Is Medicare Advantage facing a strategic reset? What the signals are telling us.

Publicly traded health payors, particularly those with substantial Medicare Advantage exposure, have reported profitability concerns associated with medical costs. Investors have predictably punished their valuations. In reaction, these carriers have presented plans to drop membership, focusing on profitable sectors and geographies. A simplistic perspective would be call it part of the usual cycle of prioritizing profitability versus growth and vice versa that happens in many industries. Our belief is there is a fundamental change based on the actions of this Federal administration and this exacerbates the need for payors to invest now.

As noted in the Wall Street Journal on August 5, 2025, MA plans are pulling back to focus on profitability. “The upshot: Insurers are learning the hard way that restoring profitability means accepting lower growth or shrinkage in their Medicare Advantage rolls. And the pullback isn’t limited to Medicare. Similar retreats are under way in Medicaid and the Affordable Care Act (ACA) exchanges.” CVS and Humana, who had earlier medical cost exposure, have pulled back benefits and exited markets to see their share prices recover while the likes of UHG and ELV continue to retrench and seek to manage street expectations.

All these plans (and most of the MA payor industry) leaned into growth with generous, often zero premium, plans. These plans also offered provider choice and perquisites that increased attractiveness and therefore membership during AEP. Differentiation via “personalized” or otherwise special supplemental benefits drove growth, which was backstopped often with a strong emphasis and investment in risk adjustment maximization.

This approach no longer works. Partly because if everyone is doing it, it no longer differentiates, and partly because CMS is no longer willing to pay for it. As we noted in a previous post (https://highroads.com/medicare-advantage-under-the-microscope-why-operational-efficiency-matters-now/), the risk adjustment program is being scaled back, the Stars program is more stringent, and overall payments are tighter. In addition, more funds are being tied to reporting and transparency compliance.

The solve comes in three high-level parts: 1) operational efficiency – as always; 2) agility to serve members well; 3) clinical programs that work to improve outcomes and therefore lower total costs. And yes, this is a version of motherhood and apple pie, but the timeless advice is timeless for a reason. The question is how.

Our clients are leaning into systems that create operational efficiency though product / benefit data rationalization and centralization as well as substantial automation. This same rationalization has allowed them to explode the variability of offerings in the market while simultaneously dropping administrative cost. Finally, introducing clinical programs and incentives is part of that newfound flexibility in benefit design that drives, in part, member and provider behaviors. The current administration has made its health reimbursement-related priorities clear, and the successful payors will optimize to win.