Seniors Face an 18% Drop in Highly Rated Medicare Advantage Plans — But Quality Might Not Be the Cause

Healthcare spending can keep growing while the companies providing coverage struggle to turn that growth into profits. For investors, the difference is important: government reimbursement, medical bills, and regulatory decisions all influence how much revenue reaches the bottom line.

The Mercatus Center projects Medicare spending rising from 3.33% of the economy in 2026 to 4.57% by 2040, underscoring the program’s growing fiscal pressure. That expanding footprint makes Medicare Advantage worth watching, but buying insurers simply because America is aging misses the harder question of profitability. The latest quality ratings offer a timely example of why investors must look beneath the headline.

Medicare Advantage’s Shrinking Four-Star Club

The Centers for Medicare & Medicaid Services’ (CMS) Oct. 8 release shows an 18% decline in Medicare Advantage prescription-drug contracts earning at least four stars.

“Plans” is shorthand here. CMS rates contracts, which can encompass multiple individual plans.

Surprisingly, the enrollment share moved higher even as the contract count fell. That means the 18% decline does not establish that seniors have 18% fewer local choices or that care deteriorated across the board.

The Measuring Stick Changed

CMS recalculates scoring thresholds annually. For 2027, it also added two medication-safety measures and tripled the weight of measures covering physical and mental health, from one to three.

Consequently, a lower rating can reflect changes in scoring as well as performance. The report does not isolate how much each factor contributed. Blaming everything on worse care would overreach; dismissing the decline as bookkeeping would, too.

For shareholders, this difference between them deserves attention because regulatory surprises can reset expectations quickly. January’s proposed reimbursement increase helped push UnitedHealth Group (NYSE:UNH | UNH Price Prediction) down as much as 15% in premarket trading, illustrating how sensitive insurance stocks are to Medicare policy. That was a separate payment decision, but the investing lesson carries over. 

Humana Provides The Counterexample

But the primary insurers of Medicare Advantage plans feel the impact differently. Humana (NYSE:HUM), for example, announced this morning that 95% of its Medicare Advantage members are in contracts rated four stars or better for 2027. Its qualifying contracts increased from seven to 18. Its stock is soaring more than 12% in morning trading. 

CVS Health (NYSE:CVS), meanwhile, reported that more than 69% of Aetna’s members meet that threshold. Its stock is down almost 1.8%. Interestingly, J.P. Morgan estimates that UnitedHealth’s membership share in four-star-or-better coverage declined from approximately 81% to 67%, yet its stock is rising 1.4% today, indicating resilience despite the setback. 

Still, that comparison gives Humana a stronger ratings position, although it does not establish superior profitability. CMS says the new ratings affect 2028 quality-bonus payments, making this a future earnings consideration.

Humana also reported 534,000 additional members completing annual preventive visits. That provides evidence of operational improvement beyond the stars themselves. Investors should now watch how management translates those gains into margins after medical expenses and benefit spending.

Key Takeaway

Put Humana on the watch list, but require earnings guidance that supports the ratings improvement before buying. For seniors, compare doctors, covered drugs, and total costs alongside stars — especially with separate prescription-drug premium pressures approaching. A rating is useful evidence, but it can’t make either decision for you.

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