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Hospital stocks hit as RBG's death puts future of health care in question

Hospital stocks hit as RBG's death puts future of health care in question

Ana Gupte, AG Health Advisors, speaks with CNBC’s “Fast Money” about the future of the Affordable Care Act following the death of Supreme Court Justice Ruth Bader Ginsburg. For access to live and exclusive video from CNBC subscribe to CNBC PRO:

Shares of health insurers and hospitals sold off sharply Monday, following the death of supreme court justice Ruth Bader Ginsburg and the looming battle to confirm her replacement. Analysts say it creates a new level of uncertainty over the future of the Affordable Care Act, also known as Obamacare.

“It sounds like the Republicans are really gonna push for a supreme court nominee approval before the new administration ( and) the fear is that the ACA will be probably repealed,” said Jefferies health care analyst Brian Tanquilut, adding “I’m not sure that’s necessarily the case, but obviously that’s the fear that’s been baked into the stocks right now.”

Shares of Medicaid insurers Centene and Molina Health fell roughly 8.5%. The ACA has helped fuel the growth Medicaid in states that have expanded coverage to low-income and poor adults.

Hospital operator stocks also fell, with Tenet Healthcare sinking 13%, Universal Health Services down 8.6% and Community Health Systems off 6%. Investors worry that the repeal of the ACA could result in higher uncompensated care for the facilities, if millions were to lose health coverage.

The Supreme Court is set to hear the latest constitutional challenge to Obamacare, the case of California vs. Texas following the election on Nov. 10. If a new justice were to be seated in time for that case to be heard, that could push the balance of the court in favor of repeal.

“If the case gets argued in front of a new Supreme Court with a new justice, the center of gravity and the court will no longer be with Chief Justice Roberts, who has turned away too much stronger challenges to the law. It’ll be with the other conservative justices,” explained professor Nicholas Bagley, of the University of Michigan Law School, while adding he thinks the fears are overblown.

“The question is, will those conservative justices all vote to eliminate the Affordable Care Act, on the basis of this case… I think it’s not likely,” he said.

The current case before the high court centers on the issue of the individual mandate. Trump administration and Republican states argue that when Congress reduced the Obamacare individual mandate penalty to $0, the ACA was effectively invalidated. Chief Justice John Roberts cast the decided vote to uphold Obamacare in 2012, by ruling the individual mandate penalty was the equivalent of a tax.

“There’s a long way between getting a solid conservative majority and getting rid of the law entirely,” because of the consequences of repealing the law, said Douglas Holtz-Eakin, president of the bi-partisan American Action Forum, and former economic policy director for 2008 Republican presidential nominee John McCain. “They could end up landing in a bunch of different places, to avoid a complete disruption. We’ve seen them do that in the past.”

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