(Reuters) – CVS Health lowered its adjusted profit forecast for 2024 on Wednesday after an increase in medical care among older adults in the United States drove up fourth-quarter costs at its insurance business.

The company cited a late-year rise in medical care, including outpatient procedures among those enrolled in Medicare Advantage plans, under which insurers are paid a set rate to manage healthcare for people 65 and older, or those with disabilities.

The new forecast factors in the potential for medical costs being elevated in 2024, it said.

Medical costs have been higher through 2023 and insurers such as Humana and UnitedHealth have said they rose even more at the end of the year, as seniors sought medical services like hip and knee surgeries that were deferred during the pandemic.

Rival Humana has cut its 2024 and 2025 profit forecasts because it expects increased costs next year.

Aetna, CVS’s insurance business, recorded a medical benefit ratio – the percentage of claims paid to premiums collected – of 88.5 % in the fourth quarter, narrowly beating analysts’ estimate of 88.44%, according to LSEG data.

The healthcare conglomerate lowered its forecast for adjusted profit for 2024 to at least $8.30 per share, from the at least $8.50 per share it had forecast in December. Analysts expect a profit of $8.49 per share.

It made a profit of $2.12 per share on an adjusted basis for the quarter ended Dec. 31, beating analysts’ estimate of $1.99 per share.

The beat was driven by strength in its drugstores and its pharmacy benefits manager (PBM) unit, which negotiates drug prices between insurers and manufacturers.

Revenue at its health services business, under which CVS operates the PBM, rose 12%, to $49.15 billion, helped by growth in specialty pharmacy and higher branded drug prices.

(Reporting by Sriparna Roy and Leroy Leo in Bengaluru; Editing by Pooja Desai)

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