US Proposes Increase In Medicare Advantage Payments, Insurer Stocks Rise

The administration of U.S. President Barack Obama proposed to raise payments for private health insurers offering Medicare plans by 1.35 percent on average for 2017, federal regulators said in a notice issued Friday.

The Centers for Medicare and Medicaid Services (CMS), a federal unit within the U.S. Department of Health and Human Services, said payments to insurers would vary under the 2017 Medicare Advantage proposal, depending on the region where the plan is sold and on the bonus payments received by insurers. Medicare Advantage plans, sometimes called “Part C” or “MA Plans,” are offered by private insurers approved by Medicare, which then reimburses the companies using government funds.

"Looks like the best case scenario has played itself out," Ipsita Smolinski of Capitol Street, a Washington, D.C., research firm, which had anticipated about 1 percent increase in payments, told Reuters.

Insurers, who have lobbied the government not to cut payments, gave the proposal a nod of approval as shares of health insurance firms rose during after-market trade. Shares of UnitedHealth Group Inc., Aetna Inc. and Anthem Inc. all rose by more than 1 percent Friday in after-hours trading, following the announcement.

The slight hike in payments is a major shift compared with recent years when federal authorities proposed cuts to average payments.

Factoring in risks of unexpected expenses referred to as “risk coding trends,” Friday’s proposed rates would change expected average revenues of insurers by 3.55 percent.

In addition to the increase in payments, CMS’ notice also included changes that would help insurers who offer Medicare Advantage health benefits to elderly and disabled Americans.

“These proposals continue to keep Medicare Advantage strong and stable and as with this past year, support the provision of high quality, affordable care to seniors and people living with disabilities," CMS Acting Administrator Andy Slavitt reportedly said.

The final rate for 2017 Medicare Advantage payments will be released in April.