U.S. government proposes 1.84 percent hike in 2019 payments to Medicare insurers

[February 02, 2018] By Caroline Humer

NEW YORK (Reuters) - The U.S. government on Thursday proposed an increase of 1.84 percent on average in its 2019 payments to the health insurers that manage Medicare Advantage insurance plans for more than 20 million elderly or disabled people.

The proposed rate, which affects how much insurers charge for monthly healthcare premiums, plan benefits and ultimately, how much they profit, was near analyst expectations, and insurer shares were largely unchanged in after-hours trading.

UnitedHealth Group Inc, Humana Inc, Aetna Inc and WellCare Health Plans Inc are the largest sellers of Medicare Advantage health insurance. Under the program, they are paid a set rate by the government to cover member healthcare costs.

The 2019 payment proposal also expands the benefits that insurers can offer in the plans to include items like wheelchair ramps and devices to diminish the impact of health conditions, a positive for insurers competing with traditional Medicare for members.

Kim Monk, managing director of company and investing research group Capital Alpha Partners, said she had expected an increase of 1 percent to 2 percent on average. Payments rates will vary based on geography and on factors like the health of members and the quality ratings of the insurer.

January enrollment data showed that Medicare Advantage 2018 enrollment was 20.9 million and had grown to account for 35 percent of overall Medicare enrollment, BMO Capital Markets analyst Matt Borsch said in a recent research note.

Medicare Advantage competes with the traditional Medicare fee-for-service program. Both have grown as the so-called "Baby Boomer" generation ages into Medicare and together cover more than 55 million people.

Insurers have bet on future growth of Medicare Advantage as the Trump Administration turns to private insurers to control healthcare costs.

The Centers for Medicare and Medicaid Services, a division of the U.S. Department of Health and Human Resources, releases the proposed rate early each year and then opens a public comment period. The final rate released in April could be higher or lower than the proposed one.

In December, CMS provided a forecast for medical services cost growth of more than 4 percent, one of the key components of the total payment rate, which also includes other factors. For instance, the law requires the government to pay similar amounts in the Medicare Advantage plans and the fee-for-service Medicare program, which typically results in a payment cut to insurers.

(Reporting by Caroline Humer; Editing by G Crosse and Chris Reese)

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