Medical Device Stocks To Beat Estimates This Earnings Season

The final amendment in Donald Trump’s healthcare bill as offered late last month was apparently not of much help in calming the healthcare economy from the upheaval caused by the first version of the proposed American Health Care Act (AHCA).

The original AHCA proposal was grossly criticized by both Democrats and Republicans, as reflected in last month’s House poll. The Democrats pointed to the Congressional Budget Office's (CBO) analysis that there would be 24 million more uninsured in a decade from now under AHCA. Republicans too were of the view that AHCA will not bring the desired results.

Though from the House vote results it was quite clear to the Trump administration that full repeal and replacement of the Affordable Care Act will never be accepted by mass, they refuted complete change of their original planning. This comes as no surprise as Trump was always extremely vocal against the Affordable Care Act (ACA).

The Amendment in a Nutshell

The proposed amendment submitted to the House of Ways and Means Committee consists of the creation of a risk-sharing program as part of the AHCA’s Patient and State Stability Fund (PSSF). The aim is to set aside funds to be used in covering a portion of costs alongside insurers. This would invariably result in bringing down premium costs while accommodating more people under the healthcare umbrella.

Per the proposed amendment, the government would set aside $15 billion within the PSSF. The Health Department would then carry out the risk sharing program by providing payments to health insurers for individual claims. The sharing of the burden by the government would result in lower premiums allowing the insurance umbrella to cast a wider net. If the amendment is enacted it would be effective from Jan 1, 2018.

Boon or Bane for MedTech?

The foremost question that arises now is whether Medical Device stocks stand to gain or lose on the developments at Capitol Hill. Supporters for the Republican alternative argue that if the proposed amendment is implemented, more people would be covered as a portion of the cost would be borne by the government. Needless to mention, this may lead to broadening of customer base for the MedTech companies, who could have otherwise suffered.

On the other hand, the medical device industry was earlier happy with the original Trump action plan which promised cancellation of major healthcare taxes including the two signature taxes of Obamacare, the unpopular Cadillac tax (40% excise tax on high-cost healthcare plans) and the controversial 2.3% MedTech tax. With the original plan being voted out, the fraternity is worried whether the final plan will still include the MedTech tax repeal within its agenda.

Ahead of Earnings

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