Best of the Week
Most Popular
1.Stock Market in DANGER of Strangling the Bears to Death - Nadeem_Walayat
2. Germany Pivoting East, Exit US Dollar, Enter Gold Standard - Jim_Willie_CB
3.Flight MH17 – Kiev Flash Mob's Last False Flag? - Andrew_McKillop
4.Stock Market Crash Nightmare! - Nadeem_Walayat
5.Gold - The Million DOLLAR Question... - Rambus_Chartology
6.Gold And Silver – BRICS And Germany Will Pave The Way - Michael_Noonan
7.The Jewish Selfish Gene, People Chosen by God, Everyone Else is Goyim to Kill - Nadeem_Walayat
8.The Israeli Promised Land Dream - The Criminal Roadmap Towards “Greater Israel”? - Felicity Arbuthnot
9.Which Way is Inflation Blowing? Watch Commodities - Gary_Dorsch
10.U.S. Economy Quarterly Review and Implications for 2014-2015 - Lacy Hunt
Last 5 days
Our Totalitarian Future - Totalitarianism NOW! - 30th July 14
Stocks Bear Market Formation Revealed - 30th July 14
We Just Found “The Future” - 30th July 14
What the “Steak Bandit” Says About Asset Values - 30th July 14
Designer War By Default - Seven Types of Elite Madness - 30th July 14
Death of the U.S. Dollar? Gold an Inflation Hedge? Really? - 29th July 14
We’re Ready to Profit in the Coming Gold Price Correction—Are You? - 29th July 14
Their Economy Will Collapse, Including Ours - 29th July 14
Silver Prices – Megaphone Patterns - 29th July 14
Real U.S. Interest Rates - Fed Exit a Blue Pill? - 29th July 14
Why Israel Should NOT Exist, Just Like Any Other Rogue State - 29th July 14
Gold Still Looking Good - 29th July 14
Silver Price Set To Star - 29th July 14
Our Population Growth Totalitarian Future - 29th July 14
World War 1 Cause and Consequences - The Planned Destruction of Christendom - 29th July 14
Will Crashing Commodities Crash the Stock Market? - 29th July 14
Ukraine MH17 - Washington Thinks Americans Are Fools - 29th July 14
Stock Market Bubble Warning - 29th July 14
Gold Price and U.S. Dollar’s July Rally - 28th July 14
Second Quarter Corporate Earnings: Marching Toward a Strong Economic Recovery - 28th July 14
Time to Put a New Economic Tool in the Box - 28th July 14
Mossad in Gaza, Ukraine and the Cult Of The All-Powerful Elite - 28th July 14
Elliott Wave Gold Price Projection Since 1970 - 28th July 14
Investors Remain Uncertain As Stock Fluctuate Near Long-Term Highs - Will The Uptrend Extend? - 28th July 14
The Mass Psychology Of Decline - 28th July 14
Will the US Destroy the World? - Don’t Expect to Live Much Longer - 28th July 14
GDM and GDXJ Gold Stocks In-depth Look - 28th July 14
Stock Market One FINAL High? - 28th July 14
What It Means - Paradigm Collapse And Culture Crisis - 27th July 14
Wall Street Shadow Banking: You Can’t Taper a Ponzi Scheme: “Time to Reboot” - 27th July 14
6 Tips for Picking Winning Gold Mining Stocks - 27th July 14
Israel's War on Children, Exterminating the Palestinians Future - 27th July 14
Guilt By Insinuation - How American Propaganda Works - 26th July 14
Surprise Nuclear Attack On Russia To Liberate Ukraine - 26th July 14
Use "Magic" Of Gold/Silver Ratio To Greatly Increase Your Physical Holdings - 26th July 14
Derivatives Market Species Origins - Abuse, Props and Risks - 26th July 14
Stock Market Manipulation and Technical Analysis - 26th July 14
China’s Stock Market Finally Looks Like A Buy - 26th July 14
Ed Milliband Fears Israel Jewish Fundamentalist Gaza War Massacres Backlash - 26th July 14
The Big Energy = Power Battle Is Coming - 25th July 14
USrael - Zionists in Control of America's Goyim Brainwashed Second Coming Slaves - 25th July 14
More Weakness Ahead for Gold Miners - 25th July 14
Gold Price Strong Season Starts - 25th July 14
Geopolitics and Markets Red Flags Raised by the Fed and the BIS on Risk-taking - 25th July 14
Gold Lockdown Until Options Expiry - New Singapore Gold Contract Threatens Price Manipulation - 25th July 14
The Bond Markets, Black Swans, and the Tiny Spirit of Santo - 25th July 14
No Road Map For Avoiding The Future - 25th July 14
Israeli War Machine Concentrating Women and Children into UN Schools Before Killing Them - C4News - 25th July 14
Israeli Government Paying Jewish Fundamentalist Students to Post Facebook Gaza War Propaganda - 25th July 14
Why the Stock Market Is Heading For A Fall - This Time Is Not Different - 25th July 14
An Economic “Nuclear Strike” on Moscow, A “War of Degrees” - 25th July 14
BBC, Western Media Working for Israeli Agenda of Perpetual War to Steal Arab Land - 25th July 14
Ukraine: What To Do When Economic Growth Is Gone - 24th July 14
Stock Market Clear and Present Danger Zone - 24th July 14
The Five Elements to Creating a Something-for-Nothing Society - 24th July 14
Instability is the New Normal? - 24th July 14
Israel's Suicide Bombers Over Gaza - 24th July 14
EUR-AUD Heads Into The Danger Zone - 24th July 14
Tesco Supermarket Death Spiral Accelerates as Customers HATE the Mega Brand - 24th July 14
Ukraine MH17 Crisis - Best Remember Who Your Friends Are - 24th July 14
Three Reasons Why Gold Price and Gold Stocks Will Rise - 24th July 14
HUI Gold Bugs Fighting To Break Downtrend - 23rd July 14
What Putin Knows About Flight MH17 - 23rd July 14
Why Microsoft Will Continue to Rebound, Huge Upside Potential - 23rd July 14
Will Putin Survive? - 23rd July 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Biggest lie in Stock Market History Revealed

