Government as Payer

In October 2024 Humana learned that its quality ratings had collapsed. Humana is the purest large bet on Medicare Advantage in America: roughly 80–85% of its revenue comes from the federal government. CMS rates every Medicare Advantage contract from one to five stars, and plans with four or more stars receive a 5% bonus on their payment benchmark and keep a larger share of the savings they generate. In the 2024 Star Ratings, about 94% of Humana's members were in plans rated four stars or more. In the 2025 Star Ratings released that October, which set bonus payments for 2026, the figure fell to about 25%, largely because one large contract was downgraded; in the 2026 ratings it was about 20% (reported). Humana sued CMS and lost twice in 2025, then appealed to the Fifth Circuit; analysts put the lost bonus at about $1–3 billion of 2026 revenue (reported), and Humana cut its 2026 earnings guidance. Its shares, about $570 at their late-2022 peak, had already fallen by more than half by late 2024 on rising costs. The 2027 ratings, published in October 2026, showed a recovery: Humana said about 95% of its members were in plans of four stars or more.

No sales team, product launch or acquisition moved Humana's value as much as a quality formula run in Baltimore, where CMS has its headquarters. That is the defining fact of government-paid healthcare: for the companies that serve it, the rules are the business model.