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Agency Proposes New Medicare Ratios

WASHINGTON (CN) - The Department of Health and Human Services has proposed a rule meant to ensure Medicare providers are spending more money on patient care than administrative expenses.

Part of the Affordable Care Act concerns reforming payment systems for Medicare and protecting beneficiaries. The Department of Health and Human Services proposed an amendment to the Social Security Act that would add new medical loss ratio requirements.

A medical loss ratio (MLR) is a percentage of revenue used for patient care in contrast to money used for administrative expenses or profit.

The proposed rule would require Medicare Advantage organizations and prescription drug sponsors to report their medical loss ratio and would impose penalties for failing to maintain an 85 percent ratio.

Organizations that do not meet the 85 percent ratio could face a number of sanctions, including a prohibition on enrolling new members, or contract termination.

The department noted that it is using commercial loss ratio rules as a reference point for developing the Medicare ratios, and explained its reasons for doing so. "First, the intent of the provisions to help ensure value for health coverage is comparable. Second, keeping the requirements similar will limit the burden on organizations that participate in both markets (the overwhelming majority of those offering Medicare products). Third, aligning the commercial and Medicare regulations will make commercial and Medicare MLRs as comparable as possible for comparison and evaluation purposes, including by Medicare beneficiaries," the department wrote. "We recognize that some areas of the regulation for private health insurance plans needed to be revised to fit the unique characteristics of the MA and Prescription Drug plan (PDP) markets." The department proposed that the loss ratios for Medicare and prescription drugs will be reported on a contract basis. The department asked the public to submit comments on the proposed rule by April 16 of this year.

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