U.S. Department of Health and Human Services  
Office of Inspector General  
CMS Has Opportunities To 
Strengthen  States  Oversight  of  
Medicaid Managed Care Plans  
Reporting  of  Medical Loss 
Ratios  
 
Suzanne Murrin  
Deputy Inspector  General  for Evaluation and Inspections  
September 2022,  OEI-03-20-00231   U.S. Department of Health and Human Services  
 
Office  of  Inspector  General  
Report in Brief  
September  2022, OEI-03-20-00231  
Why OIG Did This   CMS Has Opportunities  To Strengthen  
Review  
States  Oversight  of Medicaid Managed Care  
State and Federal expenditures  
on Medicaid managed care are   Plans  Reporting of  Medical Loss Ratios  
growing and totaled  
$360  billion in 2020, which was   Managed care has replaced  
55  percent of total Medicaid   Key Takeaways   fee-for-service as  the predominant  
expenditures in that year.    Although States reported   payment model in Medicaid.  Federal  
With its 2016  Medicaid   that most Medicaid managed   MLR  requirements were established to  
managed care  regulations, the   care plans  submitted medical   ensure that Medicaid managed care 
Centers for Medicare  loss ratio (MLR)  reports,   plans spend most of their revenue on  
&  Medicaid  Services (CMS)  nearly half of plans   services related to the health of their  
chose medical loss ratios   MLR  reports were  enrollees, thereby limiting the amount  
(MLRs) as a policy  tool to   incomplete. In addition,   that plans can spend on administration  
apply across the program to   some States did not review   and keep as profit.    
ensure appropriate  selected MLR data elements  
The Federal  MLR is the percentage of  
stewardship  of managed care  for accuracy.  These gaps  
premium revenue that a managed  care 
funds.  States oversight of   highlight  the need  for  
plan spent on  covered  health care 
their plans annual   stronger State  oversight of 
services  and quality-improvement  
MLR  reporting is critical to   MLR reporting.  
activities  in a 12-month period.   Plans  
improve fiscal transparency,  
must submit  annual  MLR  reports  to  
monitor costs, and promote  
the State  with 13 data elements, including  the MLR, the  data  needed  to  
high-quality  care in Medicaid  
calculate the MLR, and other numeric and  descriptive  data.  In turn, 
managed  care.    
States  must  take into account  plans calculated  MLRs as part of the  
process for  setting  plans future  capitation rates.  States must set  
How OIG Did This 
capitation rates  so  that plans would  reasonably  achieve  the Federal  
Review  
MLR  standard of  at least 85  percent.    
We administered an online 
survey to and requested   What OIG Found  
information from all States  
States  reported  that most  Medicaid managed care plans submitted  
with Medicaid managed care  
MLR  reports as required.   However, we found that  49  percent  of  the 
plans subject to Federal 
495  MLR  reports  reviewed  were incomplete.   These  incomplete  
MLR  requirements  as of  
MLR  reports  were missing  at least one  of seven numeric data  elements  
September  1,  2020.  Between  
that are essential to  the MLR  calculation.   This missing  data occurred  
September 2020 and  
across four  of the seven  MLR  report data  elementsnon-claims costs; 
December  2020, 43 States  
taxes and fees; member months; and quality-improvement  activity  
submitted survey responses  
expenses.   Two-thirds of the incomplete MLR  reports did not contain  
and plans annual MLR  reports.   
fields  for plans to even enter amounts for at least one  of these data  
We reviewed  and summarized  
elements.  
States survey responses  and  
analyzed plans MLR  reports   The  data element  for  non-claims costs, generally  defined as  plans  
for completeness.   expenses for administrative services,  accounted for the majority of  
incomplete MLR  reports.  Missing  data on  non-claims costs  may  reduce 
transparency on managed  care spending  and  limit States ability to  
   
ensure that  plans are  appropriately spending Medicaid  dollars on the  
health of enrollees  rather than  excessive administrative expenses.  Even 
when the  data element for  non-claims costs appeared  in MLR reports,  
plans did not report  this data in  a consistent manner.    
States indicated that they review MLR reports for completeness, but few  
States identified incomplete reports.   In addition, although 26  States  
reported  that they  review MLR data elements for accuracy  for all  of their  
plans,  16  States  responded  that they  did not review the accuracy of  
selected  MLR data elements  for all  or some  of their  plans.  
What OIG  Recommends  and How the Agency Responded   
We recommend thatto  strengthen  States  oversight  of MLR  reporting  
and better ensure that plans are using Federal dollars for patient  care 
CMS  (1) design an  annual  MLR  reporting template for States to provide  
to  their  Medicaid managed  care plans;  (2)  clarify  that  States  should  verify  
the completeness  of  their  plans  MLR reports; (3)  clarify  that States  
should  review  their  plans MLR  reports to verify the  accuracy of reported  
data elements; and  (4)  provide  additional guidance to  States regarding  
plans reporting of non-claims costs  in MLR  reports.   CMS concurred with 
all recommendations.    
   
TABLE OF CONTENTS  
 
 
BACKGROUND ................................................................................................................................................  1  
FINDINGS ......................................................................................................................................................... 7  
States reported that most Medicaid managed  care plans submitted MLR reports as required  ................  7  
Nearly half of  MLR reports reviewed  were incomplete, even though States indicated that they      
check MLR  reports for completeness ................................................................................................................................  8  
Sixteen States reported that they did not review all MLR data elements for  accuracy, as   
recommended by CMS ......................................................................................................................................................... 11  
CONCLUSION AND RECOMMENDATIONS ...........................................................................................  15  
Design an annual  MLR reporting template for States to provide to their Medicaid managed  care  
plans ............................................................................................................................................................................................. 15  
Clarify that States should verify the completeness  of their Medicaid managed care plans               
MLR reports ............................................................................................................................................................................... 16  
Clarify that States should review their Medicaid managed care plans MLR  reports to verify the 
accuracy  of reported data elements ................................................................................................................................ 16  
Provide additional guidance to States regarding Medicaid managed care plans reporting of  
non-claims costs in MLR  reports ....................................................................................................................................... 17  
AGENCY COMMENTS AND OIG  RESPONSE  .........................................................................................  18  
DETAILED METHODOLOGY .......................................................................................................................  19  
Data Sources ............................................................................................................................................................................. 19  
State Survey Analysis ............................................................................................................................................................. 20  
Completeness Analysis of Plans MLR Reports ............................................................................................................ 20  
APPENDICES.................................................................................................................................................  22  
Appendix A: States Use of Deadlines To Ensure Timely Submission of MLR  Reports ................................. 22  
Appendix B: Actions That States Have the Authority To Take If  Plans  Do Not Comply  with               
MLR Reporting Requirements ............................................................................................................................................ 23  
Appendix C: States Methods To Ensure That Plans MLR  Reports Are Complete ......................................... 24  
Appendix D: States Methods for Verifying the Accuracy of  Numeric  Data Elements .................................. 25  
Appendix E: Agency Comments ........................................................................................................................................ 26  
ACKNOWLEDGMENTS AND CONTACT  .................................................................................................  31  
   
ABOUT THE OFFICE  OF INSPECTOR GENERAL ....................................................................................  32  
ENDNOTES  ...................................................................................................................................................  33  
   
BACKGROUND  
OBJECTIVE  
To examine States oversight of Medicaid managed care plans compliance with 
medical loss ratio  (MLR) requirements.  
 
