The Obama administration reversed course Monday and said it now anticipates boosting rather than cutting payments to insurers who offer Medicare Advantage plans — the private health plans that the president had at one time deemed wasteful.
Two months ago the Centers for Medicare and Medicaid Services had budgeted for a 2.2 percent cut to the Medicare Advantage program, which allows seniors to obtain expanded coverage from private insurers. But on Monday CMS said it now anticipates a 3.3 percent rate increase.
More than 1 out of every 4 Medicare beneficiaries uses the program, and lobbyists and members of Congress had fought the proposed cuts through TV ads and letter-writing campaigns that warned of lower benefits and higher premiums for seniors.
CMS said it changed its mind after concluding that Congress will once again act to stave off a 25 percent cut in overall payments to doctors who treat Medicare patients, something lawmakers do every year in a maneuver called the "doc fix."
Sen. Orrin G. Hatch, the ranking Republican on the Senate Finance Committee, which oversees Medicare, praised the move and took credit for spearheading a letter campaign to thwart what "would have been the largest cuts to the program in its history."
"Today, CMS rightly acted to reverse course and implement a responsible rate that will preserve choices and ensure continued access to top-notch quality and affordable care for beneficiaries enrolled in the popular Medicare Advantage program," Mr. Hatch said.
President Obama has been critical of Medicare Advantage in the past, pointing to studies that said the program cost more than traditional Medicare but didn't provide a commensurate boost in coverage.
His 2010 health law made deep cuts to the program and used the savings to pay for other parts of the Affordable Care Act.
CMS' independent actuaries objected to Monday's move, arguing that it's unwise to budget based on potential action from Congress.
But CMS officials were confident Congress will act, as it has every year for more than a decade.
"The policies announced today further the agency's goal of improving payment accuracy in all our programs, while at the same time ensuring program stability and preserving beneficiary choice," said Jonathan Blum, CMS acting principal deputy administrator.
Word of the rate increase sent shares of Humana, a prominent provider of Medicare Advantage plans, soaring in late trading on Monday.
The National Center for Public Policy Research, a conservative think tank, said CMS made the "right decision" because additional cuts to Medicare Advantage — on top of cuts imposed by the president's health care law — would have been "inexcusable."
"By being responsive to the more than 160 members of Congress from both parties who raised concerns about the impact of the proposed payment rate on seniors, CMS has taken an important step to help stabilize Medicare Advantage at a time when the program is facing significant challenges," said Karen Ignagni, president and CEO of America's Health Insurance Plans.
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