Payment Hike on Tap for Medicare Managed Care Plans Next Year
Preliminary payments to private insurers that operate Medicare Advantage plans will increase by 3.5% in 2008, CMS announced Monday, the AP/San Francisco Chronicle reports. The payment update is lower than last year's 3.9% increase but higher than Wall Street estimates of a 2% to 3% increase.
The 2008 payment rates are not a definitive amount but rather a benchmark against which insurers will offer their services.
According to the AP/Chronicle, insurers typically provide Medicare benefits for less than the benchmark because they can keep a portion of the cost difference, with the remainder going back to the federal government.
Although some insurers' shares increased after the announcement, Prudential analyst David Shove said MA plans remain "a high-risk business with a large congressional target on its back."
Rep. Pete Stark (D-Calif.) last month held a hearing to examine whether MA providers are overpaid after a report found such plans receive on average 12% more than the traditional fee-for-service plan.
House Democrats are considering payment cuts to fund other programs. However, the AP/Chronicle reports that it "could be difficult" for Stark and other lawmakers "to oppose the 2008 rate increase ... since Medicare calculated the update based on a congressionally approved formula."
Abby Block, a director with Medicare, said, "This year's rate is based on a formula that is dictated by congressional statute, same as last year." She added, "The current increase is just how the standard methodology came out this year."
Health care analyst Kevin Piper noted that final payment rates to insurers likely will be affected by the relative health plan members because plans that accept more "at-risk" members receive higher payments (Perrone, AP/San Francisco Chronicle, 4/3).