Despite obstacle after obstacle, Obamacare is moving forward and some industries could see a healthy boost. However, not everyone feels good about Obamacare. Repeal could heal segments impacted by higher taxes.
OBAMACARE, HERE TO STAY?
The Affordable Care Act, popularly known as Obamacare, may have finally shaken loose the biggest threats to its survival. It withstood a critical Supreme Court challenge, and the Democratic victories in the White House and Senate make a legislative repeal close to impossible. Touted as the biggest US healthcare reform since Medicare and Medicaid, Obamacare is expected to extend coverage to 30 million previously uninsured Americans by 20191.
The increased volume of insured patients could mean more revenue for hospitals and healthcare providers, while companies that focus on the Medicaid population could also stand to gain from the estimated 15 to 18 million-person increase in Medicaid enrollments.1 In June 2012, Supreme Court decided that states have the right to opt out of Medicaid, and as of September 2013, 14 states are not participating.2 In addition, an increased emphasis on cost containment and efficiency under Obamacare requires the adoption of electronic health records and could boost generic-drug sales3. This motif includes companies in healthcare sectors that are positioned to benefit from the implementation of Obamacare.
AFFORDABLE CARE MAY NOT BE SO AFFORDABLE
Not everybody feels good about Obamacare. It’s actually called the Patient Protection and Affordable Care Act of 2010 and was upheld by the Supreme Court in June 2012. Since then, the enactment of new sales taxes, funding cuts, and lower reimbursement rates it contains have had a significant impact on the healthcare system.4 For example, Obamacare imposes a 2.3% excise tax on the sales of medical devices, which industry lobbyist argue could have an adverse effect on job creation, investment in new research and cut up to half of the profits for medical device companies.5
Not surprisingly, $150 million has been spent by these companies since 20085 to repeal the tax while their stock prices have underperformed the overall healthcare sector and the broader S&P 500 by a wide margin.6
Stocks within Obamacare Motif
STOCKS WITHIN REPEAL OBAMACARE MOTIF
(1) Estimates for the Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision, Congressional Budget Office, July 2012 <http://cbo.gov/sites/default/files/cbofiles/attachments/43472-07-24-2012-CoverageEstimates.pdf>
(2) Medicaid Expansion, http://obamacarefacts.com/obamacares-medicaid-expansion.php (accessed Sept. 30, 2013)
(3) Bruce Japton, “Five Obamacare Winners In Second Presidential Term” Forbes, 11 July, 2012, http://www.forbes.com/sites/brucejapsen/2012/11/07/five-obamacare-winners-in-second-presidential-term/
(4) Patient Protection and Affordable Care Act of 2010, HR 3590, 111th Cong., Pub. L. No. 111-148, March 8, 2010, (accessed Feb 1, 2012)
(5) John W. Schoen, “Why a tax on medical devices has stirred the budget debate,” CNBC, Sep 30, 2013, http://www.cnbc.com/id/101073740
(6) Factset Price Data