CMS Releases Parts C And D Proposals, Reduces Part D Deductible For 2014

The Centers for Medicare and Medicaid Services (CMS) has released a proposed rule that establishes requirements for medical loss ratios (MLRs) for Medicare Advantage (Part C) and prescription drug plans (Part D), which, according to CMS, promote greater accountability and transparency. The proposed MLR rule was published in the February 22 Federal Register. In addition, in the 2014 advance notice and call letter, the CMS announced that the Medicare Part D deductible for 2014 will decrease from $325 to $310.

Medical loss ratio. Under the Patient Protection and Affordable Care Act (ACA), Medicare Advantage and prescription drug plans must meet a minimum MLR beginning in 2014. Plans must have a medical loss ratio of 85 percent, which means they must spend at least 85 percent of premium dollars on health care or quality improvement activities, as opposed to administrative costs and profit margins, or they will be subject to a sanction. If a plan fails to meet the minimum MLR requirement for three consecutive years, it will be subject to enrollment sanctions; if it fails to meet the requirements for five consecutive years, the sanction is contract termination.

Under the proposed rule, MLR would be determined based on the percentage of contract revenue spent on clinical services, prescription drugs, quality improvement activities, and direct benefits to beneficiaries in the form of reduced premiums. The proposed rule, which uses the MLR rules for the private health insurance market as a reference point, describes reporting requirements and how to calculate the MLR.

Out-of-pocket spending. The standard Part D deductible for 2014 will decrease from $325 to $310, and the initial coverage limit will decrease from $2,970 to $2,850, according to the 2014 advance notice and call letter. The out-of-pocket threshold will be $4,550, down from $4,750 for 2013.

Comments should be submitted by March 1, and may be submitted electronically at http://www.regulations.gov; or by regular mail to: CMS, Department of Health and Human Services, Attention: CMS-4173-P, P.O. Box 8013, Baltimore, MD 21244-8013.

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