Lower Medicare rates impact CVS, Humana, and other health stocks

In 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. The Centers for Medicare and Medicaid Services announced that government payments to Medicare Advantage and Medicare Part D programs will increase by an average of 3.7% or $16 billion year-over-year in 2025.

Humana CFO Susan Diamond expressed disappointment in the rate increase during an investor call in March. She stated that it may be challenging for the company to reach its goal of boosting earnings by $6 to $10 without a bigger increase in payments. The rate increase announced by CMS is the same as a rate proposal made in January, and over the past 10 years, final rates were not increased from their initial proposal only once.

During this time, other pharmaceutical companies have also faced challenges such as Eli Lily’s ZepboundOzempic facing a weight loss drug shortage and backlash over the low cost of producing the drug. This news has affected investors’ confidence in these companies’ ability to generate profits in the future.

By Sophia Gonzalez

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