Medicare Advantage rates rise less than 1 percent-WEB ONLY

The federal government said last night it will bump up a rate used to figure Medicare Advantage reimbursement to insurers by nearly 1 percent, but many analysts expect overall payment rates to fall next year.

The Centers for Medicare & Medicaid Services said the national average growth percentage per capita for Medicare Advantage plans would rise 0.8 percent in 2010.

The rate affects earnings for health care insurers, including Indianapolis-based WellPoint Inc. and Louisville-based Humana Inc.

The plans, which allow the elderly and disabled to get benefits through private health insurers, receive a government subsidy and generally offer more benefits than traditional Medicare, but they’ve drawn criticism for their cost.

The trade association America’s Health Insurance Plans estimates that Medicare Advantage payments could fall nearly 5 percent next year as a result of the changes. Spokesman Robert Zirkelbach said the cut could lead to higher premiums and benefits reductions for the more than 10 million people enrolled in Medicare Advantage.

“It’s an unnecessary disruption in the health security of seniors on Medicare Advantage,” he said.

Wachovia Securities analyst Matt Perry, who covers managed care, said the reimbursement likely will fall between 4 percent and 5 percent next year.

Analysts have said lower reimbursement could hurt earnings for private insurers, especially those like Humana and Nashville, Tenn.-based HealthSpring Inc., which have large portions of Medicare Advantage business.

Humana Inc., for instance, has 1.4 million Medicare Advantage customers, or about 12 percent of its total enrollment.

The reimbursement rate is a measure of the expected rate of growth for expenses in Medicare fee-for-service programs. It’s also one of many factors used to figure Medicare Advantage payment rates, which also vary by county and patient health, among other factors.

The 2010 increase is higher than the half-percent gain CMS unveiled when it announced preliminary rates in February. But it’s much lower than increases of 4.24 percent and 5.71 percent seen for rates this year and in 2008.

That’s largely due to a proposed 21-percent cut in physician reimbursement for next year. That creates another worry among analysts covering managed-care companies, because many expect Congress to squash that cut.

If it does, insurers could be left with understated rates that won’t bring in enough money to pay doctors at their old reimbursement level, Stifel Nicolaus analyst Thomas Carroll said.

“The problem is nobody believes that the doctors are going to get paid less next year,” he said.

Medicare Advantage plans have taken criticism lately for their cost. White House Budget Director Peter Orszag has said the government will no longer overpay companies that offer these plans. The government spends about $1.30 on Medicare Advantage patients for each dollar it spends on patients in traditional Medicare.

But several members of Congress also worry about the impact a Medicare Advantage reimbursement reduction could have on people enrolled in the programs.

A letter sent to CMS officials and signed by both Democrat and Republican senators noted that enrollees in their states could face higher premiums and benefit cuts based on preliminary information released in February.

“We must work to develop productive reforms that protect the interests of [Medicare Advantage] enrollees,” the letter stated.