The Wolf administration is proposing a profit-sharing agreement with managed care organizations, ensuring taxpayer dollars benefit vulnerable Pennsylvanians

Governor Tom Wolf announced today that Pennsylvania is proposing to enter into a new profit-sharing agreement with its medical assistance organizations (MCOs). Under the proposed agreement, PH-MCOs would be limited to 3% of profits annually with a requirement to invest additional profits in approved projects and initiatives that directly benefit the health and well-being of Pennsylvanians. The agreement would enter into force for the contractual year 2023.

“At a time when managed care organizations are making incredible returns, it’s only right that excess dollars go back to helping the very people these organizations serve,” said Governor Wolf. “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.”

“Managed care organizations are important partners in our work to help Medicare recipients access the care and services necessary to achieve the health and quality of life they deserve,” said Acting Secretary Snead. “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 can be returned to offset program costs, and I am grateful for the joint commitment of our partners in continuing to build the Medical Assistance Program which is innovative and transformative with responsible use of public resources.”

MCOs function in a medical assistance program similar to private health insurance insurers, in that they coordinate networks of providers and are exposed to the risk for all costs of care for services covered by the medical assistance program. DHS works with MCOs to negotiate and set rates to be paid on a monthly basis based on their number of members. The prices are actually solid and are based on the cost of health care and the use of services. Capitation rates are developed to ensure that the program remains financially viable while allowing for a modest profit of approximately 2-3%.

The physical health program has been in place for several years, and over the past three years DHS has seen an overall increase in profits of over 3% across the program. DHS expects this trend is likely to continue. The current environment presents an opportunity to require significant investment by PH-MCOs in the medical assistance population and to ensure that taxpayer dollars are spent on the population for which the funding is intended.

Under the proposed profit sharing agreement, MKO will be able to maintain a profit of 3% per year. For profits exceeding 3%, each MCO will have the opportunity to submit proposals to retain these profits to be used to support initiatives that are consistent with DHS’s goals of improving access to care and provider retention, investing in the social determinants of health as which is housing, food security, employment support, achieving health equity and programs that focus on community development. Proposals must include measurable goals that will be approved and monitored by the DHS Office of Medical Assistance Programs. If approved programs do not meet these goals, DHS may reimburse all or part of the retained earnings.

Since taking office in 2015, the Wolf administration has been committed to leveraging Pennsylvania’s Medicaid program to ensure access to care for lower-income and vulnerable Pennsylvanians while pursuing quality and innovation that can deliver better outcomes for the people it serves. Medicaid covers more than 3 million Pennsylvanians, and prioritizing quality in this program and the health and well-being of this population is essential to ensuring a healthy, thriving community.

For more information about Pennsylvania’s medical assistance program, visit www.dhs.pa.gov.

Governor Wolf has served two terms as a leader consistently at work for the people of Pennsylvania. Learn more about how his Priorities for Pennsylvania prompted the return of the Commonwealth, leaving Pennsylvania in a much better place than when he arrived.