Government raises Medicare Advantage payment estimate for 2015

The government has raised its payment estimate for Medicare Advantage plans, months ahead of a busy election season during which cuts to the program promise to be a key focus for politicians and voters.

The Centers for Medicare and Medicaid Services said Monday that 2015 payments to the plans should increase less than 1 per cent overall. That compares to a drop of nearly 2 per cent that the government forecast in February.

Analysts expect actual funding to fall, when many other variables are considered. But the drop shouldn’t be as steep as they initially forecast.

This might lead to fewer changes for the plans, which serve nearly 16 million people or about 30 per cent of all Medicare beneficiaries. The government has squeezed rates for the past few years in part to help fund the health care overhaul. Insurers that run the plans say they’ve had to trim benefits, drop doctors and leave markets as a result.

“It’s a good day for (the) plans,” Avalere Health analyst Matthew Eyles said.

Medicare Advantage plans are privately run versions of the government’s Medicare program for the elderly and disabled people. The government subsidizes the coverage, and insurers generally offer dozens of different plans in every market. Many come with extras like dental and vision coverage that are not available with standard Medicare.

The government has paid insurers who run Medicare Advantage plans more per enrollee than the cost of care for people with traditional Medicare coverage. But that is being scaled back in part to help pay for the health care overhaul, the massive federal law that aims to provide insurance for millions of uninsured people.

UnitedHealth Group Inc. is the nation’s largest provider of the coverage. Its CEO, Stephen Hemsley, told analysts earlier this year that 2014 reimbursement was cut about 6.7 per cent, and a similar cut for 2015 would be “extraordinarily disruptive.”

Analysts have said the government’s preliminary forecast from February would translate into actual funding cuts ranging from 3 per cent to 6 per cent. Changes in funding can depend on where the plan is located and its quality rating, among other variables.

Now, Medicare Advantage plans may see a drop of only 1 per cent to 3 per cent, Eyles said.

The government is still scaling back funding for the coverage, but it also made some adjustments to how plans are compensated for the health status of their enrollees to give some money back, Eyles said after a preliminary analysis Medicare’s latest numbers, which were released after markets closed.

Shares of UnitedHealth climbed 26 cents after hours to $81.34, while Humana Inc., the second-largest Medicare Advantage provider, rose $1.50 to $113.50.