So much excitement over a measly 1.6%. Still, shares in health plans with heavy Medicare exposure are soaring today after Friday’s announcement by CMS that Medicare Advantage payment rates are expected to rise 0.7% in 2012 (1.6% after adjusting for quality bonuses). For example, shares in Humana are up 5% in midday trading, while HealthSpring shares are up 3%. The projected 2012 increase is way better than what was expected by Wall Street analysts. Notes Christine Arnold of Cowen:
Friday’s announcement secures the payment outlook for 2012, in our view, which will enable companies to maintain and/or expand margins while maintaining and/or growing membership.
From the perspective of investors, that’s good and/or great news.