Washington Medicaid Managed Care Medical Loss Ratio Audit

Washington's MCPs did not consistently comply with federal MLR reporting requirements for CY 2021.

Inconsistent inclusion of DSRIP payments in the denominator for some MCPs; proper exclusion needed where applicable.

Inaccurate treatment and classification of state-directed payments and special payments in the MLR reporting template, leading to misstatements.

Wrap-around payments for FQHCs, Rural Health Clinics (RHCs), and RHC T1015 Service Based Enhancement (RHC SBE) were not consistently classified as pass-through payments; guidance needed for accurate classification.

Incentive payments to MCPs were not consistently excluded from the MLR denominator; proper exclusion and reconciliation required.

MPC/BHPC payments outside of the integrated managed care contract were excluded inconsistently; they should be excluded from both numerator and denominator.

Non-claims costs misclassification and reporting gaps identified (e.g., some non-claims costs not reported; specific categories needed).

IBNR/runout data inconsistencies and lack of standard runout period guidance for IBNR reporting, with CHPW not using runout data.

In accordance with §§ 438.6(c)(2)(ii)(A) and 438.8(e)(2)(i)(A), Washington should closely monitor MCPs’ reporting of SDPs by reviewing the reported incurred claims payments in the MLR calculation and reconcile all amounts with MCPs’ MLR reporting.

In accordance with § 438.6(a), wrap-around payments for FQHCs, RHCs, and RHC SBE are not pass-through payments. Washington should augment the instructions in the MLR Reporting Template to provide clear guidance for the MCPs' accurate classification and treatment of special payments as pass-through payments.

In accordance with § 438.6(b)(2), incentive payments made by Washington to the MCPs are not considered premium revenue and should not be included in the denominator of the MLR calculation. These payments are in addition to the capitation payments received under the managed care contract. Washington should closely monitor the proper exclusion of incentive payments from the MLR calculation, and reconcile all incentive payment amounts with MCPs’ MLR reporting.

In accordance with § 438.8, only services covered under a Medicaid managed care contract should be included in the MLR calculation. Washington should implement additional oversight and monitoring procedures to validate that the expenditures and revenues associated with payments made outside of the Managed Care contract (e.g., MPC/BHPC services) are excluded from the MLR numerator and denominator.

In accordance with § 438.8(f)(2)(vi), Washington should enhance oversight and monitoring processes to verify the accounting of accruals to validate the proper classification and inclusion of risk sharing arrangements.

Washington should implement additional oversight procedures by requesting additional documentation to validate numbers reported in the MLR Reporting Template to address MCPs’ reporting of QIA expenses. By taking this approach, Washington can more easily validate MCPs’ adherence to federal standards regarding the proper reporting of QIA expenditures in the MLR calculation.