Page 1 GAO-17-427R Medicaid Managed Care Compensation

441 G St. N.W.

Washington, DC 20548

March 31, 2017

The Honorable Ron Wyden

Ranking Member

Committee on Finance

United States Senate

The Honorable Frank Pallone

Ranking Member

Committee on Energy and Commerce

House of Representatives

Medicaid Managed Care: Compensation of Medicaid Directors and Managed Care 

Organization Executives in Selected States in 2015

In fiscal year 2017, Medicaid is projected to finance the health care coverage for an estimated 

74 million beneficiaries with estimated expenditures of $596 billion.1 State Medicaid directors 

oversee the day-to-day operations of their state Medicaid programs, and are responsible for a 

wide array of activities including benefit and payment determinations; procurement of services; 

and processing of claims for fee-for-service (FFS) delivery services and making payments to 

managed care organizations (MCOs). Executives of MCOs have a variety of responsibilities in 

delivering services to Medicaid beneficiaries, some of which are similar to those of state 

Medicaid directors and others that are different. For example, a MCO executive may oversee 

the enrollment and payment of providers in managed care—similar to what a state Medicaid 

director might do for the state’s FFS operations. However, MCO executives may also oversee 

marketing functions, manage operations across multiple states, or address the capital needs of 

the organization.2 As of July 2014, almost 77 percent of total Medicaid enrollment was in some 

type of managed care arrangement.3 MCOs can be for-profit or nonprofit, stand-alone plans, or 

they can be members of a group of insurers or other holding companies. 

1Medicaid, a joint federal-state health program for low-income and medically needy individuals, finances the delivery 

of health care services to beneficiaries through fee-for-service (FFS) payments to participating providers and 

capitated payments to Medicaid managed care organizations (MCOs). Under managed care arrangements, states 

contract with MCOs to provide certain services to beneficiaries. States may use other Medicaid managed care 

arrangements, such as prepaid inpatient health plans (PIHP) and prepaid ambulatory health plans (PAHP); these 

plans are not included in this report. 

Spending for Medicaid managed care has grown significantly, representing over one-third of federal spending on 

Medicaid in 2014.

Office of the Actuary, Centers for Medicare & Medicaid Services, United States Department of Health and Human 

Services: 2016 Actuarial Report on the Financial Outlook for Medicaid, (2016).

2Under the managed care delivery model, states typically contract with MCOs to provide a specific set of Medicaidcovered services to beneficiaries and pay them a set amount per beneficiary per month to provide those services.

3The most recent year for which enrollment data were available at the time of the report was 2014. Percentage 

represents enrollment in all types of managed care, which, according to Centers for Medicare & Medicaid Services 

officials includes MCOs, PHIP, PAHP, Program of All Inclusive Care for Elderly (PACE), and Primary Case 

Management. 

Accessible Version
You requested that we examine executive compensation in Medicaid managed care. This report 

examines what is known about the 2015 compensation of Medicaid directors and top paid MCO 

executives in selected states offering Medicaid managed care.

To determine what is known about the 2015 compensation of Medicaid directors and top paid 

MCO executives in states offering Medicaid managed care, we judgmentally selected 10 states 

that offered comprehensive, risk-based managed care in 2015.

Page 2 GAO-17-427R Medicaid Managed Care Compensation

4 These states had varying levels 

of Medicaid enrollment in managed care, but at least 50 percent in 2014; required at least some 

of their MCOs to file National Association of Insurance Commissioners (NAIC) annual financial 

reports; and were geographically diverse.5 We collected the 2015 compensation—salaries and 

additional benefits—of Medicaid directors in the 10 selected states by reviewing the 10 states’ 

websites for compensation data. Where necessary, we also contacted officials of the Medicaid 

programs in those states to obtain compensation information. We obtained information on the 

salaries of the Medicaid directors from all 10 states and information on additional benefits from 9 

of the states. The information we gathered cannot be generalized to other states.

