‘The Medicare pullback is here’

This is the headline of a Wall Street Journal article this morning that focuses on Medicare Advantage.

“Many seniors enjoy the perks that come with Medicare Advantage. But those extras — like dental coverage and free gym memberships — are being scaled back,” the WSJ says. Insurers are cutting benefits and leaving unprofitable markets.

Once rewarded by Wall Street investors for rapid expansion in the lucrative privatized Medicare program, companies now are being applauded for showing restraint amid rising medical costs and lower government payments, says the WSJ. 

Humana and CVS Health, which operates Aetna, both beat earnings expectations in their most recent quarterly updates and their shares rose, bucking a broader downturn in health-insurance stocks, the WSJ says. They both had moved to “retrench” their Medicare Advantage businesses this year. 

On the other hand, UnitedHealth Group grew more aggressively in Medicare — but the growth came with rising costs and disappointing results. Its stock has lost nearly half its value and the company is planning a “major pullback” for 2026, says the WSJ. 

Insurers are learning that restoring profitability means accepting lower growth or shrinkage in their Medicare Advantage rolls, the WSJ says. And the pullback isn’t limited to Medicare; similar retreats are under way in Medicaid and the Affordable Care Act exchanges.

Medicare Advantage, long championed by Republicans as a cost-saving alternative to traditional Medicare, was supposed to save taxpayers money, the WSJ says. But as allegations increased that insurers were being overpaid, bipartisan scrutiny of the program intensified and the Biden administration moved to rein in costs. 

The timing couldn’t have been worse for investors, the WSJ says. Lower payments collided with soaring medical expenses, meaning lower revenue, higher costs and shrinking profits.

Wall Street is now more wary of how unpredictable profits in government programs have become, the WSJ says.

While Democrats have led efforts to cut overpayments, Republicans also face increasing pressure to curb spending — especially after recent tax cuts, says the WSJ.