Health care rally cools as Obamacare repeal works through Congress
Health care stocks were mixed Friday as investors reassessed the potential effect the Senate’s proposed bill to toss out much of Obamacare could have on bottom lines of hospitals and insurers.
Investors in the health sector, which also includes drugmakers and medical device companies, initially breathed a sigh of relief that the draft bill unveiled Thursday — aimed at repealing and replacing the Affordable Care Act — was a more moderate version of the earlier House bill.
Health care stocks rallied Thursday after the bill was released. But the bullish sentiment cooled Friday. Investors refocused on the fact the bill could eventually result in fewer insured, as well as criticism from lawmakers and the health care community that steep cuts to Medicaid later could hurt state budgets and make it harder for the poor to get coverage.
The health care sector was little changed Friday, easing just 0.09%. For the year, the sector is up nearly 17%. That compares with a nearly 9% gain for the broad U.S. stock market.
Hospital stocks rose Friday after a major rally a day earlier, with HCA Holdings up 0.12% and Universal Health Services finishing 0.2% higher. The bill’s proposals also call for a phaseout of Obamacare’s Medicaid expansion and the elimination of individual must-have-insurance mandates. Insurer stocks were lower. Aetna and Anthem fell 0.6% and 1.2%, respectively. Centene and Molina Healthcare, two of the largest players in the Medicaid managed care business, fared better, retaining their gains on Friday.
The Senate plan proposes to extend coverage for people covered through Medicaid expansion funding through 2024 rather than 2020. Some investors were heartened, but others focused on the inevitability of the phaseout.
Still, there are pluses for stocks, analysts say. They include: a “less draconian” approach to drug pricing, eliminating taxes paid by the rich to pay for Obamacare and establishing two funds totaling $119 billion to stabilize the individual insurance exchanges, which have come under pressure due to rising premiums.