Managed care has replaced fee-for-service as the predominant payment model in  
Medicaid.  State and Federal expenditures on Medicaid managed  care are growing  
and in 2020  totaled $360 billion, which  was  55 percent of total Medicaid expenditures  
in that year.1   With its 2016 Medicaid managed care regulations (hereinafter referred  
to as the 2016 Final Rule),  the Centers  for Medicare &  Medicaid  Services (CMS)  chose 
MLRs as a policy tool to apply across the program to ensure appropriate stewardship 
of  managed care  funds.   Federal MLR requirements were established to ensure that  
Medicaid managed  care plans spend most of their  premium  revenue on covered  
health care services and quality-improvement  activities, thereby limiting the amount  
that plans can spend on administration and keep as profit.2    States oversight of their  
plans annual  MLR reporting is critical to  improve  fiscal transparency,  monitor costs,  
and promote high-quality care  in Medicaid managed care.  
Medicaid  Managed  Care  
Medicaid is a complex landscape  of State-specific programs that  offer health 
coverage to eligible groups, such as low-income  adults, pregnant women,  children,  
and individuals with disabilities.  States administer and finance Medicaid using State  
and Federal funds.  States have the flexibility to structure their programs on the basis  
of their unique needs  within  Federal regulations.   For Medicaid managed care, States  
contract  with and oversee the health plans that operate in the State.  States pay these 
contracted managed  care plans a monthly premium, known as a  capitation payment,  
for each enrollee regardless of whether the enrollee uses any  covered services each 
month.  
Medicaid  Managed  Care MLRs  
Managed care organizations (MCOs), prepaid ambulatory health plans (PAHPs), and  
prepaid inpatient health plans (PIHPs),  hereinafter collectively referred to  as managed  
care plans, are subject to Federal MLR requirements.3   CMS directed States to include  
contract requirements  for their Medicaid managed care plans  to calculate and report  
MLRs, beginning on or  after July 1,  2017.4    
The Federal MLR is the percentage of  premium  revenue that a managed care plan 
spent on covered  health care services and quality-improvement  activities  in  
CMS Has Opportunities To Strengthen States Oversight of Medicaid Managed Care  
Plans Reporting of Medical  Loss Ratios    
OEI-03-20-00231   Background |  1     
a  12-month  period.5   CMS  requires States to set their managed  care plans capitation 
rates so  that  plans would  reasonably  achieve MLRs of at least  85  percent for  
contracts starting on or after July  1, 2019.6   As part of the process for setting  
capitation rates, States must take into account the calculated MLRs that their  
managed  care plans have reported.7   States have  the option to require plans to meet  
a minimum MLR.  If  States require this, the  minimum MLR must be  at  least 
85  percent.8   Previous OIG  work found that most States  established  minimum  
MLRs by  September  2020.9   States that set minimum MLRs also have  the option to  
require plans to  repay the State if  a plan fails to meet  the State-set minimum  
MLR  (hereinafter referred to as a remittance).10    
Federal regulations  further established States oversight of their plans  MLR  reporting  
by requiring States to annually submit to CMS  a summary description of  each plans  
MLR report.11   As part of  their  monitoring  of  managed care programs, States also  
must  use MLR data to  improve  their programs performance.12   CMS  explained  in  its  
May  2019 guidance  that States  must  ensure  that plans comply  with MLR  requirements  
and should routinely audit  MLR  data and calculations  reported by their plans.   
CMS  specified  that States should ensure that revenues, expenditures, and  other  
amounts are  appropriately  identified to distinguish  payments  for healthcare services  
or quality-improvement  expenses from administrative services, taxes, or other  
activities.13    
MLR  calculation  
The  calculated  MLR  is the percentage of  premium  revenue that a managed care plan 
spent on covered  health care services and quality-improvement  activities in  
a  12-month period, as shown in 
Exhibit 1:  The calculated  MLR 
Exhibit  1.   Specifically, the  
MLR  numerator is the sum of  incurred  
claims (hereinafter referred to as claims  
Numerator 
costs)  and  expenditures on  health care 
Claims costs (excluding 
quality-improvement  activities  
non-claims costs) plus 
(hereinafter referred to  as   quality-improvement 
quality-improvement  expenses).14, 15    expenses 
Non-claims costsgenerally defined as  
plans  expenses for administrative  Denominator 
Premium revenue minus 
servicesare  excluded from  claims costs  
taxes and fees 
in the numerator.16   The 
MLR  denominator is premium revenue 
minus taxes, licensing fees, and  
Source:  42 CFR   438.8.  
regulatory  fees (hereinafter referred to   Note:  MLRs for managed long-term services and  
as taxes and fees).17     supports plans smaller than 630  member months and  
for standard plans  smaller than 5,400  member months  
are considered  non-credible and assumed to meet the 
The number of member  months is a  
MLR  standard.  
measure of plan size and is used to  
determine whether  a plan is  large  enough  (i.e., has sufficient  claims experience)  to  
CMS Has Opportunities To Strengthen States Oversight of Medicaid Managed Care  
Plans Reporting of Medical  Loss Ratios    
OEI-03-20-00231   Background |  2     
calculate  a credible MLR  and, therefore,  be subject to the Federal MLR  standard of  
85  percent.   Small plans  are eligible to  add credibility adjustments (ranging from 1 to  
8.4  percentage points) to their calculated MLRs.   If a plan is quite small, the plans  
MLR  is considered to be non-credible and assumed to meet or exceed  the 
MLR  standard.18    
MLR  reporting  
States must require plans to submit annual MLR  reports (hereinafter referred to as  
MLR  reports) to the State within 12  months after the end of the MLR  reporting year.19   
Plans must attest to the accuracy of the MLR  calculation when submitting the 
MLR  report to the State.20    
Federal  MLR  reporting requirements indicate that  a  plans  MLR  report  must  contain,  
at minimum,  13 specific  data elements, as shown in Exhibit 2.21   States may require 
plans to submit  the MLR  report  in any  format, including using a standardized  
MLR  reporting  template  created by the State.  CMS  had not provided  States a  
standardized format for  the  MLR  report as of 2020  but  may consider  developing one 
in the future.22       
  Exhibit 2:  The 13 data  elements required in  MLR reports  
data elements  4 data elements  1 data element 
applicable to all plans  applicable to some plans  not yet applicable to any plans 
To calculate MLR numerator:    Expense allocation    Expenditures on activities 
method(s)  related to fraud prevention 
  Claims costs 
consistent with regulations 
  Non-claims costs (to be    Aggregation method 
adopted for the private 
excluded from claims costs) 
  Any credibility adjustment  market at 45 CFR part 158 
  Quality-improvement 
applied 
expenses 
  Any remittance owed to 
To calculate MLR denominator: 
the State, if applicable 
  Premium revenue 
  Taxes and fees 
MLR result and other data: 
  Calculated MLR 
  Member months 
  Comparison with financial 
audit 
Source:  OIG review of  42 CFR   438.8.  
Eight of the 13  required  data elements are applicable to all managed  care plans, 4  are  
applicable to some plans, and the remaining element is not yet applicable to any  
plans.   There are eight  data elements  applicable to all plansseven numeric and one 
descriptive  data element.  The numeric  data  elements include non-claims costs.  This  
data element  is defined in  Federal  MLR  regulation as expenses for  administrative 
services that are not  for claims; quality improvements; or taxes and fees.23   The 
regulation  also specifies  that non-claims costs should be excluded from  claims costs,   
and lists four non-claims costs,  including two  types of  payments to third-party  
CMS Has Opportunities To Strengthen States Oversight of Medicaid Managed Care  
Plans Reporting of Medical  Loss Ratios    
OEI-03-20-00231   Background |  3     
vendors.24   In May  2019  guidance, CMS  noted that States must require plans to  collect  
MLR  data from their third-party vendors  that provide claims adjudication  activities  to  
ensure that plans identify and  exclude third-party vendors non-claims  costs from the  
plans  claims costs.25   For the descriptive  data element in this group, plans describe 
how the information in the MLR  report  compares with the plans audited financial  
report required in Federal regulation (hereinafter referred to as  comparison with 
financial audit).  
The data elements  applicable  to some plans  include two numeric  (i.e.,  credibility  
adjustment, remittance)  and two  descriptive  (i.e.,  expense allocation method(s),  
aggregation method) data elements.  Plans must  complete these data elements  
depending on the States MLR  requirements or  on specific plan characteristics.   For  
example, plans are expected to  describe the  aggregation method used to  combine  
MLR data for all covered  Medicaid eligibility groups.  However,  as  allowed by  
regulation,  States  may  require separate MLR  calculations and reporting  for  specific  
populations.26   Therefore, these  States plans  would  not have aggregation methods to  
describe.  
The remaining data element in Exhibit  2,  expenditures on activities related to fraud  
prevention, is  not yet  applicable to any plans.   Although specified  in the Federal  
MLR  regulations, this data element is not yet part  of the MLR  calculation.27   In a  
technical correction, CMS  explained that the  reporting requirements for fraud  
prevention expenses  were erroneously finalized in the 2016  Final Rule.   The 2020  Final 
Rule amended fraud prevention expenses to be consistent with private market  
MLR  regulations.  Fraud  prevention expenses  will be added to the Medicaid managed 
care MLR  calculation if and when the private market  regulations define these types of  
expenses.28  
Related OIG work  
In 2021, OIG issued a data brief that provided  a national landscape of the MLRs  that 
plans have achieved.  This data brief demonstrated that States that  chose to establish 
minimum MLRs with remittance requirements may recoup millions of  Medicaid  
dollars from plans that failed to meet State-set minimum MLRs.29   Specifically,  
OIG  found that 92 percent of plans MLRs met or  exceeded the Federal MLR  standard 
of 85  percent.  However,  19  plans reported owing  $198  million to States that chose to  
establish minimum MLRs with remittance requirements.   
In 2021, OIG  also  issued  an audit that examined  Minnesotas Medicaid managed care 
plans MLRs.   OIG found  that one of eight plans did not  achieve an  85-percent 
MLR.   Minnesota  could have saved $82,427  in calendar year 2017  if Minnesota had  
required this plan to  meet  a State-set minimum of 85 percent  and pay a remittance.   
However,  during the time period of OIGs review,  the Federal  Medicaid managed care 
MLR requirements  were not yet in effect  for  this State.   OIG did not issue a  
recommendation because Minnesota incorporated a remittance requirement  
CMS Has Opportunities To Strengthen States Oversight of Medicaid Managed Care  
Plans Reporting of Medical  Loss Ratios    
OEI-03-20-00231   Background |  4     
beginning calendar year 2018  for plans that do not meet  an MLR of at least  
85  percent.30  
From 2015 to 2017, OIG issued a series of seven State-specific audits that determined  
whether  potential Medicaid savings  could have been realized  if the State  had 
implemented a minimum MLR  requirement.31   These audits  covered time periods  
before CMS  incorporated  MLRs  into the Federal  Medicaid regulations.  The  audits  
used a  hypothetical Medicaid MLR  calculation based on a formula similar to the  
Federal MLR  standard for certain private insurers and Medicare Advantage plans.   
These audits found that five States could have realized savings if they had required an 
85-percent minimum MLR  and required plans to return money if the minimum  
MLR  was not met.  
Methodology  
We requested  information  from  all 51 State  Medicaid agencies (including the District  
of Columbia) regarding their implementation of Federal MLR requirements as of  
September  1, 2020.   All 51 States responded to our request.   The 43  States  with  
Medicaid managed  care plans subject to Federal MLR  requirements  as of 
September  1,  2020,  submitted  a self-administered online survey  and their  plans 
MLR  reports.32   However, one State had not obtained any of its plans MLR  reports  
prior to submitting the survey to OIG.  As such, this State did not complete  the 
sections of the online survey about reviewing  MLR reports for  completeness and  
accuracy.  Therefore,  the  analyses of  these sections of the State survey responses  
reflect only 42  States.  
We reviewed  and summarized States responses to the online survey.   We calculated  
frequencies  for all numeric and categorical survey  responses.  Specifically,  we 
determined  the number of  States  that  reported  including  MLR requirements in  plans 
contracts,  and the number of States that  said  they  received  complete and accurate 
MLR  reports.  We also  analyzed survey data to  determine whether  States  reported  
that  they reviewed the accuracy of  all  eight data elements that are applicable  to all 
plans  (i.e.,  claims costs;  non-claims costs;  quality-improvement  expenses;  premium  
revenue;  taxes  and fees;  calculated MLR;  member months;  and comparison  with  
financial  audit).  
We reviewed  the completeness  of  the plans MLR reports  that States submitted to  us  
for review.33   Specifically, we  reviewed  495  MLR  reports for the  7  numeric data  
elements  that are applicable  to all plans  (i.e.,  claims costs;  non-claims costs;  
quality-improvement  expenses;  premium revenue;  taxes and fees;  calculated MLR;  and 
member months).   We excluded from this analysis  the comparison with the  financial  
audit  data element  because,  even though it is applicable to all plans, it is  not required  
to calculate the MLR.  We also excluded from this analysis the data elements that are  
applicable  only  to some  plans and  the fraud prevention expenses  data element  that is  
not yet applicable to  any plans.   We  determined  whether  each of these seven  data  
CMS Has Opportunities To Strengthen States Oversight of Medicaid Managed Care  
Plans Reporting of Medical  Loss Ratios    
OEI-03-20-00231   Background |  5     
elements  (1) contained  a number;  (2)  contained a  zero or  a dash;  (3) was  blank;  or 
(4)  could not be found in the MLR  report.  We indicated  that a data element was not 
found if the MLR  report did not delineate or label a field for plans to  enter an amount  
for that  data element.  
We determined whether each of the seven numeric data elements  was  complete. For  
claims costs, non-claims  costs, premium revenue, the calculated  MLR, and member  
months data elements  we considered these data  elements complete if plans entered  
amounts greater than zero  and did not leave these data elements blank.   For the 
quality-improvement  expenses and taxes and  fees data elements,  we considered  each 
of  these data elements  complete if plans entered  an amount,  a zero,  or a dash.  Plans  
may not have quality-improvement  spending or taxes in an  MLR reporting year.  
Additionally, if we  could  not find a label or  a field  for a plan to enter information for a  
data element, we considered that  data element incomplete.  Finally, we determined  
the number of  reports  that were  complete  (i.e.,  reports that  included  complete data  
for all seven data elements)  or incomplete (i.e.,  reports that were missing information  
for one or more  of the seven data elements).  
Limitations  
We did not independently verify the self-reported information  from State Medicaid 
agencies.  We also did not independently verify the data  contained in the  plans  
MLR  reports that States  submitted  to  us in response to our information request.   
However,  we reviewed the information for inconsistencies and  when we identified  
them, we followed up with State Medicaid  agencies to resolve these inconsistencies.  
Standards  
We conducted this study in accordance with the Quality Standards for  Inspection  and  
Evaluation  issued by the Council of the Inspectors General on Integrity and Efficiency.  
CMS Has Opportunities To Strengthen States Oversight of Medicaid Managed Care  
Plans Reporting of Medical  Loss Ratios    
OEI-03-20-00231   Background |  6     
FINDINGS  
States  reported that most Medicaid managed care plans  
submitted MLR  reports as required    
According to  States,  most  Medicaid managed  care plans submitted Federally  required  
MLR reports.   As of September 1, 2020,  39  of  the 43  States  with managed  care plans  
reported  receiving  all MLR  reports  from their plans.  One  State  indicated  that it had 
not obtained  any  of the required  MLR reports  by  September 1,  2020,  but  noted that it  
received  these reports  by  the end of  2020.   This State granted extensions to plans due 
to the States delays with developing  an  MLR  reporting template  and the need for  
plans to update their information systems.   For each of the remaining three States,  
specific types of plans had not yet submitted their MLR  reports.   
The three  States  with unsubmitted MLR reports  had  not taken  actions  against  plans  
that had not  submitted the  reports.  Two  of the  States  were  waiting for specific  
guidance from CMS  for their Medicare-Medicaid plans  and the remaining  State was  
reviewing the delays for  its small dental and behavioral health plans.   
Some  States  reported challenges with plans  submitting  MLR  reports on time.   Four  
States noted that plans requested extensions to submit MLR  reports because of data  
problems,  technical reasons,  or the COVID-19 pandemic.   To obtain  reports not 
submitted by the deadline,  a few  States  communicated  with plans by email or  
escalated the issue to the plans management.   Appendix  A  includes additional 
information about States deadlines  for MLR  reports.  
All States reported that they have the authority to take actions with their plans if plans  
do not comply  with annual MLR  reporting requirements.  Most  commonly,  States  
indicated that they could require plans to revise and resubmit MLR reports, escalate 
compliance issues to plan management, and implement corrective actions  with their  
plans.  Appendix  B contains  additional  information about other actions States have 
the authority to take with plans that do not  comply with annual MLR  reporting  
requirements.  
States  communicated  their  MLR  reporting  requirements  in plans  
contracts,  as  required,  and  through  policy  and guidance  
documents  
States  included MLR  reporting  requirements in plans contracts, policies, guidance,  
and through MLR reporting  templates.  States  included  these  requirements in their  
Medicaid  managed care plan contracts  with two exceptions.   One State indicated that 
it incorporates these requirements  into  only  some plans contracts.   Another  State  
noted that its dental plans contracts do not include a requirement to submit  
CMS Has  Opportunities To Strengthen States Oversight of Medicaid Managed Care  
Plans Reporting of Medical Loss Ratios   
OEI-03-20-00231   Findings |  7     
MLR  reports.  In accordance with Federal regulations,  States must ensure,  through 
plan contracts, that their  MCOs,  PIHPs, and  PAHPs calculate and report MLRs.34  
Seven States  reported challenges with incorporating the MLR requirements into plans 
contracts, and a few  of them described these challenges.   One State explained that  
MLR  requirements  were included  in the States  MLR reporting  template  but used  
minimal  language about  MLR requirements in  plans contracts.   Another  State  
explained it worked  with its actuary to develop contract  requirements  and two  States  
inquired  about the availability of draft contract language  in their  responses.  
In addition to  including  MLR  requirements in plans  contracts,  30  States  indicated that 
they  developed  written  policies  or procedures  regarding  plans submission of  
MLR  reports.   States  reported providing  guidance or information  to their plans about  
MLR  reporting requirements by email or regular mail, and through reminders and  
technical assistance.   States  also  indicated that they  developed  an annual MLR  report  
template  for plans to submit their MLR  data.   A few  of  these States  indicated that 
plans submit  the MLR  reports though an online reporting  tool.    
Nearly half of MLR reports  reviewed  were  incomplete,  even 
though States indicated that they  check  MLR  reports for  
completeness  
Gaps  existed in plans  reporting  of  four  data  elements   
States received many incomplete MLR  reports  from their plans.35   Specifically,  
49  percent (244  of  495) of MLR  reports reviewed by OIG  were missing at least 1  of the 
7  numeric data elements  applicable to all plans.   Plans submitted these reports to  
28  different States.   Missing data occurred across four MLR  report data elements 
non-claims costs;  taxes and fees;  member months;  and quality-improvement  
expensesas shown in Exhibit  3.  Every MLR  report in OIGs review  contained 
complete data  for the other three numeric data elements: claims  costs, premium  
revenue, and the calculated  MLR.  
Missing data may prevent plans from calculating accurate MLRs  and make it difficult  
for States to  conduct oversight of plans MLR calculations.  Of the 244  MLR  reports 
missing data, most (172)  were missing 1  of the 4 data elements.  The remaining  
72  MLR  reports  were missing 2 or 3 data elements.  
 
