News | April 07, 2008

Medicare Boosts Payment 3.6 Percent to Insurers in Medicare Advantage

April 8, 2008 - The government on Monday said it would raise payments next year to insurers that provide healthcare coverage to seniors by 3.6 percent, a slight increase from last year's boost.

The increase applies to companies in the Medicare Advantage program, the privately run wing of the government health care plan for seniors. Officials from the Centers for Medicare and Medicaid Services said the increase is slightly lower than the estimated 3.7 percent expected growth increase for Medicare in 2009.

Last year the agency increased payments on average by 3.5 percent.

About 22 percent of the 44 million seniors in Medicare receive their benefits from private companies. The government pays insurers a set fee for each enrollee, which varies by the county they live in.

Wall Street was still analyzing the payment increase Monday evening, though it appeared to be lower than some analyst projections.

The 2009 payment rate will serve mainly as a benchmark against which companies offer services, rather than a final payment amount. Companies typically offer to provide Medicare benefits for less than the benchmark because they can use the remaining money to offer additional benefits, including dental and vision care. Those extras can help attract new enrollees.

UnitedHealth is the largest provider of Medicare Advantage with 14 percent of the market and 1.4 million seniors enrolled. Humana has more than 1.25 million seniors in its plans and accounts for about 13 percent of the total market.

Other companies with significant investment in Medicare include HealthSpring Inc., Health Net Inc. and Wellcare Health Plans Inc.

Medicare officials announced Thursday they will begin auditing how insurers bill the government for treating various medical conditions. The government hopes to start adjusting company payments to make up for billing errors by the end of the year.

Democrats in Congress made a push last year to cut payments to private companies in Medicare, pointing out that they cost the government about 13 percent more than traditional Medicare.

On Thursday, unions AFL-CIO, AFSCME and several consumer groups sent a letter to congressional leadership calling on it to curb "excessive corporate subsidies" to private insurers.

"It is fiscally irresponsible for Congress to allow this waste of taxpayer dollars to continue unabated, when money is needed to shore up Medicare's finances," states the letter, which was also signed by Families USA and the Medicare Rights Center.

Despite such prodding by labor and consumer advocates, analysts do not expect another effort to cut payments to the companies. President Bush has vowed to veto any effort by Congress to trim payments to insurers.

The insurance industry has argued that companies use government funding to provide important health care benefits not offered under traditional Medicare.

Shares of Humana Inc. fell 16 cents to $43 in after hours trading, following an earlier close at $43.16. Shares of UnitedHealth Group Inc. fell 13 cents to $36.54 in after-hours trading, following an earlier close at $36.67.

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