: 1,838 days

Daily Burn Rate: $11.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Healthcare

Official Description: THIS TASK ORDER IS TO SUPPORT, PART D COVERAGE GAP THIRD PARTY ADMINISTRATOR (TPA).

Place of Performance

Location: COLUMBIA, RICHLAND County, SOUTH CAROLINA, 29203

State: South Carolina Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $20.4 million to PALMETTO GBA, LLC for work described as: THIS TASK ORDER IS TO SUPPORT, PART D COVERAGE GAP THIRD PARTY ADMINISTRATOR (TPA). Key points: 1. Contract focuses on third-party administration for Medicare Part D, a critical component of prescription drug coverage. 2. The award was made under full and open competition, suggesting a competitive bidding process. 3. The contract duration of over 1800 days indicates a long-term need for these services. 4. Palmetto GBA's existing role as a Medicare Administrative Contractor suggests familiarity with the program. 5. The firm-fixed-price contract type aims to control costs by establishing a set price. 6. The contract is for 'Other Computer Related Services,' highlighting the IT-intensive nature of TPA functions.

Value Assessment

Rating: good

The contract value of $20.4 million over approximately five years for third-party administration of Medicare Part D coverage appears reasonable given the complexity and scale of the program. Benchmarking against similar TPA contracts for large government programs would provide a more precise assessment, but the fixed-price nature suggests an effort to ensure cost predictability. The specific services required, such as claims processing, data management, and beneficiary support, are essential for the functioning of Medicare Part D.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple qualified bidders had the opportunity to submit proposals. The specific number of bidders is not provided, but this procurement method generally fosters price discovery and encourages contractors to offer competitive terms. The agency's decision to use full and open competition suggests confidence in the market's ability to provide suitable solutions at a fair price.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it typically leads to more competitive pricing and a wider range of innovative solutions, ultimately maximizing the value of federal dollars spent.

Public Impact

Beneficiaries of Medicare Part D will continue to receive essential prescription drug coverage administration services. The contract supports the operational integrity of a major federal healthcare program. The services delivered are crucial for ensuring timely and accurate processing of prescription drug claims. The geographic impact is nationwide, as Medicare Part D serves beneficiaries across the United States. The contract likely supports a workforce involved in healthcare administration, IT support, and customer service.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in if Palmetto GBA's system becomes deeply integrated and difficult to replace.
Reliance on a single TPA for a critical function could pose risks if performance issues arise.
The long contract duration may limit opportunities for future competition and innovation.

Positive Signals

Palmetto GBA's established presence and experience with Medicare programs suggest a lower risk of operational disruption.
The firm-fixed-price contract structure provides cost certainty for the government.
Full and open competition indicates that the government sought the best value from the market.

Sector Analysis

The healthcare administration sector, particularly within government programs, is characterized by complex regulatory environments and significant IT infrastructure requirements. Third-party administrators play a vital role in managing the operational aspects of large-scale health insurance programs like Medicare Part D. Spending in this area is substantial, reflecting the government's commitment to providing healthcare services. Comparable contracts often involve extensive IT systems for claims processing, beneficiary management, and data analytics, with values ranging widely based on scope and duration.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions or subcontracting requirements for this contract. As a delivery order under a larger contract vehicle, the small business considerations would have been addressed at the prime contract level. Without further information on the prime contract's small business goals, it is difficult to assess the direct impact on the small business ecosystem for this specific task order.

Oversight & Accountability

Oversight for this contract would primarily fall under the Centers for Medicare and Medicaid Services (CMS), which is responsible for the administration of Medicare. CMS likely has established performance monitoring and quality assurance processes to ensure Palmetto GBA meets contractual obligations. Transparency is generally maintained through contract awards databases and public reporting of federal spending. The Inspector General for the Department of Health and Human Services would have jurisdiction over any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Medicare Part D Prescription Drug Benefit
Medicare Administrative Contractors (MACs)
Healthcare IT Services
Federal Health Programs Administration

Risk Flags

Contract Duration
Cybersecurity Risk
Performance Monitoring
Vendor Lock-in Potential

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $20.4 million to PALMETTO GBA, LLC. THIS TASK ORDER IS TO SUPPORT, PART D COVERAGE GAP THIRD PARTY ADMINISTRATOR (TPA).

