The Senate parliamentarian just threw out key Medicaid and Affordable Care Act spending cuts in the GOP's "Big Beautiful Bill," raising the hurdle to a quick passage. UnitedHealth Group, Centene and HCA Healthcare led an early rally among S&P 500 managed-care companies and hospital operators.
However, the health care stocks backed away from their morning highs, reflecting uncertainty about what will happen next, while the S&P 500 climbs toward a record high.
Big Beautiful Bill's Procedural Hurdles
Senate rules allow for tax and spending legislation to get around filibusters requiring a 60-vote majority. Yet the Senate parliamentarian reviews that each provision meets the so-called Byrd Rule, making sure its clear purpose is to change taxes or spending. Policy tweaks that have other motivations can be stricken.
Reports on Thursday, along with Democrats' cheerleading, indicate the parliamentarian disallowed key spending curbs. One would limit state taxes on Medicaid providers, which is widely seen as a backdoor way of increasing federal Medicaid funding to states. The House version of the GOP tax bill would save $89.3 billion over 10 years, the Congressional Budget Office found.
However, the Senate approach took a harsher tack, gradually lowering the current limit on provider taxes in states that expanded Medicaid coverage under the ACA. The parliamentarian's rulings are behind closed doors. It's not clear if the different treatment of states based on whether they expanded Medicaid is what was deemed to run afoul of the rules for using budget reconciliation, or whether it was the indirect nature of the spending cuts.
Senate Republicans can decide to reject the parliamentarian's decisions, but that would still require a majority vote and potentially raise a concern about the precedent it would set. Conservative GOP House members have said the Senate should ignore the rulings and proceed to a quick vote, but numerous Republican senators have dismissed the idea.
Plan A will be to revise rejected provisions and try again.
ACA Exchange Reprieve
Reports also indicate that the parliamentarian rejected a provision that would have the effect of significantly lowering ACA subsidies for buying coverage on the health insurance exchanges. The measure would actually restart payments to insurers that President Donald Trump halted in 2017. The payments compensated insurers for providing platinum-level coverage to silver-plan purchasers with modest incomes.
To recoup their costs, insurers responded by massively increasing the benchmark silver plan premium that determines the available subsidy for all ACA coverage. Restarting those subsidies would lower the benchmark silver premium much closer to the cost of high-deductible bronze coverage. As a result, the zero-deductible bronze plans that have proliferated since 2018 would become much more costly.
Further, the parliamentarian nixed provisions that would lower the federal share of spending for the ACA Medicaid expansion to 80% from 90% in states that provide coverage to undocumented immigrants using their own funds.
UNH, CNC, HCA, S&P 500
UnitedHealth and Centene, both major players on the ACA exchanges and in Medicaid managed care, jumped Thursday morning. UNH rose 2% early, but finished up 0.2%, while CNC settled for a 0.1% gain after advancing 3% out of the gate.
However, some gains persisted among hospital operators, with HCA rising 0.95% and Tenet Healthcare advancing 2.1%.
Oscar Health, which gets a large share of its business from the ACA exchanges, rose 6.8%, holding onto the bulk of its early 10% gain amid the setback for the Big Beautiful Bill.
The S&P 500 advanced 0.8%, climbing to within a whisker of its Feb. 19 all-time high at 6,147.
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