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Medicaid-Oriented Health Plans’ Administrative Expense Benchmarks

October 17, 2006

Philadelphia. October 17, 2006. Sherlock Company’s performance benchmarks for Medicaid-Oriented health plans showed median administrative costs of $18.35 per member per month (PMPM) for all products in 2005.  Marketing had the lowest costs with $2.35, followed by Medical and Provider Management with $4.47.  Account and Membership Administration and Corporate Services had costs of $5.61 and $5.94, respectively. Total administrative cost excluding marketing and miscellaneous business tax was $15.19.

In the Medicaid universe, enrollment regulations vary from state to state, some have mandatory enrollment while others have voluntary enrollment.  Because of these regulations, marketing is strictly prohibited in some states and accepted in others.  Miscellaneous business tax also varies state to state.   In theses instances, costs are unable to be controlled by management and were removed to facilitate comparability among plans. 

Excluding marketing and miscellaneous business tax, Commercial ASO had the lowest PMPM cost with $9.89.  Medicaid Family Buy-in had the lowest cost for Medicaid products with $ 13.36, followed by Child Buy-in with $13.57, and Medicaid HMO with $14.91.   Commercial POS, HMO, and Indemnity & PPO had costs of $11.92, $12.88, and $13.84, respectively.  Medicare Advantage had the highest cost with $47.99.

Medicare Advantage had the lowest cost expressed as a percent of revenue, with 6.7%.  Commercial ASO had the highest cost with 83.6% of revenue.  Commercial HMO and POS both were 5.8% and Indemnity & PPO had 7.1% of revenue, respectively.  Medicaid HMO, Child Buy-in, and Family Buy-in were 9.6%, 19.6%, and 12.0% of revenue, respectively.

Medicaid-Oriented health plans is one of five universes of the Sherlock Expense Evaluation Report (SEER), performance metrics benchmarks for health plans, the fourth consecutive year for this universe.  This year, thirteen plans participated in our analysis of the performance of Medicaid-Oriented plans.  Together these plans represented 2.0 million members.  Additional information concerning Medicaid-Oriented health plans is available from Sherlock Company.


Douglas B. Sherlock, CFA
Sherlock Company

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