For-Profit Publicly Traded Medicaid Managed Care Plans Rack Up Higher Admin Costs

The Commonwealth Fund reports that 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. Provider-owned and operated plans had the lowest administrative costs, with a paltry 8% of member premiums spent on administrative costs.The report analyzed 225 Medicaid managed-care plans covering nearly 24 million enrollees. More than 25% of the publicly traded plans scored lower on quality measures compared to non-publicly traded plans.

These findings are critically important as more states begin to shift their Medicaid populations into managed care plans of one type or another. According to the Kaiser Family Foundation, as of 2008 nearly 22 million Medicaid beneficiaries were enrolled in more than 300 full-risk managed care plans across 34 states.

This is important for behavioral health organizations that might be contemplating a run at Medicaid managed care. Between the proliferation of managed care and accountable care organizations (ACO) in Medicaid, providers are encouraged to collaborate, find strength in numbers and seriously consider the wide variety of risk-sharing models that exist. At the same time, behavioral health providers need to be cautiously realistic about the infrastructure, capital, and governance required to be successful.