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Investing.com -- Shares of medical device manufacturers tumbled on Tuesday after the Centers for Medicare & Medicaid Services (CMS) proposed significant payment reductions for home health agencies that could impact diabetes care providers. Tandem Diabetes Care Inc (NASDAQ:TNDM) fell 6.4%, DexCom Inc (NASDAQ:DXCM) dropped 4.9%, and Insulet Corporation (NASDAQ:PODD) declined 2%.
The sell-off follows CMS’s proposed rule for calendar year 2026 that would decrease Medicare payments to home health agencies by 6.4%, or approximately $1.135 billion compared to 2025. The proposed cuts include a permanent adjustment of -4.059% and a temporary reduction of 5.0% to recoup what CMS describes as retrospective overpayments.
Investors appear concerned that the payment reductions could negatively impact diabetes device makers, as many patients using continuous glucose monitors (CGMs) and insulin pumps rely on Medicare coverage. The proposal particularly affects companies like DexCom, which manufactures CGMs, and Tandem and Insulet, which produce insulin delivery systems.
The proposed rule, issued on June 30, 2025, is part of CMS’s annual update to Medicare payment policies under the Home Health Prospective Payment System. While the proposal includes a 2.4% payment update ($425 million increase), this is more than offset by the proposed permanent and temporary adjustments.
The rule also proposes reclassifying all continuous glucose monitors and insulin infusion pumps under the "frequent and substantial servicing payment category," which CMS says would give beneficiaries access to current technology rather than having to wait five years.
CMS stated that the actions in this proposed rule "would help improve patient care and protect the Medicare program’s sustainability for future generations."