Medicare Advantage Rates Receive Lower Than Expected Raise


The U.S. is raising payments to Medicare Advantage insurers by .85 percent on average, below the proposed 1.35 percent boost as part of the push to contain costs of Medicare Advantage, according to the Centers for Medicare and Medicaid Services. Specific payments to insurers vary based on location and how sick the insurer is.

Top providers of the plans, such as UnitedHealth Group Inc., WellCare Health Plans Inc. and Humana Inc. suffered from the lower-than-expected payouts, all seeing significant stock drops after the announcement.

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The Obama administration has been pushing to contain costs for Medicare Advantage since the Affordable Care Act became law in 2010. At the time, the U.S. was spending about 10 percent more for each Medicare Advantage beneficiary than for the traditional Medicare program. Spending per Medicare Advantage recipient is about 2 percent higher this year, according to the Medicare Payment Advisory Commission, known as MedPAC, which advises Congress on payment policies.
About 16.7 million people, or 30 percent of all Medicare beneficiaries, enrolled in Medicare Advantage plans last year. The U.S. paid Medicare plans about $170 billion for doctor and hospital services that year, according to MedPAC.
Including changes tied to patients’ diagnoses, total revenue for health plans is estimated to increase 3.05 percent in 2017, CMS said Monday. The U.S. had initially estimated that revenue would increase by 3.55 percent.

In its February proposal, CMS said it would change how employer-linked Medicare Advantage plans are compensated, potentially lowering payments to those plans. In the final rule, the government created a two-year transition that will phase in the rate changes gradually for the employer plans.
When those adjustments are incorporated, actual payments to Medicare Advantage plans may decrease by 0.5 to 3.9 percent, according to an estimate from the consulting firm Oliver Wyman that was prepared for industry lobbying group America’s Health Insurance Plans before Monday’s announcement.

The AHIP said the U.S. should avoid cutting payments to protect care for beneficiaries.


Photo by 401(k) 2012 via Flickr CC License

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