Core Administrative Costs of Medicaid Plans Were 6.5% of Premiums in 2010

PHILADELPHIA--(BUSINESS WIRE)-- Medicaid plans core administrative expenses were 6.5% of premiums and equivalents in 2010. The median value in the prior year’s universe was 7.0%. Expressed per member per month (PMPM), median core costs were $21.56 compared with $22.41 for last year’s universe.

These results are excerpted from the 2011 Medicaid edition of the Sherlock Expense Evaluation Report (SEER), a benchmarking study completed through an in-depth survey of 11 Medicaid plans. Collectively, the plans serve 5.7 million Americans of which 4.3 million are enrolled in Medicaid HMO products. These members represent 16.5% of all Medicaid MCO members. Along with supplemental content from our Blue Cross Blue Shield and Independent/Provider–Sponsored universes, Medicaid membership in represented plans serve more than 20% of all Medicaid MCO members.

For plans participating in this and last year’s survey, the median increase in core costs was 2.1% on an as-reported basis and 1.2% after eliminating the effect of product mix differences. Cost growth was affected by product mix changes favoring members that are more costly to administer. Medicare Advantage membership of continuous plans grew by 36.5% on average, while commercial membership declined at an average rate of 3.0%. According to Douglas B. Sherlock, CFA, Sherlock Company’s president, “Corporate Services cost increases may be attributable to adaption to the Patient Protection and Affordable Care Act (PPACA) during 2010.”

Medicaid MCOs are an increasingly integral component of health care. The weak economy contributes to their growth now while the PPACA will do so in the future. Optimizing administrative expenses is central to providing value for state and federal Medicaid sponsors and consumers, and is also essential to assure Medicaid plan competitive advantages.

The Medicaid universe is among several benchmarked by Sherlock Company. Others include Blue Cross Blue Shield plans, Independent/Provider–Sponsored plans, Medicare plans and TPAs. The 60 plans in various universes serve approximately 50 million insured Americans.

Additional information is available in Plan Management Navigator, available upon request or through our website, The complete analysis is available in SEER. Please call for additional information.

We will also host a web conference on Monday, October 17th from 2:00 PM to 3:00 PM Eastern Time to discuss the summary results. Douglas 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 North Wales, 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.


Sherlock Company
Douglas B. Sherlock, CFA, 215-628-2289
[email protected]

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