On November 1, CMS posted on its website Medical Loss Ratios (MLRs) for individual Medicaid managed care organizations (MCOs) in 2018, 2019, and 2020. These data come from the MLR Summary Reports that states are required to submit to CMS. This CMS action follows the posting on July 15 of the first tranche of Managed Care Program Annual Reports (MCPARs) for 2023. Combined with the inclusion of strengthened transparency provisions in the May 10 Medicaid Managed Care Rule, we are witnessing a remarkable (if long-overdue) change in CMS’s historical reluctance to use transparency to promote accountability on the part of individual Medicaid MCOs and the state Medicaid agencies with which they contract.
MLR is one metric of financial performance for MCOs. Basically, it measures the share of capitation revenues (per-member, per-month payments) that an MCO spends on medical care. For MCOs, lower MLRs are better; the less they spend paying network providers for delivering services to enrollees, the more that remains for administrative costs and profits (or, in the case of nonprofit MCOs, surplus). For the Medicaid program, higher MLRs are better: the less that is spent on administrative costs and profits or surplus, the more that is available for spending on covered services that enrollees need. The Medicaid definition of MLR differs slightly from the basic concept, but these dynamics still hold.
State Medicaid programs are encouraged but not required to hold MCOs to a minimum MLR standard. If they choose to do so, the standard can’t be less than 85 percent. The recent annual KFF state budget survey found that 38 of the 41 responding managed care states impose a minimum MLR standard and that 34 require remittances from MCOs that do not meet the minimum standard. Regardless of whether the state imposes a minimum MLR standard or collects remittances, each MCO must submit to the state an annual report documenting its MLR for the most recent contract year. State Medicaid agencies are not required to post these reports on their websites, and few do so.
What state Medicaid agencies are required to do is to submit to CMS a summary description of the annual MLR reports they receive from the MCOs with which they contract at the same time they seek approval from CMS for the capitation rates they propose to pay to the MCOs. (Federal Medicaid matching funds are not available for state payments to MCOs unless CMS has approved the rates). It is these MLR Summary Reports that CMS has now started to post on Medicaid.gov. For each MCO, the summary data include: the MLR percentage for the reporting period, the numerator (i.e., claims incurred plus amounts spent on quality improvement), the denominator (i.e., capitation payments received less taxes and regulatory fees), and the remittance (if any) owed. While this information is summary, and not as comprehensive as what is (or at least should be) in the Annual MLR Reports each MCO must file, it does allow for comparison of MLR results by MCOs operating within the same state and in different states. (CMS also uses this information to target its program integrity MLR audits).
In September 2022, the HHS Office of Inspector General issued a report on state and federal oversight of MLR reporting and made a number of recommendations to “better ensure that [MCOs] are using federal dollars for patient care.” Among the OIG recommendations was that CMS design a standardized annual MLR reporting template for MCOs to use. This past September, CMS issued a 120-page toolkit, Medical Loss Ratio (MLR) Monitoring, Reporting, and Oversight: A Toolkit for States to Ensure Complete and Accurate MLR Reporting (September 2024). The purpose of this toolkit is to advise state Medicaid agencies on collecting, validating, and using the MLR data submitted by the MCOs. (State agencies are required to review and validate the MLR data that MCOs submit in their Annual Reports and that state agencies in turn submit to CMS in their Summary MLR Reports.)
The CMS posting of MLR Summary Reports, while important, is not without its limitations. Most obviously, the Reports cover only calendar years 2018, 2019, and 2020, even though the Summary Reports for calendar years 2021 and 2022 should also be available by now (the Annual MLR Reports for calendar years 2021 and 2022 were due from the MCOs to the state agencies by the end of 2023, over 11 months ago). In addition, state agencies, in submitting the data contained in the Summary Reports that CMS has posted, did not have the benefit of the just-issued MLR Toolkit. Finally, as noted, the data are by definition summary, and do not include information on non-claims (i.e., administrative) costs.
That said, the CMS posting of this MCO-specific MLR data is a watershed moment for financial transparency in Medicaid managed care. It builds upon CMS’s posting of the MCPARs (which include the MLR percentage but not numerator, denominator, and remittances) as a means of enabling the public to assess MCO stewardship of Medicaid enrollees and funds.
But wait! There’s more!
In addition to the MCPARs and the MLR Summary Reports, states also submit to CMS, at least annually, a Network Adequacy and Access Assurances Report. Among other things, this report includes documentation of the adequacy of the provider network of each MCO. State Medicaid agencies are required to post these reports on their websites within 30 days after submitting them to CMS. However, as the MCPAR experience demonstrates, state compliance with CMS transparency requirements has been uneven. The most efficient way to ensure public availability of the state Network Adequacy reports is for CMS to post them.
Then transparency advocates could have access to a more complete set of data with which to hold MCOs accountable for the care they are paid to deliver.
