How Market Monster Centene Sees the World Post-Trump

Last week market monster Centene held its annual year-end investor day where it laid out its earnings estimates for 2017 and the assumptions behind them.  Centene is the ultimate “canary in the coalmine” for President-Elect Donald Trump’s health agenda to repeal and replace ObamaCare, with its significant exposure to Medicaid and exchange/subsidized markets, and its rapidly-growing Medicare Advantage portfolio.

Centene’s investors are like long-tailed cats in a roomful of rocking chairs these days, so last week they offered investors a blue-chip panel with some hot takes. Panelists included Doug Holtz-Eakin, President of American Action Forum; Centene board member Tommy Thompson, former Bush HHS Secretary and Governor of Wisconsin; Dick Gephardt, Centene board member and former US House Majority Leader; and Jon Dinesman, Centene’s Government Relations chief. Some points made:

  1. Policy changes will take time and the most likely process is repeal, then a transition period, and then a replacement offering. A reconciliation bill will mostly be used to repeal key Affordable Care Act (ACA) provisions over a transition period, with three years considered ideal by Speaker Ryan. They expected many portions of the ACA to be repeal-proof in reconciliation, both legislatively and politically.
  2. When the Senate reconvenes on January 3, 2017 they are expected to work on a budget resolution and a reconciliation bill by mid-January, with a vote not until March at the earliest. The panel emphasized that the GOP objective is to deliver on campaign promises and demonstrate the ability of Congress to function, not to create market disruption. There is a commitment to drafting a detailed replacement program with bipartisan input, noting at least eight (8) Democratic votes are needed to pass it in the Senate under current filibuster rules.
  3. Panelists noted that dropping or disrupting coverage for over 20 million newly insured Americans would be politically hazardous. They stated that maintaining stability on the exchanges is a key GOP priority and the GOP will likely make policy changes required to do so in 2017. While the form of coverage replacement could change from Medicaid to individual coverage or high-risk pools, the number of uninsured is unlikely to increase dramatically.
  4. The panelists noted that states that have not expanded Medicaid may actually have an incentive to expand their Medicaid program or obtain additional federal funding through Section 1332 innovation waivers, which can’t be repealed, ahead of broader Medicaid reform. States will want to maximize Medicaid spending prior to block grants to inflate per-capita expenses, the basis of the grants.
  5. While advancing Medicare Advantage and privatizing Medicare are long-held GOP objectives, reforming the program will be the most challenging of all Trump health agenda items. Panelists observed that Democrats have grown fonder of the Medicare Advantage program and bipartisan support has grown as Medicare Advantage (MA) payments have come in-line with traditional Medicare this year. Medicare reform could potentially accelerate growth for Medicare Advantage, but even if not enacted, the segment will continue on its strong growth trajectory.

I take comfort that such Republican luminaries don’t foresee draconian rollbacks to Medicaid expansion or coverage for the low-income. That alone would be a welcome holiday gift after weeks of apocalyptic scenario planning.



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