US Proposes $21 Billion Medicare Payment Boost to Insurers
Health insurance companies selling private Medicare Advantage plans in the US would see a greater increase in payments in 2026 than in the current year if a proposal released Friday is adopted by the incoming Trump administration.
(Bloomberg) -- Health insurance companies selling private Medicare Advantage plans in the US would see a greater increase in payments in 2026 than in the current year if a proposal released Friday is adopted by the incoming Trump administration.
Medicare Advantage plan payments would rise 4.3% on average, the government said, bolstering revenue for companies including UnitedHealth Group Inc., Humana Inc., and CVS Health Corp. Excluding expected changes in patient risk scores, which increase revenues, payments would increase by 2.2%.
Shares of all three companies jumped on the news in trading after New York markets closed. Humana gained 7%, UnitedHealth was up 3.9% and CVS increased 2.7%.
The proposed increase from the Centers for Medicare and Medicaid Services would be the largest since 2023. In the past two years, insurers have complained that rates were too meager to cover rising medical costs, and the payment policies have squeezed earnings and weighed on stock prices.
In recent years, the Biden administration has attempted to constrain payments to Medicare Advantage plans, which lawmakers, watchdogs, and whistleblowers have accused of wasting tax dollars. The rate change for 2025, finalized in April, amounted to a slight cut after excluding changes to risk scores, the measures of patient illness that influence payments.
The positive update may be welcomed by the industry, and the incoming Trump administration could make the policy more favorable. If today’s proposal is adopted, it would result in an additional $21 billion in payments in 2026 over expected payments in 2025.
“While rates in recent years have been considered insufficient” by Medicare insurers, “there is some optimism that rates could improve under a Trump CMS,” JPMorgan analyst Lisa Gill wrote in a research note before the proposal Friday.
CMS plans to finish phasing in changes to certain risk coding policies, first proposed in 2023, that insurers opposed. Despite outcry from the industry that changes would destabilize the market, Medicare officials said in a news release that the market remained robust.
The US is expected to spend $9.2 trillion over the next decade on payments to private Medicare plans, according to CMS. Health care conglomerates UnitedHealth, Humana and CVS sold more than half of the Medicare Advantage plans in 2024, according to KFF, the health policy group.
Medicare Advantage covered more than half of Medicare beneficiaries and cost $455 billion in 2023, not including Part D drug plan payments, according to the Medicare Payment Advisory Commission, a nonpartisan adviser to Congress.
$83 Billion
The group said that the US would pay $83 billion more to cover people in Medicare Advantage plans in 2024 than if those people were on traditional Medicare. That’s due to the way that plans select members and record patient illnesses, as well as other aspects of the program that result in higher payments.
The Medicare Advantage rate proposal is usually released in late January or early February, before a final notice due in April.
Democratic Senator Elizabeth Warren and Representative Lloyd Doggett had asked Biden officials to release the rule quickly, saying that Medicare Advantage plans are overcharging the government by claiming patients are sicker than they actually are, which brings them more funds.
There is precedent for an outgoing administration to put forward its Medicare Advantage rate proposal in the final days of office. In 2021, the first Trump administration issued its plan on Jan. 15, less than a week before President Joe Biden’s inauguration.
(Updates with share moves in third paragraph.)
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First Published:11 Jan 2025, 03:16 AM IST
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