The Biden administration on Friday finalized new rules designed to cut widespread overbilling by private Medicare Advantage plans, but softened the approach after intense lobbying from the industry.

Regulators are still working on rules that will cut billions of dollars a year from insurers. But they will make changes in phases over three years rather than all at once, and that will lessen the immediate impact.

In the short term, private health plans will still be able to receive payments that Medicare officials don’t see fit. The system will eventually eliminate the extra funds that insurers receive to cover patients diagnosed with fewer than 2,000, including 75 that appear to be the subject of widespread manipulation.

But the extended schedule could also alleviate concerns raised by health plans, doctors and others that a broad policy change could lead to unforeseen consequences, such as increased premiums or reduced benefits for Medicare Advantage recipients.

In the two months after the proposal went public, insurers and their allies launched a costly, high-profile lobbying campaign using television commercials to pressure lawmakers on Capitol Hill and recruit thousands of people to comment against it.

A senior Medicare official in the country acknowledged on Friday that industry outrage had influenced the shape of the new rules.

“We’ve been very comfortable with our policies, but we always want to hear what stakeholders have to say,” said Chiquita Brooks-Lasur, administrator for the Centers for Medicare and Medicaid Services. She said the desire for a slower policy change was “what we really heard from our comments and we wanted to respond.”

The new payment formula is a reaction to a growing body of evidence that for more than a decade, private insurance companies have been using the formula to collect overpayments from the federal government. The plans are eligible for additional payments for patients who may be more expensive to treat, prompting many to go to great lengths to diagnose as many diseases in their clients as possible. Insurers collect tens of billions of dollars of additional payments per year, according to various estimates.

Nearly every major insurance company participating in the program has settled or faced a federal fraud lawsuit for this behavior. Evidence of overpayment is documented. academic research, government guard dog reports and plan audits.

Despite excesses and fears that Medicare Advantage too often denies needed care, about half of all Medicare beneficiaries are now enrolled in private plans that receive more than $400 billion a year in government spending. It remains popular with consumers, who often receive lower premiums and benefits such as vision and dental services not available in the state’s basic Medicare plan.

The program has also become profitable for major insurance companies. recently research from the Kaiser Family Foundation found that insurers make about twice as much gross margin with Medicare plans as they do with their other lines of business. Humana recently announced that it will stop offering commercial insurance to focus on Medicare, which serves older Americans and the disabled, and Medicaid, which primarily serves the low-income population.

The new rule will eventually eliminate additional payments for many diagnoses that were commonly reported by Medicare Advantage plans but that Medicare did not report as high-volume health care. These diagnostic codes included some of those specifically targeted by private plans, such as “complicated” diabetes and a form of severe malnutrition commonly seen in countries experiencing famine.

Under a three-year phased implementation, insurers will receive payouts based on one-third of the new formula in the first year and two-thirds in the old one. Overall, Medicare estimates that Medicare Advantage plans will pay 3.32 percent more next year than this year. Under the initial limits proposed by the administration, that increase would have been about 1 percent. Previous changes to the payment model also took three years.

Opponents of the policy argued that the change could reduce the benefits to the plan’s clients and could have a disproportionate impact on the poor and minorities. Slower deployment did not soften them.

“While we appreciate that CMS has moved to a phased approach, the underlying policy has not fundamentally changed,” the post reads. Mary Beth Donahue, president of the Better Medicare Alliance, an industry group that spent eight figures on anti-policy television ads. “We remain concerned about the unintended consequences of this risk adjustment policy for older people.”

But the Alliance of Community Health Plans, a group that represents non-profit insurers, said in a statement that it welcomes the new approach: “We support changes to the risk adjustment model to focus on delivering results for consumers and removing key incentives for aggressive documentation. ”

Insurers have often challenged the agency’s Medicare actions in court, but it’s not clear if any insurers will challenge this policy.

Some proponents and experts say the new formula is too timid. The Medicare Payments Advisory Commission (MedPAC), which recommends the policy to Congress, wrote in commentary letter that the proposed changes, while “correct in direction, are not sufficient to address the problem of excess Medicare spending.”

Mark Miller, former chief executive of MedPAC, urged Medicare to go even further than its original proposal. He is now an executive vice president of Arnold Ventures, a political and advocacy organization closely associated with the group that funded TV advertising protecting change. He described the final approach as disappointing. “They are basically bowing to the plans,” he said in an email.

In February, weeks after the proposal was made, top health officials in the Biden administration came out strongly in defense of the change. In series tweetHealth and Human Services Minister Xavier Becerra described criticism of the policy as “disinformation spread by highly paid industry hackers and their allies.” In an interview with The New York Times, D. Mina Seshamani, a senior Medicare official, said she intends to “hold the industry accountable for cheating the system.”

Ms. Brooks-Lasour’s comments on Friday were more measured, highlighting the “stakeholder” perspective on Medicare. She said she doesn’t feel like Medicare is giving in to industry pressure.

The pay change is one of a number of hardline program rules recently proposed or completed by the administration. Another proposal provides for tighter controls on industry marketing and makes it harder to plan to deny medical care to patients. And the rule, finally approved in January, requires plans to reimburse the government for a larger share of the overpayments found in audits.

While the Medicare Advantage program has long enjoyed strong bipartisan support on Capitol Hill, few leading lawmakers have come forward in this round to defend the plans despite all the lobbying. Republicans on the committees that oversee the programs wrote letters to Medicare officials asking technical questions about the change, but avoided harshly criticizing the policy. On Tuesday, 17 Democrats in the House of Representatives sent a letter to Medicare representatives asking them to delay implementation but not cancel it.

Bill Cassidy of Louisiana, a physician who is the top Republican on the Senate Committee on Health, Education, Labor and Pensions, and Senator Jeff Merkley, a Democrat of Oregon, introduced legislation on Tuesday, it will take further steps to prevent “unreasonable payments, coding or diagnoses.”