The Centers for Medicare and Medicaid Services (CMS) said that on
average, reimbursement for such Medicare Advantage plans in 2015
would rise 0.4 percent, reversing what is said was a 1.9 percent
average reduction proposed in February.
Analysts were still parsing the numbers, but said that the final
decision appeared to be a win for insurers, who along with a broad
swath of Republicans and Democrats in Congress had lobbied the
government to keep payments level. The proposed cuts had also
figured into Republicans' criticism of President Barack Obama's
"They were asking for flat (reimbursement) but no one ever thought
they would get close to it," said Ipsita Smolinski, managing
director of Capitol Street, a healthcare consulting firm based in
Shares in health insurers with large Medicare Advantage businesses,
like Humana and UnitedHealth Group Inc, were trading slightly higher
after the announcement. Their trading has historically been volatile
around the annual government announcement as investors assess its
Some in Congress were quick to comment on the shift.
"In many parts of the country, including New York, Medicare
Advantage works very well. They've shouldered their share already
and this proposed cut would have been disproportionate, hurting
seniors who would lose doctors or pay more. We're glad the
administration heeded our call and reversed the policy," Democratic
Senator Charles Schumer said in a statement. New York has the most
Medicare Advantage members in the country.
But Republican Senator Orrin Hatch said that the move is not enough
for seniors whose benefits were already hit by cuts this year.
"Although CMS has scaled back some of the new proposed cuts, much
more work needs to be done to protect our seniors," Hatch said.
KEEPING RATES STEADY
Private insurers manage Medicare benefits for about 15 million of
the 50 million elderly or disabled Americans eligible for the
program. Humana said it was studying the announcement, while other
insurance industry officials had no immediate comment.
CMS, part of the U.S. Department of Health and Human Services, said
on Monday that it had adjusted several of the factors that had made
up the proposed cut for 2015. Insurers' analysis of the proposed
reimbursement rates had estimated the reduction at 4 percent to 7
"They urged us to use whatever means we could to keep the rates
close to parity to where they are today," Jonathan Blum, CMS
principal deputy administrator, said at a press briefing.
[to top of second column]
"When you put all these pieces together, we estimate that the
average change for a plan will be 0.4 percentage points, a little
higher than what the industry had recommended to us," Blum said.
The agency said that costs for Medicare health services have
continued to drop, and that it now expected a decline in spending
per member of 3.4 percent versus the 1.9 percent on which it
initially based its 2015 payments.
Other changes to the payment formula included removing a requirement
that insurers perform a costly overhaul of the way they assess the
risk from their sickest members. It also made changes to other risk
adjustment parameters to account for relatively better health among
U.S. baby boomers, a move that will benefit insurers, although some
will be helped more than others based on the regions they serve.
The proposed payment rates are a key factor in how insurance
companies plan their business for the coming year, including in
which markets they will offer health plans, what their medical and
administrative costs will be, and at what level to set premiums and
doctor visit co-payments.
CMS is mandated by Obama's Affordable Care Act and by other laws to
cut Medicare Advantage spending rates to the level of government
administered fee-for-service Medicare.
"My impression is that CMS would like to implement these cuts faster
than they are ... but they are phasing them in due to political
pressure," said Kim Monk, managing director at Capital Alpha
Partners, a public policy research firm.
(Reporting by Caroline Humer and David Morgan in Washington, D.C.;
editing by Michele Gershberg, Jonathan Oatis and Eric Walsh)
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