April 2, 2018 / 9:33 PM / 6 months ago

UPDATE 2-U.S. govt sets 3.40 pct hike in 2019 payments to Medicare insurers

(Adds analyst comment, share prices)

By Bill Berkrot and Caroline Humer

April 2 (Reuters) - The U.S. government on Monday said it would increase by 3.40 percent on average 2019 payments to the health insurers that manage Medicare Advantage insurance plans for seniors and the disabled, a higher-than-expected rise reflecting a projection of higher medical cost growth.

The rate, which affects how much insurers charge for monthly healthcare premiums, plan benefits and, ultimately, how much they profit, represents an increase over the 1.84 percent increase proposed by the Centers for Medicare & Medicaid Services (CMS) in February.

Medicare Advantage plans serve more than 20 million people aged 65 and older.

"Medicare Advantage plans are likely to be pleased by the final rule," said Ipsita Smolinski, managing director at healthcare research consulting firm Capitol Street. "Final MA rates are strong versus the proposal due to the effective growth rate jumping almost 1 percent."

UnitedHealth Group Inc, Humana Inc, Aetna Inc and WellCare Health Plans Inc are the largest sellers of Medicare Advantage health insurance. Under the program, they are paid a set rate by the government to cover member healthcare costs. Shares of the insurers were largely flat in extended trading.

CMS Administrator Seema Verma also laid out a plan to provide faster access to cheaper generic drugs for Medicare recipients. CMS is a division of the U.S. Department of Health and Human Services.

The government also said it would extend low-income cost sharing on generic drugs for patients with Medicare Part D to biosimilar drugs, which are less expensive versions of high-priced biotech medicines.

Medicare Advantage competes with the traditional Medicare fee-for-service program. Both have grown as the "Baby Boomer" generation ages into Medicare. Together, they cover more than 55 million people.

The government said that the new rate reflected a decline in payments of 2.26 percent related to the Affordable Care Act requirement that Medicare advantage and fee-for-service Medicare have the same payment structure.

It also forecast medical services costs, known as the effective growth rate, to rise by 5.28 percent, up from a prior projection of 4.35 percent, to reflect changes in spending under the 2019 U.S. budget. (Reporting by Bill Berkrot in New York and Caroline Humer in Wilton, Connecticut Editing by James Dalgleish)

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