 
 
 
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Exhibit 3: Missing data occurred across four  data elements.a  
 
costs  215 M LR reports 
 
Taxes and fees 
 
  Member months 
 
Quality expenses  -
 
Source:  OIG analysis of 495 MLR reports  with  reporting  periods ending in  2018 or 2019.  
aThe number of reports do not sum to 244  because  incomplete reports could have more than 1 missing data element.  
The data element for  non-claims costs,  generally defined  as  expenses for  
administrative services, accounted for the majority of incomplete MLR  reports.  If  a  
plan fails to exclude non-claims costs from  claims costs, as required, the 
MLR  numerator  would be inflated.   As a result, the  calculated  MLR  would be too high  
and may erroneously  meet  the Federal MLR standard of at least  85-percent.   The 
MLR  standard  is  intended to ensure that  at least 85  percent of plans revenue is spent  
on covered health care services and quality-improvement  activities, thereby  limiting  
the amount that plans spend on administrative services.  
Of the MLR reports  that delineated or labelled  a field to enter non-claims costs, 
79  did not include dollar  amounts for the non-claims costs data element.   We 
examined the premium revenue amounts in these reports and identified 24  reports 
with premium revenue amounts greater than $500  million, yet the non-claims costs  
data element was blank  or $0.00.  In response to  specific questions regarding the 
non-claims costs data element, CMS  explained to  OIG that it would be very unusual  
and unlikely for a plan not to have an amount for non-claims costs in  an  
MLR  reporting year.36  
Federally  required data elements did not appear in  two-thirds  of  
incomplete MLR reports   
At least one of four data elements  (non-claims costs; taxes and fees; member months; 
quality-improvement  expenses) did not appear anywhere in  67  percent  (163  of 244)  
of incomplete MLR reports.  In other  words, these reportssubmitted by plans to  
15  Statesdid not  contain  fields for plans to  even  enter amounts for at least one of  
these  data elements.    
The non-claims costs data element accounted  for  the majority of these reports, as 
shown in Exhibit 4.  Of the 215  MLR  reports missing non-claims costs,  136  did not 
delineate fields for plans  to enter  non-claims  cost amounts.    
 
