NEW YORK (Reuters) – The U.S. government on Monday said it would increase by 2.53 percent on average 2020 payments to the health insurers that manage Medicare Advantage insurance plans for seniors and the disabled, a reflection of a new estimate on medical cost growth.
The rate, which affects how much insurers charge for monthly healthcare premiums, plan benefits and, ultimately, how much they profit, represents an increase over the 1.59 percent increase proposed by the Centers for Medicare & Medicaid Services (CMS) in February.
The government raised the final payment rate from the proposed rate after revising its estimate for increases in medical services for next year. Its final estimate of that growth rate is 5.62 percent compared with 4.59 percent in its February proposal.
“Most of the puts-and-takes remained the same as proposed, but CMS upped the growth rate, which is definitely helpful in 2020,” said Ipsita Smolinski, managing director at healthcare research consulting firm Capitol Street.
Medicare Advantage plans serve more than 20 million people, most of them aged 65 and older.
Shares in insurers were unchanged in after hours trading. UnitedHealth Group Inc, Humana Inc, CVS Health Corp, through its acquisition of Aetna, and WellCare Health Plans Inc are the largest sellers of Medicare Advantage health insurance.
Under the program, they are paid a set rate by the government to cover member healthcare costs.
In addition to medical costs, the government’s 2020 payment rate also factors in other changes in policies, such as quality of care related payments that may result in declines or increases from year to year.
For instance, the 2020 rate reflected a decline in payments of 3.08 percent related to the Affordable Care Act requirement that Medicare Advantage and fee-for-service Medicare have the same payment structure.
Starting in 2020, Medicare Advantage plans will also be able to offer supplemental non-health related benefits to chronically ill enrollees that address their social needs, CMS Administrator Seema Verma said. Those can include needed structural changes to the home, such as adding ramps and widening doorways.
The plans can tailor these offerings to individuals, and the offerings could increase competition between plans, Verma said.
Previously, plans have only been allowed to offer health related benefits.
Medicare Advantage competes with the traditional Medicare fee-for-service program. Both have grown as the “Baby Boomer” generation ages into Medicare. Together, they cover more than 55 million people.
Reporting by Caroline Humer; Editing by Bill Berkrot