UPDATE 1-U.S. Medicare chief says health law working

Thu Feb 10, 2011 3:07pm EST

* Medicare chief says healthcare law helping elderly

* Says Medicare Advantage premiums down, enrollment up

* HMO shares up slightly, Humana shares down 0.7 percent (Recasts, adds new material throughout)

By Donna Smith

WASHINGTON, Feb 10 (Reuters) - President Barack Obama's chief of health programs for the elderly and poor on Thursday said the year-old U.S. healthcare overhaul was reducing Medicare costs and called a push by congressional Republicans to repeal the law unfortunate.

Medicare and Medicaid services administrator Donald Berwick, appearing before a congressional panel, rebuffed Republican claims that the law would raise costs for people enrolled in Medicare Advantage (MA), which uses private insurance providers such as Humana Inc (HUM.N) and UnitedHealth Group Inc (UNH.N), to deliver benefits.

Berwick told the House of Representatives Ways and Means Committee that the latest data show premiums are down an average 6 percent this year, while enrollment is up by 6 percent to more that 12 million people.

Separately, Oppenheimer & Co analyst Michael Wiederhorn said he expects growth in private Medicare plans to continue to swell as more of the nation's baby boomer population qualifies for the program, which covers people age 65 or older.

Such plans "should be an attractive alternative to control costs ... compared to the inefficient Medicare Fee-For-Service," he wrote in a research note, adding that cuts to the plans under the health law could squeeze HMO profits.

Overall, shares of HMOS were up slightly compared to the larger S&P 500 index. Humana shares were down 0.7 percent at $58.14 while UnitedHealth was up nearly 1 percent at $42.46 in afternoon trade on the New York Stock Exchange.

As Berwick testified, Democrats released a report by the Government Accountability Office that said many Medicare Advantage programs spend a high percentage of premiums on administrative costs and profits.

"One out of every three MA enrollees is in a plan that spends less than 85 percent of their projected Medicare payment on medical expenses, which means more than 15 percent of their projected Medicare payment goes to overhead and profit," the report said. The healthcare overhaul places limits on how much insurers can spend on profits and administrative costs.

At the Ways and Means hearing, Republicans pointed to prepared testimony by the Medicare and Medicaid agency's own chief actuary, Richard Foster. He predicted higher costs and lower enrollment in Medicare Advantage as changes in government payments under the new healthcare law go into effect.

Berwick said that Medicare Advantage providers have been aggressive in advertising and enrolling new beneficiaries.

"This law means real improvements for Medicare beneficiaries, now and in the future," Berwick said in his written testimony to the Ways and Means Committee. "That's why the House vote to repeal this law was unfortunate."

It was Berwick's first appearance before the House panel and Republicans, who are pushing to repeal the law and deny funding for its implementation, pressed for yes and no answers on its effect on Medicare. Berwick said the law was complicated and said it was difficult to be that specific.

"I am most disappointed in the lack of candid answers," said Republican Representative Geoff Davis. (Additional reporting by Susan Heavey; Editing by Xavier Briand)