Health-care legislation that should clear Congress on Wednesday would leave the managed-care industry largely untouched, as the measure would preserve funding for Medicare Advantage plans.
Lawmakers are likely to revisit the question of cutting reimbursements to Medicare Advantage plans next year, as some key pieces of the bill expire in six months.
Several other health-industry sectors also appear to do well, or to incur no significant harm, under the Medicare, Medicaid and SCHIP Extension Act of 2007, which the Senate passed Tuesday and the House is considering Wednesday. Respiratory-care companies may be an exception.
"We believe final approval of the ... bill would represent a highly favorable outcome for the managed-care industry in the near term relative to other recently proposed legislation," Deutsche Bank analyst Scott Fidel said in a note.
While Congress likely will continue to debate potential cuts in Medicare Advantage reimbursement next year and beyond, the industry has emerged "largely unscathed" from this year's legislative negotiations that threatened Medicare payments, Fidel wrote. Managed-care companies offer Medicare Advantage plans to Americans older than 65.
The Senate bill includes no cuts to Medicare Advantage funding aside from eliminating $1.5 billion allocated to a regional preferred provider organization stabilization fund. An independent congressional advisory panel has recommended that the fund be eliminated.
The measure also would extend the State Children's Health Insurance Program through March 31, 2009, without the expansion that could have boosted Medicaid managed-care companies.
Stifel Nicolaus analysts noted that other major components of the legislation expire on June 30, 2008, which will force Congress to develop new measures in the second quarter.
The bill would replace a scheduled 10.1% cut in Medicare physician reimbursement with a 0.5% increase through the first half of 2008, the firm noted.
"Critics of the bill are already dubbing it a path of least resistance piece of legislation, since most offensive pieces of legislation were removed to speed approval," Stifel analysts said in a note.
Medicare Advantage had faced a potential $50 billion in cuts in earlier version of legislation, and now takes virtually no hit, Stifel noted.
While the Medicare Advantage debate will resurface in six months, the firm said, "all of the major players will remain in their current seats with current opinions six months from now.
