(Bloomberg) — Health insurers that offer private Medicare Advantage plans will get a smaller-than-expected increase in payments next year.
Medicare program managers are raising payments to the insurers by 0.85 percent on average, according to a statement Monday from the Centers for Medicare & Medicaid Services (CMS), down down from the 1.35 percent boost proposed in February. Payments to individual insurers can vary, because CMS gives individual plans quality bonuses and premiums are adjusted based on where enrollees live and how sick they are.
The smaller increase gives less of an increase to top providers of Medicare Advantage plans such as UnitedHealth Group Inc. (NYSE:UNH) and Humana Inc. (NYSE:HUM) as those providers are deciding whether to participate in either the off-exchange individual commercial health insurance market, or the public exchange market, in 2017.
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Other publicly traded insurers that are big providers of the private Medicare plans include Aetna Inc. (NYSE:AET), Centene Corp. (NYSE:CNC), and WellCare Health Plans Inc. (NYSE:WCG). CMS raised rates by about 1.25 percent for this year, after a cut of about 4 percent in 2015. Medicare Advantage plans are run by private health insurers, and funded and regulated by the government.
The Obama administration has been pushing to contain costs for Medicare Advantage since PPACA became law in 2010. At the time, the U.S. was spending about 10 percent more for each Medicare Advantage beneficiary than for the traditional Medicare program. Spending per Medicare Advantage recipient is about 2 percent higher this year, according to the Medicare Payment Advisory Commission, known as MedPAC, which advises Congress on payment policies.
$170 billion program
About 16.7 million people, or 30 percent of all Medicare beneficiaries, enrolled in Medicare Advantage plans last year. CMS paid Medicare plans about $170 billion for doctor and hospital services that year, according to MedPAC.
Including changes tied to patients’ diagnoses, total revenue for health plans is estimated to increase 3.05 percent in 2017, CMS said Monday. CMS had initially estimated that revenue would increase by 3.55 percent.