By Jonathan Blum, Acting Principal Deputy Administrator and Director, Center for Medicare
With today’s regulation limiting overhead and profits for Medicare Advantage and prescription drug plans, the Affordable Care Act continues to promote value for consumers’ and taxpayers’ health care spending. These new requirements apply to Medicare health and drug plans offered by private insurance companies serving over 37 million seniors and persons with disabilities, and build on a similar regulation we issued last year requiring a minimum medical loss ratio for health plans serving consumers in the private insurance market. Medicare health and drug plans, beginning next year, must meet a minimum medical loss ratio, limiting their spending on non-health related items such as administrative costs, profit, or overhead. More specifically, this means that the plans must spend at least 85 percent of their revenue on direct benefits to Medicare enrollees such as clinical services, prescription drugs and quality improving activities.
The new Medicare MLR requirements will also give people with Medicare and their caregivers more information about Medicare plans when comparing their health care options during enrollment periods. They will be able to consider a plan’s medical loss ratio, along with quality ratings, coverage, premiums and other factors that influence their health care decisions.
By ensuring that plan payments are spent on health care and activities that improve the quality of care received, seniors and persons with disabilities will have more opportunities to work with their doctors and other health care professionals to stay healthy. With Medicare spending already growing at a slower pace, the new requirements are just one more way the Affordable Care Act is creating more value for seniors and persons with disabilities. We are excited about new initiatives and projects that are improving the health of people with Medicare and are committed to making a stronger Medicare program.