Healthcare Business News

Higher administrative costs seen in for-profit Medicaid plans, report finds

By Rebecca Vesely
Posted: June 15, 2011 - 12:01 am ET

Medicaid managed-care plans owned by publicly traded insurers have higher administrative costs than similar plans owned by providers, according to a report.

For-profit publicly traded plans spent 14% of member premiums on administrative costs, while non-publicly traded plans owned by health systems, local providers and clinics spent 10% of premiums on administrative costs, according to the Commonwealth Fund report.

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Provider-sponsored plans had the lowest administrative cost ratio, with 8% of member premiums spent on administrative costs.

The report authors compared 225 Medicaid managed-care plans with 23.8 million total enrollees. All plans included at least 5,000 members.

Some 27% of the publicly traded Medicaid-only plans reported quality measures and scored lower on these measures compared to non-publicly traded plans. For-profit publicly traded plans scored 13 percentage points lower for managing chronic illness, and 11 percentage points lower on a composite score measuring preventive care, according to the report.

The report noted that publicly traded plans were underrepresented among health plans reporting quality measures to the National Committee on Quality Assurance, the data set used for the study. New federal reporting requirements might yield better quality performance data on these plans, the report authors said.

More states are moving their Medicaid populations into managed care. As of 2008, 21.7 million Medicaid beneficiaries were enrolled in 307 full-risk managed care plans in 34 states, according to the Kaiser Family Foundation.

“Managed-care plans represent a large piece of Medicaid's future, and plans owned by publicly traded companies will likely be a growing share of this market,” lead author Michael McCue, a professor at Virginia Commonwealth University, said in a statement.

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