3 Charts That Predict A Huge Potential Problem for Obamacare

Rolling with the punches (so far)

The Affordable Care Act, commonly known as Obamacare, has certainly taken plenty of punches so far – but proponents are still smiling.

However, there’s a major problem looming on the horizon for Obamacare. The following 3 charts tell the story.

Source: White House on Twitter

1. Increased enrollment in Medicaid

Source: U.S. Department of Health & Human Services

Increased enrollment in Medicaid

31 states plus the District of Columbia have decided to expand Medicaid under the Affordable Care Act.

In some respects, the Medicaid expansion goal of Obamacare has been one of the most successful parts of the legislation, despite a large number of states opting not to participate.

Source: Kaiser Family Foundation

2. Timeline for reduction of federal subsidies

Source: Patient Protection and Affordable Care Act

Timeline for end of federal subsidies

While federal dollars spurred many states to expand Medicaid under Obamacare, that money will slowly decrease.

The success of Medicaid expansion, however, has led to much higher costs than expected in several states – for example, IL, KY and WA more than doubled projected enrollment.

Source: Wikimedia Commons

3. Expansion states requiring balanced budget

Source: Kaiser Family Foundation, National Conference of State Legislatures

States colored in blue decided to expand Medicaid and require a balanced budget

Expansion states requiring balanced budgets

Nearly every state that has opted to expand Medicaid under Obamacare also requires the state legislature to pass a balanced budget.

The only exceptions to this are: HI, IN, NY, PA, VT, and WA Source: Wikimedia Commons

Putting it all together

Rapid Medicaid expansion in many states. Federal money decreasing soon. Most of the states require balanced budgets.

States could face tough choices:• Increase taxes? • Decrease spending in other

areas?• Cut back on Medicaid

expansion?

Source: Pixabay

Implications for healthcare stocks

Ironically, Obamacare’s biggest success could lead to its worst failure.

What’s the investing impact if some states cut Medicaid spending after the federal subsidies decrease?

The hardest hit stocks will likely be providers of Medicaid managed care. Here are two that could feel the most pain.

Source: Wikipedia

Centene Corp. (NYSE:CNC)

Centene offers Medicaid managed care plans in 17 states. Eight of those states have opted to expand Medicaid under Obamacare, six of which require balanced budgets.

71% of Centene’s total member base stems from Medicaid – making the company heavily dependent on the government program.

Molina Healthcare (NYSE:MOH)

Molina offers Medicaid plans in 11 states, including six which expanded Medicaid under Obamacare. Of those only WA doesn’t require a balanced budget.

14% of Molina’s total membership came from Medicaid expansion.

Bottom line

It’s too early to know how states will respond to the loss of significant federal funds to help offset the costs of Medicaid expansion.

However, the potential for this to present significant problems for Obamacare’s Medicaid expansion is real – and could hurt stocks like Centene and Molina.

Source: Pixabay

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