UPDATE 2-US government issues Medicare Advantage guidelines

Fri Feb 17, 2012 6:47pm EST

WASHINGTON Feb 17 (Reuters) - The Obama administration on Friday issued 2013 payment and policy guidelines for U.S. health insurers that participate in the Medicare Advantage program, saying the proposed changes would bring lower premiums and stable or improved benefits.

But the documents did not include an official preliminary estimate for the net average percentage change in reimbursements, leaving insurers and financial markets in the dark about the guidelines' potential impact on the industry.

Analysts said unofficial estimates suggested a possible all-in gain of 2.3 percent, far better than market expectations that had ranged from no change to a decline of 5 percent.

A year ago, the Centers for Medicare and Medicaid Services estimated a 1.6 percent net all-in rise for 2012 but later reduced that to 0.4 percent.

CMS, which oversees the federal healthcare program for the elderly, said on Friday that the 2013 guidelines point to an overall annual growth rate of 2.47 percent and a 2.3 percent per capita growth rate next year. But those figures do not take into account variables such as geographic location.

CMS officials said a net all-in figure for 2013 could be released among final rates due to be published on April 2.

"This positive growth trend will help ensure that beneficiaries maintain a choice of plans without significant increases in premiums or decreases in benefits," the agency said in a statement.

Medicare Advantage allows the program's 48 million beneficiaries to purchase private insurance instead of receiving traditional Part A hospital coverage and Part B physician coverage. Critics say it pays too much to private insurers.

About 25 percent of beneficiaries participate in Medicare Advantage.

Analysts were upbeat about the guidelines.

Ipsita Smolinski, a healthcare analyst with Capitol Street, cited the guidelines' 2.3 percent national per capita growth as a positive sign for insurers given that Medicare providers are scheduled to receive reimbursement cuts as a result of deficit reduction talks in Congress last year.

Ana Gupte, analyst for Sanford Bernstein, added: It should be good for the health insurers and specifically for the Medicare Advantaged leveraged health insurers."

Humana Inc. and UnitedHealth Group Inc. are the biggest providers of Medicare Advantage plans and the most exposed. Other providers include Aetna Inc., Cigna Corp. , Coventry Health Care Inc., Health Net Inc. and WellPoint Inc..

Analysts believe Medicare Advantage will expand as the Baby Boom generation leaves the workforce and younger retirees opt for private coverage instead of traditional Medicare.

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