Deutsche sees margin pressure despite ‘positive surprise’ from CMS

Deutsche Bank views the 2027 Medicare Advantage and Part D rate announcement last night from the Centers for Medicare and Medicaid Services as a “positive surprise” for the managed care stocks in the near term. The expected average change in revenue represented almost 240 basis points of increase compared to the proposed 0.09% in the advance rate notice, the analyst tells investors in a research note. However, Deutsche says 2.48% does not represent a rate that appears in-line with cost trends and could lead to continued margin pressure on the Medicare Advantage space in 2027. The firm points out Humana (HUM), UnitedHealth (UNH), CVS Health (CVS), Elevance Health (ELV), Centene (CNC) and Molina Healthcare (MOH) were up mid to high single digit percentages following the announcement.