On February 15, 2013, CMS released a proposed rule implementing the ACA’s medical loss ratio (MLR) requirements for Medicare Advantage (MA) and prescription drug (Part C and Part D) plans. Under these provisions, which are intended to limit plan spending on marketing, overhead, and profit, MA organizations and Part D plan sponsors will be required to report their MLR, reflecting the percentage of contract revenue spent on clinical services, prescription drugs, quality improving activities, and direct benefits to beneficiaries in the form of reduced Part B premiums. CMS has generally aligned the Medicare MLR rules with commercial MLR regulations that went into effect January 1, 2011.  Plan sponsors that do not have an MLR of at least 85% will be subject to payment remittance; if a plan sponsor fails to meet MLR requirements for more than 3 consecutive years, it also will be subject to enrollment sanctions and, after 5 consecutive years, to contract termination. CMS expects the first year of MLR reporting to occur in 2015 for the 2014 contract year. Comments on the proposed rule will be accepted for 60 days. The official version of the proposed rule will be published in the Federal Register on February 22, 2013. CMS also has released the 2014 Advance Notice and draft Call Letter, which detail updates to payment methodologies, other policies, and program operations for MA organizations and Part D drug plan sponsors. CMS notes that for the first time in the Part D program’s history, the costs of beneficiary coverage are falling, with 2014 defined standard Part D prescription drug benefit having lower co-payments and deductible than in 2013. CMS also is proposing a number of policy changes for 2014, including requiring Part D plan retail and mail pharmacies to obtain patient consent to deliver a prescription, new or refill, prior to each delivery. In addition, CMS proposes to require that Part D sponsors place beneficiary-level prior authorization requirements on certain categories of drugs which may be covered under the hospice or end stage renal disease (ESRD) benefits, so as to ensure that these drugs are appropriately payable under Part D before the prescriptions are filled.  Comments will be accepted until March 1, 2013.  The final 2014 Rate Announcement and Call Letter will be published on April 1, 2013.