Assessing the Financial Health of Medicaid Managed Care Plans and the Quality of Patient Care They Provide

By Michael J. McCue, D.B.A., and Michael H. Bailit, M.M.
The Commonwealth Fund, June 15, 2011

In many states, Medicaid programs have contracted out the delivery of health care services to publicly traded health plans that are focused on managing the care of Medicaid members. Under the health reform law, states will be expanding the enrollment of their Medicaid programs and these publicly traded companies are expected to capitalize on this growing market. This study examined how publicly traded health plans differ from non–publicly traded ones in terms of administrative expenses, quality of care, and financial stability and found publicly traded plans that focused primarily on Medicaid enrollees paid out the lowest percentage of their Medicaid premium revenues in medical expenses and reported the highest percentage in administrative expenses across different types of health plans. The publicly traded plans also received lower scores for quality-of-care measures related to preventive care, treatment of chronic conditions, members’ access to care, and customer service.

Under health care reform, the Medicaid market is expected to increase by 16 million members by 2019. Given recent patterns in state contract awards to managed care plans, it is reasonable to anticipate that plans operated by publicly traded companies will enroll the majority of the expanded Medicaid population.


Issue Brief (18 pages):


By Don McCanne, MD

How many times does it have to be said? Publicly traded, investor owned, for-profit health plans pay out a lower percentage of revenues for medical care, waste more on administrative excesses, and provide lower quality care. This study confirms that this is true as well for publicly traded Medicaid managed care plans. Under the Affordable Care Act, this flawed Medicaid model will be expanded to include another 16 million individuals. Since it is our tax funds paying for these programs, we should all be communicating our outrage in the most obtrusive manner that is tenable. Wait. Forget tenable. Let’s start a rampage!

Re-posted with permission from