As risk-based managed care continues to grow in Medicaid, the model's financial sustainability is being tested across the country.
While Medicaid enrollment grew 8 percent and revenue 19 percent between 2011 and 2012, financial results "decreased significantly," a Milliman report found, with the average medical loss ratio increasing from 85.5 percent to 87.9 percent.
Milliman actuaries Jeremy Palmer and Christopher Pettit studied 162 managed care organizations in 32 states, and found that health plans in the $10 million to $100 million range saw "significantly less favorable financial performance than the larger revenue categories" in 2012, but with a lot of variation across the country even in large health plans, such as Aetna's MCOs reporting losses in Pennsylvania and Texas.
Kentucky's recently expanded MCO program, which one large insurer recently exited, had an average MLR of 104 percent -- with all four of the insurers studied reporting losses, the Milliman report found.
Oregon, which is using an accountable care model in Medicaid, had an average MLR of 99 percent, with the for-profit Trillium Community Health Plan reporting a financial gain, compared to a Kaiser Permanente Northwest MCO reporting a loss.
Other states with high average MLRs were Hawaii (95 percent), Kansas (90 percent), Massachusetts (94 percent), Minnesota (91 percent), Texas (90 percent) and Virginia (90 percent). Only one of the five Massachusetts MCOs studied reported a financial gain, along with only two of seven studied in New York -- Health Insurance Plan of Greater New York and UnitedHealthcare.
Illinois and Nevada's Medicaid managed care programs showed the lowest average MLRs -- 75 percent and 77 percent, respectively -- while states like Michigan, Missouri and Wisconsin had average MLRs in the high 80s.
Palmer and Pettit also found pharmacy benefits accounting for up to 20 percent of total claims costs, a large factor especially in states that include drug costs within budget capitation rates.
As some states expand Medicaid under the Affordable Care Act, Palmer and Pettit expect risk-based managed care to continue growing and to be an indicator of the success of some of the latest healthcare financing models being used in Medicaid.