US softens cut to Medicare Advantage 2024 payments
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[April 01, 2023]
By Ahmed Aboulenein
WASHINGTON (Reuters) - The U.S. government announced on Friday a lower
than expected 1.1% average cut of 2024 reimbursement rates for health
insurers that offer coverage through the Medicare Advantage program,
boosting shares of the market's largest players.
It improved the rates it would pay insurers after pushback from the
industry, which contended the government was cutting reimbursement rates
by too much for them to adequately serve older people enrolled in their
plans.
The U.S. Centers for Medicare and Medicaid (CMS) said it expected total
payments for next year to rise by 3.3% from 2023, or around $13.8
billion, up from its 1% initial estimate, and reduced drops on some
costs resulting from rule changes.
Health insurers who operate Medicare Advantage plans have come under
pressure after the government last month proposed new rules for an audit
program to avoid overpaying them.
The agency said in its final rates announcement on Friday it would phase
in the revision over three years and estimated it would result in a
smaller drop during the first year.
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"The policies finalized in this Rate Announcement will help make more
accurate payments. This reduces incentives to cherry-pick healthy
beneficiaries and discriminate against sicker patients," CMS said in a
statement.
UnitedHealth Group Inc and Humana Inc shares were up more than 2% in
after-market trade. Elevance Health Inc shares were up nearly 2%, while
CVS Health Corp and Cigna Group shares were up by over 1% after hours.
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REUTERS/Emily Elconin
![](http://archives.lincolndailynews.com/2023/Apr/01/images/ads/current/peasleymemorials_lda_2022.png) The companies are among the largest
players in the Medicare Advantage market in which private insurers
are paid a set rate by the government to manage member healthcare.
The government payment rates affect how much insurers charge for
monthly premiums, plan benefits and ultimately, how much they
profit. Medicare Advantage covers nearly half of the 65 million
people enrolled in the government's Medicare program for people aged
65 and older or disabled.
Estimated cuts resulting from the risk model revision in the CMS
initial proposal had insurers facing an average 2.3% effective drop
in payments, potentially costing the industry $3 billion.
The agency pegged the spending increase in the traditional Medicare
program, which in previous years was the main factor determining how
much the agency pays Medicare Advantage insurers, at 2.3%, up from
2.1% in its initial proposal.
It estimated the risk model revision would result in a 2.16% drop,
down from 3.12% in its initial proposal and kept its estimate for a
separate drop in bonus payments at 1.24%.
(Reporting by Ahmed Aboulenein; Editing by Muralikumar Anantharaman)
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