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Medicare Rate Cuts Impact CVS, Humana, and Other Health Stocks

Byeditor

Apr 2, 2024

During morning trading on Tuesday, the stocks of several health insurance companies, including Humana, CVS Health, UnitedHealth, and Elevance Health, took a hit after federal regulators did not raise payments for Medicare plans above industry expectations. Despite this, the Centers for Medicare and Medicaid Services announced that government payments to Medicare Advantage and Medicare Part D programs would increase on average by 3.7%, or $16 billion, year-over-year in 2025.

CMS Administrator Chiquita Brooks-LaSure stated that the rate increase is meant to maintain the stability of the Medicare Advantage and Part D prescription drug programs and keep payments up-to-date and accurate. This news led to a decline in stock prices for Humana, the nation’s second largest Medicare Advantage health insurer, as well as other companies in the industry.

UnitedHealth stock fell 6%, CVS Health shares slid 8%, Centene Corp. stock fell 5%, and Elevance Health stock dipped 4%. The rate increase was in line with a proposal made in January, and historically, final rates have not deviated from initial proposals in the past decade. Humana CFO Susan Diamond expressed concerns during an investor call in March about the impact of the rate increase on the company’s earnings goals.

In other pharmaceutical news, the weight loss drug shortage is affecting Eli Lily’s Zepbound, and a study revealed that Ozempic costs only $5 to make. This news led to a swift backlash within the industry.

By editor

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