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Medicaid Plan Core Administrative Cost Growth Declines in 2008

October 13, 2009

Philadelphia. October 13, 2009.  Core per member administrative costs in Medicaid plans decreased by 1.4% in 2008, compared with 8.2% in 2007. Adjusting for changes in product mix, administrative expenses grew by 1.4% in 2008 compared with 4.2% in 2007. Administrative expenses of such plans were 8.8% of premium equivalents in 2008 compared with 9.3% in 2007.  Median core administrative expenses of Medicaid products sold by these plans were 7.0%, and total administration for Medicaid products was $20.13. All cited values exclude net capital costs and net non-operating income, income taxes and miscellaneous business taxes.

These results are excerpted from the Medicaid edition of the Sherlock Expense Evaluation Report (SEER), a benchmarking study comprising the results of 11 plans serving 3.2 million people surveyed by Sherlock Company. Collectively, they served 1.7 million Medicaid HMO members, plus 175,000 Family and Child Buy-in members. The median proportion of Medicaid HMO members was 74.2%.

For public policy and competitive reasons, administrative cost management is a high priority for health plans. Sherlock benchmarks include thousands of operational and financial performance metrics. Besides Medicaid plans, other universes include Independent / Provider-Sponsored plans, Blue Cross Blue Shield plans, Medicare plans and Larger plans. Collectively, the 50 plans serve more than 39 million insured Americans.

The growth in core administrative costs ranged from a high of 10.6% for Corporate Services to a decline of 5.1% for Account and Membership Administration. Provider and Medical Management comprised the greatest share of the total increase on a mix-adjusted basis.

Additional information was published on October 9 in Plan Management Navigator, available at our website, The complete analysis is available in SEER. Please call for additional information.

We will host a web conference on Thursday, October 15 from 2:00 PM to 3:00 PM East Coast Time to discuss the summary results. Doug Sherlock will offer a brief presentation, followed by questions and answers. To participate in the web conference, please register at:

Once registered, dial-in information and a link to connect to the web will be provided in a confirmation email.


Sherlock Company (, based in Gwynedd, Pennsylvania, provides informed solutions for health plan financial management. Since its founding in 1987, Sherlock Company has been known for its impartiality and technical competence in service to its clients.

Douglas B. Sherlock, CFA
Sherlock Company

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