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Exhibit 4: For the four  data elements with missing data, many  MLR  reports  
had no  field  for plans to enter  these data.  
  -claims costs 
Member months 
Taxes and fees 
Quality expenses 
Source:  OIG analysis of 495 MLR reports  with  reporting  periods ending in 2018 or 2019.  
Even  when  the  non-claims  costs  data  element  appeared in MLR reports,  plans did not 
report  it  in a consistent  manner.   Some  MLR  reports included  one line-item and  
others included many  line-items for the non-claims costs data element.  In more than 
two-thirds  of these MLR  reports, plans used  the explicit label non-claims costs.   
However, the remaining  MLR  reports  did not  contain  a field with  this explicit label.   
Instead, these  reports contained  fields with  a variety of labels such as  general  phrases  
about  administrative  costs  and/or  some specific  phrases including  marketing  and 
claims processing/member services.  
States  reported  that they  review  MLR  reports  for completeness,  
but  few  States  identified incomplete  MLR  reports  
Forty-two States indicated  that  they review MLR reports to determine whether they  
are complete.37   To ensure completeness, many  States responded that they  visually  
review MLR  reports to identify missing data elements.  Thirty-three States  reported  
that they  required plans to submit a self-attestation that MLR  reports are complete.   
States also indicated that they use the State  actuary or State data analytics  team or  
hire a third-party contractor to review the reports  for completeness.   Appendix C  
includes  additional  methods  States use  for ensuring complete MLR  reports. 
Seven States  reported  that all or some of their plans did not submit  complete 
MLR  reports.   A couple  of these  States indicated that their plans seemed unclear  
about MLR  reporting requirements.   Another  State explained that it  did  not include  
fields  in its MLR  reporting template for plans to enter  some of the  MLR  data elements  
specified in Federal  MLR  regulations.   As such, the State had not  initially  identified  
these data elements as  missing,  and therefore, did not take action against  the  plans.   
However, upon receipt of OIGs survey,  the State  revised  its MLR  reporting template.  
Six of these  seven States reported taking  actions to address plans that submitted 
incomplete MLR  reports,  such as requiring plans to revise and resubmit  MLR  reports 
and following up to obtain data elements that had not been submitted.  Two of the 
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six  States escalated the issue to the plans management and one of these  two  States  
also amended the plans contract language and implemented a corrective action plan.  
Two States described specific  challenges that incomplete MLR  reports present.  One 
of them  noted that incomplete MLR  reports  cause delays  with the States  analysis of  
the MLR reports.  The other State indicated that incomplete MLR  reports require State 
resources to follow up with plans to obtain corrected reports.   
Sixteen States  reported that they  did not  review all  MLR  data 
elements  for accuracy, as recommended by CMS      
Although many  States  indicated  that they  review  the accuracy of required  MLR  data  
elements, not all States did so.   As shown in Exhibit  5, 16  of 42  States38  indicated that 
they did not review  the  accuracy of some of the 8  data elements  that are applicable to  
all plans (i.e.,  claims costs; non-claims  costs; quality-improvement  expenses; premium  
revenue; taxes  and fees; the calculated MLR; member months; or the  comparison with  
financial  audit).   Currently,  
CMS  recommends, but does not   Exhibit 5: Sixteen States did not review  
require, that States determine  the 
the accuracy  of selected  MLR data 
accuracy of plans  MLR  reporting.39, 
elements for all or some plans.  
40   Most  commonly, these States   
did not review the accuracy of the  States Review of  Data Elements   Number 
comparison  with financial audit;  Applicable to All Plans   of States  
non-claims costs; and taxes and fees   All data elements reviewed  
26  
data elements.  For the  comparison   for all plans  
with financial audit  descriptive  data   Some data elements not  
16  
element,  a couple of  States explained   reviewed for all or some plans   
that plans MLR  reports and plans  Total   42  
audited financial reports  were not  
Source:  OIG analysis of surveys submitted by States in 2020.   
comparable because the audited  
financial reports covered  different timeframes  from the MLR  reports  or  included  
programs other than  Medicaid.  
Five  of the 16  States  did not always  review  at least half  of  these  data  elements.   One 
of these States  responded that  it  only reviews the calculated  MLR  for accuracy.   
Another State said it reviews the calculated MLR for all plans, but the remaining  seven 
data elements for  only some plans.   This State  explained  that it gives the MLR  reports 
from their dental-only plans a lighter review.   A  third  State reviews only  the 
calculated MLR  and member months data elements  and explained  that it  limits its  
review  because the State does not use the MLR  calculation  to  determine whether  
plans  must return funds to the State.   A  fourth  State reviews the claims costs, 
premium revenue, calculated MLR, and member  months data elements, but for only  
some of its plans, noting  that different  internal  program units reviewed MLR  reports 
for different types of plans.   The remaining State indicated it reviews all eight data  
elements, but only for some of  its  plans.  The State does not review the accuracy of  
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any MLR  data from  its  dental plans because the State  does  not require dental plans  to  
meet a minimum  MLR.   
States  reported  that they  review  MLR data elements  for accuracy  
by  comparing them  to  regulatory language and  plans  other  
financial records  
Most States (34  of 42)  reported  that they  review  the accuracy of the  numeric  
MLR  data elements  that make up the calculated  MLR (i.e.,  claims costs;  non-claims  
costs;  quality-improvement  expenses;  premium revenue;  and taxes and fees).   Many  
of these States  indicated that they compared these numeric  data  elements to  the 
description of the data element in the Federal  MLR  regulation.  States  also responded  
that they verify  numeric  data elements using sources such as  plans  prior MLR  reports, 
plans audited financial reports,  and plans Medicaid claims data.   Appendix  D  
provides  additional information about other  sources  States used to verify the accuracy  
of some of these numeric  data elements.  
For the calculated  MLR  data element, 32  States  indicated  that the reporting template  
plans use to submit MLR  reports contains spreadsheet features to  check  
MLR  calculations.  Seven States noted that they manually recalculate the  MLR  to  
check for accuracy.  
For the 3  descriptive  data elements  (i.e., comparison with financial audit,  expense 
allocation method(s), and aggregation method),  26  States indicated that they  
reviewed them for  accuracy.   Some  States  characterized  their reviews  of the 
descriptive  data elements  in  general terms,  with phrases like reviewed for  
reasonableness and validate the  accuracy.   However,  other  States described specific  
strategies for determining  the  accuracy  of the descriptive  data elements.   For both the 
comparison with financial audit data element and  expense allocation method(s) data  
element, States indicated that they compared them to  plans  audited financial reports,  
recent quarterly financial reports,  and prior financial  or MLR  reports.  With respect to  
the aggregation method data element,  four  States  responded that they use  an  
MLR  reporting  template  that automatically  aggregates  the MLR  data  across eligibility  
groups.    
Many States  clarified that the review  for accuracy  of  all or some of the  numeric and  
descriptive  data elements was  conducted by third-party contractors, including  
accountants and actuaries.  For example, 28  States hired a third-party  contractor  to  
recalculate the plans reported MLR.   Some  States  responded  that third-party  
contractors ensure that MLR  data are consistent  across sources and follow  up with  
plans to request clarification, verification, or additional data.  
 
 
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Fourteen States  found  errors  within plans  MLR  reports  and  
eleven States  took  actions  with  plans  
Fourteen States  reported  that they found MLR reports that contained inaccurate 
numeric or  descriptive  data for  all (2 States) or some (12  States) of their managed care  
plans.  These States indicated that inaccuracies occurred for the premium revenue; 
claims costs; non-claims costs; taxes and fees; quality-improvement  expenses; and 
member months data elements. 
A few States noted that inaccuracies in 
Plan submits an incomplete  
MLR  reports included plans leaving a data  
MLR template which 
element blank, plans entering information on 
translates to incorrect data 
the wrong line of  a report, and  differences  
and calculations  
between  amounts in  the MLR  report and  the 
-A State describing a  common  audited financial  report.  
inaccuracy of  MLR reports  
Many  of these  States took action  when they  
identified  managed care plans that submitted  
inaccurate data in their MLR  reports.   Nine  States required plans to revise and  
resubmit the MLR  report.   Two  States explained that the State adjusted plans 
MLR  reports based on recommendations made by their third-party contractors that 
review the reports.  Five  States escalated the issue  with inaccurate MLR reports  to  
plans management.  One State implemented a corrective action plan to address the 
inaccurate data and revised the plans contract language.  
Three States indicated that they had not taken  any action with plans that submitted 
MLR  reports that contained inaccurate data.  Two  of these States had not yet finalized 
their reviews, and the remaining State noted that the errors it found  were minimal  
and no action was necessary.  
Some States  were  uncertain about  their  MLR  oversight  
responsibilities and  wanted  additional  guidance  or  tools  from  
CMS  
Fifteen States responded that  CMSs  guidance 
about States oversight of these reporting  
It would be helpful to have  
requirements,  including monitoring  
insight into CMSs 
MLR  reports for completeness and accuracy,   expectation of the activities  
were insufficient.   For example, three States   needed to  demonstrate  
noted that they had to interpret the  Federal   appropriate oversight by [the  
MLR  regulations and  design their own  State].  
MLR  process without clear  direction  from  
-A State  noting need for  
CMS.  One  of these States noted that it  had  additional  CMS  guidance  
trouble finding  a point of contact for  
MLR  questions.   Another  State  indicated that it 
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had to confirm  plans MLR  calculations without training or guidance from CMS  about  
how to do so.  
Some  States  indicated that  assistance  from CMS, such as  technical assistance and/or  
tools,  would  help with  MLR  oversight.  For example, three  States requested that 
CMS  provide a standardized MLR  reporting template.   With respect to automating the 
review of plans MLR  reports, one State  
expressed the need for  an electronic  
Given newer requirement [the   submission  platform or  software.   
State] would appreciate  some   However, two States explained that their  
standardization from CMS [for]   information technology limitations would  
how reporting should occur.   
make it difficult to automate the review of  
Such as having a standardized 
plans MLR  reports.   To  ensure appropriate  
reporting template.  
MLR  oversight,  one State suggested  
-A State requesting  an MLR   CMS  provide a best-practices document  
reporting  template     and another  State  requested  a checklist  
from CMS  that defines  MLR  reporting  
expectations and  deadlines. 
 
 
 
