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What the Obamacare Ruling Means for Health Care Stocks

Stocks in this article: CYH THC UHS HCA CVH UNH AET BSX

By David Sterman

NEW YORK ( StreetAuthority) -- Cooler heads have prevailed. A showdown between the executive branch of government and the judicial branch of government looked to usher in a new era of intra-governmental rancor that our Founding Fathers sought to avoid.

But the U.S. Supreme Court's decision to let much of the Obama Administration's health care law stay intact is a victory for anyone who wants to see policy makers in Washington move forward -- not backward -- in addressing many of our nation's major's fiscal challenges.

Opinions vary widely on the merits of the far-reaching legislation, with detractors on both sides of the partisan aisle (albeit for differing reasons). Yet, many agree that health care is in need of some sort of fix. For roughly two decades, we've been spending a rising percentage of our gross domestic product (GDP) on health care (which by some estimates has reached 17%) without a commensurate increase in the quality of care we receive.

The Obama administration's goals of expanded coverage and streamlined costs through the use of best practices are laudable. The proof, as they say, will be in the pudding. Chances are, the plan will need to be tinkered with as some anticipated benefits fail to materialize.

For example, hospitals will be rewarded (or punished) as they move to meet goals of improved patient outcomes. Quickly and radically improving the delivery of hospital-based health care is more daunting than you might think.

Yet, even if the plan achieves all of its goals, a range of health-care segments will either benefit or suffer from the legislation. Back in the beginning of June, I gave my take on the health-care law itself and how the Supreme Court's possible decisions would affect various health-care sectors and stocks. Despite how you may feel about the legislation itself, you need to be aware of the winners and losers so that you can position your portfolio accordingly.


Clear winners from this landmark ruling include:
  • Hospitals that no longer need to shoulder the burden of uninsured emergency room patients who can't pay their bills when they come due. (These hospitals will also benefit from an increase in higher-margin elective surgeries as more patients get coverage.)
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