Which stocks get hit by the budget cut? Part I

While budget cuts are inevitable following the debt ceiling deal, the Centers for Medicare and Medicaid Services surprised the market on Friday that it planned to reduce payments to skilled-nursing facilities by 11.1% for fiscal 2012, cutting $3.87 billion out of the spending plan. The 11% was much larger than the 5-6% that was anticipated. CMS said in a note Friday that the rates “correct for an unintended spike in payment levels and better align Medicare payments with costs.”

The news hit nursing and healthcare facilities. Catching the eyeball was Sun Healthcare Group (SUNH) which dropped more than 50% in a day. Others hard hit by the news included Skilled Healthcare Group Inc.(SKH), Kindred Healthcare Inc. (KND),  Ensign Group Inc.(ENSG) , National Healthcare Corp. (NHC) , Five Star Quality Care Inc. (FVE). Real Estates Investment Trusts (REITs) that cater to nursing and healthcare facilities did not escape the slump. Omega Healthcare Investors (OHI) , Health Care REIT Inc. (HCN) , HCP Inc. (HCP) all lost more than 6% on Monday.

General care hospitals soon joined the slump as the market anticipated further Medicare/Medicaid cut would involve this group that included HCA Holdings Inc. (HCA), Community Health Systems Inc.(CYH) and Universal Health Services Inc. (UHS).



Disclaimer: This blog is for general information purpose only. Stocks/financial instruments mentioned in this blog are not to be taken as investment advice/recommendation. Readers must consult their own financial advisors and/or consider their own risk/reward profile before making investment/trading decisions. The blog author may have released this information prior to this post to affiliates or parties that have financial interests in trading on this information. The blog author is not liable for any investment/trading decisions of readers should readers decide to base the decisions on information provided by the blog.

Disclosure: The blog author does not own any of the above positions in her personal account as of August 2, 2011

Healthcare Reform Part II

In my previous write-up on this topic, I talked about inclusion of preventive services. Today, I’ll discuss including children with pre-existing conditions into the health-care system. According to a new report , there are 5 million children under the age of 18 who has pre-existing conditions. So far, insurance companies had been denying coverage to people with pre-existing conditions. The Affordable Care Act recognized the need for brining in all those children with pre-existing conditions into the system. So accordingly, health plans beginning on or after September 23, 2010 for new plans and existing group plans, “The new law includes new rules to prevent insurance companies from denying coverage to children under the age of 19 due to a pre-existing condition.”


Now the law says that from this year no children should be denied coverage because of pre-existing conditions.

This is a very good step to consumer protection. But there are some loopholes in this law. The law states that children cannot be denied coverage because of pre-existing conditions, but it did not say that all children need to be covered. So, insurance companies can stop offering coverage to these children till 2014, when everyone need to be offered insurance. Anticipating that the insurance companies would read through these fine prints, the Health and Human services announced a Pre-existing Condition Insurance Plan that will “offer coverage to uninsured Americans who have been unable to obtain health coverage because of a pre-existing health condition”.

So will this provision of Health-Care Reform help the consumers?

The actual benefits will be delayed till 2014 for sure.

http://www.familiesusa.org/resources/newsroom/press-releases/2010-press-releases/pre-existing-national.html
http://www.healthcare.gov/law/timeline/index.html
http://www.hhs.gov/news/press/2010pres/07/20100701a.html



by Roy Tutu


About the author:

Roy Tutu is the publisher of the blog, “ephemeralthinking.com” – a blog that covers topics related to economics, business, society and entertainment.

Roy is an economist with a passion for writing. According to Roy, “our informal conversations leap from one topic to another, transforming and reshaping our views and opinions. Ephemeralthinking.com is an avenue that brings in such informal discussions to curious readers.”

Contact Roy Tutu at roytutu@ephemeralthinking.com

Health Care Reform Part I

“On March 23, 2010, President Obama signed the Affordable Care Act. The law puts in place comprehensive health insurance reforms that will roll out over four years and beyond, with most changes taking place by 2014.”


We are planning to run a mini-series examining different aspects of the Act. In this part, we will talk about the effects of expanding preventive services to millions. The Act states that for health plan years beginning on or after September 23, 2010, “All new plans must cover certain preventive services such as mammograms and colonoscopies without charging a deductible, co-pay or coinsurance.” http://www.healthcare.gov/law/about/provisions/services/index.html

How will it affect consumers?

Although it is a blessing to consumers, the actual cost of health-care might go up. Insurance companies will provide the preventive care at no extra cost, but in effect, they will raise the cost of providing overall insurance. So, consumers can expect that their overall deductible/coinsurance/copays to rise.

Good news for medical device manufacturers!

Demand for all devices that helps in preventive care will rise. As preventive care becomes more affordable, people will have regular routine care. So, demand for mammograms, colonoscopies and other preventive care are expected to rise and medical devices manufacturers will have to keep up with this extra demand. It is a very positive news for medical device manufacturers.

How will it affect the overall society?

“Prevention is better than cure.” Early detection of diseases can prevent life-threatening episodes that need emergency visits or costly health-care procedures. So, preventive services are expected to lower costs of health-care, by preventing frequent emergency visits and other costly medical procedures. Hence, the overall benefit to the society is considered to outweigh the cost. However, many studies have pointed out that availability of improved preventive care has sometimes led to higher cost of care. It is stated that with the availability of better preventive care, doctors ask to have more preventive care services which shoots up health-care expenses. If preventive care services are available to consumers at no extra cost, then we do not see that problem. However, we also have to be careful that insurance companies do not shoot up the overall health-care costs, as mentioned earlier.

by Roy Tutu

About the author:

Roy Tutu is the publisher of the blog, “ephemeralthinking.com” – a blog that covers topics related to economics, business, society and entertainment.


Roy is an economist with a passion for writing. According to Roy, “our informal conversations leap from one topic to another, transforming and reshaping our views and opinions. Ephemeralthinking.com is an avenue that brings in such informal discussions to curious readers.”


Contact Roy Tutu at roytutu@ephemeralthinking.com