We collected information about the 2015 compensation—salaries and supplemental 

compensation, such as stock options—of top paid MCO executives in the 10 selected states. 

We did so by reviewing two applicable sections of the NAIC financial reports that the MCOs filed 

with their state’s office of insurance for 2015.6 These sections provided information on the 

contribution of Medicaid premiums to total MCO revenues and executive compensation.7 We 

obtained all requested NAIC files from 9 states. We selected MCOs whose Medicaid premiums 

contributed more than half of their total revenue in 2015. We excluded MCOs that were 

members of a group of insurers or other holding company system and that reported the amount 

of the executives’ compensation that was allocated to the specific MCO in the state, rather than 

the entire compensation these executives received in 2015. This was the case for all MCOs in 2 

 

States may have different types of managed care arrangements in Medicaid. In this report, where we refer to 

Medicaid managed care, we are referring to comprehensive, risk-based managed care, the most common type of 

managed care arrangement. 

4For purposes of this report, we refer to “top paid” executives as those executives who either acted as principal 

executive officer or principal financial officer, or similar capacity, or whose total compensation exceeded $100,000 in 

2015.

5The 10 selected states were Florida, Hawaii, Indiana, Louisiana, Massachusetts, New Mexico, New York, 

Tennessee, Washington, and Wisconsin.

NAIC is the United States standard-setting and regulatory support organization created and governed by the chief 

insurance regulators from the 50 states, the District of Columbia, and five U.S. territories. Through NAIC, state 

insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory 

oversight. States’ offices of insurance may require insurance plans to file annual financial statements using NAIC’s 

financial report. 

6

In MCO executives’ compensation we included salary paid, bonuses, stock awards, option awards, sign-on 

payments, and severance payments. We excluded other benefits the executives might have received in 2015, such 

as MCO contributions to vested and unvested defined contribution plans and the dollar value of any insurance 

premiums paid by, or on behalf of the MCO because we did not have similar information for Medicaid directors.

7We identified MCOs that served Medicaid beneficiaries in the 10 selected states in 2015 by contacting Medicaid 

officials in these states. We requested from the states’ offices of insurance in 9 states and a state’s Medicaid program 

two files that are part of MCO’s NAIC financial reports. Specifically, we requested the NAIC financial reports’ 

Supplemental Compensation Exhibit, which represents information on the compensation of the principal executive 

and financial officers and other top paid executives, and Schedule T, which includes information on the portion of the 

MCOs’ revenues attributable to Medicaid premiums. 
states, and therefore we do not provide MCO executive compensation for these 2 states. We 

excluded executives whose total compensation was within the top and bottom 5 percent of total 

compensation of all executives in order to minimize the number of outliers in our data. We 

analyzed NAIC compensation data for the remaining 133 executives in 15 MCOs in 7 selected 

states.

Page 3 GAO-17-427R Medicaid Managed Care Compensation

8 The results are not generalizable to executives in other MCOs or other states.

We also interviewed former Medicaid directors about their compensation as Medicaid directors 

and MCO executives, and reviewed reports with national data and related information on 

Medicaid directors’ compensation. To select the former Medicaid directors, we used an iterative 

process to identify former Medicaid directors who then became MCO executives, and selected 

for interviews those who would provide us with perspectives on their experiences and 

compensation both at the state and MCO level.9 We also obtained national data on Medicaid 

directors’ compensation and tenure by interviewing officials at the National Association of 

Medicaid Directors (NAMD), and obtained and reviewed NAMD’s national data from their annual 

operations surveys.10 We also reviewed recent reports on Medicaid managed care and 

Medicaid directors’ compensation.11

We conducted this performance audit from May 2016 to March 2017 in accordance with 

generally accepted government auditing standards. Those standards require that we plan and 

perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objective. We believe that the evidence obtained 

provided a reasonable basis for our findings and conclusions based on our audit objective. 

