Investors are anxious about the impact of the incoming administration of President-elect Donald Trump on the fortunes of local health insurance, pharmaceutical and biotech companies, as well as hospitals.
The prospect of cuts to the federal Medicaid program that provides health insurance for low-income people could hurt the bottom lines of companies like Long Beach-based Molina Healthcare Inc. and Woodland Hills-based Health Net (a unit of St. Louis-based Centene Corp.), as well as dozens of financially strained local hospitals.
For example, roughly 80% of Molina’s business is providing medical coverage for patients enrolled in state-run Medicaid programs, with another slice coming from state-run health insurance exchanges set up under the Affordable Care Act.
In 2017 and 2018, Molina lost a substantial amount of business as many states curtailed their health insurance exchanges with encouragement from the first Trump administration. Now, there’s concern that the incoming Trump administration could cut Medicaid funding and/or encourage states to rein in their Medicaid programs.
This could mean fewer bidding opportunities for Molina, Centene and Elevance Health (formerly Anthem Inc.).
And, according to website Seeking Alpha, it could mean that federal Medicaid reimbursement payments for health care services already rendered are not increased even as medical costs rise.
On Nov. 6, the day after the election, Seeking Alpha author Dulan Lokuwithana wrote, “Shares of Molina Healthcare, Centene, and Elevance Health, which focus on Medicaid, a healthcare program jointly funded by states and the government, have come under pressure.
There are concerns that a future GOP administration is unlikely to raise reimbursement rates for Medicaid.”
Most hospitals are already suffering financially in part because these reimbursement rates have not kept pace with the cost of providing care. And even before the Trump administration takes office, some of those reimbursement rates are scheduled to be cut on Jan. 1.
The California Hospital Association on Nov. 12 sent a letter to the California congressional delegation asking for their assistance in preventing the Jan. 1 cuts to Medicaid reimbursement payments to safety net hospitals that have a disproportionate share of patients on Medicaid.
Many more such battles would lie ahead under a second Trump administration.
Pharma company shares up, then down as Kennedy presence looms
Shares of major publicly-traded pharmaceutical companies generally rose in the immediate aftermath of the election, part of the broader market rally as investors initially believed that the incoming Trump administration would be more lenient toward mergers and acquisitions within the sector and would work to speed up Food and Drug Administration approvals of pharma company drug candidates.
But then Trump announced he was nominating Robert F. Kennedy Jr., a vaccine skeptic, to head the Health and Human Services agency that includes the FDA. Among other things, Kennedy has said he wants to see staff cuts at the agency, which could lengthen the time it takes to approve drugs. At the very least, the prospect of Kennedy overseeing the FDA injects more uncertainty into the FDA drug approval process.
As a result, shares of pharmaceutical companies generally fell about 5% on Nov. 15, including Thousand Oaks-based pharma giant Amgen Inc.
Through Nov. 19, shares of Amgen and vaccine maker Pfizer Inc. had not recovered any of the ground lost in that Nov. 15 selloff.
