The Medicaid “Mega Reg” final rule now makes medical loss ratios (MLRs) a requirement for Medicaid managed care programs in every state. While the Medicaid MLR formula largely follows the commercial and Medicare Advantage formula, there are some key differences between the three. In this report, Milliman consultants discuss several issues that state agencies and managed care organizations need to consider in the development and completion of MLR reporting.
Milliman today announced the second iteration of its research into the administrative expenses associated with Medicaid managed care plans. This research complements the analysis of Medicaid managed care financial results report that was released on June 6, 2016. The information has considerable value, given the Centers for Medicare and Medicaid Services (CMS) Medicaid managed care rule (CMS-2390-F), published on April 25, 2016, and historical CMS Medicaid capitation rate-setting guidance. These regulations require greater documentation of administrative costs included in the capitation rates and this information can be useful in providing greater transparency of the rate-setting process.
The additional analysis on administrative expenses is critical in helping understand the true expenses incurred by Medicaid managed care organizations. The recent approval of the Medicaid managed care rule highlights the focus placed on each component of the managed care capitation rates. We believe that this research can become as familiar in the industry as our financial analysis report to help establish benchmarks for use in rate setting.
Key findings from the analysis include:
• The average administrative loss ratio (ALR) for Medicaid-focused plans is 8.8% after removing the impact of taxes and fees
• Calendar year (CY) 2014 and 2015 ALR values, net of taxes and fees, are considerably lower than in previous years
• The administrative per member per month (PMPM) value continues to climb as average premium levels increase
This is the second year the administrative expenses report has been produced, with expectation of providing future annual updates consistent with the Medicaid managed care organization financial results report.
To see the Medicaid administrative expenses report, click here.
Medical loss ratios (MLRs) will become a required part of financial reporting and prospective rate setting for Medicaid managed care programs in every state, effective for managed care contracts beginning on or after July 1, 2017. The creation of minimum MLR standards for Medicaid managed care follows the precedents set by the commercial health insurance market in 2011 and the Medicare Advantage (MA) market in 2014.
Join Milliman’s Ian McCulla, Scott Jones, and Jill Brostowitz for the webinar “Medical loss ratios in the Medicaid mega reg” on Friday, June 24, at 12 p.m. EST. They will discuss the release of the final Medicaid and Children’s Health Insurance Program (CHIP) managed care rule (final rule). To register, click here.
Milliman today announced the availability of its annual research into the financial results associated with Medicaid managed care plans. These plans have become increasingly popular, which is due to the Medicaid expansion provisions in the Patient Protection and Affordable Care Act (ACA) and the continued growth of the managed care delivery system within Medicaid. This information is especially valuable now, with the recent release of the Medicaid and CHIP Managed Care Final Rule (CMS-2390-F) by the Centers for Medicare and Medicaid Services (CMS). The CMS regulations require reporting and monitoring of Medicaid managed care medical loss ratios, and may be useful as the industry contemplates the financial consequences of the new regulation.
We are excited about this year’s iteration of the report because of its relevance with the recently finalized Medicaid managed care rule published by CMS. This is an area of intense focus for the industry as we look to quantify the various impacts of the new regulation. This report has become an industry standard, and it allows us to offer analysis as Medicaid continues to evolve.
Key findings from the analysis include:
• Average profit increased from 2.1% in calendar year (CY) 2014 to 2.6% for CY 2015
• Revenue captured by the study increased by 30%
• The medical loss ratio (MLR), using the CMS definition, was 90.2% in CY 2015, more than 5% higher than the minimum 85%
The financial results report is now in its eighth year of publication and is widely cited by the industry. An accompanying report related to Medicaid administrative costs is anticipated to follow the release of this report.
To see the Medicaid financial results report, click here.
As managed care has replaced fee-for-service (FFS) in the Medicaid market, states have often sought to replicate fee-for-service supplemental provider payment programs in managed care. Supplemental payment programs, sometimes called upper payment limit (UPL) programs, constitute a major source of revenue for providers in many states. Pass-through payments are the primary mechanism currently used to retain supplemental payment funding in managed care.
Final Medicaid managed care regulations, released April 25, 2016, confirm that pass-through payments will be restricted in the near future and ultimately eliminated. In this paper, Milliman’s Andrew Gaffner, Carmen Laudenschlager, and Christine Mytelka provide an overview of pass-through payment provisions in the new regulations, including the rationale and phase-out timing of the Centers for Medicare and Medicaid Services (CMS). They also discuss some of the difficulties the loss of pass-through payments will cause for states and providers and suggest a number of potential changes states can consider to mitigate the impact on managed care programs.
Milliman today announced new research into the administrative costs associated with Medicaid managed care plans. These plans have become increasingly popular, which is due to the Medicaid expansion provisions of the Patient Protection and Affordable Care Act (ACA) and the continued growth of the managed care delivery system within Medicaid. This information is especially valuable now, with the release of the proposed 2016 Centers for Medicare and Medicaid Services (CMS) capitation rate-setting guidance and the CMS proposed rule for Medicaid managed care. These CMS regulations require greater documentation of Medicaid managed care administrative costs, and may be useful as plans look to establish benchmarks.
We are excited about the addition of the administrative cost report to the annual financial analysis of Medicaid risk-based managed care reporting. This is an area of intense focus for the industry as we look to meet increased expectations of transparency in capitation rate-setting and face regulatory reporting of medical loss ratios.
Among other findings, the analysis demonstrates that Medicaid managed care administrative costs are primarily driven by expenditures for human capital and non-income-based taxes and fees.
The administrative cost report complements Milliman’s annual analysis of Medicaid managed care financial results, which is now in its seventh year. The administrative cost report will be updated annually.
To see the administrative cost report, click here. To view the annual financial analysis, click here.