Core Administrative Costs for Medicaid Plans Experience Fastest Growth Since 2012

PHILADELPHIA--()--Medicaid-focused health plans posted an increase of 7.1% in core administrative costs in 2018, the highest since 2012. This compares to last year’s increase of 5.5%. Increases are calculated for continuously participating plans, after backing out the effect of mix changes.

On an as-reported basis, per member core costs increased by 7.1%, which matched the prior year’s increase. Cost increases exclude the effect of ACA-related and other taxes. Total administrative expenses including ACA-related and other miscellaneous business taxes increased by 12.4% primarily due to the restoration of the Annual Fee on Health Insurance Providers.

Our key findings from our analysis of the Sherlock Benchmarks are:

  • All core clusters accelerated in growth from last year except for Corporate Services.
  • The Sales and Marketing cluster, not included in core costs, increased by 1.8%, slower than last year’s 5.2%.
  • Growth in Claims was the most important source of growth for Medicaid-focused core costs in 2018.
  • Because growth on an as-reported and constant-mix basis matched one another, expensive and cheaper products offset one another.

The average inferred core Medicaid staffing ratio fell slightly to 22 FTEs per 10,000 members. Average core compensation increased by 1.4% to $94,000 per FTE. Non-Labor costs per FTE and the propensity to outsource increased.

For the universe as a whole, the median core costs were $33.48 per member per month, higher than last year’s $28.82. The median administrative expense ratio was 6.6% equaling last year.

Additional information was published recently in Plan Management Navigator, and is posted at

We will discuss the results via free web conference on Wednesday, October 9th 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/webinar. Once registered, dial-in information and a link to connect will be provided in a confirmation email.

The Navigator analysis excerpts from the 2019 Medicaid edition of the Sherlock Benchmarks. This benchmarking study analyzes in-depth surveys of 12 health plans with a plurality of their business stemming from Medicaid and CHIP. The 12 plans collectively served 10.3 million comprehensive members of which 6.5 million were Medicaid or CHIP. Health plans serving nearly 8 million members are included in various Sherlock Benchmark universes.

While health plan managers are responsible for the health care for many of your members, they manage the administrative services necessary for all of them. In the current environment, optimizing administrative expenses is a high priority for health plan managers. Plans have completed their adaptation to the Affordable Care Act and the bulge in Exchange and Medicaid members. Plus, administrative expense visibility has been heightened by the rhetoric of presidential candidates.

The Sherlock Benchmarks reflects approximately 858 health plan years of experience spanning 22 consecutive years. They are “the gold standard” of benchmarks used to measure and manage health plan administrative activities. Planning, budgeting and cost benefit analyses are credibly informed by the Sherlock Benchmarks.

Besides the Medicaid universe, other universes include Blue Cross Blue Shield Plans, Independent/Provider-Sponsored plans, and Medicare plans. Collectively, the approximately 40 participating plans serve approximately 51 million insured Americans.

Sherlock Company (, 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.


Douglas B. Sherlock, CFA

Release Summary

Cost trends for Medicaid


Douglas B. Sherlock, CFA