NU Online News Service, Jan. 20, 2004, 5:31 p.m. EST, Washington – Health plans are praising the U.S. Department of Health and Human Services for increasing the federal payment rate to Medicare Advantage health plans an average of 10.6%.[@@]

Karen Ignagni, president of AAHP-HIAA, Washington, says the new payment rates “will lead to more choice and enhanced coverage for Medicare beneficiaries, including many who do not currently have access to private-sector Medicare.”

However, Ignagni says, this is just the beginning of the process of reversing 6 years of underfunding of Medicare health plans, and the effects of underfunding will not be reversed overnight.

“But we are seeing evidence that the process of stabilizing, and ultimately enhancing, private-sector Medicare is well under way,” she says.

The increased payments, which will take effect March 1, were mandated by the Medicare Prescription Drug, Improvement and Modernization Act of 2003. President Bush signed the act into law late last year.

The act requires health plans to use the increased funds to reduce beneficiary premiums or co-pays, enhance benefits, stabilize or expand provider networks, or reserve funds to offset either premium increases or reduced benefits in the future.

“These increases are an investment in our seniors,” says HHS Secretary Tommy Thompson. “They are aimed at supporting better services for Medicare beneficiaries in health care plans.”

Because of underfunding, many Medicare health plans have either left the Medicare Advantage (previously known as Medicare+Choice) program, or reduced services.

HHS says these plans now have the opportunity to remain in the program and provide continued services for seniors who choose a managed care plans.

HHS says these plans must submit new proposals to the Centers for Medicare & Medicaid Services for review by Jan. 30.