 
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CONCLUSION AND RECOMMENDATIONS  
CMS  chose MLRs as a  policy tool to apply across  the program  to  ensure appropriate 
stewardship of  Medicaid  managed care  funds.  Federal MLR  requirements are 
intended to ensure that  managed  care plans spend most of their  premium  revenue on 
covered health care services and activities that improve enrollees quality of care,  
thereby limiting the dollars plans can spend on administration and keep as profit.  
States oversight  of their plans annual  MLR  reporting is critical  to  improve  fiscal 
transparency,  monitor costs, and  promote high-quality care  in Medicaid managed 
care.   States  must  conduct robust oversight of their plans MLR  reports  to  effectively  
leverage the MLR  calculation  to  ensure  appropriate Medicaid managed  care 
spending.  
Our findings indicate that States  succeeded  in ensuring that most Medicaid managed  
care plans submitted their MLR  reports to the State as required.  However,  nearly half 
of  the  reports  that plans submitted  were incomplete, which may  present  a substantial  
obstacle to  States  oversight efforts  and ability  to  ensure  accurate MLRs.   Specifically,  
the data element for non-claims  costs, generally defined as  plans expenses for  
administrative services, accounted for the majority of incomplete MLR  reports.  
Missing  data on  non-claims costs  may  reduce transparency into managed care 
spending and  limit States  ability to ensure  that  plans are appropriately  spending  
Medicaid dollars  on the health of enrollees rather than excessive administrative  
expenses.    
Our findings also indicate that  data elements  were missing from the reporting  
templates  plans use to provide MLR data to  States, which  may result in incomplete 
reports.   An incomplete reporting template would  make it exceedingly difficult for  
States to identify gaps in plans reports, and in turn, limit their ability to ensure the 
accuracy of the reports.    
Incomplete and inaccurate MLR reporting may prevent States from verifying the 
integrity of plans MLR  data and from using accurate MLRs  to set plans future 
capitation rates, as  required.   We recommend thatto  strengthen States oversight of  
plans MLR  reporting and  better ensure that plans  are using  Federal dollars for patient  
careCMS:  
Design an  annual  MLR  reporting  template for  States to provide  
to their Medicaid managed care plans  
To ensure  that plans report  all  required MLR data elements,  CMS  should develop  a 
nationwide MLR  reporting template  that  States  could  use to collect  MLR  reports from  
their plans.  This  template  would delineate fields  for plans to report, at minimum, the 
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OEI-03-20-00231   Conclusion and Recommendations  | 15     
data elements specified in Federal  MLR regulations.  This template would be designed  
to prevent plans from leaving  these data elements blank  and would help to  ensure  
the completeness of MLR  reporting across all States.  
Clarify that  States  should  verify the completeness of  their  
Medicaid managed care  plans MLR  reports  
Plans MLR  reports  are intended to provide States with financial information they  
need to oversee Medicaid managed care spending.   Complete reportscontaining, at 
minimum, the data elements specified in MLR regulations at 42 CFR   438.8(k)are  
essential to  States oversight of plans MLR calculations  and to fiscal transparency  in  
Medicaid managed care.   Current Federal  MLR regulations do not  explicitly  require 
States to verify the completeness of  their plans MLR reports and CMS guidance to  
States  does  not  sufficiently  detail States responsibility for ensuring  that  plans  
MLR  reports  are complete.   CMS should  clarify  to States  the importance of  verifying  
the completeness of plans MLR  reports.  For example, CMS  could:  
   emphasize to States  the  importance  of  reviewing  MLR  reports for 
completeness  and following-up with plans that submit incomplete reports;  
   organize and publicize periodic conference calls and/or a virtual  community of  
practice for States and CMS to discuss MLR  oversight roles and  
responsibilities,  highlight  best practices for  obtaining complete MLR  reports, 
and share successful methods and strategies for  verifying  completeness;  
   amend  Federal  MLR regulations to require States to verify that  MLR reports  
are complete and  identify in regulation or guidance the actions CMS  could 
take with States that do  not verify the completeness of plans MLR  reports.  
Clarify that  States  should  review their  Medicaid managed care  
plans MLR  reports to verify the  accuracy of reported data 
elements  
Federal MLR  regulations  require plans to attest to  the accuracy of the MLR  calculation  
when submitting their MLR reports to the State.41   These  regulations do not explicitly  
require States to review the accuracy of plans MLR  reports, but  inaccurate MLRs  and  
underlying data elements cast doubt  on the integrity of plans MLR reporting.   
CMS  should clarify States oversight responsibilities with respect to the accuracy of  
the data elements  specified in  Federal  MLR regulations at 42  CFR  438.8(k). For  
example, CMS  could:  
   develop and issue guidance to States that establishes minimum standards for  
States reviews of the accuracy of reported  MLR  data elements;  
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OEI-03-20-00231   Conclusion and Recommendations  | 16     
   organize and publicize periodic conference calls and/or a virtual  community of  
practice for States and CMS to discuss MLR  oversight roles and  
responsibilities, highlight best practices for reviewing MLR  data elements for  
accuracy, and share successful methods  and strategies for ensuring accurate 
reporting;  
   amend  Federal  MLR regulations to require States to review the accuracy of  the 
data elements  in plans MLR reports  and identify in regulation or guidance the 
actions CMS  could take  with States that do not verify the accuracy  of reported  
MLR data elements.  
Provide additional guidance to States regarding  Medicaid  
managed care  plans reporting  of non-claims costs  in 
MLR  reports  
Federal MLR  regulations  require plans  to  exclude non-claims costsgenerally defined  
as expenses for  administrative servicesfrom  claims costs  in the MLR  numerator to  
ensure that administrative expenses are not  counted as spending on health care 
services for enrollees.42   In addition to its May 2019  guidance that plans must exclude 
third-party vendors non-claims costs from  the plans  claims costs,  CMS  should  
provide specific guidance to States to clarify its requirements and expectations for  
plans identification and reporting of the non-claims costs data element in  
MLR  reports.   Our  findings demonstrate that plans  are frequently failing to report  
non-claims costs.  Providing  specific guidance about the types of administrative 
expenses that should be considered and reported as non-claims costs for 
MLR  purposes  could promote better compliance with this requirement.  Clear, specific  
CMS  guidance for the non-claims  costs data element could  also  enhance the 
transparency of plans administrative expenses and help to ensure appropriate 
MLR  reporting.  
 
 
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OEI-03-20-00231   Conclusion and Recommendations  | 17     
AGENCY  COMMENTS AND OIG  RESPONSE  
CMS concurred with  all of OIGs recommendations  and has actions planned for  
implementation.  
In response to our  recommendations, CMS stated  that it plans to develop a handbook  
for State oversight of  MLR reporting as part  of a  comprehensive managed  care 
oversight strategy.  CMS  anticipates that the handbook  will include:  
   a recommended template for plans MLR submissions and information on 
leading MLR  oversight practices, in response to  our first  
recommendation;  
   information  clarifying that States should  (1)  verify  the completeness of  
their plans MLR reports  and  (2)  review plans MLR  reports to verify the 
accuracy of reported data elements, in response to our second and third  
recommendations; and  
   information on the reporting of non-claims costs in MLR reports, in  
response to our  fourth recommendation.  
OIG appreciates CMSs planned efforts to improve monitoring and oversight of  
Medicaid managed care  programs and looks  forward to reviewing  the handbook  
when it is complete.  
Appendix E includes the full text of CMSs  comments.  
 
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OEI-03-20-00231   Agency Comments  and OIG Response  | 18     
DETAILED METHODOLOGY  
Data Sources  
We requested  information  from  all 51  State Medicaid agencies (including the District  
of Columbia) regarding their implementation of Federal MLR requirements as of  
September 1,  2020.  All 51  States responded to our request.  The 43  States  with  
Medicaid managed  care plans subject to Federal  MLR requirements as  of  
September  1, 2020,  submitted all requested information, which included (1)  a 
self-administered online survey, (2)  an accompanying information request,  and  
(3)  plans MLR reports.43  
State  survey   
The online survey included questions about States oversight of plans MLR  reporting,  
including whether States  included MLR requirements in plans contracts  and received  
MLR  reports  from plans,  and the extent to which States reviewed the MLR  reports for 
completeness,  and accuracy.  We also  asked States about the challenges they  
encountered with overseeing MLR  requirements.    
Information request  
The information request asked States to identify each plan subject to Federal  
MLR  requirements as  of  September 1,  2020.  States provided descriptive information 
for each plan, including the  type of managed  care plan  and the State-set  minimum  
MLR  for the plan, if any.   
Plans  MLR reports  
We requested that States provide OIG the MLR report(s) for each Medicaid managed  
care plan subject to Federal MLR requirements.   In total, we reviewed 495  MLR  reports  
submitted by States  for reporting periods ending  in 2018 or  2019.44   Our analysis 
included 293  MLR reports with reporting periods  ending in 2018 and 202  MLR reports  
with reporting periods ending in 2019.   States submitted  MLR  reports  for the 
following types of plans:  MCOs;  PIHPs;  PAHPs;  MCOs plus managed long-term  
services and supports plans (MLTSS);  MLTSS-only plans;  Medicare-Medicaid plans;  
behavioral health plans;  and dental plans.  We did not request from States  
information about CHIP.  However,  when States provided MLR  reports that contained  
combined  MLR data for  Medicaid and CHIP,  we included these data in our review.    
Federal MLR regulations  consider plans MLRs  to be non-credible if they  have less  
than 5,400 member  months for standard plans and less than 630  member months  for  
MLTSS-only plans.45   Plans with non-credible  MLRs  are expected to submit  
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MLR  reports to their  States for review.46   We included in the analysis  MLR  reports 
from  11  plans that  reported  as  non-credible.  
Four  States  had  plans  that  were Medicare-Medicaid financial alignment  
demonstrations.  These States, along  with CMS, directed  these  plans  to  follow  either  
Medicare regulations  or  a combination of  Medicare and Medicaid regulations  for  
MLR  requirements.   We, therefore,  excluded  from the analysis 44  plans from these 
States.  
State  Survey Analysis  
All 43 States that had plans subject to Federal MLR requirements as of  
September  1,  2020,  submitted responses to  the online survey.  However, one State did  
not complete all sections of the survey because the State had not obtained any of its  
plans MLR reports prior  to submitting the survey  to OIG.   As such, this State did not 
complete the sections of  the online survey about reviewing MLR reports for  
completeness  and accuracy.  Therefore, the analyses of these sections of the State 
survey responses reflect  only 42  States.  
We reviewed  and summarized States responses to the online survey.   We calculated  
frequencies  for all numeric and categorical survey  responses.  Specifically,  we 
determined the number  of States that  reported  including  MLR requirements in plans 
contracts,  and the number of  States  that said they  received complete and accurate 
MLR reports.   We  also analyzed  survey data to  determine whether States  reported  
that they reviewed the accuracy of all eight data elements that are applicable to all  
plans.   As noted in the background,  8  of the  13  required MLR  data elements  are 
applicable to all plans  (i.e.,  claims costs, non-claims costs;  quality-improvement  
expenses;  premium revenue;  taxes and fees;  calculated MLR;  member months;  and 
comparison  with financial audit).   We excluded from this analysis the  remaining five  
data elements.   
For narrative survey responses, we analyzed themes across States and noted unique 
and informative quotes.   We examined States practices for and  challenges  with 
oversight of  MLR requirements and reporting.  
Completeness  Analysis of  Plans MLR  Reports  
We reviewed  the completeness  of  plans  495 MLR reports  that States submitted for 
our review.   For the purpose of our  completeness analysis,  we focused on  seven  
numeric data elements  that are applicable to all plans  (i.e.,  claims costs;  non-claims  
costs;  quality-improvement  expenses;  premium revenue;  taxes and fees;  calculated  
MLR;  and member months).   We excluded  from this analysis the comparison with 
financial audit  data  element  because even though it is applicable to all  plans, it is  not 
required  to calculate the MLR.   We also excluded  from this analysis  the four  data  
elements  that are  applicable  only  to some plans  and the fraud prevention expenses  
data element  that is not  yet applicable to any plans.47   We determined  whether each  
CMS  Has Opportunities To Strengthen States  Oversight of Medicaid Managed Care  
Plans Reporting of Medical  Loss Ratios  
OEI-03-20-00231   Detailed Methodology |  20     
of these seven  data elements  (1)  contained a number;  (2)  contained a zero  or a dash;  
(3)was  blank;  or (4)  could not be found in the MLR  report.  We indicated that  a data 
element  was not  found if the MLR report did not  delineate or label any  field  for a plan  
to enter an amount for a  data element.    
For the non-claims  costs  data element, we found that many  MLR reports did not  
delineate or label a  field  as non-claims costs.  Instead,  some MLR  reports contained  
wording  similar to  the definition of non-claims  costs in the MLR  regulation.48   Some  
MLR reports  contained general phrases  about  administrative costs  and/or specific  
phrases such as  marketing  and  claims processing and  member services.  When an 
MLR report  contained  any of this language, we considered the non-claims costs  data  
element as  present  in the report.  Then we determined if the data element contained  
a non-zero number, a zero, or a dash, or  was blank.  
We determined  whether  each of the seven numeric data elements  was  complete.   For  
claims  costs,  non-claims costs,  premium revenue,  the calculated MLR, and member  
months data elements,  we  considered  these data elements  complete if plans entered  
amounts  greater than zero  and did not  leave  these  data elements  blank.   For the 
quality-improvement  expenses and taxes and  fees data elements, we considered  each 
of  these data elements  complete if plans entered  an amount,  a zero, or a dash.   Plans  
may not have quality-improvement  spending or taxes in an  MLR reporting year.   
Additionally, if we  could  not find a label or  field  for  a plan  to enter information for  a  
data element, we considered  that  data element incomplete.   Finally, we determined  
the number of reports  that were complete (i.e., reports that included  complete data  
for all seven data elements) or incomplete (i.e., reports that were missing information 
for one or more of the seven data elements).  
 
