Report: Federal Medicaid program could have seen savings if Affordable Care Act standards were used in New York

The U.S. Department of Health and Human Services Office of Inspector General said recently the federal Medicaid program could have realized savings if New York had applied medical loss ratio standards like those set in the Affordable Care Act (ACA).   

The amount that commercial health insurers and Medicare Advantage plans can spend on expenses not related to health care is set under the ACA.

These amounts, known as the medical loss ratio (MLR), are important because insurance providers that fail to meet the standards are required to pay rebates to enrollees or the U.S. Department of Health and Human Services.

Presently Medicaid spending is exempt from MLR guidelines, however, there are states that have made similar standards part of contracts with Medicaid managed care organizations.

"The federal government is entitled to the federal share of the net amount recovered by a state with respect to its Medicaid program,"  the Department of Health and Human Services Office of Inspector General said.. "While the New York State Department of Health had policies in place limiting the amount plans could charge for administrative costs as a component of their capitated rate, the federal Medicaid program could have achieved further savings during calendar year 2012 if the state agency had required its Medicaid managed care plans to meet MLR standards similar to those established by the ACA and issue rebates to the state agency if these standards were not met."

The office has recommended that the New York State Department of Health incorporate MLR standards into its contracts with Medicaid managed care organizations.