Healthcare Stocks: Mergers Show How Obamacare Will Deliver Investor Profits

Companies / Healthcare Sector Jul 20, 2012 - 06:33 AM GMT

By: Money_Morning

Companies

Best Financial Markets Analysis ArticleDon Miller writes: Want proof that healthcare stocks are poised to reap rewards from Obamacare?

Just take a look at this recent blockbuster healthcare merger.

Giant managed care firm WellPoint Inc. (NYSE: WLP) announced July 9 that it would buy Amerigroup Corp. (NYSE: AGP), the country's largest private Medicaid managed care company, for $4.9 billion in cash.


The day acquisition was announced, Amerigroup stock jumped 38%.

Of course, healthcare mergers and acquisitions (M&A) are nothing unusual. But a close look at this deal sheds light on the direction of the next major trend of consolidation within the industry.

In fact, when it narrowly upheld the Affordable Care Act (informally known as Obamacare), the Supreme Court unwittingly set the table for a new wave of M&A in a downtrodden healthcare space --Medicaid.

Government-sponsored programs like Medicaid and Medicare have traditionally been viewed as ho-hum businesses with razor-thin profit margins.

So why is WellPoint jumping with both feet into a business that is typically not a big money maker?

Let's take a closer look...

Insurers Eye Government Programs for Profits
Medicaid has a long history as a perpetual money pit, funded jointly by the states and federal government to assure healthcare for the needy.

But Medicaid spending currently takes up 24% of the average state's already strained budget and is growing at 7% a year.

In an effort to rein in spending, more and more beleaguered states have been turning to private managed care companies to run their publicly-funded healthcare programs like Medicaid.

But Obamacare promises to fundamentally alter the landscape by expanding Medicaid to cover more people.

