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CMS sees private Medicare plans growing in 2012

Sep 15, 2011, 1:10 p.m.

By Anna Yukhananov

WASHINGTON (Reuters) - More elderly and disabled Americans will enroll in private Medicare health insurance plans next year, and they will pay lower premiums for the second year in a row, U.S. health officials said on Thursday.

The plans, called Medicare Advantage, are run through private health insurers as an alternative to traditional fee-for-service Medicare plans. Rates are expected to be 4 percent lower next year than in 2011, the government's Centers for Medicare and Medicaid Services (CMS) said.

Enrollment in the plans is expected to grow 10 percent, to about 13.1 million, according to data the plans provided to CMS. Almost 12 million people are already enrolled in the program.

Jonathan Blum, director of CMS's Center for Medicare, said the lower costs and growth forecasts show companies are still interested in offering such plans despite new consumer protections under the healthcare law and payment caps to insurers.

"We can say with complete accuracy that despite projections in 2010 that the program will decline, the program has grown ... and will continue to grow," Blum told reporters.

"The plans have made a very strong statement that they intend to commit to the program."

Seniors will also have an extra seven weeks to enroll in the programs this year, and enrollment will start earlier, on October 15, which could boost the number of those participating.

Medicare Advantage has come under fire from critics who say the government pays too much to the insurance companies running it. Supporters of the plans say they are more efficient than traditional Medicare plans and offer better services, such as vision care and hearing aids, for less money.

The 2010 health reform law reduces federal payments to Medicare Advantage plans over time to bring them more in line with traditional Medicare and save the government money.

Analysts have said those changes are not likely to kill off the plans, but could lead to consolidation in the industry.

Companies such as Humana Inc and UnitedHealth Group Inc are some of the biggest providers of such plans.

Shares of health insurers were up more than 1 percent on both the Morgan Stanley Healthcare Payor Index and the S&P Managed Health Care Index, slightly outpacing the stock market overall.

Starting next year, plans with high quality scores will also get financial bonuses, and can enroll new beneficiaries throughout the year as an added incentive.

"Plans that do a better job serving the needs of their Medicare members should be rewarded and all plans should be encouraged to improve their performance," Blum said in a statement.

Overall, about 1 percent of beneficiaries will have to choose a new provider because their Medicare Advantage plan has shut down, officials said, compared to 5 percent last year.

The insurance industry warned, however, that seniors can expect more costs and fewer benefits with Medicare Advantage plans after payment cuts have more time to take effect.

They point to projections from the Congressional Budget Office, which in March predicted Medicare Advantage enrollment would decline to 7.8 million in 2019.

"Medicare Advantage plans remain committed to the program and are doing everything they can to preserve benefits and keep coverage as affordable and possible for beneficiaries," said Robert Zirkelbach, press secretary for America's Health Insurance Plans.

"However, as these cuts take effect in the coming years, Medicare Advantage beneficiaries will face higher out-of-pocket costs, reduced benefits, and fewer health care choices."

The group, along with its insurer members, fought against many of the healthcare reforms before they passed but now says it is committed to implementing the law.

Medicare Advantage has been a growing business for the industry as high unemployment dents enrollees in health insurance plans offered by employers.

A quarter of the 48 million people currently enrolled in Medicare, or almost 12 million, opt for the private alternatives, the highest number since the program started in its current form in 1999, according to the Kaiser Family Foundation. It said premiums were $39 per month on average in 2011.

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