CVS Health Just Got a $13 Billion Reprieve. Here's Why the Stock Could Keep Climbing.

By Thomas Niel – Apr 13, 2026 at 7:30PM ESTKey PointsEarlier this year, CVS Health shares fell after reports that Medicare payment rates would only increase by 0.09% next year.However, with Medicare's final ruling selecting a much higher 2.5% escalation, CVS, like other healthcare stocks, have bounced back in price.Cheaper than peers, and with forecasts of further earnings runway, there's still time to buy into what may become an extended rally for CVS Health.In a matter of months, a key issue affecting CVS Health's (CVS 1.56%) performance has seemingly vanished. On April 7, the Centers for Medicare & Medicaid Services (CMS) finalized the amount by which it will increase payments to providers operating under the Medicare program. As you may recall, the original proposed increase was poorly received by investors, mostly because it was barely above zero and heightened concerns about a further squeeze on industry margins. But now, with the official increase far better than expected, healthcare stocks like CVS Health have surged again. Rather than being the recipient of a short-lived rally, the latest Medicare rate increase could kick off a further surge in shares. Image source: Getty Images. What makes the Medicare decision a big deal for CVS Back in January, news of CMS's proposed 0.09% Medicare rate increase sparked a sharp sell-off in top healthcare stock, including CVS. To some, this may be surprising. After all, isn't CVS just a pharmacy chain? ExpandNYSE: CVSCVS HealthToday's Change(-1.56%) $-1.24Current Price$78.09Key Data PointsMarket Cap$101BDay's Range$77.53 - $78.8252wk Range$58.35 - $85.15Volume6.7MAvg Vol8.8MGross Margin13.78%Dividend Yield3.35% That hasn't been the case for quite some time. Currently, CVS is a highly diversified provider of healthcare services. Besides operating its eponymous chain of pharmacies, CVS Health is the parent company of health insurance provider Aetna. As a major provider of Medicare Advantage plans, the prospect of just a 0.09% increase signaled lower profitability ahead. However, with CMS's finalized payment policy calling for a nearly 2.5% increase, perceptions regarding future profitability have improved considerably. With this increase, insurers will collect $13 billion more in payments than previously expected. Although payment increases still lag rising costs of as much as 9% annually, sell-side analysts like Mizuho's Jared Holz believe plan providers like CVS Health's Aetna unit have a greater chance of increasing their margins next year, mostly through benefit cuts. Why the rally could continue The biggest takeaway with the Medicare payment rate decision news is what it could mean for CVS Health's earnings in the coming year. Although managed care accounts for only a portion of CVS's overall business, the aforementioned news bodes well for confidence in management's 2026 earnings guidance. As stated in the Q4 2025 earnings report, management expects CVS's adjusted earnings per share to come in between $7 and $7.20 per share. Shares have rallied from the low $70s since the Medicare announcement, implying the stock is trading at around 11 times forward earnings. Health insurance stocks like UnitedHealth Group and Humana trade at 15 to 20 times forward earnings. That's not to say that CVS is destined to reach valuation parity with these stocks, but even partially bridging the valuation gap could have a considerable impact on CVS's stock price. For instance, at 13 or 14 times forward earnings, based on current guidance, a move to $90 or $100 per share may be reasonable. The potential upside, both in the near and longer term, could be even greater. The high end of analyst estimates calls for CVS to report EPS of $7.40 this year, with the larger Medicare payments perhaps driving a further double-digit earnings growth in 2027. Alongside growth potential, an investment in CVS Health offers steady gains via the stock's 3.4% forward dividend yield.Read NextApr 13, 2026 •By David Jagielski, CPAShould You Buy CVS Health Stock Before May 6?Apr 12, 2026 •By Parkev Tatevosian, CFAHuge News for CVS Stock InvestorsApr 10, 2026 •By Prosper Junior Bakiny2 Recession Resistant Dividend Stocks to Buy Now While They're Still CheapApr 9, 2026 •By Parkev Tatevosian, CFAIs CVS Stock an Undervalued Dividend Stock to Buy?Apr 4, 2026 •By Selena MaranjianIf You'd Invested $100 in CVS Health (CVS) Stock 5 Years Ago, Here's How Much You'd Have Today (Spoiler: You Wouldn't Have Lost Money)Mar 20, 2026 •By Prosper Junior BakinyBest Healthcare Stocks to Buy After the Market PullbackAbout the AuthorThomas Niel is a contributing Analyst at The Motley Fool, covering publicly traded companies in the consumer goods and technology sectors. Prior to the Motley Fool, Thomas was a contributing Analyst for several online investing publications, including InvestorPlace, Seeking Alpha, and TipRanks. He also has past career experience in the accounting and government contracting industries. He holds a B.B.A. in Accounting from Marymount University. Thomas won his school's geography bee in the fifth grade, but retired from the professional geography bee circuit shortly thereafter.TMFThomasNielStocks MentionedCVS HealthNYSE: CVS$78.14(-1.50%)-$1.19UnitedHealth GroupNYSE: UNH$313.17(+2.90%)+$8.84HumanaNYSE: HUM$198.09(+3.09%)+$5.94Mizuho Financial GroupNYSE: MFG$8.65(+0.23%)+$0.02*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.