The message can not get any clearer than what is being stated by CVS management. The discussion now being had is things will be better in 2025. Kind of doubtful as MedPac zeroes in on Medicare Advantage plans. I suspect more will be done to rein in MA plans. Read on and also the article. “Brown echoed Pearl, noting that a lot of CVS’ challenges come from Medicare Advantage, which touches Aetna, Oak Street Health and Caremark. In 2024, CVS made a strategic decision to focus on adding more seniors into its Medicare Advantage product. However, more people are utilizing healthcare services than the company anticipated. Stating . . . “As the utilization went up, the profit margins went down. The goal of a Medicare Advantage program is to not only get
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The message can not get any clearer than what is being stated by CVS management. The discussion now being had is things will be better in 2025. Kind of doubtful as MedPac zeroes in on Medicare Advantage plans. I suspect more will be done to rein in MA plans. Read on and also the article.
“Brown echoed Pearl, noting that a lot of CVS’ challenges come from Medicare Advantage, which touches Aetna, Oak Street Health and Caremark. In 2024, CVS made a strategic decision to focus on adding more seniors into its Medicare Advantage product. However, more people are utilizing healthcare services than the company anticipated. Stating . . .
“As the utilization went up, the profit margins went down. The goal of a Medicare Advantage program is to not only get revenues through increasing the number of people that are signing up into their programs, but also to reduce their utilization, so that they’re keeping the savings as profitability.”
In the company’s last earnings call on August 7, executives repeatedly pointed to pressures on the Medicare Advantage business promising that it will see better margins in 2025, according to a transcript of the call.
“In June, we submitted our bids for the 2025 Medicare Advantage plan,” said Karen Lynch, CEO of CVS Health, in the earnings call. “Our bids went through a rigorous internal review and we are confident in our pricing for 2025, which reflects prudent assumptions for utilization trends. The actions we took are expected to drive 100 to 200 basis points of margin recovery in 2025 off of our current baseline and start the multi-year pathway to achieving target margins of 4% to 5%.”
As mentioned previously, the headwinds aren’t only tied to Medicare Advantage. In its quest to become a healthcare juggernaut, CVS made an acquisition in senior primary care. And one healthcare expert said that in doing so, it overpaid for Oak Street Health when it shelled out $10.6 billion. The primary care company would likely be worth around $2 or $3 billion now, according to Ari Gottlieb, principal of A2 Strategy Corp. With the exception of Astrana — a company that helps providers engage in value-based care — a lot of risk-bearing primary care businesses have been hurt by V28, CMS’ new Hierarchical Condition Categories model that began in 2024 and is being phased in over three years. It changes the way Medicare Advantage risk adjustment scores are calculated.”
Should CVS Health Break Up? – MedCity News