Government crackdown and legal entanglements take all the fun out of the Medicare Advantage plan bonanza.

By Wolf Richter for WOLF STREET.

Humana is one of the big health insures with Medicare Advantage Plans that have come under intense scrutiny from this Administration, from the prior administration, from Congress, from legal actions, and from investigative reports in the media, amid allegations of dramatically overbilling Medicare. These insurers are facing a full-blown government crackdown.

But it was so sweet while it lasted, generating huge profits, big revenue gains, and a massive run-up of the price of the stock: Humana’s shares – along with others in that arena – shot higher and higher from 2017 through 2022. But amid that crackdown, revenue growth has stalled over the past few quarters, and Humana posted a big loss in February.

Humana’s shares [HUM], which started cratering in November 2022, have now entered our pantheon of Imploded Stocks, for which the minimum requirement is a plunge of 70% from the more or less recent all-time high. Its shares today fell 1.8% to $166.01, down by 71% from the all-time high on November 3, 2022, and down by 37% from a year ago, and pretty exactly back where they’d first been 11 years ago, in March 2015 (data via YCharts).

This is what happens when corporate revenue growth, profits, bonuses, and lucrative stock-based compensation plans depend on overbilling the government, and the government finally belatedly gets tired of it, and cracks down.

Medicare Advantage plans are a semi-privatization of Medicare under which the government pays the health insurer a monthly amount for each of their enrollees, and the insurer then pays for the treatment of the enrollee (the enrollee pays for Medicare Part B and some also pay a premium for the Advantage Plan). Advantage Plans include prescription drug benefits and assorted other benefits, caps, and reductions.

The monthly amount that the government pays to the insurer for each enrollee rises with the health problems the enrollee has. So, inevitably… if the insurer “finds” more and bigger health problems, or exaggerates existing health problems, they can claim substantially higher monthly fees, even if those health problems don’t exist, or never get treated. And the government pays them for it.

This type of overbilling led to higher costs for Medicare, and part of those were passed on and led to higher Medicare Part B premiums that seniors pay. According to a report by the US Congress Joint Economic Committee earlier in March, “in 2025 the federal government paid Medicare Advantage insurers an estimated $76 billion to $84 billion more than it would have cost to cover the same beneficiaries in Traditional Medicare.”

The committee found that “overpayments increased Part B premiums by $212 per enrollee in 2025, totaling $13.4 billion in higher premiums.”

And it found that since 2016, these overpayments “have added an estimated $82 billion to Part B premiums.”

But every dollar that was overpaid by the government added to the revenues and profits of the insurers. And the incredible trajectory of their stocks from 2017 through 2022 shows that.

And there are other aspects, as the Medicare overbilling scandal has metastasized. For example, a federal court ruled last week that Humana, CVS Health subsidiary Aetna, and Elevance Health, must face a civil lawsuit that alleges, based on a whistleblower that came forward in 2021, that the insurers paid “hundreds of millions” in kickbacks between 2016 and 2021 to online brokerages to steer people to their Medicare Advantage plans – because those Advantage Plans were so immensely lucrative to the insurers.

Humana has also gotten caught up in allegations that it had been overbilling the government for Medicare Part D (prescription drugs) plans, and settled a number of those cases, including for $90 million in 2024, a whistleblower case brought by one of its former actuaries.

But as far as investors and Wall Street analysts are concerned, the bigger the Medicare overbilling, the better because it made everyone a lot of money. Just don’t get caught.

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