With or Without "Obamacare" These Healthcare Stocks Are Headed Higher

The fat lady hasn't sung yet...but she is warming up.

Three days of arguments before the Supreme Court have made it abundantly clear - "Obamacare" is in danger of being gutted or completely wiped off the books.

Only one thing's for sure. Investors will want to keep buying healthcare stocks -especially as 10,000 baby boomers a day turn 65 years old for the next 20 years.

But there's one segment of the healthcare sector that will be sitting in the driver's seat when it comes to delivering healthy profits and investment returns - no matter how the court rules.

Here's what you need to know...

Obamacare's Confusing Details

Fact is, analysts have been struggling to figure out how the Affordable Care Act (ACA) would impact various segments of the healthcare sector ever since the bill was passed.

"For most companies, the bill is neither very good nor very bad," Dan Mendelson, CEO of Avalere Health, told NPR after the bill passed in 2010. "Across each of the different segments there are pieces that will be good and pieces that will be more challenging."

That's because in addition to a slew of new taxes on pharmaceutical, hospital, and insurance businesses, Obamacare includes a dizzying array of incentives that will have a dramatic effect on industry profits.

Uncertainty surrounding the law is already rattling stocks.

Healthcare stocks have underperformed the broader market this year, up 6.4% compared to the S&P 500's 11.6% gain.
With the bill's fate up in the air, major players will have to devise new strategies for either outcome.

What Obamacare Means for
Healthcare Stocks

Here's what the law might mean for major players.

Big Pharma - Big drug makers like Pfizer Inc. (NYSE: PFE) and Eli Lilly & Co (NYSE: LLY), would pay about ! $85 bill ion over 10 years to fund ACA. They also made concessions that would save the Medicare system billions of dollars a year.

In return, they were able to kill a proposal to allow cheaper prescription drugs from Canada and were granted longer patents on generic versions of biotech drugs.

On balance, they probably would come out ahead.

Insurance Companies - The picture appears positive for insurance companies. The infusion of 40 million new people into the system is seen as a gigantic shot in the arm.

But there are huge tradeoffs.

Most importantly, the insurers would no longer be able to deny people coverage based on pre-existing conditions. They also would face billions of dollars in new taxes and restrictions.

But insurers supported the plan for one simple reason - they can pass any cost increases on to their customers.

Hospitals & Doctors -Over the next 10 years, hospitals and doctors would contribute $155 billion to paying for the legislation by taking smaller payments from Medicare and other government programs.

But if the court rules that the individual mandate is constitutional, hospitals would no longer be forced to treat patients who can't pay for their services.

The Ultimate Winner in the Obamacare Debate

There's only one sector that is likely to benefit no matter what the court decides.

Managed care companies, typically known as Health Maintenance Organizations (HMO) and Preferred Provider Organizations (PPO), are already heavily involved in reducing health care costs.

They do that through a variety of techniques to reduce unnecessary health care costs by reviewing the necessity of services, controlling admissions and lengths of stay and intensive management of health care cases.

Although widely criticized for denying medical services, they are also credited with subduing medical cost inflation.
!
But here's the kicker: fully 90% of insured Americans are enrolled in plans with some form of managed care, according the industry's trade association.

That puts them in a position to profit delivering investors solid returns for years to come -- no matter how the Supreme Court weighs in.

Here are three managed-care companies that stand to thrive - whether Obamacare survives or not.

UnitedHealth Group Inc. (NYSE: UNH) - the largest managed care company provides services to more than 78 million members. Its products include risk-based health insurance and plan management for mid-sized employers, small businesses, and individuals. Shares are up 6.2% this year and have a three-year average annual return of 36%.

WellPoint Inc. (NYSE: WLP) -- is one of the largest U.S. managed care firms with over 34 million members. The company offers various network-based managed care plans to large and small employers, individual, and Medicaid markets. The stock is up 1% this year and has a three-year average annual return of 24%.

Aetna (NYSE: AET) -- the nation's third-largest managed-care organization with a market value of $16 billion, Aetna provides medical, pharmacy, dental, and vision plans. Shares are up 8.5% this year and have a three-year average annual return of 24%.

News & Related Story Links:

• Money Morning:
  Drug Companies and Hospitals Get a Boost from Healthcare Reform
• Money Morning:
  From Obamacare to Taxes: 5 Hot Topics Politicians Love to Lie About
• NPR:
  Health Care Firms See Mixed Blessing In Overhaul
• Yahoo Finance:
  Health Care Sector Is a Winner Regardless of Supreme Court Ruling

Best Wall St. Stocks Today:

A argument has arisen about whether the facility put together last spring to help finance Greece and to cover future bailouts of eurozone nations if they need it is large enough. The package put together by the EU and IMF totaled nearly $1 trillion.
That fund has put nearly $150 billion into Greece. Many capital markets investors believe that will need to be increased in two years. Ireland may need $130 billion, a
lthough the problems with its banks have not been sufficiently analyzed and the outcome of its austerity package remains unknown. Several EU members want Portugal to tap the fund because its cost to raise money has moved up sustainability. And, there is Spain with 20% unemployment and a housing market which gets into more trouble as time passes.
Several analysts have pointed out that the size of the Spanish economy is more than that of Ireland, Greece, and Portugal combined. It is a very crude measurement to determine what Spain may need in terms of money from the EU/IMF facility.
The total obligations to cover the financial needs of the four nations could rise to $600 billion or $700 billion, which would test the current fund. That test could become harder if any of the four nations’ voters reject austerity and vote in legislators opposed to cost cuts. The changes of heart do not mean the nations can dodge the laws of finance. It only means they may push their days of reckoning further into the future, and that would probably mean bigger bailouts.
There are two opposing arguments about the bailout fund size. The first is that the stronger nations of Europe and IMF should save all the troubled nations at once to salvage the euro and undercut the fears of investors. If this were to work, borrowing costs for the region would drop and perhaps the capital markets would return to normal. Countering that is the point of view that a larger bailout fund would lead to more contagion as the weaker nations grab for the money in the facilit! y to plu g the holes in their budgets. That argument against this is simple. Countries which take aide also lose a large portion of their financial sovereignty which is then transferred to the IMF, France, and Germany in exchange for the help.
The foot race is on: can Spain and Portugal convince investors that their budget plans are strong enough to mitigate their needs for capital? Or, will concerns about their financial futures continue to drive the yields on their sovereign paper higher?
There is middle course. It is for each country to raise taxes so rapidly that, if the increases hold, the need for outside capital will drop. Such a move would essentially make the countries self-financing. It might also cause unprecedented labor riots. Tax increases are the other side of the austerity coin. But, there is a long shot that higher receipts to treasuries may be a solution which keeps Spain and Portugal from the need to rely on outside help.