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Let’s Do the Math: ACA Added At Least $1.3B in Annual Profit for Medicaid Health Plans

Disclaimer: I think its great when MCOs make money. From my study of economics and history (and life itself), only a profit motive will change healthcare outcomes. This quick analysis is meant to point out that ACA/ObamaCare has its own capitalist underbelly, too.

Disclaimer 2: This isn’t really news. I’ve had it on my list to do this calculation a while now. Just now getting around to it.

 

 

ACA added at least $1.3B annual profit for Medicaid managed care plans

Based on CBO estimates, ACA Medicaid expansion added $68B in spending 2015. Assuming a 2% profit, that means ACA added $1.36B to Medicaid health plan profits for each year moving forward. If we only used 2015 as the starting point, that means roughly $4B in profits have been added to Medicaid health plan bottom lines the past 3 years.

 

ACA added at least $8.8B annual administrative revenues for Medicaid managed care plans and vendors

Assuming 13% administrative expense (continuing with an assumed 85% MLR; 13% admin and 2% profit), then an additional $8.8B in annual administrative spending is happening due to Medicaid expansion. That’s $8.8B now going to pay for case managers, technology firm salaries, transportation company costs and myriad other services that are included in the administrative costs component allowed under Medicaid health plan spending.