Overview of "Medicare Payments Shock Sends Health Insurance Stocks Diving" (The Journal — PM edition of What's News)
This WSJ PM edition episode covers the market and policy fallout from the Trump administration’s proposed Medicare reimbursement rates, which surprised investors and sent major health-insurance stocks sharply lower. The show also runs through other top business headlines of the day — corporate earnings (GM, Boeing, UPS), Amazon’s physical‑retail moves, a TikTok settlement, broader political and demographic stories, and tax-refund dynamics tied to electoral politics.
Key takeaways
- The administration proposed that Medicare Advantage reimbursement rates rise only about 0.09% next year — far below Wall Street’s 4–6% expectation — prompting big declines in insurer stocks.
- Insurers warn that lower rates could force cuts to extra benefits, narrower plan offerings, or more restrictive plan rules for Medicare beneficiaries.
- Final Medicare rates are still proposed and subject to change; industry lobbying and advertising campaigns are expected before final rates are released (typically in early April).
- Broader markets were mixed: the Dow fell 0.8% (dragged by insurers), while the Nasdaq rose 0.9% and the S&P 500 gained 0.4%.
- Other business news: GM reported a large loss tied to EVs but raised cash‑flow expectations; Boeing had stronger delivery-based revenue; UPS announced 30,000 job cuts in operations; Amazon is closing 72 Amazon Go/Fresh stores while expanding Whole Foods and planning a large Illinois store.
Medicare proposal: what was proposed and why it matters
- What was proposed: Medicare actuarial estimates would keep average reimbursement rates for Medicare Advantage plans essentially flat — an estimated increase of just 0.09% for next year.
- Why CMS justified it: actuaries' lower health‑cost growth projections and a proposed policy change aiming to increase payment transparency and accuracy (and sustain the Medicare program).
- Why insurers object: companies expected higher rates. Insurers say inadequate payments squeeze margins and ultimately can reduce supplemental benefits (dental, vision), reduce plan availability, or increase restrictions on care access.
- Industry response: immediate stock selloffs and a likely large lobbying/advertising push aimed at influencing the final rate before the April decision.
Notable quote:
- From a UnitedHealth executive on the earnings call: “We will continue to work with CMS to ensure an appropriate final growth rate calculation to avoid a profoundly negative impact on seniors' benefits and access to care.”
Market reaction and numbers
- Health-insurer stocks (Humana, UnitedHealth, CVS among others) fell as much as ~14% on the news.
- Market indices: Dow -0.8%; Nasdaq +0.9% (chip-stock strength); S&P 500 +0.4% (first new high in two weeks).
- Timeline: final Medicare Advantage rates typically issued in early April — this is the industry’s window to influence outcomes.
Other business headlines in the episode
- General Motors: reported a $3.3 billion loss (largely tied to its EV business) but shares rose 8.8% after forecasting stronger cash flows and promising more cash returns to investors.
- Boeing: returned to profit in Q4 with higher revenue as aircraft deliveries hit their highest level since 2018; shares slipped 1.6%.
- UPS: cutting 30,000 operations jobs as part of cost-cutting efforts; reported Q4 profit growth and expects modest revenue growth this year; shares +0.2%.
- Amazon retail strategy: closing 72 Amazon Go and Fresh stores but plans to open more than 100 new Whole Foods locations and a large general-merchandise/grocery store in Illinois.
- TikTok settlement: settled a California lawsuit alleging harm to teens’ mental health; thousands of similar claims are pending against major social platforms.
Politics, policy & other news briefs
- Immigration and political fallout: transcript reports criticism of “Kristi Noem” over handling of a death in Minnesota; note that the transcript refers to Noem as Homeland Security Secretary though she is the governor of South Dakota — the episode describes political divisions, video contradictions, and Trump defending her. Senate Republicans and the White House were also seeking a last‑minute deal with Democrats on immigration enforcement to avoid a shutdown.
- Population growth: Census Bureau estimate — U.S. population grew by 1.8 million (0.5%) in the year through June, the slowest pace since the pandemic period.
- Boat strike lawsuit: families of two Trinidadians killed in a U.S. strike off Venezuela are suing in U.S. court, alleging the strike amounted to murder; White House called the targets “designated narco‑terrorists.”
- Yale financial-aid change: starting this fall, students from households with incomes up to $200,000 can attend tuition-free (an expansion of middle-class aid models similar to offerings at some other elite institutions).
Taxes, refunds, and political strategy
- IRS/refunds: The episode discusses a likely increase in average tax refunds this year (last year average ≈ $3,100; this year expected about $1,000 higher for many taxpayers).
- Political angle: administration aims to make refunds visible and tied to its policies to boost voter support; practical challenges include IRS staffing and the difficulty of ensuring credit for the policy amid competing news.
- Operational caveat: routine direct-deposit refunds are automated, but IRS staffing shortfalls matter when returns trigger questions requiring human review.
What to watch next
- Medicare Advantage final growth-rate decision (expected early April) — industry lobbying and potential policy revisions before then.
- Federal Reserve decision from its meeting (announcement expected the following day in the show’s timeline).
- Amazon’s rollout plans for Whole Foods stores and the fate of other physical-retail experiments.
- Legal and political developments around immigration enforcement, the boat-strike lawsuit, and the TikTok/social-media litigation landscape.
Quick reference — key numbers
- Proposed Medicare rate change: +0.09% (vs. 4–6% expected).
- Insurer stock moves: down ~14% for some names (Humana, UnitedHealth, CVS among worst hit).
- Market moves: Dow -0.8%; Nasdaq +0.9%; S&P 500 +0.4%.
- GM loss: $3.3 billion; GM shares +8.8%.
- UPS job cuts: 30,000.
- U.S. population growth: +1.8 million (0.5%) year-over-year.
- Average tax refund last year: ≈ $3,100; projected average this year: about $1,000 higher for many filers.
Recommended audience actions
- Investors in health insurers: monitor CMS rulemaking/comments and lobbying developments; expect volatility until final rates in April.
- Medicare beneficiaries / advocates: watch for insurer communications about benefit changes or plan availability for next enrollment season.
- Policy watchers: track final CMS rule, congressional responses, and the political messaging around refunds ahead of elections.
- General business/news readers: follow upcoming Fed decision and company earnings commentary for further market cues.
Produced by The Wall Street Journal — PM edition of What's News.