 
 
CMS  Has Opportunities To Strengthen States  Oversight of Medicaid Managed Care  
Plans Reporting of Medical  Loss Ratios  
OEI-03-20-00231   Detailed Methodology |  21     
APPENDICES  
Appendix A: States Use of Deadlines  To Ensure Timely 
Submission of MLR  Reports  
Federal regulations require that plans must submit MLR reports to States within 
12  months of the end of  the MLR reporting  year,  but do not require States to set a  
more specific deadline for MLR report submission.49   However, only 2  of the 43 States  
did not  require plans to submit MLR reports by a specific deadline, as shown in 
Exhibit  A-1.  State-set deadlines ranged from 4  months to 18  months after the end of  
the MLR  reporting  year for the 36  States that provided a single deadline.  Five States  
responded that they set  multiple deadlines.  Four of them explained that deadlines  
differed depending on the plan type and  one State had initial and final submission 
deadlines.    
Exhibit A-1: States set varied deadlines for plans to submit MLR reports.  
 
deadlines  5 States 
 
More than 12 months 
12 months 
8 to 11  months 
Less than 8 months 
No deadline  2 
Source:  OIG analysis of surveys submitted by States in 2020.   
   
CMS Has  Opportunities To Strengthen States Oversight of Medicaid Managed Care  
Plans Reporting of Medical Loss Ratios    
OEI-03-20-00231   Appendices |  22     
Appendix B: Actions  That  States  Have the Authority  To Take  If  
Plans Do Not Comply with MLR  Reporting Requirements  
All 43  States indicated that they have the authority to take actions with plans that do  
not comply with MLR reporting requirements.   In Exhibit  B-1,  States identified the  
actions they take from a list included in the online survey.    
Exhibit B-1:  States identified the actions they have the authority to take with  
their plans.  
 
plans to revise and resubmit MLR reports  42 States 
 
Escalate compliance issue to plan's management 
 
  Implement a corrective action plan 
 
Fine the managed care plan 
 
Amend/revise the plan's contract language 
 
  Freeze the plan's enrollment of new members 
 
Change the plan's future capitation rates 
 
Terminate the plan's contract 
 
Suspend the plan's contract 
II 
Other action(s) 
 
Source:  OIG analysis of surveys submitted by States in 2020.   
 
 
   
 
CMS Has  Opportunities To Strengthen States Oversight of Medicaid Managed Care  
Plans Reporting of Medical Loss Ratios    
OEI-03-20-00231   Appendices |  23     
Appendix C: States  Methods  To Ensure  That  Plans  MLR  Reports  
Are Complete  
Forty-two  States  indicated  that they used at least  one of the methods  shown in 
Exhibit  C-1  to  ensure the completeness of their plans MLR reports.50    
 
Exhibit C-1:  States used several methods to  ensure that plans  MLR  reports are 
complete.  
 
  plans to submit a self-attestation  33 States 
 
Visually review MLR reports after plans submit them 
 
 
Hire third-party contractors to conduct review 
 
 
Use State actuaries or data analytics team to review MLR reports 
 
Require plans to submit draft versions of MLR reports--in advance 
 
of the deadline 
 
Require plans to use an on-line reporting tool that identifies 
  incomplete data elements prior to submission 
  Uses a software program that electronically identifies incomplete 
data after submission 
 
 
  Source:  OIG analysis of survey s submitted by States in 2020.   
CMS Has  Opportunities To Strengthen States Oversight of Medicaid Managed Care  
Plans Reporting of Medical Loss Ratios    
OEI-03-20-00231   Appendices |  24     
Appendix D:  States  Methods  for  Verifying the Accuracy of  
Numeric  Data Elements  
States used a variety of sources to verify the accuracy of  the five  data elements that 
make up the calculated MLR  (i.e.,  claims costs; non-claims costs; quality-improvement  
expenses; premium revenue; and taxes and  fees).   States indicated  that they  
compared  these data elements  to the  information and  data sources  shown in  
Exhibit  D-1.51   CMS  recommends that States should  routinely audit the MLR  data and  
calculations reported by  their plans.52  
In addition to the data sources  provided in Exhibit D-1,  some States provided 
descriptions of other methods they used to verify  the accuracy of  certain data  
elements.  Most  commonly, these States said that they compare the five numeric  
MLR  data elements to plans monthly  or quarterly financial reports.  States  also  noted 
that  they compare plans  claims costs with encounter data  and  plans premium  
revenues to capitation payment reports.  States  also explained that they ask plans  
questions or request more information from plans about each numeric data element,  
if necessary.  
  Exhibit D-1:  States used different sources  to  verify the accuracy of  five numeric data  
elements.  
 
of data element in 
Plan's audited financial reports 
MLR regulation 
 
Claims costs  28 States  Claims costs  24 States 
 
Non-claims costs  Non-claims costs 
 
Quality expenses  Quality expenses 
 
Premium revenue  Premium revenue 
 
Taxes and fees  27  Taxes and fees  21 
 
 
Plan's Medicaid claims data  Plan's prior annual MLR report 
 
Claims costs  26 States  Claims costs  23 States 
 
Non-claims costs  - Non-claims costs 
Ill 
 
Quality expenses  Quality expenses 
Premium revenue  13  Premium revenue 
Taxes and fees  6  Taxes and fees  23 
Source:  OIG analysis of  surveys submitted by States in 2020.   
CMS Has  Opportunities To Strengthen States Oversight of Medicaid Managed Care  
Plans Reporting of Medical Loss Ratios    
OEI-03-20-00231   Appendices |  25     
Appendix E: Agency Comments  
Following this page  are the official comments  from CMS.    
 
