Medicare Advantage Plan Administrative Cost Trends: First Overall PMPM Cost Growth Since 2013

By a News Reporter-Staff News Editor at Managed Care Weekly Digest -- Medicare-focused plans' per member administrative costs increased by 0.8% in 2016, up from a decline of 3.2% in 2015 and the first increase since 2013. A shift in mix to less expensive Medicaid meant that as-reported expenses appeared to increase by 0.1%, compared to the 4.1% decrease in the prior year. These changes exclude confounding effects of differences in the universe and the effects of ACA and other taxes (see also Sherlock Company).

After eliminating the effects of mix differences, Account and Membership Administration increased by 3.1% per member, which is slower than the increase in 2015. The Sales and Marketing and Corporate Services clusters flipped from a decrease in the prior year to an increase in 2016. Provider and Medical Management continued its decline from 2015, but at a slower rate.

Corporate Executive and Governance was the most rapidly growing function overall, while Information Systems function's growth was the most important source of growth for Medicare plans.

The median total costs for the universe were $42.76 per member per month, lower than last year's $44.72. The median administrative expense ratio was 8.6%, which was relatively flat from last year.

Additional information was published recently in Plan Management Navigator, and is posted here.

We will discuss the results via free web conference on Thursday, September 28th from 2:00 PM to 3:00 PM Eastern Daylight Time. Douglas Sherlock will offer a brief presentation, followed by questions and answers. To participate in the web conference, please register at sherlockco.com/webinar. Once registered, dial-in information and a link to connect will be provided in a confirmation email.

The Navigator analysis excerpts from the 2017 Medicare edition of the Sherlock Benchmarks. This benchmarking study analyzes in-depth surveys of 10 health plans with a plurality of their business stemming from Medicare Advantage and collectively served 4.0 million comprehensive members.

Planning under uncertainty entails strategies that are applicable under any scenario. Cost optimization has been called a "no-regret move" for this reason. After all, superior performance should be translatable into growth in market share or earnings under any environmental outcome, since optimal costs can be deployed to achieve low prices or superior quality. One tool to inform this "no-regret move" is the Sherlock Benchmarks.

Besides the Medicare universe, other universes include Blue Cross Blue Shield Plans, Independent / Provider - Sponsored plans, and Medicaid plans. Collectively, the approximately 40 participating plans serve 50 million insured Americans.

This is the 20th consecutive year of the Sherlock Benchmarks. With cumulative experience of 780 health plan years, they are "the gold standard" of benchmarks used to measure and manage health plan administrative activities.

Sherlock Company (www.sherlockco.com), 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. View source version on businesswire.com: http://www.businesswire.com/news/home/20170927006338/en/

Keywords for this news article include: Medicaid, Medicare, Managed Care, Health Policy, Sherlock Company.

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