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Medical Loss Ratio Recoveries of MCO Remittances from Profit-Limiting Arrangements

When a State recovers a prior expenditure, it must refund the Federal share by reporting the recovery to Centers for Medicare & Medicaid Services at the FMAP used to calculate the amount it had originally received (SSA §1903(d)(2); Centers for Medicare & Medicaid Services State Medicaid Manual, §2500.6(B)). In its final rule (81 Fed. Reg. 27498 (May 6, 2016)), Centers for Medicare & Medicaid Services encouraged States to adopt provisions in contracts with managed care plans that would require remittances from the MCOs if a minimum medical loss ratio is not met. A medical loss ratio is a tool that can help ensure that the majority of capitated payments are used to deliver services to beneficiaries. Prior OIG reviews found that some States have adopted such remittance provisions. We will review States and managed care plans with contract provisions that require remittances from managed care plans if a minimum percentage of total costs to be expended for medical services (medical loss ratio) is not met. We will determine whether the Federal share of recoveries of MCO payments that States received through profit-limiting methodologies is returned to the Federal Government. Centers for Medicare & Medicaid Services reimburses each State at the FMAP for the quarter in which the expenditure was made (SSA §1903(a)(1)).

Announced or Revised Agency Title Component Report Number(s) Expected Issue Date (FY)
Nov-16 Centers for Medicare & Medicaid Services Medical Loss Ratio Recoveries of MCO Remittances from Profit-Limiting Arrangements Office of Audit Services W-00-17-31508 2018

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