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Medicare Advantage Health Plans’ Administrative Expense Benchmarks

October 17, 2006

Philadelphia. October 17, 2006. Sherlock Company’s 2005 Medicare Advantage performance benchmarks had a median administrative cost of $29.96 per member per month (PMPM) for total products.  Medical and provider management had the lowest cost with $5.67.  Marketing had the second lowest median cost with $7.13.  Account and Membership Administration and Corporate Services had costs of $8.78 and $8.04, respectively.

Cost expressed as PMPM, Commercial ASO had the lowest cost with $13.48. Commercial HMO, POS, and Indemnity & PPO had costs of $27.53, $37.36, and $33.25, respectively.  Medicaid HMO had the second lowest cost with $21.14.  Medicare Advantage had the highest cost among the products with $65.79.

Medicare Advantage had the lowest cost expressed as a percent of revenue, with 9.0%.  Commercial ASO had the highest cost with 100.0% of revenue.  Commercial HMO, POS, and Indemnity & PPO were 13.2%, 16.0%, and 16.8%, respectively.  Medicaid HMO had a percent of revenue cost of 10.4%.

Compared to other universes, the Medicare Advantage health plans had the second highest cost for its Medicare Advantage product with $65.79. Medicaid-Oriented plans had the highest cost for Medicare Advantage with $71.77.  Blue Cross Blue Shield, Larger Plans, and Provider-Sponsored had costs of $54.21, $61.89, and $46.79. The median cost for Medicare Advantage products was $61.89.

The Medicare Advantage Edition 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.  Six plans which served over 974,000 members participated in our analysis of the performance of Medicaid-Oriented plans.  Additional information concerning Medicare Advantage health plans is available from Sherlock Company.


Douglas B. Sherlock, CFA
Sherlock Company

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