CVS Health Faces Cost Challenges in Medicare Advantage, Revises 2024 Forecast

CVS Health encountered setbacks in the first quarter, falling short of expectations and revising its 2024 forecast significantly below Wall Street estimates. The health care conglomerate’s stock experienced a sharp decline following the announcement, attributed to ongoing challenges related to escalating costs within its Medicare Advantage sector.

Leadership at CVS Health addressed analysts, citing persistent cost escalations stemming from increased utilization of care services within the Medicare Advantage domain. They identified mounting expenses associated with outpatient care and supplementary benefits, alongside emerging pressures linked to inpatient care.

CEO Karen Lynch underscored the impact of the cyberattack on Change Healthcare, a subsidiary of competitor UnitedHealth Group, on CVS Health’s operational insights during the quarter. Change Healthcare facilitates the submission and processing of insurance claims for various insurers, including CVS Health.

The company had previously adjusted its 2024 projections earlier in the year, seeking to comprehend the drivers behind the continued cost hikes within the Medicare Advantage framework, a privately administered iteration of the government’s Medicare program catering to individuals aged 65 and above.

Despite these challenges, CVS Health noted a disparity in pressure between its commercial insurance segment, encompassing plans tailored for employers and offered on individual insurance exchanges, and its Medicare Advantage sector. The company remains vigilant in addressing cost dynamics and anticipates further scrutiny and strategic adjustments to manage future forecasts effectively.