Where Do the Funds Go If Obamacare Is Defunded?
Stopping a "train wreck." Caving in to "anarchists." Trying to "extort a president."
Those were the views of House Speaker John Boehner (R-Ohio), Senate Majority Leader Harry Reid (D-Nev.), and President Barack Obama, respectively, on what was then an impending vote by the House of Representatives to defund the Affordable Care Act, commonly known as Obamacare. That vote to fund the federal government without allocating money for Obamacare has now been held, passing 230-189 largely along party lines.
Many say that the House's action was an exercise in futility, since the Senate seems certain to strip defunding Obamacare from the legislation. Even if the Senate went along with the House, President Obama has threatened a veto.
I'll leave all of the political prognostication to others. What I'm interested in is the money flow in the stock market that could kick into gear if funding stops for operations required to support the Affordable Care Act. In other words, where do the funds go if Obamacare is actually defunded?
Give and take
Determining which stocks would see mass departure of capital isn't very difficult. All we have to do is look at where the big money flowed after Obamacare was passed and after the Supreme Court upheld much of the law. Where Obamacare gave, defunding of Obamacare could conceivably take away.
What's at the top of the list for probable investor flight? Hospital stocks. Publicly traded hospital chains have sizzled ever since the Supreme Court decision in June 2012. Shares in Tenet Healthcare , for example, nearly doubled on hopes that Obamacare would generate more business from insured patients and reduce write-offs from providing care for the uninsured. If the health-insurance exchanges needed for those uninsured individuals to gain coverage didn't have money to operate, Tenet and its peers would undoubtedly lose much of those big gains.
Pharmacy chains have been prominent promoters of Obamacare, in large part because they seek to benefit from newly insured Americans needing more prescription drugs. Walgreen was the first big player to announce efforts to educate customers about the impact of health reform. It's probably no coincidence that the company's stock has soared more than 90% since the Supreme Court's ruling. That major uptrend could easily turn into a downtrend, though, with no money for Obamacare.
Which stocks would be most likely to see money flowing in? Delta Airlines is one possibility, if the whole law were overturned. A leaked letter from the company to the Obama administration revealed that Delta's health care costs would increase by nearly $100 million in 2014 largely because of Obamacare. That figure amounts to around one-tenth of Delta's total net income last year. Other large employers could also stand to benefit if Obamacare faded away because of lack of funds.
Much ado about nothing?
All this talk assumes that the defunding of Obamacare really takes enough money away from Obamacare programs to cause them to stop -- or at least significantly weaken them. Is that a valid assumption? Probably not.
Sen. Tom Colburn (R-Okla.), a medical doctor by profession and no fan of the president's health-reform legislation, asked the Congressional Research Service, or CRS, to provide information on the possible consequences of a "funding lapse" on implementation of Obamacare. The answer in a nutshell: Funding for Obamacare would continue even if the government were shut down.
Yep -- Obamacare possesses zombie-like abilities. It keeps moving even if you think it's dead.
There are several reasons for this. One is that the government could use money not included in annual appropriations called multiple-year and no-year discretionary funds. The Obamacare exchanges would probably keep on rolling. In fact, they're supposed to be self-sustaining beginning in 2015.
According to the CRS, the IRS could still collect Obamacare taxes, federal subsidies to help many individuals purchase health insurance would probably still be in place, and the individual mandate would still be in force. All of these elements would largely march forward even if Congress didn't allocate another dime to Obamacare. Such are the strange ways of the federal legislative and budgetary processes.
As Sen. James Inhofe (R-Okla.) admits, the effort to defund Obamacare is "largely symbolic." Even if Obamacare is defunded, the funds keep on flowing for the most part. The current debate -- on both sides of the political spectrum -- is mainly much ado about nothing.
If the train stays on the tracks ...
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The article Where Do the Funds Go If Obamacare Is Defunded? originally appeared on Fool.com.Fool contributor Keith Speights and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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