Where Do the Funds Go If Obamacare Is Defunded?

Stopping a "train wreck." Caving in to "anarchists." Trying to "extort a president."

Those were the views of House Speaker John Boehner (R-Ohio), Senate Majority Leader Harry Reid (D-Nev.), and President Barack Obama, respectively, on what was then an impending vote by the House of Representatives to defund the Affordable Care Act, commonly known as Obamacare. That vote to fund the federal government without allocating money for Obamacare has now been held, passing 230-189 largely along party lines.


Many say that the House's action was an exercise in futility, since the Senate seems certain to strip defunding Obamacare from the legislation. Even if the Senate went along with the House, President Obama has threatened a veto.

I'll leave all of the political prognostication to others. What I'm interested in is the money flow in the stock market that could kick into gear if funding stops for operations required to support the Affordable Care Act. In other words, where do the funds go if Obamacare is actually defunded?

Give and take
Determining which stocks would see mass departure of capital isn't very difficult. All we have to do is look at where the big money flowed after Obamacare was passed and after the Supreme Court upheld much of the law. Where Obamacare gave, defunding of Obamacare could conceivably take away.

What's at the top of the list for probable investor flight? Hospital stocks. Publicly traded hospital chains have sizzled ever since the Supreme Court decision in June 2012. Shares in Tenet Healthcare (NYSE: THC  ) , for example, nearly doubled on hopes that Obamacare would generate more business from insured patients and reduce write-offs from providing care for the uninsured. If the health-insurance exchanges needed for those uninsured individuals to gain coverage didn't have money to operate, Tenet and its peers would undoubtedly lose much of those big gains.

Pharmacy chains have been prominent promoters of Obamacare, in large part because they seek to benefit from newly insured Americans needing more prescription drugs. Walgreen (NASDAQ: WBA  ) was the first big player to announce efforts to educate customers about the impact of health reform. It's probably no coincidence that the company's stock has soared more than 90% since the Supreme Court's ruling. That major uptrend could easily turn into a downtrend, though, with no money for Obamacare.

Which stocks would be most likely to see money flowing in? Delta Airlines (NYSE: DAL  ) is one possibility, if the whole law were overturned. A leaked letter from the company to the Obama administration revealed that Delta's health care costs would increase by nearly $100 million in 2014 largely because of Obamacare. That figure amounts to around one-tenth of Delta's total net income last year. Other large employers could also stand to benefit if Obamacare faded away because of lack of funds.

Much ado about nothing?
All this talk assumes that the defunding of Obamacare really takes enough money away from Obamacare programs to cause them to stop -- or at least significantly weaken them. Is that a valid assumption? Probably not.

Sen. Tom Colburn (R-Okla.), a medical doctor by profession and no fan of the president's health-reform legislation, asked the Congressional Research Service, or CRS, to provide information on the possible consequences of a "funding lapse" on implementation of Obamacare. The answer in a nutshell: Funding for Obamacare would continue even if the government were shut down.

Yep -- Obamacare possesses zombie-like abilities. It keeps moving even if you think it's dead.

There are several reasons for this. One is that the government could use money not included in annual appropriations called multiple-year and no-year discretionary funds. The Obamacare exchanges would probably keep on rolling. In fact, they're supposed to be self-sustaining beginning in 2015.

According to the CRS, the IRS could still collect Obamacare taxes, federal subsidies to help many individuals purchase health insurance would probably still be in place, and the individual mandate would still be in force. All of these elements would largely march forward even if Congress didn't allocate another dime to Obamacare. Such are the strange ways of the federal legislative and budgetary processes.

As Sen. James Inhofe (R-Okla.) admits, the effort to defund Obamacare is "largely symbolic." Even if Obamacare is defunded, the funds keep on flowing for the most part. The current debate -- on both sides of the political spectrum -- is mainly much ado about nothing. 

