Not All of Obamacare Was Upheld

The individual mandate part of Obamacare was upheld by the Supreme Court and that's a big win for companies that count on people being able to afford health-care services.

But not all of the Affordable Care Act provisions that throw more patients into the system were upheld. The Supreme Court ruled that the federal government can't withhold Medicaid funding if states choose not to expand their Medicaid offerings. Essentially states can choose to take additional funds and expand or choose not to expand, but the federal government can't punish them for not expanding.

How many states might choose not to expand? Just over half of the states joined together asking the court to strike down the all-or-nothing provision.

Of course some of those states were just acting like teenagers not wanting to be told what to do by their parents. They'll be happy to take the federal government's extra cash and give their citizens more health-care coverage. The federal government will pick up the tab in the early years, but the states will be on the hook for some of the cost later, which might be a deal breaker for some of the cash-strapped states.

As we get closer to 2014, when the Medicaid expansion part of the law goes into effect, we'll get a better idea of how many states might opt out of the expansion. How many and which ones opt out will have an effect across the health-care industry.

More covered people means more sales of drugs and medical devices. Care for things that can be avoided by the uninsured because they're not immediately life threatening -- Merck's (NYSE: MRK  ) shingles vaccine Zostavax or medical devices used in elective surgeries, for example -- should get the largest bump.

For emergency care, it'll be the hospitals -- Tenet Healthcare (NYSE: THC  ) , Community Health Systems (NYSE: CYH  ) , and the like -- that'll gain the most from the expanded Medicaid coverage, since they currently have to foot the bill for uninsured patients that come to them. Those companies tend to be somewhat regionalized -- Tenet is only in 12 states, for example -- so the breakdown of exactly which states choose not to expand coverage will be important.

The other major beneficiary of expanded Medicaid will be the insurers, such as Molina Healthcare (NYSE: MOH  ) and Wellcare Health Plans (NYSE: WCG  ) , that administer the plans for the states. They'll benefit from the increase in customers, assuming the states opt in for the expansion.

The Supreme Court has ruled, but the people get to rule next when they vote in November. Find stock ideas for how to benefit from each candidate's platform in the Fool's new free report: "These Stocks Could Skyrocket After the 2012 Presidential Election." Get your free copy by clicking here.

Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (7) | Recommend This Article (17)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 28, 2012, at 5:56 PM, maiday2000 wrote:

    More people receiving "subsidized" care may be good for hospitals, device makers, and drug companies, but it isn't such a great deal for anyone who pays taxes. This ruling essentially means less discretionary spending for consumers, more government debt, more uncertainty, and less job growth. Expect the economy to slog around with zero job and wage growth.

  • Report this Comment On June 29, 2012, at 11:15 AM, pugwee wrote:

    This law may not be perfect, but it is a step in the right direction. I think companies will actually find this to be a benefit to them in terms of lowering lost productions hours due to illness.

  • Report this Comment On June 29, 2012, at 11:20 AM, jbmaine wrote:

    This will make an excellent scientific controlled experiment on the new health care law. After 5 plus years analysis of health care costs and health care results can be made on non-expanding and expanding states.

  • Report this Comment On June 29, 2012, at 11:23 AM, sandywe51 wrote:

    "some states acting like teenagers not wanting to be told what to do"...??? We are a country of individual states each with it's own budget. Yes, it was about states not wanting to be told what to do because that was unconstitutional which is why the Supreme Court said that the federal government can't hold a gun to any state's head to increase that state's own budget costs. It's a new federally imposed tax on the same 50% of the people who actually pay federal taxes every year. The other 50% who don't pay federal taxes will get their insurance paid for by the 50% who do pay taxes and file each year. Will everyone have insurance, yes, but not everyone will have to pay for it. It's just another entitlement program. Who'll have money to invest? More healthcare costs and increased taxes on dividends? Much to look forward to..NOT!!!

  • Report this Comment On June 29, 2012, at 11:33 AM, kwtoufectis wrote:

    Brian,

    In characterizing ACA provisions as serving to "throw more patients into the system" you seem to think that access to health care is something of a punishment.

    Those who have had to count on emergency room services in lieu of access to primary care aren't likely to receive the message that follows when you open with such language.

    Since conveying a message about the news and how we might interpret it is the point of such articles, I'd encourage you to rethink such language.

  • Report this Comment On June 29, 2012, at 12:13 PM, scottk11 wrote:

    I agree with maiday2000 that there will be a shift in spending from "discretionary" items to healthcare. However, this should have no effect on GDP growth and there is the perspective that shifting spending to healthcare should actually benefit the US economy since healthcare is a domestic industry and much of the "discretionary" spending is on items that are produced overseas (e.g., cars, flat screen TVs).

  • Report this Comment On July 02, 2012, at 11:28 AM, Whumpsnatz wrote:

    sandywe51,

    I'm getting sick and tired of the continued parroting of a Big Lie; "50% who don't pay federal taxes". That's not merely wrong, it's bassackwards, and if you truly believe it, you've refused to do any research.

    This Big Lie started as "47% don't pay any INCOME taxes". This particular lie uses the ludicrous definition of "income taxes" as not including Social Security and Medicare as "income taxes". What is being left out is that 1) all people who work for a living pay that tax, 2) they only pay tax on the income under about $106K; if your salary is $2 million, all the rest is exempted, 3) the tax does not apply to unearned income, and, the counter to this Big Lie, 4) about HALF of all personal tax revenue comes from those taxes.

    Now it has mutated into "50% don't pay ANY taxes". That's a lie, and you are a liar.

    If you're not just another vicious idiot, go do some research.

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