The Affordable Care Act, better known as Obamacare, is perhaps best known for the individual mandate, which requires American adults to purchase health insurance in public exchanges or face a tax penalty. The law also required all states to expand Medicaid, a program for low-income individuals and families, to all citizens making up to 138% of the federal poverty level (FPL). While the Supreme Court invalidated Obamacare's mandate that all states expand Medicaid, many (26 and the District of Columbia) chose to expand Medicaid up to 138% FPL in exchange for federal money that currently covers 100% of the cost.
Governors in many of the remaining 24 states face mounting pressure to take the additional federal money and expand Medicaid, which would potentially benefit a variety of stocks. Hospitals like HCA, Community Health Systems (NYSE:CYH) and Tenet Healthcare (NYSE:THC) would reduce their bad debt expense because more previously uninsured low-income customers would have insurance helping them pay. Tenet Healthcare wrote off almost $1 billion to bad debt expense last year, while HCA wrote off a whopping $3.9 billion. Medicaid-focused insurers like Molina (NYSE:MOH) and Wellcare Group (NYSE:WCG) could also see further membership (and thereby premium) growth if more states choose to accept the federal money to expand Medicaid.
On Friday's Obamacare-focused episode of Market Checkup, Motley Fool health care analysts David Williamson and Michael Douglass consider the current state of play in the Medicaid expansion and identify which stocks are most poised to benefit if more states continue the expansion.
David Williamson has no position in any stocks mentioned. Michael Douglass has no position in any stocks mentioned. The Motley Fool recommends WellPoint. The Motley Fool owns shares of WellPoint. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.