Medicaid Plan Operational Administrative Costs Increased by 6.3% in 2014; Grew by 15.1% after the Effect of ACA Taxes

PHILADELPHIA--()--In 2014, core operational administrative expenses (Core expenses exclude Sales and Marketing) under the control of management of Medicaid plans increased at a median rate 6.3% per member, the second highest in the past five years. Account and Membership Administration costs increased by 3.8%, greater than three of the prior five years. These comparisons eliminate the effects of product mix and universe changes. The median core costs before Miscellaneous Business Taxes was $27.99 per member per month.

However, Miscellaneous Business Taxes increased by 617.7% to $6.09 per member per month because of taxes and fees associated with the Affordable Care Act, so total administrative costs per member increased by 15.1%.

Per member, Sales and Marketing costs declined by 4.2%. Both Medical and Provider Management and Corporate Services clusters experienced sharp increases at 5.6% and 5.5%, respectively.

While Information Systems costs declined on a PMPM basis, Enrollment and Customer Services increased at a double digit rate. Some participants call this a “surge” cost stemming from changes in the health insurance markets. Claims processing also increased at a near double digit rate.

Additional information was published yesterday in Plan Management Navigator, and is posted at www.sherlockco.com. We will discuss the results via free web conference on Wednesday, October 7th from 2:00 PM to 3:00 PM Eastern Daylight Time. Douglas Sherlock will offer a brief presentation, followed by questions and answers. To participate in the web conference, please register at sherlockco.com/webinar. Once registered, dial-in information and a link to connect will be provided in a confirmation email.

The Navigator analysis excerpts from the 2015 Medicaid Plan edition of the Sherlock Expense Evaluation Report (SEER). This benchmarking study analyzes in-depth surveys of 11 Medicaid Plans serving 6.9 million members. Because they have a median membership of 461,000 members, we believe that they are mature plans from a cost perspective.

A challenging economy and the Affordable Care Act make streamlining administrative costs a high priority for health plans. An express purpose of the MLR rule is to “create incentives … to become more efficient.” SEER provides the initial step in this process by helping health plans identify and prioritize cost variances.

Besides the Medicaid universe, other universes include Blue Cross Blue Shield plans, Independent/Provider-Sponsored and Medicare plans. Collectively, these organizations serve more than 41 million insured Americans.

This is the 18th consecutive year of the Sherlock Benchmarks. With cumulative experience of nearly 700 health plan years, they are “the gold standard” of benchmarks used to measure and manage health plan administrative activities.

Sherlock Company (www.sherlockco.com), based in North Wales, Pennsylvania, provides informed solutions for health plan financial management. Since its founding in 1987, Sherlock Company has been known for its impartiality and technical competence in service to its clients.

Contacts

Sherlock Company
Douglas B. Sherlock, CFA
215-628-2289
sherlock@sherlockco.com

Contacts

Sherlock Company
Douglas B. Sherlock, CFA
215-628-2289
sherlock@sherlockco.com