U.S. Medicare Advantage payment hike spurs market

U.S. agency moves on Advantage plans; may help contain premiums in 2014

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The Centers for Medicare and Medicaid Services has reversed ground on a planned 2.2 percent payment cut for Medicare Advantage plans next year and instead has set a rate that calls for a 3.3 percent increase.

This week's announcement should ease fears of a big jump in premiums for Medicare Advantage beneficiaries in 2014, although health insurers still face a new tax in 2014 and a proposed $200 billion in Medicare Advantage plan savings by 2017 -- both of which could translate to higher premiums.

The announcement gave a boost to the Dow Jones industrial average, which rallied Tuesday -- driven on gains by health care firms such as United Health and Aetna after the rate increase was made public late Monday.

While the payment rate increase is welcome news for insurers, "it remains to be seen if the 3.3 percent increase in reimbursements is going to manifest itself to reduced cost to consumers in 2014," cautioned Bill McKendree of Apprise, an Allegheny County program in East Liberty that helps seniors find the best Medicare plan for them.

Insurers could argue that rising costs for prescription medications, or health care in general, wipe out any cost reduction for consumers, he said.

"It sounds wonderful, and it would be a wonderful incentive for insurance companies to reduce the cost of premiums, or at least stabilize the cost so we don't see a significant increase. But we have to wait until October when the companies release their plan information to see if this is going to trickle down to consumers," he said.

The stakes are high in southwestern Pennsylvania, he said, as estimates are that more than 50 percent of the region's Medicare beneficiaries are on Medicare Advantage plans, which offer comprehensive Medicare coverage to Medicare-eligible beneficiaries, typically including drug coverage. That compares with about 25 percent of beneficiaries nationwide.

A key element to the reversal was the Centers for Medicare and Medicaid Services' acknowledgement of the likely congressional override of a 25 percent to 30 percent cut in Medicare physician payments scheduled to go into effect in 2014. The cuts, required by the 1997 Balanced Budget Act, come up every year and have been canceled each time out of concern of the impact on Medicare beneficiaries.

"We believe CMS has adopted the reasonable expectation that the Legislature will act to prevent the scheduled automatic physician pay cuts in Medicare," said Eugene Scanzera, vice president for UPMC Health's Medicare plans. "We are pleased that CMS reviewed and has taken seriously the comments it received from both the industry and Medicare beneficiaries as to the effects of the proposed payment cuts made back in February."

Insurers had warned that the proposed cut to Medicare Advantage plans next year could lead to a $50 to $90 monthly premium increase in 2014. America's Health Insurance Plans in Washington, D.C., which had lobbied members of Congress, said more than 160 members raised concerns about the proposed cuts.

With the reversal, "CMS has taken an important step to help stabilize Medicare Advantage at a time when the program is facing significant challenges," said Karen Ignagni, AHIP's president and CEO, in a news release.

CMS officials say the announced rates "set a stable path for Medicare Advantage and implement a number of policies designed to improve payment accuracy."

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Steve Twedt: stwedt@post-gazette.com or 412-263-1963.


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