Posted by Michael Wonder on 15 May 2019
CMS issues new guidance addressing spread pricing in Medicaid, ensures Pharmacy Benefit Managers are not up-charging taxpayers
15 May 2019 - Agency issues guidance for Medicaid Managed Care and CHIP health plans that clarifies how current regulations require “spread pricing” to be accounted in the calculation of medical loss ratios.
As part of President Trump’s efforts to lower prescription drug costs in Medicaid, CMS today issued guidance for Medicaid and CHIP managed care plans regarding the calculation of a plan’s Medical Loss Ratio (MLR), which represents the percent of premium revenue that goes toward actual claims and activities that improve healthcare quality, as opposed to administrative costs and profits.
CMS regulations require Medicaid and CHIP managed care plans to report an MLR and use an MLR target of 85 percent in developing rates. The 85% target means that only 15% of the revenue for the managed care plan can be for administrative costs and profits. CMS is concerned that some managed care plans are not accurately reporting pharmacy benefit spread pricing when they calculate and report MLRs.
