By Josh Nathan-Kazis

Cuts to the Medicaid program that could amount to hundreds of billions of dollars over the next decade are looking more and more likely after a House of Representatives vote on Tuesday night, and shares of hospital owners and Medicaid-focused insurers were down Wednesday.

Proposed Medicaid cuts have been in the air for months, and uncertainty about the depth of cuts remains even after Tuesday night's vote. The bottom line, however, is that cuts to the program, which provides health coverage to 21% of people in the U.S., do seem to be on their way.

"Many investors will be more nervous today than they were yesterday, before the vote," Raymond James healthcare policy analyst Chris Meekins told Barron's early Wednesday.

The new House budget plan could be bad news for hospital companies like HCA Healthcare and Tenet Healthcare, which serve Medicaid patients, and for the insurers that specialize in Medicaid plans, specifically Molina Healthcare, Centene, and Elevance Health.

Shares of the larger Medicaid-focused insurers were down the most early Wednesday. Centene dropped 5.1%, Molina fell 5.3%, and Elevance was down 2.5%. Among the hospital companies, Tenet was down 2.7%, while HCA was down 4.1%.

After days of fervent dealmaking, House Speaker Mike Johnson (R., La.) on Tuesday corralled nearly every Republican in the chamber -- including moderate members who are wary of steep Medicaid cuts -- into supporting a resolution that lays out a framework for a federal budget deal.

What the moderates' votes in favor of the resolution mean about the future of the Medicaid cuts is an open question.

"If you want to be long the Medicaid names, you say, well they had to make a deal with moderates not to cut Medicaid, so clearly everything will be fine," says Chris Meekins, a healthcare policy analyst at Raymond James.

On the other hand, Meekins says, cuts outlined in the framework have to come from somewhere.

The resolution demands that the House committee responsible for Medicaid funding propose cuts to reduce the federal budget by $880 billion through 2034. Much of that will need to come from Medicaid.

"The problem is you still have to come up with the cuts, and you have to get the conservative hardliners on board," Meekins said. He expects about $500 billion in Medicaid cuts.

Where in the Medicaid program those cuts come from will determine which stocks they hit hardest.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com

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February 26, 2025 12:01 ET (17:01 GMT)

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