Medicaid Directors Earned Less than Most Top Paid MCO Executives in Selected 

States in 2015 

In 10 selected states, the average salary for Medicaid directors in 2015 was $152,439, which 

was less than the $236,007 average salary paid to MCO executives in 7 of these states. 

However, according to MCO executives who were former Medicaid directors, their roles and 

responsibilities as Medicaid directors were generally more complex and time consuming than 

their roles as MCO executives.

Medicaid Directors’ Compensation in 2015 was Less than Most Top Paid MCO 

Executives in Selected States

Medicaid directors’ salaries in the 10 selected states ranged from $103,020 to $260,088, with an 

average of $152,439 and a median of $141,000 in 2015. Our data on the 10 selected states is 

 

8MCOs reported compensation information in various levels of detail. MCOs generally did not identify those 

executives for whom the reported compensation did not represent the entire year. For example, there were instances 

when an executive only worked for part of the year; in such cases, the reported information only represented 

compensation paid for the portion of the year during which the executive was employed with the MCO.

9At each interview, we solicited names of additional former Medicaid directors who then became MCO executives 

and who the interviewees thought would be useful to interview, ending the process after interviewing eight former 

Medicaid directors. This process is often referred to as “snowball sampling.”

10National Association of Medicaid Directors (NAMD), State Medicaid Operations Surveys, 2012-2016.

11Medicaid and CHIP Payment and Access Commission (MACPAC), Report to the Congress on Medicaid and CHIP 

(Washington, D.C.: June 13, 2014); and Andy Allison, Milbank Memorial Fund, The Role of State Medicaid Directors: 

A Leadership Imperative (New York, N.Y.: 2015). 
generally consistent with national data collected by NAMD on the salaries of Medicaid directors. 

Specifically, NAMD found that Medicaid directors made between $105,000 and $260,000, with 

an average of $152,518 and a median of $142,000 in 2016. In addition, data from the 9 selected 

states that provided us with information on additional benefits provided to Medicaid directors 

indicated that Medicaid directors in those states received health insurance, paid leave, and life 

insurance in 2015 in addition to their salaries.

Page 4 GAO-17-427R Medicaid Managed Care Compensation

12 Table 1 provides information on the 2015 

benefits in addition to salary of Medicaid directors in 9 of the 10 selected states. 

Table 1: Type of Benefits in Addition to Salary Provided to Medicaid Directors in Selected States, Calendar 

Year 2015 

State 

Health 

insurance

Retirement 

benefits

Paid 

leave

Life 

insurance

Short 

term 

disability

Long 

term 

disability 

Other 

benefits

1

Yes Yes Yes Yes Yes No Yes

2

Yes No Yes Yes No No Yes

3

Yes Yes Yes Yes No No Yes

4

Yes Yes Yes Yes No Yes No

5

Yes Yes Yes Yes Yes Yes No

6

Yes Yes Yes Yes Yes Yes Yes

7

Yes Yes Yes Yes No No Yes

8

Yes Yes Yes Yes No No No

9

Yes Yes Yes Yes Yes No No

Source: GAO analysis of state Medicaid information. | GAO-17-427R

Note: None of the nine states indicated that any additional cash benefits, such as bonuses or awards were provided 

to their Medicaid director in 2015. 

According to the Supplemental Compensation Exhibits submitted by selected MCOs that we 

reviewed, the top paid executives’ total compensation—salaries and supplemental 

compensation—in 2015 ranged from $110,740 to $1,904,431, with an average of $314,278 and 

a median of $270,713.13 The 2015 salaries paid to 133 top paid executives in seven of the 

selected states that we included in our analysis ranged from $108,598 to $796,732, with an 

average of $236,007 and a median of $229,442.14 In addition to their salary, these executives 

 

12We did not collect information on the dollar value of the additional benefits.

