Medicare Rate Decision Came Two Weeks Before Announcement

The Obama administration decided March 15 to scale back a proposed cut in Medicare payments to health insurers, two weeks before the information may have been tipped to stock traders, according to Senator Charles Grassley.

Grassley, an Iowa Republican who has been investigating whether lobbyists obtained confidential government information, said events suggest the rate decision may have been known to people outside of the Medicare agency long before an analytics firm released an April 1 report speculating on the decision.

“A significant number of people likely knew what the outcome would be long before the decision was announced,” Grassley said in an e-mail today. “It seems unlikely that none of them hinted at it to anyone else for more than two weeks.”

The timeline of events was pieced together after a Height Analytics LLC report on April 1 told clients that the Obama administration would reverse plans to cut payment rates for Medicare Advantage plans sold by private insurers. The report beat by more than 40 minutes the official government announcement, sending the shares of Humana Inc. (HUM), UnitedHealth Group Inc. (UNH) and other insurers soaring.

Marilyn Tavenner, the acting administrator of the Centers for Medicare and Medicaid Services, described the government’s timeline leading up to the payment decision in an April 19 letter that Grassley released today.

Mark Hayes, a Greenberg Traurig LLP lobbyist, discussed the possibility of a rate change in an April 1 e-mail sent to Height Analytics, a Washington-based investor firm that provides analysis and information about government decisions. In turn, Height advised its clients in a memo that day about the policy change.

Height has said it did nothing wrong. Greenberg Traurig said it, too, hadn’t found evidence of any illegal activity, though it plans to stop doing work with so-called political intelligence firms.

Medicare Advantage plans are those offered by private insurers with different benefits and costs than the traditional Medicare health coverage for the elderly and disabled. The government sets the rates the insurers are paid.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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