UnitedHealth (NYSE:UNH) and CVS Health (NYSE:CVS) are in the spotlight as analysts at Piper Sandler call them top picks in the managed care sector. Why? The U.S. Centers for Medicare & Medicaid Services (CMS) just proposed a 4.3% hike in Medicare Advantage (MA) payment rates for 2026. That's a game-changer for top-tier companies like CVS and UnitedHealth, setting them up to capture the maximum benefits. For CVS, expect a sharp drop in costs per member and a big bump in its MA medical loss ratio (MLR) for 2025, while UnitedHealth's powerhouse model continues to drive double-digit EPS growth.
Let's talk numbers. CVS has a price target of $64, giving it plenty of room to run. Analysts are projecting a 680 basis points improvement in its MLR next year, thanks to streamlined supplemental benefits. For UnitedHealth, trading just below its five-year average P/E, its integrated business model isn't just about surviving; it's about thriving. Combine efficiency with resilience, and you've got a company ready to ride the wave of rising MA payments while maintaining a premium over its peers.
Sector-wide, the stakes are high. That proposed payment bump? It could pour an extra $21 billion into the Medicare Advantage space by 2026. CVS's dividend yield of 5.16% and operational agility make it a standout, and UnitedHealth's relentless innovation secures its long-term edge. For investors, this is more than a bet on growthit's a play on two market leaders positioned to dominate as the healthcare landscape evolves.
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