As Say Ahhh! readers know, CCF researchers have scanned state Medicaid agency websites for information about the performance of individual managed care organizations (MCOs) for children, for children and youth in foster care, and, most recently, for pregnant and post-partum women. In most of the states we looked, it wasn’t possible to identify which MCOs perform well and which perform poorly for these populations on access, quality, or reducing health disparities. We wondered whether this lack of transparency also holds true for the financial performance of individual MCOs. After all, the case for transparency about how individual MCOs are using state and federal Medicaid dollars is just as compelling as the case for transparency on how well they are delivering needed services to the enrollees.
To assess the financial transparency of state Medicaid agency websites, we focused on medical loss ratio (MLR)—basically, the share of capitation payments made to an MCO by the state Medicaid agency that is spent on furnishing covered services to Medicaid enrollees. The MLR is expressed as a percentage. The higher percentage, the more the MCO spends on services and the less it spends on administration and keeps as profit. There are other financial metrics we could have looked for—e.g., the results of the independent financial audit required of each MCO every three years—but the MLR is the only metric that is reported annually using a methodology standardized by regulation. And, as New Mexico’s Legislative Finance Committee explains in a 2023 Accountability Report on Medicaid, MLR is an important metric for state policymakers: “The state aims to maximize spending on medical care by establishing limits on how much managed care organizations can spend on administrative costs, known as the medical loss ratio.”
Every Medicaid MCO is required to submit to its state Medicaid agency an annual report that calculates its MLR percentage for the most recent contract year and provides the data that supports the calculation (e.g., claims incurred, non-claims costs, capitation revenues, etc.). State agencies are not required to post these reports. They are, however, required to include the MLR percentages (but not supporting data) for each MCO in the Managed Care Program Annual Report (MCPAR) they have to submit to the Centers for Medicare & Medicaid Services (CMS). State agencies are also required to post the MCPARs on their websites, but most don’t. CMS now makes the 2022 and 2023 MCPARs available on request but it does not yet post them. (CMS also collects MLR percentages for individual MCOs in a separate state report but it does not post those reports either).
There are 41 managed care states. In scanning their Medicaid agency websites, we assumed that the title of the annual report would include either “medical loss ratio” or “MLR.” We ran these search terms through both the agency’s search engine and Google (which, in most cases, proved to be more useful). We did not conduct a full-on Where’s Waldo? excavation of each website of the kind that the California State Auditor conducted for this May 2023 report (see Figure 8), so we may have missed some postings.
Our expectations were not high, and we were not disappointed. No states post the Annual MLR Reports as submitted by their MCOs, but nine states—Arizona, Florida, Iowa, Louisiana, Mississippi, New Hampshire, Oregon, Utah, and Virginia—post detailed MLR data for each MCO. This data includes both the raw percentages and the information supporting the calculations, although in some cases it has not been updated since 2020. Ohio presents MLR data for each MCO on a per member per month basis, which is not all that accessible for those among us who are not actuaries.
In most of these states, the MLR information takes the form of reports prepared by the accounting firm Myers and Stauffer that review each MCO’s submissions to the state agency and propose adjustments. The reports are concise, to the point, and, as financial statements go, relatively easy to understand. For example, the accountant’s report on Louisiana Healthcare Connections indicates that for CY 2021, for the non-expansion population, the MCO had an adjusted MLR of 93.8 percent, reflecting (1) $1.535 billion in payments for services plus expenses for quality improvement divided by (2) $1.637 billion in capitation payments (net of taxes). Non-claims costs—i.e., administrative expenses other than those for quality improvement—totaled $128.2 million. (This MCO is a subsidiary of Centene Corporation, one of the Big Five national managed care companies.)
By way of comparison, the accountant’s report on UnitedHealthcare of Louisiana for the non-expansion population for the same CY 2021 period indicates an adjusted MLR of 97.0 percent, the result of dividing (1) $1.458 billion in payments for service plus spending on quality improvement by (2) $1.503 billion in Medicaid revenues net of taxes. The MCO’s total non-claims costs were $75.7 million, or 4.8 percent of Medicaid revenues before taxes. This was $53.2 million less than Healthcare Connections’ non-claims costs, which represented 7.5 percent of its Medicaid revenues before taxes. (This MCO is a subsidiary of another of the Big Five, UnitedHealth Group.)
These annual MLR reports give policymakers—and, in financially transparent states like Louisiana, the public—the ability to compare the performance of individual MCOs and ask questions that can lead to improvement. For example, it would be important to understand why Healthcare Connections’ administrative expenses for the non-expansion population are so much higher as a percentage of Medicaid revenues than UnitedHealthcare’s—or than all but one of the other MCOs contracting with Louisiana’s Medicaid program during that same period: Aetna Better Health (6.2 percent), Amerihealth Caritas (8.9 percent), and Healthy Blue (4.1 percent). For that matter, why can’t all the MCOs keep their administrative costs as low as Healthy Blue?
What can we take away from this search for Annual MLR Reports?
First, most managed care states, even those like Washington that are admirably transparent about individual MCO performance on quality, do not make MLR information about these same MCOs publicly available on their websites. The contrast between quality and financial transparency in these states is striking.
Second, the state Medicaid agencies that post detailed MLR information are doing so even though the federal government does not require it. These agencies recognize that they are accountable for managing public funds and that financial transparency is essential to maintaining public trust in their stewardship of Medicaid managed care dollars.
Third, state agency commitment to transparency on MCO financial performance is not partisan (nor should it be). Detailed MLR information for individual MCOs is posted on Medicaid agency websites in both Red and Blue states. The issue is that most managed care states are not as transparent as they should be and CMS has not stepped up to fill the void.
Finally, posting of MLR information has not led to an exodus of MCOs from the transparent states. As the public MLR reports attest, there is more than enough revenue on the table to make continued participation of MCOs in these Medicaid markets more than worth their while, even if increased transparency means accountability for performance.
