CMS's Oversight of Federal Medical Loss Ratio Requirements in Medicaid Managed Care

With its 2016 Medicaid managed care regulations, CMS chose medical loss ratios (MLRs) as a policy tool to ensure appropriate stewardship of managed care funds. The Federal MLR is the percentage of premium revenue that a managed care plan spent on covered health care services and quality improvement activities during a 12-month period. Federal MLR requirements help ensure that managed care plans spend most of their revenue on services related to the health of their enrollees, thereby limiting the amount that plans can spend on administration and keep as profit. As part of the process for setting capitation rates, Federal regulations require States to set their plans' capitation rates so that plans will reasonably achieve MLRs of at least 85 percent-the Federal MLR standard. States must take into account their plans' reported MLRs when setting future capitation rates. OIG has previously found weaknesses in States' oversight of the completeness and accuracy of their plans' MLR reporting. CMS plays a vital role in overseeing States' implementation of Federal MLR requirements, as it is responsible for the review and approval of States' capitation rates for their managed care plans, including review of State-submitted MLR data. OIG's evaluation will determine: (1) how CMS has incorporated MLR data in its review of States' capitation rate certifications; (2) the oversight activities that CMS conducts to ensure that States submit to CMS complete and accurate MLR data; and (3) whether CMS has ensured that States have used MLR data, as required, to set actuarially sound capitation rates.

Announced or Revised	Agency	Title	Component	Report Number(s)	Expected Issue Date (FY)
December 2022	Centers for Medicare and Medicaid Services	CMS's Oversight of Federal Medical Loss Ratio Requirements in Medicaid Managed Care	Office of Evaluation and Inspections	OEI-03-23-00040	2025