New agreement proposes to cap MCO profits to ensure taxpayer dollars benefit Pennsylvanians

Ed Gruver//October 17, 2022

New agreement proposes to cap MCO profits to ensure taxpayer dollars benefit Pennsylvanians

Ed Gruver//October 17, 2022

A new profit-sharing agreement between Pennsylvania and its Medical Assistance physical health (PH) managed care organizations (MCOs) has been proposed to ensure taxpayer dollars benefit vulnerable citizens, Governor Tom Wolf announced. 

Under the proposed agreement, which would take effect in 2023, PH-MCOs will be capped at annual profits of 3 % and be required to invest additional profits in approved initiatives and projects aimed at benefiting individual health and well-being. 

“At a time when managed care organizations are seeing incredible returns, it is only right that excess dollars be funneled back into helping the very people those organizations serve,” Wolf said. “This agreement is a responsible use of public money and will put a cap on annual profits to allow the wealth to be shared among those who need it most.” 

MCOs will be able to maintain 3 % profit annually under the proposed profit-sharing agreement. Each MCO will have an opportunity to submit proposals to retain these profits to be used to support initiatives in line with the goals of the Department of Human Services (DHS).  

These goals include achieving health equity, employment supports, food security, housing, and programs focused on community development. The DHS’ Office of Medical Assistance Programs will approve and track each proposal’s measurable goals. All or a portion of the profits may be recouped by DHS should approved programs fail to meet their goals. 

“Managed care organizations are important partners in our work to help Medical Assistance recipients access the care and services necessary to achieve the health and quality of life they deserve,” Acting Secretary Meg Snead said. “This profit-sharing agreement will allow us to ensure that taxpayer resources for this program can be used to further invest in the program’s mission or be returned to offset program costs.” 

MCOs work with the DHS to negotiate and establish rates paid on a monthly basis based on how many members they have. To ensure the program remains financially solvent while allowing for profit of 2-3 %, capitation rates are developed. 

Over the last three years, an overall increase in the physical health program’s profits have exceeded 3 %. As this trend is expected to continue, an opportunity exists to require investments by the PH-MCOs in the Medical Assistance population. The excess profit would be spent on people the funding is intended to benefit. 

More than three million Pennsylvanians are covered by the Medical Assistance program. This profit-sharing agreement is intended to leverage Medical Assistance to ensure taxpayer money aids lower income and vulnerable Pennsylvanians.