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Health Investors Shrug as GOP Bill Faces Tough Road in Senate

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(Bloomberg) — The House voted, and health stocks shrugged.

Hospital and health insurance stocks quickly bounced back Thursday after the U.S. House of Representatives voted for a bill that would defund large parts of the Affordable Care Act but faces a tough road in the Senate. In the minutes after the vote, the BI North America Hospitals Index fell as much as 1.6% before reversing to close up 0.2%.

The Republican bill, formally known as the American Health Care Act, passed by a vote of 217-213, would cut billions of dollars in health care spending and result in millions more Americans going without health insurance, according to the Congressional Budget Office.

(Related: 4 ACA Change Paths That Just Got More Popular)

“Everyone knew it was coming, and it was priced in,” said Ana Gupte, an analyst at Leerink Partners. “People do think it’ll get watered down in the Senate.”

Already, several key Senate Republicans said they will set aside the House health care bill and write their own version. The party holds a narrow 52-48 majority in the upper chamber.

The insurance industry’s main lobby, America’s Health Insurance Plans, criticized the House bill, saying the Senate should boost subsidies to help people afford insurance, and also ensure that enough funding is provided to state Medicaid programs.

“The American Health Care Act needs important improvements to better protect low-and moderate-income families who rely on Medicaid or buy their own coverage,” AHIP CEO Marilyn Tavenner said in a statement. “The tax credit should be enhanced to reduce premiums and better meet the needs of people with low and modest incomes, are older, or live in areas with high health care costs.”

The Standard & Poor’s 500 Managed Health Care Index finished the day up 0.7%.

The GOP bill would roll back an expansion of Medicaid, largely to people above the poverty level and to childless adults, cutting coverage for about 14 million people by 2026. Those reductions will save the government about $840 billion over 10 years, according to an analysis of an earlier version of the bill by the nonpartisan Congressional Budget Office. The CBO hasn’t made a final assessment of the current version.

The Medicaid rollback would have an impact on health insurers, especially those who provide Medicaid coverage to people under the law. But it would hit hospitals the hardest, since the Affordable Care Act’s subsidized expansion of insurance coverage has resulted in more paying customers.

‘Step Backward’

Michael Dowling, CEO of Northwell Health, New York’s largest hospital system, called the measure “a step backward.”

“You’re going to have a lot more people without coverage,’ he said in an interview. “It’s going to put a lot more pressure on those facilities that are already overburdened.”

Lobby groups for hospitals, doctors, older Americans and other groups have all issued strong statements of opposition.

“We urge the Senate to restart and reset the discussion in a manner that provides coverage to those who need it and ensures that the most vulnerable are not left behind,” Rick Pollack, CEO of the American Hospital Association, said in a statement.

The bill would also hurt some people in with commercial health coverage. The measure would eliminate a rule requiring all Americans to have coverage, and would replace income-based Affordable Care Act subsidies with tax credits based primarily on age that phase out for people with incomes above $75,000. Including the Medicaid cuts, about 24 million fewer people would be insured in 2026.

‘Draconian Cuts’

“Such draconian cuts would destabilize state Medicaid programs and adversely affect our neediest citizens and the health plans that provide access to their care,” Jeff Myers, president and CEO of Medicaid Health Plans of America, said in an email.

Insurers will now look to the Senate, where they’d like to see changes that would ensure that all Americans are able to afford coverage.

“The goal should be to have people covered by insurance that’s quality and economical,” said Michael Neidorff, the chief executive of Medicaid specialist Centene Corp. “We’re the wealthiest nation in the world, and people are entitled to health insurance.”

— Read Aetna to Quit Virginia’s ACA Exchange as CEO Limits Risk on ThinkAdvisor


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