Who is the contractor on this award?

The obligated recipient is PALMETTO GBA, LLC.

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 $20.4 million.

What is the period of performance?

Start: 2021-07-26. End: 2026-08-07.

What is Palmetto GBA's track record with Medicare administration?

Palmetto GBA has a significant history of administering Medicare contracts. They have served as a Medicare Administrative Contractor (MAC) for various jurisdictions, handling claims processing, provider services, and other administrative functions for Medicare Parts A and B. Their experience extends to managing complex data and ensuring compliance with Medicare regulations. This extensive background suggests a deep understanding of the operational requirements and challenges associated with federal healthcare programs, including the intricacies of prescription drug coverage administration.

How does the $20.4 million value compare to similar Medicare Part D TPA contracts?

Directly comparing the $20.4 million value to similar Medicare Part D TPA contracts is challenging without access to proprietary contract databases or specific details on the scope of services for comparable awards. However, the value appears reasonable for a five-year period supporting a critical function of a national program. TPA contracts for large government health programs can vary significantly based on the number of beneficiaries served, the complexity of claims processing, IT system requirements, and the specific administrative tasks outsourced. The firm-fixed-price nature of this contract suggests a defined scope, which aids in cost control.

What are the primary risks associated with this contract?

Key risks include potential performance issues by the contractor, Palmetto GBA, which could disrupt Medicare Part D operations and affect beneficiary access to medications. There's also a risk of cost overruns if the firm-fixed-price contract does not adequately account for unforeseen complexities or changes in program requirements, though this is mitigated by the contract type. Another risk is the potential for cybersecurity breaches, given the sensitive health and financial data handled. Finally, long-term reliance on a single vendor could lead to reduced competition and innovation in future contract cycles.

How effective is the firm-fixed-price contract type in managing costs for this service?

The firm-fixed-price (FFP) contract type is generally effective in managing costs for services with a well-defined scope, such as third-party administration for Medicare Part D. Under an FFP contract, the contractor assumes the risk of cost overruns, providing the government with cost certainty. This structure incentivizes the contractor to perform efficiently to maintain profitability. For this contract, it means the government knows the total cost upfront, assuming no significant contract modifications are needed. However, if unforeseen issues arise that require scope changes, modifications to the FFP can occur, potentially increasing the total cost.

What is the historical spending trend for Medicare Part D TPA services?

Historical spending on Medicare Part D TPA services has been substantial and generally increasing, reflecting the growth in Medicare enrollment and the complexity of prescription drug benefits. While specific figures for TPA functions are often bundled within broader Medicare administrative costs, the overall expenditure on the Part D program itself runs into hundreds of billions of dollars annually. Administrative costs, including TPA functions, represent a small but critical portion of this total. Trends show a continued need for robust administrative support to manage enrollment, claims, and formulary management effectively.

What are the implications of 'Other Computer Related Services' for the contract's focus?

Classifying the contract under 'Other Computer Related Services' (NAICS code 541519) indicates that the core of the work involves IT solutions and support for the third-party administration functions. This likely encompasses the development, maintenance, and operation of IT systems used for processing prescription drug claims, managing beneficiary data, interfacing with pharmacies, and generating reports. It highlights the technology-driven nature of modern healthcare administration and suggests that the contractor's expertise in IT infrastructure, software development, data management, and cybersecurity is paramount to fulfilling the contract's objectives.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Other Computer Related Services

Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › IT AND TELECOM - DATA CENTER

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 17 TECHNOLOGY CIR, COLUMBIA, SC, 29203

Business Categories: Category Business, Limited Liability Corporation, Nonprofit Organization, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $20,356,798

Exercised Options: $20,356,798

Current Obligation: $20,356,798

Actual Outlays: $17,420,760

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: GS35F0462V

IDV Type: FSS

Timeline