13We also analyzed the executive compensation data by type of MCO. Specifically, we examined the data to identify 

any major differences in compensation between for-profit and nonprofit MCOs, and among MCOs with different levels 

of contribution of Medicaid premiums to the MCO’s overall revenues. This analysis did not identify any major 

differences among the types of MCOs we examined.

14The NAIC files show the amounts paid for the time the executive worked for the MCO in 2015. Therefore, they may 

represent salaries and compensation paid for less than one year. 
received supplemental compensation, such as bonuses, stock awards, and option awards, 

adding an average of about $78,271.

Page 5 GAO-17-427R Medicaid Managed Care Compensation

15

 

Based on our analysis, the 2015 salary of Medicaid directors was lower than most top paid 

MCO executives in 6 of the 7 selected states for which we had MCO executive compensation 

data. Overall, the Medicaid directors’ average salary was $84,645 less than the MCO 

executives’ average salary, and $162,916 less than the average total compensation. Table 2 

shows the Medicaid director’s salary in each of the 10 selected states compared to average 

MCO executive’s compensation. 

Table 2: Medicaid Directors’ Salaries and Selected Managed Care Organizations’ (MCOs) Top Paid 

Executives’ Compensation Paid, in Selected States, Calendar Year 2015 

State

2015 Medicaid 

director salarya

2015 MCO executives’ compensation paidb,c

Number of 

executives Average salary paid

Average total 

compensation paid

1 $140,000 29 $285,559 $385,060

2 $119,932 28 $169,605 $191,744

3 $171,710 d d d

4 $142,000 17 $194,953 $263,697

5 $210,000 10 $186,017 $200,518

6 $146,400 27 $265,211 $318,973

7 $260,088 d d d

8 $103,020 20 $255,749 $320,869

9 $116,084 2 $454,325 $1,872,855

10 $115,156 d d d

Average $152,439 N/A $236,007 $314,278

Source: GAO analysis of data obtained from selected states’ websites or provided by selected states’ Medicaid and 

office of insurance officials. | GAO-17-427R 

Note: For purposes of this report, we refer to “top paid” executives as those executives who either acted as principal 

executive officer or principal financial officer, or similar capacity, or whose total compensation exceeded $100,000 in 

2015.

a

The Medicaid director’s salary for one of the 10 selected states was for fiscal year 2015. The rest of the salaries 

were for calendar year 2015. 

b

The data on MCO executives’ compensation generally does not indicate whether the executives worked for the 

entire year in 2015.Therefore, the figures presented represent the amounts paid for the time the executives worked at 

the plans. 

c

In MCO executives’ compensation we included salary paid, bonuses, stock awards, option awards, sign-on 

payments, and severance payments. We excluded other benefits the executives might have received in 2015, such 

as MCO contributions to vested and unvested defined contribution plans and the dollar value of any insurance 

premiums paid by, or on behalf of the MCO, because we did not have similar information for Medicaid directors.

d

Executive compensation information is not presented for 3 of the 10 states. Selected MCOs in 2 of the 3 states were 

excluded from our analysis, because they were members of a group of insurers or other holding company system and 

only reported partial compensation for their executives.The compensation they reported for their executives was the 

portion of the executives’ total compensation that was allocated to the specific plan in the state, rather than the entire 

compensation these executives received in 2015. The third state did not provide us with information on executives’ 

compensation in selected MCOs.

The total compensation paid to 109, or 82 percent, of the 133 executives in our selected MCOs 

was higher than the average Medicaid director’s salary, while the total compensation paid to 24 

executives, or 18 percent, was less. Figure 1 illustrates how the actual total compensation of the 

133 MCO executives in 7 selected states compares with the average Medicaid director’s salary 

in the 10 selected states. 

