April 4, 2016 / 9:01 PM / 3 years ago

UPDATE 2-U.S. to raise payments to insurers for Medicare Advantage 2017 plans

(Adds analysts, insurer reaction)

By Caroline Humer

NEW YORK, April 4 (Reuters) - The U.S. government will pay U.S. health insurers who provide Medicare Advantage plans to elderly and disabled Americans about 0.85 percent more on average in 2017 than in 2016, reflecting mostly stable medical costs, a government agency said on Monday.

The Department of Health and Human Services’ final plan to raise payments was a bit less than the 1.35 percent increase the agency proposed in February. It said the lower figure reflected revisions to medical services cost calculations.

“The Medicare Advantage rates look very much in line with the proposed rule,” said Ipsita Smolinski of Capitol Street, a Washington research firm.

Insurers including UnitedHealth Group Inc, Aetna Inc and Anthem Inc manage health benefits for more than 17 million Americans enrolled in Medicare Advantage plans. The other more than 30 million people eligible for Medicare coverage are part of the government-run fee-for-service program.

Shares in UnitedHealth and Aetna were slightly lower in very light after-hours trading, while Anthem was unchanged.

Each year, the government sets out how it will reimburse insurers for the healthcare services their members use. Payments vary by region, the quality rating earned by the health plan and the relative health of the members.

The proposal is always subject to industry lobbying and often changes before it is finalized.

Analysts said that while that the lower-than-proposed payment was a slight negative for insurers, the agency made two other modifications in the final overall payment plan that would benefit the industry next year.

Capital Alpha Partners analyst Kim Monk said the Centers for Medicare and Medicaid Services, the health agency division that regulates Medicare, gave ground on two issues: a new method for calculating risk and cuts in payments for certain employer-based retiree drug plans.

The government agency, which initially planned to implement the cuts over a year, said on Monday it now planned to introduce a two-year transition period after hearing from insurers, unions, employers and lobbying groups that the cuts proposed in February were too aggressive.

Insurance lobbyist America’s Health Insurance Plans President Marilyn Tavenner said in a statement the government had made changes to mitigate the negative impact of its original proposal, but that more could be done to improve the stability of the employer-based retiree plans. (Reporting by Caroline Humer; Editing by Steve Orlofsky and Peter Cooney)

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