Financial Transparency in Medicaid Managed Care: Identifying High Performing States

State Medicaid agencies in the United States are lacking transparency when it comes to the financial performance of individual managed care organizations (MCOs) that serve vulnerable populations. A recent scan of state Medicaid agency websites by researchers revealed that information on the effectiveness of MCOs in providing access, quality, and reducing health disparities for children, children and youth in foster care, and pregnant and post-partum women is often not readily available to the public.

To address this lack of transparency, researchers focused on analyzing the medical loss ratio (MLR), which represents the percentage of capitation payments made to an MCO by the state Medicaid agency that is used for providing covered services to Medicaid enrollees. The higher the MLR percentage, the more the MCO spends on services and the less on administrative costs and profit. While other financial metrics could have been considered, the MLR is the only annual metric reported using a standardized methodology regulated by the government.

Of the 41 managed care states, researchers found that very few states publicly post detailed MLR data for each MCO on their Medicaid agency websites. States like Arizona, Florida, Iowa, Louisiana, Mississippi, New Hampshire, Oregon, Utah, and Virginia are exceptions, but some data has not been updated since 2020. The reports prepared by accounting firms like Myers and Stauffer review each MCO’s submissions and propose adjustments, providing policymakers and the public with valuable information for comparison and improvement.

It is evident from the search for Annual MLR Reports that most states do not prioritize financial transparency for individual MCOs, despite being transparent about quality performance. However, states that do post detailed MLR information recognize the importance of accountability in managing public funds and maintaining trust in Medicaid managed care dollars.

The commitment to transparency on MCO financial performance transcends political affiliations, as both Red and Blue states have taken initiatives to provide detailed MLR information publicly. While CMS has not required this level of transparency, state agencies have taken it upon themselves to ensure accountability and trust in managing Medicaid funds.

Overall, the posting of MLR information has not deterred MCOs from participating in transparent states, as there is significant revenue available to make their involvement in Medicaid markets worthwhile. Increased transparency not only promotes accountability but also drives improvements in the performance of MCOs serving vulnerable populations.