 

15We excluded from our analysis other benefits the executives might have received in 2015, such as MCO 

contributions to vested and unvested defined contribution plans and the dollar value of any insurance premiums paid 

by or on behalf of the MCO, because we did not have similar information for Medicaid directors.
Figure 1: Highest, Lowest, and Average Medicaid Director’s Salary and Selected Managed Care 

Page 6 GAO-17-427R Medicaid Managed Care Compensation

Organizations’ (MCOs) Top Paid Executives’ Compensation Paid, in Selected States, Calendar Year 2015 

Notes: For purposes of this report, we refer to “top paid” executives as those executives who either acted as principal 

executive officer or principal financial officer, or similar capacity, or whose total compensation exceeded $100,000 in 

2015.

The Medicaid director salary for one state was for fiscal year 2015. The rest of the Medicaid directors’ salaries were 

for calendar year 2015. 

Compensation data for top paid MCOs is presented for 133 executives in the 15 MCOs in 7 of 10 selected states. 

Executive compensation information is not presented for 3 of the 10 states. Selected MCOs in 2 of the 3 states were 

excluded from our analysis, because they were members of a group of insurers or other holding company system and 

only reported partial compensation for their executives. The compensation they reported for their executives was the 

portion of the executives’ total compensation that was allocated to the specific plan in the state, rather than the entire 

compensation these executives received in 2015. The third state did not provide us with information on executives’ 

compensation in selected MCOs.

In MCO executives’ compensation we included salary paid, bonuses, stock awards, option awards, sign-on 

payments, and severance payments. We excluded other benefits the executives might have received in 2015, such 
as MCO contributions to vested and unvested defined contribution plans and the dollar value of any insurance 

premiums paid by or on behalf of the MCO, because we did not have similar information for Medicaid directors.

Our review of the data suggests that at least some compensation figures reflect partial years—

executives who were in their position in the selected MCO for only a portion of the year. Partial 

compensation data would depress the overall average compensation figures for the MCO 

executives, as well as the difference between the Medicaid directors’ salaries and MCO 

executives’ compensation. Thus, the difference between the Medicaid directors’ salaries and 

MCO executives’ compensation would have been greater had plans reported a full year of 

compensation for all of the MCO executives.

Former Medicaid Directors Said They Earned Less as Medicaid Directors and Had More 

Page 7 GAO-17-427R Medicaid Managed Care Compensation

Complex and Time Consuming Roles than They Experienced as MCO Executives

Former Medicaid directors we interviewed said that their roles and responsibilities as Medicaid 

directors were generally more complex and time consuming than their roles as MCO executives. 

In addition, they said their compensation as Medicaid directors was lower than their 

compensation as MCO executives. They described their responsibilities as Medicaid directors 

as being numerous and diverse, including overseeing 

· the provision of several services—ranging from mental health services to long term 

services and supports; 

· many programs—including different agencies and sub-agencies within their states that 

may be responsible for the various aspects of Medicaid; 

· two different Medicaid delivery systems, depending on the state—FFS and Medicaid 

managed care; and

· different functions—including provider and beneficiary enrollment, payment rate setting, 

management of the claims processing system, program integrity audits, testifying in 

court cases involving Medicaid, and negotiating contracts with MCOs.

In addition, the former Medicaid directors said they were held accountable for their state’s 

Medicaid program to the federal government, their governor and legislature, the media, and the 

public. They added that they managed large budgets ranging from $3 million to $13 billion. The 

former directors said that their responsibilities were very complex and time consuming, requiring 

a range of skills including leadership, communication, flexibility, good negotiation ability, and 

knowledge of all Medicaid related issues and programs. 

In contrast, the former Medicaid directors said that their roles as MCO executives were 

generally less complex and time consuming. They said that MCO executives develop strategy 

and oversee, develop, and run the MCOs’ functional areas. For example, they may be 

responsible for overseeing specific functions, such as government and investor relations, 

Medicaid, expansion to other states, and business development. They said that they are 

generally not held accountable to various entities, such as state legislatures and the public, to 

the same degree as Medicaid directors. 

