Workflow
Big Gains Ahead for Medicare Advantage Sellers as Payments Set to Grow
CVSCVS Health(CVS) ZACKS·2025-01-14 14:40

Stock Performance - Shares of UnitedHealth Group Incorporated (UNH), Humana Inc (HUM), and CVS Health Corporation (CVS) grew by 3 9%, 6 8%, and 7 3%, respectively, following the Biden administration's proposal to increase payments to Medicare Advantage (MA) plans [1] - The proposed payment increase significantly exceeded market expectations, signaling a potential windfall for these companies [1] Earnings Growth Expectations - Humana's next-year EPS growth rate is expected at 3 3% with a Zacks Rank 2 (Buy) [2] - UnitedHealth's next-year EPS growth rate is expected at 8% with a Zacks Rank 3 (Hold) [2] - CVS Health's next-year EPS growth rate is expected at 16 7% but has a Zacks Rank 5 (Strong Sell) [2] Medicare Advantage Market Dynamics - Government payments to MA plans are projected to rise by an average of 4 33%, an increase of more than 21billionfrom2025to2026[4]−Excludingchangesinpatientriskscores,theeffectivegrowthrateisexpectedtobe22321 billion from 2025 to 2026 [4] - Excluding changes in patient risk scores, the effective growth rate is expected to be 2 23% [4] - UnitedHealth, Humana, and CVS Health collectively account for nearly 60% of the MA market [6] Industry Challenges - Physicians treating Medicare patients face their fifth consecutive year of payment cuts, leading to frustration over perceived preferential treatment for insurers [5] - The American Medical Association (AMA) is urging Congress to align physician payment rates with the rising cost of care [5] - MA remains under scrutiny from politicians on both sides for care denials and alleged overpayments, adding an element of uncertainty [7] Financial Impact - The finalized 2025 payment rates, announced in April, amounted to a slight reduction when adjusted for risk scores [6] - The newly proposed rates, coupled with membership growth, are poised to bolster the financial performance of MA plan sellers [6] - The Fed is likely to spend 9 2 trillion over the next 10 years on MA payments to plans [7] Conclusion - With the proposed payment increase and growing membership, Medicare Advantage sellers like UnitedHealth, Humana, and CVS Health are positioned for near-term growth [3] - Ongoing scrutiny and pushback from physicians could influence the sector's longer-term trajectory [3]