Potential Cost Savings for the Medicaid Program if States Adopted a Minimum Medical Loss Ratio and Required Remittances From Managed Care Organizations

OBJECTIVE

Most Medicaid enrollees receive healthcare services though managed care delivery arrangements, where States pay managed care organizations (MCOs) a monthly capitation payment for each Medicaid enrollee. Centers for Medicare & Medicaid Services reviews and approves capitation rates that are actuarially sound and developed in a way that MCOs could reasonably achieve a medical loss ratio (MLR) of at least 85 percent. The MLR is a measure of the proportion of premium revenue spent on enrollee healthcare services or quality improvement activities, compared to health plan administrative costs and profits. Federal managed care regulations give States the option to set a minimum MLR of at least 85 percent and require MCOs to submit remittances to the State if a Medicaid managed care plan fails to meet the minimum MLR. However, not all States have a minimum MLR requirement or require remittances when MCOs do not meet the State-set minimum MLR. OIG plans to identify potential cost savings for the Medicaid program in States that do not have a minimum MLR requirement or require remittances from MCOs when the State-set minimum MLR is not met.

TIMELINE

• October 15, 2025
  Announced
• Today
  Office of Audit Services In-Progress
• Est FY2027
  Estimated Fiscal Year for Project Completion

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