Health Net 2004 Annual Report Download - page 50

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•
Medicare Risk health care costs increased by $126.3 million, or 10.2%, for the year ended December 31, 2004 compared to
the same period in 2003. Medicare risk health care costs increased primarily as a result of higher hospital costs from higher
bed day utilization, higher pharmacy cost trend for HMO products and provider settlements of $14.6 million relating to
claims processing and payment issues that had been or were being resolved in the fourth quarter of 2004.
Health Plan Services MCR increased to 88.0% for the year ended December 31, 2004 as compared to 82.7% for the same period
in 2003. The increase is primarily due to higher commercial health care costs that outpaced the premium revenue growth.
A rate/volume analysis showing the impact of these commercial, Medicare and Medicaid health care cost changes for the year
ended December 31, 2004 compared to the same period in 2003 is summarized in the following table.
•
Medicaid health care costs decreased by $57.8 million, or 6.0%, for the year ended December 31, 2004 compared to the
same period in 2003. Medicaid health care costs decreased as a result of lower physician costs combined with membership
losses.
2003 Compared to 2002
Year Ended
December 31, 2004
(
Dollars in millions
)
Increase in Commercial Health Care Cost PMPM
17.5 %
Decrease in Commercial Member Months
(1.8)
Increase in Commercial Health Care Cost over Prior Year
$828.3
15.7 %
Increase in Medicare Risk Health Care Cost PMPM
11.5 %
Decrease in Medicare Risk Member Months
(1.3)
Increase in Medicare Risk Health Care Cost over Prior Year
$126.3
10.2 %
Decrease in Medicaid Health Care Cost PMPM
(1.4)%
Decrease in Medicaid Member Months
(4.6)
Decrease in Medicaid Health Care Cost Prior Year
$(57.8)
(6.0)%
Increase in Total Health Plan Services Health Care Cost PMPM
14.5 %
Decrease in Total Health Plan Services Member Months
(2.5)%
Increase in Total Health Plan Services Health Care Cost over Prior Year
$896.8
12.0 %
Health Plan Services costs increased by $355.3 million or 5.0% to $7,516.8 million for the year ended December 31, 2003 from
$7,161.5 million for the same period in 2003 due to the following:
•
Commercial health care costs increased by $376.8 million, or 7.6%, for the year ended December 31, 2003 compared to the
same period in 2002. Commercial health care costs increased primarily due to higher hospital and physician costs and
moderating trends in pharmacy costs attributable to benefit changes, increased generic usage and the conversion of two
popular prescribed pharmaceuticals to over-the-counter status.
47
•
Medicare Risk health care costs decreased by $66.2 million, or 5.1%, for the year ended December 31, 2003 compared to
the same period in 2002. Medicare risk health care costs decreased primarily due to a decrease in member months as a
result of our planned exit from certain counties in California, Arizona and Connecticut. The increases in health care costs
on a PMPM basis were primarily in California and Connecticut, which experienced higher physician capitation rates and
increased inpatient and outpatient utilization. These trends were also consistent with revenue increases and limited
Medicare fee schedule increases in 2003.