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UnitedHealth, Humana to See 0.4% Medicare Rate Rise in 2012

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April 4 (Bloomberg) -- Medicare payments to U.S. health insurers led by UnitedHealth Group Inc. and Humana Inc. will increase 0.4 percent in 2012, less than projected because of lower-than-expected spending on doctor visits, regulators said.

The Baltimore-based Centers for Medicare and Medicaid Services announced in February the private health plans may expect an average 1.6 percent gain in payments. Medicare spent less than administrators expected on physician visits in 2010, Jonathan Blum, a deputy director of the agency, said during a conference call after the close of U.S. markets. Payments to Medicare Advantage plans are tied to overall program spending.

A payment boost under Medicare Advantage, through which private insurers offer health benefits to those eligible for Medicare, is “incredibly important” to plans like Humana, based in Louisville, Kentucky. The plans face $136 billion in cuts under the health overhaul through 2019, said Robert Laszewski, the president of Health Policy Strategy and Associates, an Alexandria, Virginia-based company that consults with health insurers.

“The chickens come home to roost” beginning in 2014, Laszewski said in an interview, referring to the point when top provisions in the health-care overhaul take effect.

Medicare is the U.S. government health-care program for the elderly and disabled. Program administrators must phase in rate reductions over three to six years until they are closer to the cost of enrolling a person in the standard, government-run Medicare program, according to the nonprofit Kaiser Family Foundation in Menlo Park, California.

Covering an individual through Medicare Advantage costs the U.S. an average of 10 percent more than providing benefits under traditional Medicare, the U.S. Medicare Payment Advisory Board reported last month.

The lower-than-expected spending on physician services by Medicare is a reflection of the fact that Americans are using less health care, said Dan Mendelson, chief executive officer of the Washington-based consulting firm Avalere Health LLC.

“That is a trend you see throughout the industry,” Mendelson said in an interview. “That will require some adjustment on the part of the plans.”

Twenty-four percent of the 47 million people enrolled in Medicare last year were covered by private insurance companies, including Minnetonka, Minnesota-based UnitedHealth and Humana, according to the Kaiser Family Foundation. Enrollment is expected to increase 6 percent this year compared from 2010, Donald Berwick, the administrator of the Centers for Medicare and Medicaid Services, said in February.

Regulators didn’t increase Medicare Advantage payment rates for this year so health insurance companies are being paid the same as in 2010.

To contact the reporter on this story: Jeffrey Young in Washington at jyoung89@bloomberg.net.

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net.

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