(Bloomberg) — Health insurers paid by the U.S. government to provide Medicare coverage will see their rates cut by about 0.9 percent next year, the U.S. government said Friday.
The proposed cut will be the subject of heavy lobbying by the health insurance industry, and isn't expected to become final until April 6. Insurers estimate payments to the program, which allows private companies such as Humana Inc. and UnitedHealth Group Inc. to offer Medicare plans, have been reduced by nearly 10 percent in the last two years.
Medicare is the U.S. health program for the elderly and disabled. About 15.7 million people, or 30 percent of Medicare beneficiaries, get coverage through the Medicare Advantage, according to the Kaiser Family Foundation. The private program allows for lower out-of-pockets costs compared with the traditional government-run version.
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The actual rate decrease could change for some plans, since Medicare adjusts payments to insurers based on the health risks of their customers, said Sean Cavanaugh, deputy administrator and director of the Center for Medicare, said in a conference call. While the per-patient rate will be cut, the yearly adjustments could mean that revenue to the plans actually grows by 1.05 percent.
Government payments to the insurers have been under pressure since 2010, when the Patient Protection and Affordable Care Act was partly financed with $206 billion in cuts to Medicare Advantage plans over a decade.
Rate Cuts
At the time, U.S. spending for Advantage beneficiaries was estimated to be as much as 13 percent higher than for people enrolled in traditional Medicare, leading to criticism that the insurers were overpaid.
Even after the cuts, the Medicare Payment Advisory Commission, which studies the program for Congress and recommends cost savings, estimates that Advantage plans were paid about 4 percent more in 2013 per beneficiary than the cost of the traditional program.
The U.S. government reduced Medicare Advantage payment rates 4 percent in April 2014, slightly more than the 3.55 percent cut proposed in February last year.
–With assistance from Alex Wayne in Washington.
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