OIG: Medicaid Managed Care Plans Submit Incomplete MLR Reports

Almost half of medical loss ratio (MLR) reports from state Medicaid managed care plans were incomplete, indicating the need for CMS to increase states’ oversight of MLR reporting, the Office of Inspector General (OIG) found.

State and federal spending on Medicaid managed care reached $360 billion in 2020, accounting for 55 percent of total Medicaid expenditures.

CMS established MLR requirements to ensure that Medicaid managed care plans are spending the majority of their revenue on healthcare services for enrollees rather than directing it toward administrative services or keeping it as profit.

Plans must submit annual MLR reports to their state that include the MLR, the data needed to calculate the MLR, and other numeric and descriptive data. States then use the MLRs to determine plans’ future capitation rates, which must allow plans to achieve the federal MLR standard of at least 85 percent.

OIG launched an online survey that requested information from all states with Medicaid managed care plans subject to federal MLR requirements to determine the completeness of MLR reports. Forty-three states responded between September 2020 and December 2020.

States reported that most of their Medicaid managed care plans submitted MLR reports as required, but OIG found that 49 percent of the 495 MLR reports reviewed were incomplete.

The incomplete reports were missing at least one of seven numeric data elements required to calculate MLRs. The missing data was related to non-claims costs, taxes and fees, member months, and quality improvement activity expenses. Two-thirds of the incomplete reports did not have fields for plans to enter amounts for at least one of these data elements.

The majority of incomplete MLR reports were missing non-claims costs, the OIG report found. These costs represent plan spending on administrative services. Without this element, states may be unable to ensure that plans are spending Medicaid dollars on enrollee health instead of administrative services.

For the plans that included non-claims costs in their MLR reports, they were not reported in a consistent manner, OIG noted.

States indicated in the survey that they review MLR reports for completeness, yet few states identified incomplete reports. Twenty-six states said they check the accuracy of MLR data elements for their plans, while 16 states said they did not.

These findings indicate an opportunity for CMS to strengthen states’ oversight of MLR reporting from their Medicaid managed care plans.

OIG recommended that CMS design an annual MLR reporting template for states to offer to their Medicaid managed care plans. In addition, CMS should clarify that states should verify the completeness of MLR reports and the accuracy of the reported data elements. Lastly, CMS should provide states with additional guidance on plans’ reporting of non-claims costs in MLR reports.

CMS agreed with OIG’s recommendations.

When health plans do not spend the required revenue on member healthcare needs and fail to meet federal MLR requirements, they must issue MLR rebates. The Kaiser Family Foundation (KFF) estimated that private payers will issue about $1 billion in MLR rebates across the individual market, small group market, and large group market in 2022.