The former Medicaid directors said that it is not uncommon for Medicaid directors to take higher 

paying jobs in the private sector. They noted that MCOs often recruit Medicaid directors, 

because of their extensive programmatic knowledge and experience. One former Medicaid 

director said that this has resulted in a loss of institutional knowledge in state Medicaid 

programs. The former Medicaid directors also commented that state Medicaid programs are 

having difficulty attracting new Medicaid directors with the right skills and programmatic 
experience to fill vacant positions.

Page 8 GAO-17-427R Medicaid Managed Care Compensation

16 In particular, they said that states usually have difficulty in 

raising the salaries of Medicaid directors in order to retain them or attract new individuals with 

the right skills for the job. For example, two former directors said that states may be constrained 

by state laws that cap Medicaid directors’ compensation, or concerns about negative 

perceptions associated with raising the salary of the head of a social services program. 

National studies also suggest that Medicaid directors’ compensation is not competitive with the 

compensation of individuals completing similar tasks in the private sector. For example, a 2015 

Milbank report noted growth in Medicaid and the related increase in the responsibilities and 

influence of Medicaid directors; on the other hand, it noted that Medicaid directors’ 

compensation has been stagnant relative to the private sector.17 Similarly, a 2014 report by the 

Medicaid and CHIP Payment and Access Commission found that in the midst of increasing 

Medicaid program demands and complexity, state Medicaid programs are experiencing a “brain 

drain” as seasoned state Medicaid directors leave.18 The report concluded that high turnover 

compromises the ability of the Medicaid program to sustain focus and achieve larger program 

goals. According to national data that NAMD has been collecting through surveys of Medicaid 

directors since 2012, Medicaid directors’ responsibilities and budgets have been growing as 

their salaries have remained flat, and tenure has been declining, often because Medicaid 

directors leave to join the private sector. For example, according to the NAMD data, Medicaid 

directors in 2016 had been in their position for a median of less than 2 years. This was down 

from a median of almost 4 years when compared to the states’ previous Medicaid directors, 

according to NAMD officials we spoke to. Also, according to the NAMD data, in 2016, fewer 

than 27 percent of Medicaid directors had been in that position for over 2 years.19

Agency Comments

We provided a copy of this report to the Department of Health and Human Services (HHS) for 

comment. HHS did not have any comments.

As agreed with your offices, unless you publicly announce the contents of this report earlier, we 

plan no further distribution until 30 days from the report date. At that time, we will send copies to 

the Secretary of the Department of Health and Human Services, and other interested parties. In 

addition, the report is available at no charge on the GAO website at http://www.gao.gov. 

 

16The former Medicaid directors said that new Medicaid directors often may join the program for a short time—

enough to gain experience before taking a private sector job.

17Andy Allison, The Role of State Medicaid Directors: A Leadership Imperative. 

18Medicaid and CHIP Payment and Access Commission (MACPAC), Report to the Congress on Medicaid and CHIP 

(Washington, D.C.: June 2014). 

19National Association of Medicaid Directors (NAMD), State Medicaid Operations Survey: 5th Annual Survey of 

Medicaid Directors, (Washington D.C.: December 2016).
If you or your staffs have any questions about this report, please contact me at (202) 512-7114 

or yocomc@gao.gov. Contact points for our Offices of Congressional Relations and Public 

Affairs may be found on the last page of this report. GAO staff who made key contributions to 

this report are listed in enclosure I. 

Carolyn L. Yocom

Director, Health Care

Page 9 GAO-17-427R Medicaid Managed Care Compensation
Enclosure I: GAO Contact and Staff Acknowledgements

Page 10 GAO-17-427R Medicaid Managed Care Compensation

GAO Contact: Carolyn L. Yocom, (202) 512- 7114 or yocomc@gao.gov

Staff Acknowledgments: In addition to the contact named above, Thomas Conahan (Assistant 

Director), Pauline Adams (Analyst-in-Charge), Julie Flowers, Jacquelyn Hamilton, Drew Long, 

and Katya Rodriguez made key contributions to this report. 

(100814)