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 Of the more than 50 million older Americans who receive coverage
through Medicare, about 15 million are enrolled in Medicare
Advantage plans offered by companies such as UnitedHealth Group Inc,
Humana Inc and Aetna Inc. The rest use Medicare fee-for-service
programs, in which doctors are reimbursed by the government for
patient visits and procedures.
Each February, the Centers for Medicare and Medicaid Services
proposes reimbursement rates that it agrees to pay insurers for
managing the privately run programs. It publishes a final rate 45
days later.
Insurers are bracing for a proposed cut of around 6 to 7 percent
when the government makes the information public in an announcement
expected on Friday, according to the latest industry and analyst
forecasts. Health insurance executives have been lobbying against
cuts of that magnitude, saying they would have no choice but to pass
on a significant part to seniors to keep their business intact.
Aetna, which has about 1 million Medicare Advantage members, said
that to keep costs in line with cuts in recent years, it has changed
its network of doctors and hospitals to be more cost-effective,
among other efforts.
"If you can't solve the reduction based on those activities, then
you have to resort to things that are much more visible to the
beneficiaries, which can range from benefit reductions, and either
premium increases or the introduction of a premium," said Fran
Soistman, executive vice president and head of Government Services
at Aetna.
Another possibility for insurers is eliminating plans and
withdrawing from certain markets. Many did that last year after the
government cut rates by nearly 6 percent.
"The concern is that a second consecutive 6 percent cut to the
program will be devastating for seniors," said Robert Zirkelbach,
spokesman for the healthcare industry's key trade and lobbying
group, America's Health Insurance Plans. Their campaign has included
TV, print and online advertising as well as a sign on Washington
city buses, telling viewers that "Seniors are Watching" when it
comes to Medicare Advantage benefits.
CONTAINING LEAKS
The announcement could put pressure on President Barack Obama's
administration as it defends its signature healthcare law, the
Affordable Care Act, from attack ahead of the 2014 elections. Early
technical failures hampered enrollment in insurance plans and new
fees and healthcare taxes have gone into effect, providing
Republican opponents of the law with ammunition to call for its
delay.
Insurers, which worked closely with the government to help fix early
enrollment problems, are hoping that partnership will help their
lobbying effort to influence the 2015 Medicare rates.
The U.S. government has been cutting payment rates for Medicare
Advantage as part of an overall reduction in healthcare spending
required under the law and as it seeks to bring the program fees
closer to the ones it pays through the Medicare fee-for-service
program.
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CMS is balancing the need for these spending cuts with the potential
political backlash. A group of 40 senators, both Republicans and
Democrats, recently called on the agency to maintain Medicare
Advantage payment levels and prevent disruption.
The rate announcement due out this week has been widely anticipated
by insurers and investors this year, after information on last
year's release of the final rates was leaked to investors ahead of
time. As a result of that, stocks in insurers with large Medicare
Advantage businesses jumped higher just before the market close
because the payments were not as low as investors had expected.
A Wall Street Journal report found that a lobbyist who was working
for Humana had been involved in the leak. The story prompted
investigations by the Department of Justice, Republican Senator
Charles Grassley of Iowa, Humana (which fired the law firm of the
lobbyist), the Centers for Medicare and Medicaid Services and its
Office of the Inspector General.
When asked about any changes the agency is taking this year
concerning the announcement, a spokeswoman for CMS said that the
agency is "committed to releasing Medicare payment policies in a
time and manner that is appropriate and consistent with statutory
requirements." She did not provide a comment on the probe into last
year's incident.
The U.S. Justice Department and the Office of the Inspector General
declined to comment.
Humana did not have an immediate response, and Grassley's office did
not return a call seeking comment.
This week's announcement is unlikely to affect industry stocks
unless it comes in far below or far above 6 percent, according to
CRT Capital analyst Sheryl Skolnick.
"It is by no means a secret. Everyone knows it is coming and
everyone knows it is going to be bad," Skolnick said.
The final rate announcement is expected on April 7.
(Reporting by Caroline Humer; editing by Michele Gershberg, Amanda
Kwan and Ken Wills)
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