Pennsylvania Proposes New Profit-Sharing Agreement With Medical Assistance Physical Health Managed Care Organizations

governor wolfImage via Pennsylvania Office of the Governor

PENNSYLVANIA — Governor Tom Wolf announced that Pennsylvania is proposing a new profit-sharing agreement with its Medical Assistance physical health (PH) managed care organizations (MCOs). Under the proposed agreement, PH-MCOs would be limited to 3% profits annually. They would have to invest additional profits in approved projects and initiatives that directly benefit the health and well-being of Pennsylvanians. The agreement would take effect for the 2023 contract year.

This decision comes as part of the Wolf administration’s efforts to prioritize healthcare access and affordability for all Pennsylvanians. The agreement will help ensure that profits are reinvested in programs and initiatives that improve the health outcomes of those on Medical Assistance, rather than solely benefiting MCOs’ bottom lines.

MCOs function in the Medical Assistance program similarly to insurers for private health insurance, in that they coordinate provider networks and are at risk for all costs of care for services covered by the Medical Assistance program. DHS works with MCOs to negotiate and set rates paid on a monthly basis based on their number of members. Rates are actuarily sound and based on cost of health care and service utilization. Capitation rates are developed to ensure the program remains financially solvent while allowing for a modest profit of approximately 2-3%.

The physical health program has been operating in a steady sate for several years and, over the last three years, DHS noted an overall increase in profits in excess of 3% across the program. DHS expects this trend is likely to continue. The current environment presents an opportunity to require significant investments by the PH-MCOs into the Medical Assistance population and to ensure taxpayer dollars are spent on the population the funding was intended to benefit.

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Under the proposed profit-sharing agreement, MCOs will be able to maintain 3% profit annually. For profits that exceed 3%, each MCO will have the opportunity to submit proposals to retain these profits to be used to support initiatives that align with DHS’ goals of improving access to care and provider retention, investing in social determinants of health such as housing, food security, employment supports, achieving health equity and programs that focus on community development. Proposals must include measurable goals that will be approved and tracked by DHS’ Office of Medical Assistance Programs. If the approved programs do not meet these goals, all or part of the profits retained may be recouped by DHS.

Since taking office in 2015, the Wolf Administration has been committed to leveraging Pennsylvania’s Medical Assistance program to ensure access to care to lower income and vulnerable Pennsylvanians while striving for quality and innovation that can deliver better outcomes for the people it serves. Medical Assistance covers more than 3 million Pennsylvanians, and prioritizing quality in this program and the health and well-being of this population is essential to ensuring a healthy, thriving commonwealth.

For more information about Pennsylvania’s Medical Assistance program, visit www.dhs.pa.gov.

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