CMS increases Medicare Advantage payments, reverses February proposal

Humana, UnitedHealth can expect revenue for MA policies to increase 1.25 percent next year

Health insurers operating Medicare Advantage (MA) plans can expect revenue to increase 1.25 percent next year, the Centers for Medicare & Medicaid Services (CMS) announced Monday. However, insurers likely will see their overall revenue increase about 3.25 percent as they deliver and bill for more intense services.

This increase--which is larger than expected--is thanks in part to a higher estimate of traditional Medicare spending and doesn't stem from change in policy, CMS noted.

The announcement came as a slight shock, reported Bloomberg, as the government has continued to reduce payments to insurers--by as much as 4 percent this year. In February, CMS proposed a 0.95 percent decrease in MA reimbursement rates for 2016 with a risk-scoring adjustment giving MA payers a 1.05 percent increase.

As Ana Gupte, an analyst with Leerink Partners, pointed out to Reuters, "2016 enrollment growth should be accelerated compared to previous year."

MA insurers experienced a 0.4 percent reimbursement rate increase in 2015 and a 3 percent increase in 2014. The latter increase came after CMS initially proposed a 2.2 percent payment reduction and followed an intense lobbying effort from America's Health Insurance Plans, FierceHealthPayer previously reported.

Previously, insurers and insurer lobbyist groups have warned the government that such cuts could increase costs for the elderly. While CMS' announcement "took a notable step to provide stable funding for the Medicare Advantage program, the lack of action to address policy concerns around providing care for the chronically ill and vulnerable populations could undermine health plans' efforts to address the needs of these beneficiaries," America's Health Insurance Plans' CEO Karen Ignagni said in a statement.

When the Affordable Care Act was implemented in 2010, U.S. spending for MA beneficiaries was as much as 13 percent higher than for those enrolled in traditional Medicare, according to Bloomberg. Now, the federal government spends close to 2 percent more per MA beneficiary.

Additionally, MA plans are a key line of business for many insurers, noted the Wall Street Journal. Humana and UnitedHealth Group, for instance, rely on the program for a significant share of their earnings. Humana's shares rose about 1 percent to $180 in after hours trading, reported Reuters, while UnitedHealth gained less than 1 percent to $118, noted Bloomberg

For more:
- here's the CMS announcement
- check out the Bloomberg article
- read the Reuters article
- here's the AHIP announcement
- read the WSJ piece

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