Supreme Court appears skeptical over ending Obamacare
Yahoo Finance’s Adam Shapiro and Seana Smith speak with Chris Meekins, healthcare policy analyst at Raymond James, about today’s Affordable Care Act hearing before the Supreme Court.
Video Transcript
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ADAM SHAPIRO: Supreme Court heard oral arguments today regarding the Affordable Care Act and the mandate, as states like Texas trying to get it totally repealed. And of course, there are people and states which are trying to preserve it. Let's invite into the stream Chris Meekins, Raymond James Health Care Policy Analyst on where all of this stands. But even more importantly, it's always a COVID-19 discussion in the middle of a pandemic.
Good to have you here, Chris. So let me ask you--
CHRIS MEEKINS: Thanks for having me.
ADAM SHAPIRO: --in regards to the news we got yesterday with Pfizer, there was this jubilation, euphoria, and it seems as if, you know, the reality has set in, especially since we're going to get more vaccine announcements from other companies, but we're witnessing-- I mean, New York City is, once again, becoming a hot spot. And we're witnessing spikes we've never seen in this country before. Deaths are up. Positive cases are up. But we may face new lockdowns. Where do we go with this?
CHRIS MEEKINS: Yeah, I think that if we didn't get the vaccine news yesterday, the highlight would have been just how bad things were in the US. We had five consecutive days of more than 100,000 identified cases. We averaged 110,000 cases last week. We saw hospitalizations increased 16%. We saw the death rate, average deaths per day, increased 23% week over week.
And when you look at things, it's not going in the right direction. You've got more than a dozen states have a positive test rate, so the percent of tests coming back positive above 15%, which tells you there's an out-of-control outbreak in those areas. You have more than a half dozen states with at least 10% of their hospital beds occupied by COVID patients.
So while the vaccine news is great, and we hope there'll be more favorable vaccine news, it's important to remember that doesn't help us today. That doesn't help us tomorrow. That doesn't help us a month from now. That may help us by the start of next year, maybe in the second quarter of '21 will everyone have access to it. But that's not a right now solution, which means these local governments, these state governors, are going to have to make a decision about how to handle this latest outbreak. And I think more lockdowns are going to be likely. Period.
SEANA SMITH: Chris, what about on a national level? Do you see any odds of a nationwide lockdown that's likely?
CHRIS MEEKINS: Not as long as-- not for the remainder of the assumed president-elect-- or former President Trump's term till the end of January. I think when the assumed president-elect Donald-- or Joe Biden takes office the end of January, it'll be a topic of conversation if things continue to go as bad as they are. But I think most of it's really going to be at the state level. And I think we're going to start hearing from states in the coming days.
ADAM SHAPIRO: On one level, the arguments today in the Supreme Court could have ramifications if they do allow for the repeal of the Affordable Care Act because of people who are 26 or younger on their parents insurance. If there is a repeal, it also throws the insurance sector into a kind of disarray. In the arguments that were going on today during the ACA discussion in the Court, did you pick up on anything that gives you a sense of where that might be headed?
CHRIS MEEKINS: Yeah, I think it was actually remarkably telling today. So what we saw was Justice Kavanaugh, who's assumed to be the swing vote with regard to what we call severability, that's the argument of even if you get rid of the individual mandate and you assume the parties have standing, does the entire law have to go away, and he said it's a pretty straightforward case that it doesn't, that you can just cut out the part of the individual mandate and leave the rest of the law. So that's really positive.
And what I'll tell you over the last 10 days or so, Christmas came early, not just in the Meekins' household, it came early for managed care. And what we saw was you had an election-clearing event. Democrats weren't going to get 53 Senate seats, meaning that the filibuster likely won't go away. The public option is not going to be a real topic of conversation in DC.
Normal drug pricing legislation probably [INAUDIBLE]. And now you have the second clearing event with the Supreme Court looking unlikely to strike down the entire Affordable Care Act. So right now there's a reason managed care names have been up almost 13% month-to-date, and we think things are going to continue on that front.
SEANA SMITH: Chris, it doesn't seem likely now-- we were talking to Valerie Jarrett about this in the last hour. But if we were to see this happen, millions of people have lost their jobs because of the pandemic so they don't have insurance. They're relying on the ACA right now. What would that do to the health care system, from your point of view? Because I know you've been looking at the numbers. You have a couple models here just to determine how big of an impact that could potentially have and how worrisome that could be.
CHRIS MEEKINS: Well, when you look at the number of people getting subsidies on the exchanges, it is a large number. It's almost 10 million are getting subsidies. So those subsidies would go away, which makes it more difficult for people to get insurance.
If the entire law gets struck down, that means the Medicaid expansion that had allowed more people to be covered in some of the states that opted into it by Medicaid, that could be another 20 million people that had access to insurance. So there's no question this would result in a major uptick in the uninsured rate. And at the time of a pandemic, that's the last thing you want.
I think that as we look forward, it's unlikely the Supreme Court would do that. We are going to have to wait till probably second quarter of '21 to get the formal all clear from the Supreme Court. Well, hopefully, folks don't need to worry about that. And it is open enrollment period right now. So if you have an opportunity and you are uninsured, it's a great opportunity to sign up and get it.
ADAM SHAPIRO: Very quickly, can the law, if they sever out the mandate, continue on? I realize there's no penalty if you don't buy insurance now, but what does that look like?
CHRIS MEEKINS: So it has for the last two years, right. So they made the penalty zero back in 2017, and the law continues to exist. People continue to buy insurance. They continue to get subsidies, which was one of the arguments that was made by one of the justices today, actually one of the conservative justices, Alito, said, look, you want us-- that this is the critical part of the law, but for the last two years it hasn't been a part of it, and the world has not come to an end.
It hasn't been the most critical part of an airplane for the previous analogy in the case that would bring the whole plane down. That just wasn't the case now. So we obviously have to watch, and we'll pay attention, and we'll see where things go. But I think we're in a position where from a health care investing standpoint, it's a great opportunity to be in health care.
Generally speaking, health care outperforms the market compared to the S&P over the last 40 years. And when there's a Democratic president, it tends to outperform by a little better, 10% compared to 7% under Republican presidents. So there's a lot of upside here.
People are looking for opportunities outside of maybe the tech focus that had been the case for the last several months. I say come on into health care. The water's warm. It's going to be a lot of fun for the next several months.
ADAM SHAPIRO: Chris Meekins is Raymond James Health Care Policy Analyst. Thanks for joining us on Yahoo Finance.