CMS Has  Opportunities To Strengthen States Oversight of Medicaid Managed Care  
Plans Reporting of Medical Loss Ratios    
OEI-03-20-00231   Appendices |  26    DATE:  August 25, 2022 
TO:   Suzanne Murrin 
 Deputy Inspector General 
 For Evaluation and Inspections 
FROM:  Chiquita Brooks-LaSure 
Administrator 
Centers for Medicare & Medicaid Services 
SUBJECT:  Office of Inspector General (OIG) Draft Report: CMS Has Opportunities to 
Strengthen States Oversight of Medicaid Managed Care Plans Reporting of 
Medical Loss Ratios (OEI-03-20-00231) 
The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and 
comment on the Office of Inspector Generals (OIG) draft report. CMS is committed to 
partnering with states to help strengthen the monitoring and oversight of Medicaid managed care 
programs. 
The 2016 Medicaid Managed Care Final Rule was the first overhaul of Medicaid managed care 
regulations in more than a decade.1 In addition to modernizing how states purchase managed 
care and enhancing the consumer experience and key consumer protections, the 2016 Final Rule 
also strengthened the fiscal accountability in Medicaid managed care by adopting a standard for 
the calculation and reporting of medical loss ratios (MLRs). MLRs are an oversight tool that 
generally measure how much a managed care plan spends on the provision of covered services 
compared to the total revenue it receives in capitation payments, i.e., the fixed, prospective, 
monthly payments plans receive from the state for each person enrolled. The calculation and 
reporting of MLRs provides states with the information necessary to understand how capitation 
payments made for people enrolled in Medicaid managed care plans are expended. In addition, 
the establishment of a common national standard for calculating MLRs allows for comparability 
across states, facilitates more accurate rate setting, and reduces the administrative burden on 
managed care plans that operate in multiple states or have multiple product lines. 
For contract rating periods starting on or after July 1, 2017, regulations require that Medicaid 
managed care plans calculate and report their MLR according to the standards laid out in 42 CFR 
 438.8, which are similar to those used for calculating MLRs in Medicare Advantage and the
private market. Additionally, managed care plans are required to submit to the state an annual
MLR report that, at a minimum, must include the 13 data elements outlined in 42 CFR 
438.8(k). The required data elements include both numeric and descriptive items, some of which
1 Federal Register: Medicaid and Children's Health Insurance Program (CHIP) Programs; Medicaid Managed Care, 
CHIP Delivered in Managed Care, and Revisions Related to Third Party Liability; Final Rule (81 FR 27497) (May 
6, 2016). 
CMS Has Opportunities To Strengthen States Oversight of Medicaid Managed Care 
Plans Reporting of Medical Loss Ratios 
OEI-03-20-00231  Appendices | 27  do not apply to all plan types. Of the 13 total data elements outlined in 42 CFR  438.8(k), the 
OIG reviewed plans MLR reports for completeness of only the seven numeric data elements that 
were determined to apply to all plans.  
CMS has provided states with the flexibility to require their managed care plans to submit the 
annual report in any format that the state chooses, including using a reporting template created 
by the state, so long as the report contains the required information outlined in 42 CFR  
438.8(k). Managed care plans are required to submit the annual report in the timeframe 
established by the state; however, they must be submitted within 12 months after the end of the 
MLR reporting year. The MLR reporting year varies by state, and is defined in 42 CFR  
438.8(b) as a period of 12 months consistent with the rating period selected by the state. Given 
that plans were required to begin calculating and reporting their MLRs for rating periods starting 
on or after July 1, 2017, the first MLR reports were likely not received by states until sometime 
between July 1, 2018 and June 30, 2019. In their report, the OIG reviewed 293 MLR reports with 
reporting periods ending in 2018 and 202 MLR reports with reporting periods ending in 2019; 
which were the first two years in which states and plans were responsible for calculating and 
reporting MLRs in accordance with the requirements laid out in 42 CFR Part 438. CMS 
recognizes that the 2016 Final Rule adopted new MLR reporting and oversight requirements for 
Medicaid managed care, and as such, plans and states may have experienced challenges during 
the initial years of implementation.  
In addition to the requirements for Medicaid managed care plans described above, the 
regulations at 42 CFR  438.74(a) require that states annually submit to CMS, along with the rate 
certification required in 42 CFR  438.7, a summary description of the MLR report(s) received 
from their managed care plans. CMS has recently developed a standard format, with instructions, 
for this required MLR report, and an Excel version of the report is available online.2 During the 
development of this report template, CMS consulted with states and other stakeholders on the 
content and form of the report, and the final report template includes changes made to address 
comments and concerns from those entities. The Excel template is available for states to use 
immediately if they choose, and all states submitting rate certification packages on or after 
October 1, 2022, are required to use the template. Further, CMS is developing a web-based 
portal through which states will be able to submit several required Medicaid and Childrens 
Health Insurance Program (CHIP) reports, including the MLR report. The web-based forms will 
collect exactly the same information that is included in the Excel workbook, and CMS will 
update states when it becomes available.  
Since the publication of the 2016 Final Rule, CMS has engaged in numerous activities to support 
states in their implementation of the MLR requirements. For example, CMS has released several 
relevant guidance documents, regularly holds conference calls with the Managed Care Technical 
Assistance Group, and provides direct technical assistance to states as needed. In addition, CMS 
performs Medicaid MLR reviews in high-risk states to ensure compliance with state and federal 
MLR reporting requirements. The audit objectives are to determine if plans submitted annual 
MLR reports to the states in accordance with federal requirements and the annual MLR reporting 
and minimum MLR remittance calculations for the plans were supported by the underlying data 
2 CMS, Medicaid and CHIP Managed Care Monitoring and Oversight Tools, 2022, Accessed at: 
https://www.medicaid.gov/federal-policy-guidance/downloads/cib07062022.pdf 
CMS Has Opportunities To Strengthen States Oversight of Medicaid Managed Care 
Plans Reporting of Medical Loss Ratios 
OEI-03-20-00231  Appendices | 28  and supporting documentation. To accomplish these objectives, CMS reviews MLR remittance 
submissions and additional supporting documentation provided by the states, including plans 
financial reports and additional details to support reported MLR amounts and understand the 
states oversight procedures. Finally, CMS has developed Medicaid MLR-specific audit 
procedures for the 2022 Office of Management and Budgets (OMB) Compliance Supplement, 
which is a document that identifies important compliance requirements that the federal 
government expects to be considered by state auditors.3 The MLR-related procedures in the 2022 
Compliance Supplement suggest that, among other things, state auditors verify that the 13 
required data elements are included and that the report contains an attestation statement to 
address accuracy. CMS plans to continue to develop and refine these MLR-specific audit tests 
and procedures for future releases of the OMB Compliance Supplement. 
Over the last decade, CMS has engaged in numerous monitoring and oversight activities for 
Medicaid managed care programs. While these activities have been effective in assuring state 
compliance with specific regulatory and statutory requirements, CMS recognizes the need for 
additional guidance to improve monitoring and oversight, and will continue planned efforts to 
develop and issue additional tools for states. The OIGs recommendations and CMSs responses 
are below. 
OIG Recommendation 
Design an annual MLR reporting template for States to provide to their Medicaid managed care 
plans. 
CMS Response 
CMS concurs with this recommendation. As part of a comprehensive managed care oversight 
strategy, CMS plans to develop a handbook for state oversight of MLR reporting. The handbook 
is anticipated to include a recommended template for plans MLR submissions as well as 
information on leading MLR oversight practices. 
OIG Recommendation 
Clarify that States should verify the completeness of their Medicaid managed care plans MLR 
reports. 
CMS Response 
CMS concurs with this recommendation. As noted above, CMS plans to develop a handbook for 
state oversight of MLR reporting, and will include information clarifying that states should 
verify the completeness of their Medicaid managed care plans MLR reports. 
OIG Recommendation 
Clarify that States should review their Medicaid managed care plans MLR reports to verify the 
accuracy of reported data elements. 
3 OMB, 2 CFR  Appendix XI to Part 200 - Compliance Supplement, 2022, Accessed at: 
https://www.whitehouse.gov/wp-content/uploads/2022/05/2022-Compliance-Supplement_PDF_Rev_05.11.22.pdf 
CMS Has Opportunities To Strengthen States Oversight of Medicaid Managed Care 
Plans Reporting of Medical Loss Ratios 
OEI-03-20-00231  Appendices | 29  CMS Response 
CMS concurs with this recommendation. As noted above, CMS plans to develop a handbook for 
state oversight of MLR reporting, and will include information clarifying that states should 
review their Medicaid managed care plans MLR reports to verify the accuracy of reported data 
elements. 
OIG Recommendation 
Provide additional guidance to States regarding Medicaid managed care plans reporting of non-
claims costs in MLR reports. 
CMS Response 
CMS concurs with this recommendation. As noted above, CMS plans to develop a handbook for 
state oversight of MLR reporting, and will include information on the reporting of non-claims 
costs in MLR reports. 
CMS Has Opportunities To Strengthen States Oversight of Medicaid Managed Care 
Plans Reporting of Medical Loss Ratios 
OEI-03-20-00231  Appendices | 30   
ACKNOWLEDGMENTS AND CONTACT  
Acknowledgments  
Amy Sernyak served as the team leader for this study.   Others in the Office of  
Evaluation and Inspections who  conducted the study include Becky Laster,  
Craig  Diena,  and  Nancy Molyneaux.  Office of  Evaluation and Inspections  
headquarters staff  who provided support include Robert Gibbons and Kevin Manley.  
This report was prepared under the direction of Linda Ragone, Regional Inspector  
General for  Evaluation and Inspections in the Philadelphia regional office,  and  
Joanna  Bisgaier  and Edward Burley, Deputy Regional Inspectors  General.  
Contact  
To obtain additional information concerning this report, contact the Office of Public  
Affairs at  Public.Affairs@oig.hhs.gov.  OIG reports and other information can be found  
on the OIG website at oig.hhs.gov.  
Office of  Inspector General  
U.S. Department of Health and Human Services  
330 Independence Avenue, SW  
Washington, DC 20201  
 
 
 
 
CMS Has  Opportunities To Strengthen States Oversight of Medicaid Managed Care  
Plans Reporting of Medical  Loss Ratios    
OEI-03-20-00231    Acknowledgments and Contact |  31     
ABOUT THE  OFFICE OF INSPECTOR  GENERAL  
The mission of the Office of Inspector General (OIG), as mandated by  Public Law  
95-452,  as amended, is to protect the integrity of  the Department of Health and  
Human Services (HHS) programs, as  well as the health and welfare of beneficiaries  
served by those programs.  This statutory mission is carried out through a  nationwide 
network of audits, investigations, and inspections  conducted by  the following  
operating components:  
The  Office  of  Audit  Services  (OAS)  provides auditing services for  
HHS,  either by conducting audits with its own audit resources or by overseeing audit  
work done by others.  Audits examine the performance of HHS programs  and/or its  
grantees and  contractors in carrying out their respective responsibilities and are 
intended to provide independent assessments  of  HHS programs and operations.   
These audits help reduce waste, abuse, and mismanagement and promote economy  
and efficiency throughout HHS.  
The  Office  of  Evaluation  and Inspections  (OEI)  conducts national  
evaluations to provide HHS, Congress,  and the public with timely, useful, and reliable 
information on significant issues.  These evaluations focus on preventing fraud,  waste,  
or abuse and promoting  economy, efficiency, and  effectiveness of departmental  
programs.  To promote impact, OEI reports also present practical recommendations 
for improving  program operations.  
The Office of  Investigations  (OI)  conducts  criminal, civil, and  administrative  
investigations of fraud and misconduct related to HHS programs, operations, and 
beneficiaries.   With investigators working in all 50 States and the District of Columbia,  
OI utilizes its resources by actively coordinating  with the Department of Justice and  
other Federal, State, and  local law enforcement  authorities.  The investigative efforts  
of OI often lead to criminal convictions, administrative sanctions,  and/or  civil 
monetary penalties.  
The Office of  Counsel to  the Inspector  General  (OCIG)  provides  
general legal services to  OIG, rendering advice and opinions on HHS programs and  
operations and providing all legal support for OIGs internal operations.   
OCIG  represents OIG in all civil and administrative fraud and  abuse cases involving  
HHS  programs, including False Claims Act, program exclusion, and  civil monetary  
penalty  cases.   In connection with these cases, OCIG also negotiates and monitors  
corporate integrity  agreements.  OCIG renders  advisory opinions, issues compliance 
program guidance, publishes fraud alerts, and provides other guidance to the health 
care industry concerning  the anti-kickback statute and other OIG enforcement  
authorities.  
CMS Has Opportunities To Strengthen States Oversight of Medicaid Managed Care  
Plans Reporting of Medical  Loss Ratios  
OEI-03-20-00231   About the Office  of  Inspector General  | 32     
ENDNOTES      
 
