The Centers for Medicare and Medicaid Services has issued a final rule to implement medical loss ratio requirements for the Medicare Advantage Program (Part C) and the Medicare Prescription Drug Benefit Program (Part D).

The rule is available here and scheduled for publication on May 23. The Affordable Care Act mandates insurers comply with a medical loss ratio, or MLR, under which a certain percentage of revenue is used for patient care--including quality initiatives--rather than administrative and marketing expenses, profit, and other such items.

An interim final rule effective in January 2011 set the MLR at 85 percent for the private insurance large group market and at 80 percent for the private small group and individual markets. The new final rule sets the MLR at 85 percent for the Medicare Advantage and Part D drug benefit plans. Insurers must meet the MLR or face financial penalties and eventually contract terminations if they chronically miss the threshold.

The final rule includes five categories of activities that improve health care quality: improving outcomes, preventing hospital readmissions, improving safety and reducing medical errors, promoting health and wellness, and enhancing use of health data to improve quality, transparency and outcomes while supporting meaningful use of electronic health records, according to the rule.

The activities must be designed to support improved quality and outcomes, increase outcomes in ways that can be measured, be directed toward individuals and certain populations, and be grounded in evidence-based medicine, according to the rule, available here.

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