UPDATE: Medicare Advantage Growth Estimate At 0.5% For FY10

Private Medicare plans would see a modest 0.5% increase in the 2010 fiscal year under tentative projections, a growth rate that would come in well below some analysts' expectations.

Centers for Medicare and Medicaid Services, or CMS, said late Friday that the current estimate for the growth of Medicare Advantage, which affects payment rates to private insurers, would be 0.5% for both elderly and disabled enrollees. Investment analysts at Oppenheimer & Co Inc. had forecast rates would increase by 2% to 4%.

Medicare Advantage plans are private insurers' version of the popular U.S. government health program and Medicare prescription-drug plans. The rate unveiled Friday was released as part of an "advance notice," and a final rate for fiscal 2010 won't be announced until April 6.

Private insurers taking part in the Medicare Advantage program include Humana Inc. (HUM), UnitedHealth Group Inc. (UNH) and Aetna Inc. (AET), as well as Blue Cross and Blue Shield companies.

Calculation of the 2010 growth rate for Medicare Advantage takes into account a 1.1% decline in per capita costs for Medicare Advantage enrollees. That decrease could be misleading, however, because CMS has said that it is predicated upon Congress and the president allowing a 20% drop in Medicare reimbursements to take effect in 2010.

Lawmakers generally move to enact a fix to the reimbursement rate - known as the "sustainable growth rate" - so that doctors will continue to take Medicare patients. A CMS official in a conference call Friday said that per capita costs for Medicare Advantage patients could increase to roughly 3% if a physician reimbursement fix is enacted.

-By Patrick Yoest, Dow Jones Newswires; 202-862-3554; [e-mail]