Health Net 2004 Annual Report Download - page 51

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Health Plan Services MCR decreased to 82.7% for the year ended December 31, 2003 from 83.5% for the same period in 2002
due to a continued focus on pricing discipline combined with pricing increases above the health care cost trend for our commercial
and Medicare Risk products.
A rate/volume analysis showing the impact of these commercial, Medicare and Medicaid health care cost changes for the year
ended December 31, 2003 compared to the same period in 2002 is summarized in the following table.
Government Contracts Costs
•
Medicaid health care costs increased by $44.7 million, or 4.9%, for the year ended December 31, 2003 compared to the
same period in 2002. Medicaid health care costs increased primarily due to limited Medicaid fee schedule increases and a
significant portion of providers in California being paid capitation on a percentage of premium basis.
Year Ended
December 31,
2003
(Dollars
in millions)
Increase in Commercial Health Care Cost PMPM
10.9 %
Decrease in Commercial Member Months
(3.3)%
Increase in Commercial Health Care Cost over Prior Year
$376.8
7.6 %
Increase in Medicare Risk Health Care Cost PMPM
3.5 %
Decrease in Medicare Risk Member Months
(8.6)
Decrease in Medicare Risk Health Care Cost over Prior Year
$(66.2)
(5.1)%
Increase in Medicaid Health Care Cost PMPM
2.1 %
Increase in Medicaid Member Months
2.8 %
Increase in Medicaid Health Care Cost Prior Year
$44.7
4.9 %
Increase in Total Health Plan Services Health Care Cost PMPM
7.1 %
Decrease in Total Health Plan Services Member Months
(2.1)%
Increase in Total Health Plan Services Health Care Cost over Prior Year
$355.3
5.0 %
The increases in Government Contracts costs for the year ended December 31, 2004 compared to the same period in 2003 and
for the year ended December 31, 2003 compared to the same period in 2002 are as follows:
2004 Compared to 2003
Change
2004 over 2003
Change
2003 over 2002
2004
2003
Dollars
%
2002
Dollars
%
(Dollars in millions)
Government contracts costs
$1,927.6
$1,789.5
$138.1
7.7%
$1,452.9
$336.6
23.2%
Government contracts costs increased by $138.1 million, or 7.7%, for the year ended December 31, 2004 compared to the same
period in 2003 due to an increase in costs of $672.1 million from the start of providing health care services under the new TRICARE
contract for the North Region, partially offset by $528.2 million from the expiration of the old TRICARE contracts.
The Government contracts ratio improved by 60 basis points to 95.3% for the year ended December 31, 2004 from 95.9% for
the same period in 2003.
48