Can Greater Value for Medicare Beneficiaries Come True?

The Centers for Medicare & Medicaid Services (CMS) has released proposed policies in an attempt to insure its beneficiaries will get greater protections, value, and care in the services they receive.

The 2014 Advance Notice and draft Call Letter takes important steps to improve payment accuracy for Medicare Advantage (Part C) and in Medicare prescription drug (Part D) plans for 2014, without shifting costs to beneficiaries.

Costs of the defined standard Part D plan will be lower in 2014: 

  • The standard Part D deductible will be $310, down from $325 in 2013.
  • Cost-sharing amounts will also be lower.

(See table below for more details)

Note:  Since 2010, the Affordable Care Act has affected Medicare Advantage premiums by lowering them 10 percent.  Enrollment in Medicare Advantage plans is expected to increase by an estimated 28 percent through this year.

A proposed rule, beginning in 2014, plans to implement the Affordable Care Act’s minimum medical loss ratio (MLR) requirements for Medicare Advantage and prescription drug (Part C and Part D) plans limiting how much plans can spend on marketing, overhead, and profit. Plans must spend at least 85 percent of revenue on clinical services, prescription drugs, quality improvements, and/or direct benefits to beneficiaries in the form of reduced Medicare premiums. Enrolled seniors and individuals with disabilities will get more value and better benefits as plans spend more on health care.   

Note:  Similar MLR requirements are already benefiting consumers in the private health insurance market. 

Proposed guidance in the Advance Notice and draft Call Letter released February 15, 2013, increases value and protections for beneficiaries:

  • Lower Out-of-Pocket Drug Spending:The 2014 defined standard Part D prescription drug benefit will have lower co-payments, a lower deductible and increased coverage for Medicare beneficiaries in the Part D prescription drug coverage gap, or “donut hole”.

Note:  Enrollees with liability in the “donut hole” will receive coverage and discounts of 52.5 percent on covered brand name drugs and 28 percent on covered generic drugs.

  • Greater Protection for Beneficiaries:CMSproposes to require Part D plan pharmacies to obtain enrollee consent prior to each delivery, unless the enrollee personally requests the refill. This proposal is in response to complaints from beneficiaries who have received and been charged for unnecessary and unwanted prescriptions because of “auto-ship” services. CMS proposes for Medicare Advantage enrollees protection from significant increases in costs or cuts in benefits, and, for the 2014 contract year, proposes reducing the amount of any permissible increase to $30 per member per month (down from $36 per member per month in previous years).                                                             

In addition, the 2014 statutory updates to the annual parameters for the defined standard Part D prescription drug benefit are:

Part D Benefit Parameters



Defined Standard Benefit






Initial Coverage Limit (Total drug costs after deductible before hitting coverage gap)



Out-of-Pocket Threshold  (Total amount beneficiary pays before hitting catastrophic phase)



Minimum Cost-sharing for Generic/Preferred Multi-Source Drugs in the Catastrophic Phase



Minimum Cost-sharing for Other Drugs in the Catastrophic Phase



Retiree Drug Subsidy (RDS)



Cost Threshold (Amount RDS sponsor must spend before claiming the RDS subsidy)



Cost Limit (Amount after which RDS sponsor claims no RDS subsidy)



(Note: The changes from 2013 to 2014 are rounded to the closest appropriate level.)

The Advance Notice and draft Call Letter may be viewed using the following link: click on Announcements and Documents for access to the 2014 files. Comments on the proposed Advance Notice and draft Call Letter are invited from the industry and other stakeholders and must be submitted by March 1, 2013. The final 2014 Rate Announcement and Call Letter including the final MA and FFS growth percentage and final benchmarks will be published on Monday, April 1, 2013. 

For updated information about the Medical Loss Ratio provision for the private health insurance market under the Affordable Care Act, please view the report available at: