Insurers win Medicare Advantage battle

Health insurers have persuaded Medicare Advantage bidding managers to admit that the underlying cost of care is likely to go up about 3 percent in 2014, not fall more than 2 percent.

But other program changes could still make the 2014 bidding process hard on insurers, according to Humana Inc. (NYSE:HUM).

The Centers for Medicare & Medicaid Services (CMS), the arm of the U.S. Department of Health and Human Services (HHS) that runs Medicare, announced changes in the final “national per capita growth percentage” in a Medicare Advantage “final call letter” — a document that gives a complete description of the factors a health carrier must consider when coming up with the products and prices it will offer to Medicare Advantage program managers.

Bids are due June 3.

The Medicare Advantage program gives private health insurers and other private health carriers a chance to sell health plans that serve as replacements for traditional Medicare fee-for-service (FFS) coverage. The private plans now cover about 14 million people.

CMS officials alarmed health insurers in February, when they announced that they would be using a 2014 health care cost “growth percentage” of negative 2.3 percent. Officials are expecting costs to rise 1.6 percent between this year and 2014.

The original 2014 cost reduction projection figure included the effects of a 25 percent cut in Medicare physician pay required by a federal “sustainable growth rate” (SGR) law.

Congress has acted many times to keep the Medicare physician SGR pay cuts take effect in the past. This year, Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, and Sen. Orrin Hatch, R-Utah, the highest-ranking Republican on the committee, joined to ask CMS officials to assume that Congress will continue to take the SGR physician pay cut from taking place.

In the final call letter, CMS assumes that Congress will keep postponing the physician pay cut.