Medicare Advantage plans get payment increase

Health insurers offering Medicare Advantage plans will see an average net 0.4 percent increase in federal reimbursements next year, Reuters reports.

That increase is less than the 1.6 percent gain in payments CMS projected in February because of lower-than-expected spending on doctor visits, according to Bloomberg. Jonathan Blum, deputy administrator and director at CMS, said the lower reimbursement rate reflects economic changes since the February proposal and does not indicate any Medicare policy adjustments. The lower rate means plans will have to cut a few more incremental benefits, yet won't have a major effect on margins or earnings, the Wall Street Journal notes.

A payment boost under Medicare Advantage, through which private insurers offer health benefits to those eligible for Medicare, is "incredibly important" to plans like UnitedHealth and Humana. They face $136 billion in cuts under the health overhaul through 2019, Robert Laszewski, president of Health Policy Strategy and Associates, told Bloomberg.

Although lower than expected, the more-modest increase in government funding to the Medicare Advantage plans remains in line with or higher than the rates some analysts had expected earlier this year. "While not ideal, the reduction yields a final rate still within the 0 percent to 1 percent range we feel most were expecting when the preliminary notice was issued," Stifel Nicolaus analyst Thomas Carroll told the WSJ.

CMS also is placing a 10 percent limit on total beneficiary cost increases, with plans that raise total beneficiary costs higher than that facing a more intense Medicare review and potential denial of the increase. "We still believe that a 10 percent threshold is manageable for well-run plans, but view this policy change as one that could lead plans with higher medical cost trends to falter," Carroll said.

Blum added that the net rate increase is an average. It will vary by plan depending on geographic location and their quality star rating, notes Reuters.

To learn more:
- see the Bloomberg story
- read the Wall Street Journal article
- check out the Reuters piece