Medicaid: Med Cost Mgt Divergence, Plus FWA Thoughts

Research evidence excerpt

Medicaid: Med Cost Mgt Divergence, Plus FWA Thoughts

USA | Managed Care EquityMayResearch17, 2026

Exhibit 1 - We Estimate Current CommentaryMedicaid: Med Cost Mgt Divergence, Plus FWA

Puts ELV's "Core" Net Cost Trend 3.1%/5.6%

Above MOH/CNC's by 4Q26 (Indexed to 1Q24)Thoughts

1.250

Since the Great Unwinding began in '23, a material Medicaid cost trend 1.2001.150 ++ 3.1%2.5% PMPM 1Q24 ELV

1.100divergence has developed between ELV, CNC, and MOH. Though many possible Cost to

1.050 CNCexplanations, we think med cost mgt is a contributor to the divergence, based Medical Indexed 1.000 MOH

on company, expert, and industry conversations. By most accounts, MOH has 0.950

.outperformed, but elevated focus by competitors could close the gap. In that 1Q24 2Q24 3Q24 4Q24 1Q25 2Q25 3Q25 4Q25 1Q26 2Q26 3Q26 4Q26 Source: Company filings, Jefferies

scenario, we prefer Caid exposure to carriers with the most to gain (ELV, then

CNC).

Reinforcing the Underlying Components of Caid Net Cost Trends. For ELV, CNC, and MOH, Exhibit

1 shows our updated view of medical cost trend indexed back to 1Q24. When discussing (net) cost

trend, the underlying components include: 1) "Base" inflation tied to provider rate increases, which

has historically landed in the 2.5%-3% range. 2) "Excess" cost trend driven by higher utilization and

acuity shifts. 3) Programmatic changes by the state. 4) Medical cost management (discussed next).

Examining Differences In Med Cost Mgt. Messaging from carriers portrays that ELV, then CNC

have the most opportunity to improve net cost trend by re-engaging on med cost mgt initiatives.

ELV: According to mgt, problems were identified in 2025, solutions are being implemented in 2026,

and the benefit should materialize in 2027. However, we interpreted 1Q26 commentary/results as