The Centers for Medicare & Medicaid Services (CMS) has announced a significant expansion of its auditing efforts for Medicare Advantage plans. CMS Administrator Mehmet Oz stated the agency is committed to crushing fraud, waste, and abuse across all federal healthcare programs. The agency plans to audit all eligible Medicare Advantage plan contracts for each payment year, investing more resources to ensure faster audit completions.
Following the announcement, shares of Humana dropped 6% in recent trading, while Aetna’s parent company, CVS Health, saw its stock fall close to 3%, and UnitedHealth Group slid about 2%. In a post on social media platform X, UnitedHealth welcomed CMS’s announcement to audit every Medicare Advantage plan each year. CVS and Humana did not immediately respond to requests for comment.
UnitedHealth’s stock also experienced extended losses on Wednesday amid worries about potential cuts to Medicare and a report alleging the insurer paid nursing homes to reduce hospital transfers for residents, thus lowering costs. The fair value estimate for UnitedHealth Group has been reduced in light of regulatory changes affecting Medicare Advantage and recent scrutiny of some of its business practices. This decision reflects increased uncertainty around future cash flows and potential financial repercussions.
The CMS recently announced plans to intensify regulation of the Medicare Advantage market to control overpayments to private insurers like UnitedHealth. As the largest Medicare Advantage insurer, UnitedHealth may face significant financial implications due to these changes.
Cms increases audit efforts
Specifically, the CMS directive suggests that overpayments from 2018 to 2024 will be recovered, potentially leading to a $20 billion outflow for UnitedHealth. Additionally, recent scrutiny on UnitedHealth’s coverage decisions and the potential for lower Medicare Advantage risk assessments could constrain both the growth and margins of the company’s medical insurance business. The Medicare Advantage market has encountered unprecedented turmoil in 2025, marked by the most significant drop in CMS Star Ratings in over a decade.
Black Book Research reports the national average MA Star Rating sharply decreased from 4.07 in 2024 to 3.92 in 2025, with only seven plans attaining the elite 5-star status, down dramatically from 38 the previous year. The number of Medicare Advantage plans available for individual enrollment fell approximately 6%, decreasing from 4,428 in 2024 to 4,186 in 2025. This reduction primarily stems from insurers consolidating or exiting markets due to intense financial pressures and tighter regulatory scrutiny.
Despite these shifts, the average monthly premium for Medicare Advantage plans remained steady. Moreover, approximately 32% of MA plans now offer Medicare Part B premium reductions, an increase from 19% in 2024, providing beneficiaries additional savings. In response to mounting concerns over potential overpayments and program integrity, the CMS dramatically escalated their auditing activity, reviewing all 550 eligible MA plans annually, a sharp increase from the 60 previously audited.
This rigorous scrutiny has immediate and significant financial implications, particularly impacting major insurers which have already faced notable stock market declines. Black Book’s extensive research surveyed 972 senior executives across 550 Medicare Advantage and commercial health plans, identifying over 300 software vendors critical to the success of high-performing plans. In an increasingly challenging environment, strategic investments in technology have emerged as the critical pathway for elite Medicare Advantage plans to sustain operational excellence and successfully navigate heightened CMS standards.