U.S. proposes 0.25 pct hike in Medicare Advantage payments

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By Caroline Humer | NEW YORK

NEW YORK The U.S. government on Wednesday
proposed an increase of 0.25 percent on average in payments to
health insurers who offer Medicare Advantage insurance, which
provides health benefits to more than 18 million elderly or
disabled people.

Enrollment in these plans grew by about 7 percent last year
to account for about one-third of Medicare members, making it an
important growth business for private insurers who are facing
changes in their business as Republicans seek to repeal and
replace Obamacare.

It is not clear if Republicans will make any broad changes
to the Medicare Advantage program, or to Medicare. Ipsita
Smolinski, managing director at Capitol Street in Washington
D.C. said on Wednesday that Medicare Advantage could get a boost
amid the Republican push for private programs.

The payment rate increase of 25 basis points was in line
with estimates that analysts had released ahead of time and
shares of insurers including UnitedHealth Group Inc and
Humana Inc, two of the largest providers of these plans,
were little changed in after-hours trading.

JPMorgan’s Gary Taylor said in a research note last week
that he had been expecting a proposal for payments that were
flat to slightly up from the rate that the government is now
paying insurers who provide plans.

Last year, the government proposed an increase of about 1.35
percent but later trimmed that back about 50 basis points.

But insurers have 30 days to respond to the proposed payment
rates and other changes included in the regulatory notice, which
this year was 159 pages long, and may ask for a bigger increase.

“The 2018 update is only a smidge better than flat which I
suspect may anger some plans,” Smolinski said. She said she
expected that the payment rate could rise between now and when
final rates are set.

Insurers use the payment rate information provided by the
government to prepare bids to sell Medicare Advantage plans in
specific areas.

The Centers for Medicare & Medicaid Services, the division
of the U.S. Department of Health & Human Services that regulates
Medicare, will announce the final rate on April 3.

It said that it expected an additional 2.5 percent increase
in payments related to coding of medical services.

The payment rate takes into account annual growth in medical
costs and statutory requirements to reduce government payments
to insurers for Medicare Advantage closer to the level it pays
in traditional fee-for-service Medicare.

Marilyn Tavenner, the CEO of America’s Health Insurance
Plans, the industry’s biggest lobbying group, said that it is
reviewing the notice to be sure “the program is protected from
harmful cuts.”



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