Federal regulators said Monday that payments to insurers that offer private Medicare plans to older Americans would rise slightly, but somewhat less than the government indicated earlier this year.
The increase represents a boost for companies who offer the plans under Medicare Advantage, the program in which beneficiaries can get Medicare policies from private companies, which are then reimbursed by the federal government.
Sean Cavanaugh, deputy administrator at the Centers for Medicare and Medicaid Services, said the Medicare Advantage payments would increase 0.85% on average for 2017, and that insurers would likely see overall revenue increase about 3.05%, in a final rule published Monday.
In February, CMS had indicated rates would increase 1.35%, and that insurers would likely see overall revenue increases of about 3.55% as they delivered and billed for more intensive services.
The Obama administration’s handling of Medicare Advantage is hotly watched in part because the 2010 health law derives some of its funding from cuts to the program. Federal officials said Monday they had seen record enrollment in these plans since the Affordable Care Act was passed, as proof it was “stronger and more popular than ever.”
Many health insurers count on Medicare dollars for a significant share of their earnings. The biggest participants in the Advantage program include Humana Inc. andUnitedHealth Group Inc.
In a sign of the value the industry attaches to the Medicare business, Aetna Inc. is seeking to acquire Humana; the deal awaits approval by many regulators but has been signed off on by state officials in some key markets such as Florida.
Analysts had said ahead of the announcement that even with the top line numbers, there would be winners and losers within the industry.
Mr. Cavanaugh also said the Obama administration had made some changes in response to feedback on its plans, including agreeing to make an interim change to the way that plans’ quality is rated if they serve a large population of low-income and disabled beneficiaries, and shifting its model for the way plans are reimbursed if they take on sicker-than-expected beneficiaries.
Other tweaks highlighted by the administration included an idea to identify beneficiaries at risk of overusing opioids before a prescription is dispensed. That change comes as the Obama administration—and lawmakers from both parties—are trying to tackle painkiller abuse.
Some companies and unions offer retiring workers a type of Medicare Advantage plan in lieu of traditional employer retiree coverage. More than 3 million beneficiaries get Medicare Advantage coverage that way.
CMS had proposed cutting 2.5% payments to insurers from those Medicare Advantage plans in 2017. Labor unions and businesses objected, claiming the move would hurt retirees. In response, CMS officials said Monday that they would make the change over two years.
“CMS did consider stakeholder feedback and did make some modifications to proposals,” Mr. Cavanaugh said.
In the first year, the government will adjust the payment cut halfway and end a process where employers and unions that offer the plans bid, which is a process that determines payments. The next year will see the rest of the reduction.
“Following this overwhelming bipartisan Congressional outreach, CMS took steps to mitigate the negative impact of policy changes related to risk adjustment and encounter data,” Marilyn Tavenner, president and chief executive officer of America’s Health Insurance Plans, said in a statement. “Yet, more can be done to ensure stability for more than 3 million seniors who depend on Medicare employer retiree plans.”
Senate Finance Committee Chairman Orrin Hatch, a Utah Republican, said the employer changes were insufficient. “Instead of protecting retiree health coverage provided to beneficiaries who receive coverage through their employer, the administration acted unilaterally to undermine an important, market-based health program by phasing in cuts over two years. This ill-advised move will have a direct effect on our nation’s retirees and their health care choices,” he said in a written statement.