If the train stays on the tracks ...
For now, Obamacare continues to rewrite the rules for the health-care industry. And it's creating massive opportunities for investors to profit. How? By investing in a handful of specific health-care stocks. In this free report, our analysts walk you through these opportunities and the companies that are positioned to exploit them. The informational edge contained in it is invaluable, but it can only be exploited profitably while the rest of the market remains in the dark -- and the Obamacare train stays on the tracks, of course. To access this free report instantly, simply click here now.


Read/Post Comments (12) | Recommend This Article (2)

Comments from our Foolish Readers

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 September 21, 2013, at 11:10 AM, zuni3 wrote:

    "Where do those funds go?" -- Where they should go, back to the tax payer

  • Report this Comment On September 21, 2013, at 11:26 AM, sagehopper wrote:

    What funds? How about giving Medicare back the 716 Billion they already took out? A good start.

  • Report this Comment On September 21, 2013, at 11:39 AM, amysname wrote:

    I could care less which stocks gain or lose. I am more concerned with the size of the IRS which is using a lot of our taxpayer money to increase in size. The IRS is a government agency that is OUT OF CONTROL already, to give it even more power over us taxpayers is very frightening.

  • Report this Comment On September 21, 2013, at 11:44 AM, greyhound44 wrote:

    Back to the Medicare beneficiaries and current US taxpayers!

    ret expat MD

  • Report this Comment On September 21, 2013, at 11:47 AM, Louise55 wrote:

    When Edwards was running the last time, Joe Biden scoffed at universal healthcare. Said there was NO MONEY to fund something like that. SO, if Obamacare is killed, there was no money to fund it in the first place, hence.... no money can go no where!

  • Report this Comment On September 21, 2013, at 11:56 AM, kyleml wrote:

    amysname: the IRS is not a government agency. They are a private agency that is hired by the government. They would like you to think that are part of the government, but they are not.

  • Report this Comment On September 21, 2013, at 12:06 PM, Silverstreakn2 wrote:

    How about..... toward the debt???

  • Report this Comment On September 21, 2013, at 12:18 PM, cityperson wrote:

    Not surprising many Americans do not know about all the agencies that are not governmnet, but hired by our government, The Fed and IRS for a few examples.

  • Report this Comment On September 21, 2013, at 12:18 PM, dino19 wrote:

    $716 billion dollars came from our Medicare program trust funds to fund Obama care It should be return to Medicare where it belongs. Medicare and Social Security is on the brink of bankruptcy because Bush and Obama has stolen from it $2.54 trillion dollars of our Social Security Surplus trust funds ended up in the super rich pockets in form of income tax breaks. the rest Bush and Obama spent on wars in Afghanistan, Iraq and Syrian Rebels and other government programs.

  • Report this Comment On September 21, 2013, at 3:17 PM, dnoggle wrote:

    I am already receiving benefits from the healthcare law and so will my college studen in October. This discussion is simple not one we should be having because the American people voted the President BACK in for a second term. Why, BECAUSE THE MAJORITY WANTED THE COUNTRY TO HAVE HEALTHCARE.

  • Report this Comment On September 21, 2013, at 3:43 PM, airjackie wrote:

    The funds will go to aid Israel and other special interest groups lawmakers have asked be funded. Colorado Republicans are asking for more money in their disaster. Donors have poured in large donations and want results as the insurance already paid out close to a billion dollars to PACs and lawmakers, newspapers and Media and they want Obamacare repealed now. As for the Americans they don't count as they can do for themselves or just die.

  • Report this Comment On September 21, 2013, at 5:36 PM, angelsgiggle wrote:

    Like the article said defunding will not stop Obamacare. I stand to reduce my insurance costs by 50% Jan 1st 2014.

    The Republicans in the House are doing what they have done for years....nothing. Spinning their wheels. Wasting time.

    Obamacare is law.

    It is upheld by the Supreme Court of the United States.

    Get over it....its the law. We the people elected Obama to do this work....Obama 362; Romney 206. Remember?

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