UnitedHealth Group stumbled quite a bit on Thursday, and Medicare Advantage trouble seemed to be largely at fault.
Its stock fell more than 22% after its first-quarter earnings on Thursday. This is the biggest single-day decline since 1998, Minnesota-based Minnetonka. The healthcare giant also revised its adjusted 2025 earnings per share outlook to between $26.50, while the previous forecast was between $29.50, a revision to $26.50 for $26.50.
What is it to blame? During the company’s corporate earnings call Thursday, CEO Andrew Witty called his first-quarter performance “unusual and unacceptable” and said there were two factors in his Medicare business: Care Attivity and member profile.
In UnitedHealthCare’s Medicare Advantage business, insurers expect nursing activity to increase in 2025 at a rate similar to the utilization trend used in 2024. However, according to revenue calls, it has increased at twice the rate, especially in physicians and outpatient services.
In addition, UnitedHealth Group has experienced “unexpected changes” in its Optum Medicare membership that affected revenue in 2025, Witty said. Optum Health has nurtured more new Medicare patients, some of which are in plans to exit the market. He said these patients had very little participation, so their 2025 reimbursement rate was lower than expected and “does not reflect their actual health status.”
The company is also working to adapt to the new risk-adjusting model, which has been progressively carried out over the past few years and is the CMS using updated diagnostic and cost data that can pay more accurately based on the health or health of the patient's health or patient.
“Many of the current and new complex patients we serve are affected by changes to the CMS risk model we implement,” Witty said. “It is complex to be sure, but we are not doing what we can to perform model transitions. We must and will strive to better predict and address these factors.”
Leerink Partners analysts pointed out that the response to these challenges is: “Use utilization is increased, and we believe that the complexity of V28 negatively affects Optum membership skin color/rate appears to be the main factor at play.” V28 refers to the new risk adjustment model.
For at least one industry follower, these results are unexpected. According to Tyler Giesting, director of healthcare acquisitions at consulting firm West Monroe, the increase in medical expenses has been surprising as insurers have been in the years after Covid-19, as insurers have been in the years after Covid-19.
“More notable is that they seem to face difficulties in adapting to the new CMS risk adjustment model fully implemented this year,” he said. “Insurers have enough time to prepare for these changes, so the challenge – possibly aggravated by new members from market exports – stands out.”
After these results, what is the future of UnitedHealth Group? Ari Gottlieb, head of consulting group A2 Strategy, said the company could address these issues and have a balance sheet to address these challenges. Insurers may cut costs by leveraging AI to reduce management costs, requiring providers to make certain rate offers and suspend long-term investment strategies.
MA Insurance also recently received a 5.06% increase in payments in 2026, which will eventually provide some relief to the UnitedHealth Group.
However, he fears that in the near term, the healthcare giant will address the increased utilization trend by trying to create barriers to reduce utilization. This can be done by increasing previous authorizations, limiting provider networks and reducing provider reimbursement rates.
Brown notes that this is particularly concerning given that Medicare Advantage is funded by taxpayers.
“Medicare Advantage is a 100% funded by a taxpayer program that transfers funds from Medicare to Medicare Advantage,” he said. “The profit they make is taxpayer's money. I think that is often missed in this conversation. So when we say the government raises payments by 5.06%, they transfer taxpayer's dollars to private companies: United Nations Health Corp., Humans, Humans, Aetna, etc. As taxpayers, as a country, we should serve people the easiest to us because those people and those people are ours, because these people are ours, because these people are ours, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI, because we are SENI,
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