1  Health Management  Associates, Medicaid Managed Care Spending in 2020, February 2021.  Accessed  at      
https://www.healthmanagement.com/blog/medicaid-managed-care-spending-in-2020/  on April 22, 2021.  
2  81 Fed. Reg. 27498, 27521 (May 6, 2016).  
3  42 CFR  438.8(a) and CMS,  Medicaid Managed Care Frequently Asked Questions (FAQs)    Medical  Loss Ratio, June 2020.   
Accessed at  https://www.medicaid.gov/federal-policy-guidance/downloads/cib060520_new.pdf  on January 19, 2022.  The  
Federal MLR requirements for managed care plans apply only to risk-based MCOs, PAHPs, and PIHPs, as defined in  
42  CFR    438.2.   However, PAHPs  that deliver only nonemergency medical transportation are exempted from the  
MLR  requirements.  42 CFR  438.9.    
4  42 CFR  438.8(a).  
5  42 CFR  438.8(b), (d)-(f).  
6  42 CFR  438.4(b)(9) and 81 Fed. Reg. 27499 (May 6, 2016).  
7  42 CFR   438.5(b)(5).  
8  42 CFR  438.8(c).  
9  OIG,  Nationwide, Almost All Medicaid Managed Care Plans Achieved Their Medical  Loss Ratio Targets, OEI-03-20-00230,  
August  2021.  
10  42 CFR  438.8(j).  
11  42 CFR  438.74(a)(1).  
12  42 CFR  438.66(c)(10).  
13  CMS,  Medical Loss Ratio (MLR) Requirements Related to Third-Party Vendors, May 2019.  Accessed at  
https://www.medicaid.gov/federal-policy-guidance/downloads/cib051519.pdf  on January 22, 2022.  
14  42 CFR  438.8(e)(1)-(3).  
15  The MLR numerator, as defined under 42 CFR  438.8(e)(1), also includes  expenditures for fraud prevention activities.   
However, expenditures for  fraud prevention activities are not yet part of the Medicaid MLR calculation.  
16  As defined under 42 CFR  438.8(b), non-claims costs mean  those expenses for administrative services that are none of the 
following: incurred claims; expenditures on activities that improve health care quality; or licensing and regulatory fees, or  
Federal and State taxes.  
17  42 CFR  438.8(f)(1)-(3).  
18  42 CFR  438.8(b) and 438.8(h) and CMS,  Medical Loss Ratio (MLR) Credibility Adjustments, July 2017.  Accessed at  
https://www.medicaid.gov/sites/default/files/federal-policy-guidance/downloads/cib073117.pdf  on May 9, 2022.  
19  42 CFR  438.8(b) and 438.8(k)(1)-(2).  
20  42 CFR  438.8(n).  
21  42 CFR  438.8(k).  
22  CMS,  Medicaid Managed Care  Frequently Asked Questions (FAQs)    Medical  Loss Ratio, June 2020.  Accessed at   
https://www.medicaid.gov/federal-policy-guidance/downloads/cib060520_new.pdf  on January 19, 2022.  
 
CMS Has  Opportunities To Strengthen States Oversight of Medicaid Managed Care  
Plans Reporting of Medical Loss  Ratios  
OEI-03-20-00231      Endnotes | 33    
 
23  42 CFR  438.8(b).  
24  42 CFR  438.8(e)(2)(v)(A)(1)-(4).  
25  CMS,  Medical Loss Ratio (MLR) Requirements Related to Third-Party Vendors, May 2019.  Accessed at  
https://www.medicaid.gov/federal-policy-guidance/downloads/cib051519.pdf  on January 22, 2022.  Also, under  
42  CFR    438.8(k)(3), managed  care plans must require any third-party vendor providing claims adjudication activities to  
provide all underlying data associated with MLR reporting to the managed care plan to calculate and validate the accuracy of  
MLR reporting.  
26  42 CFR  438.8(i).  
27  42 CFR  438.8(e)(4) and 438.8(k)(1)(iii)), and 85 Fed. Reg. 72754, 72792 (November 13, 2020).  
28  85 Fed. Reg. 72754, 72792 (November 13, 2020).  
29  OIG,  Nationwide, Almost All Medicaid Managed Care Plans Achieved Their Medical  Loss Ratio Targets,  OEI-03-20-00230,  
August  2021.  
30  OIG,  Minnesota Medicaid Managed Care Entities Used a Majority of Medicaid Funds Received for Medical Expenses and Quality  
Improvement Activities,  A-05-18-00018, September 2021.  
31  The OIG report numbers and issue dates for the seven audits are  The Medicaid Program Could Have Achieved Savings if New  
York Applied Medical Loss Ratio Standards Similar to Those Established by the Affordable Care Act,  A-02-13-01036,  October  
2015;  The Medicaid Program Could Have Achieved Savings if  Oregon Had Applied Medical Loss Ratio Standards Similar to Those  
Established by the Affordable Care Act,  A-09-15-02033, April 2016;  Review of Massachusetts  Medicaid Managed Care Program  
Potential Savings With Minimum Medical Loss Ratio,  A-01-15-00505, November 2016;  Review of South Carolinas Medicaid  
Managed Care Program Potential Savings With Minimum Medical Loss Ratio,  A-04-16-06191, December 2016;  Review of  
California Medicaid Managed-Care Program Potential Savings With Minimum Medical Loss  Ratio,  A-09-15-02025,  January 2017;  
Review of Wisconsin Medicaid Managed Care Program Potential Savings With Minimum  Medical  Loss Ratio,  A-05-15-00040, June  
2017; and  Review of Pennsylvania Medicaid Managed Care Program Potential Savings With  Minimum Medical Loss Ratio,  
A-03-15-00203, July 2017.  
32  Eight States reported that they did not contract with any Medicaid managed care plans subject to Federal MLR requirements  
as of  September 2020.  The Federal MLR requirements for managed care plans apply only to risk-based MCOs, PIHPs, and  
PAHPs as defined in 42 CFR   438.2.  For Vermont, the Federal MLR requirements apply to its single managed care plan, even  
though it is a non-risk-based PIHP.   Therefore, we included Vermonts plan in our analysis.  
33  As part of  OIGs information request, we asked States to provide, for each plan, the most recent MLR report that had also  
been reviewed by the State.  If  the State had not yet reviewed a plans most recent MLR report, we requested the prior  report.   
Alternatively, if the State had not yet reviewed any of the plans MLR reports, we requested  the most recent MLR report.  This  
analysis includes 293 MLR reports with reporting periods ending in 2018 and 202 MLR reports with reporting periods ending in  
2019.  
34  42 CFR  438.8(a).  
35  One  State said that its contracted actuary prepares the MLR  reports and sends them to its plans for review and feedback.  
36  Information confirmed by CMS staff on November 23, 2020.  
37  This analysis reflects 42 States instead of 43  States.   As explained in the Methodology, one State did not complete every  
question in OIGs survey because the State had not received its plans MLR reports at the time of OIGs request.  
38  Ibid.  
39  Plans are required to submit a comparison of  the information in the MLR report with the audited financial report required 
under  42 CFR  438.3(m).  See  42 CFR  438.8(k)(1)(xi).  
 
 
CMS Has  Opportunities To Strengthen States Oversight of Medicaid Managed Care  
Plans Reporting of Medical Loss  Ratios  
OEI-03-20-00231      Endnotes | 34    
 
40  81 Fed. Reg. 27498, 27533 (May 6, 2016), and CMS,  Medical  Loss Ratio (MLR) Requirements  Related to Third-Party Vendors,  
May 2019.  Accessed at https://www.medicaid.gov/federal-policy-guidance/downloads/cib051519.pdf  on January 24, 2022.  
41  42 CFR  438.8(n).  
42  42 CFR  438.8(b) and 438.8(e)(2)(v)(A)(1)-(4) and CMS,  Medical Loss Ratio (MLR) Requirements Related to Third-Party  
Vendors, May 2019.  Accessed at https://www.medicaid.gov/federal-policy-guidance/downloads/cib051519.pdf  on January 24,  
2022.  
43  Eight States reported that they did not  contract with any Medicaid managed care plans subject to Federal MLR requirements  
as of  September 2020.   The Federal MLR requirements for managed care plans apply only to risk-based MCOs, PIHPs, and  
PAHPs as defined in 42 CFR   438.2.  For Vermont, the Federal MLR requirements apply to its single managed care plan, even  
though it is a non-risk-based PIHP.  Therefore, we included Vermonts plan in our analysis.  
44  As part of  OIGs information request, we asked States to provide, for each plan, the most recent MLR report that had also  
been reviewed by the State.  If  the State had not yet reviewed a plans most recent MLR report, we requested the prior report.   
Alternatively, if the State had not yet reviewed any of the plans MLR reports, we requested  the most  recent MLR report.  
45  42 CFR  438.8(h)(3)-(4) and CMS,  Medical Loss Ratio (MLR) Credibility Adjustments,  July 2017.   Accessed at   
https://www.medicaid.gov/sites/default/files/federal-policy-guidance/downloads/cib073117.pdf  on May 9, 2022.  
46  81 Fed. Reg. 27498, 27774 (May 6, 2016).  
47  Although specified in the Federal MLR  regulations, this data element is not yet  part of the MLR  calculation.  Fraud 
prevention expenses will be added to the Medicaid managed care MLR  calculation if and when the private market regulations  
define these types of expenses.  42 CFR  438.8(e)(4) and 438.8(k)(1)(iii)), and 85 Fed. Reg. 72754, 72792 (November 13, 2020).  
48  42 CFR  438.8(b) and 438.8(e)(2)(v)(A)(1)-(4).  
49  42 CFR  438.8(k)(2).  
50  This analysis reflects 42 States instead of 43  States.   As explained in the Methodology, one State did not complete every  
question in OIGs  survey because the State had not received its plans MLR reports at the time of OIGs request.  
51  Ibid.  
52  CMS,  Medical Loss Ratio (MLR) Requirements Related to Third-Party Vendors, May 2019.  Accessed at  
https://www.medicaid.gov/federal-policy-guidance/downloads/cib051519.pdf  on January 22, 2022.  
CMS Has  Opportunities To Strengthen States Oversight of Medicaid Managed Care  
Plans Reporting of Medical Loss  Ratios  
OEI-03-20-00231      Endnotes | 35