In fact, when Obamacare kicks into high gear in 2014, a whopping 20 million more individuals are likely to enter the Medicaid system. The $80 billion that states spend to outsource Medicaid could grow to $300 billion in five years, according to Barron's.

Overall Medicaid spending, which hit $457 billion this year, is expected to double by 2020.

None of this has been lost on the fat-cat insurance companies.

With that kind of money on the table, the biggest managed care companies are betting they can squeeze costs and maximize profits by sucking up companies already operating in the space.

But frankly, the writing has been on the wall for some time.

Most managed care companies have actually been reporting flat or shrinking membership in the private sector and healthy growth in public sectors for several years. And more and more small businesses are dropping coverage for their employees because of the high premiums insurers demand.

Simply put, big insurers have been moving away from private sector business because it's just not profitable enough.

The two largest managed care firms, UnitedHealth Group Inc. (NYSE: UNH) and WellPoint, are now big players in Medicare Advantage and Medicaid, according to The Huffington Post.

And with the impending influx from Obamacare, they plan to get even bigger.

With the Amerigroup purchase, WellPoint will gain 2 million Medicaid members, spreading its footprint across 19 states and 4.5 million accounts.

States Will Participate
One slightly overlooked aspect of the Supreme Court's ruling said that states could not be penalized for refusing to go along with the Medicaid expansion in 2014.

At least seven governors who fear their states won't be able to pay for it are concerned about the issue.

But in the long run, it's likely the states will go along because the law is laden with incentives to expand coverage.

You see, the federal government will pay for a full 100% of newly eligible Medicaid beneficiaries for the first three years of the expansion, and 90% of the cost after that until 2020.

"When you think about it that way, the Medicaid expansion sounds like a real win: States get loads of free money to pay their residents' health-care bills,"wrote Sarah Kliff in a blog for The Washington Post.

Despite the states' misgivings, odds are when the Feds start doling out billions of dollars in 2014, the states will come around.

Healthcare Stocks: Who's Next in the M&A Game?
The Amerigroup deal has the industry buzzing about the next likely target.

"Expect other companies with government exposure to see greater investor interest," Credit Suisse AG (ADR NYSE: CS) analyst Charles Boorady wrote in a note to clients obtained by The Street.

Here are a few companies with significant public sector exposure that might be next in line.

Centene Corp. (NYSE: CNC): With over 2.1 million members in 17 states, the company provides Medicaid and Medicaid-related health plan coverage to individuals through government subsidized programs, including Medicaid, foster care, and Medicare special needs plans. After slipping near its 52-week low on June 15, Centene has rebounded 30%.

WellCare Health Plans Inc. (NYSE: WCG): As of December 31, 2011, it provided approximately 2,562,000 members with prescription drug plans under the Medicare Part D program that offers prescription drug coverage to Medicare-eligible beneficiaries. WellCare has already started to expand its managed care presence. On July 18 it announced a deal with Humana Inc. (NYSE: HUM) to acquire select assets of Arcadian Health Plan Inc.'s Desert Canyon Community Care Medicare Advantage plans in Arizona. WellCare stock has soared 28% this year.

Healthnet Inc. (NYSE: HNT): Healthnet serves approximately 6 million members in the United States through group, individual, Medicare, Medicaid, and Veterans Affairs programs including Medicare advantage plans. HNT stock is up 6% over the past month.

Source :http://moneymorning.com/2012/07/19/healthcare-stocks-mergers-show-how-obamacare-will-deliver-profits/

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Brandt Hardin
20 Jul 12, 19:36
Equality for All

Republicans would have us believe Obamacare is bad for America. Is there any doubt that a Romney administration would favor the rich and increase the income gap in our country while leaving millions of our citizens uninsured and unprotected? Mitt is a pariah in Mormon Clothing and will stop at nothing to expand an empire of greed for the rich in this country. Can his sacred Mormon underwear gain him enough donations to buy this election? See for yourself as Mitt dons his tighty-whities sent from the Good Lord Himself at http://dregstudiosart.blogspot.com/2012/05/mitt-romneys-magic-mormon-underwear.html


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014