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Judge's ruling raises uncertainty for health care execs

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After a federal judge in Florida struck down the entire health reform law, investors shrugged. But the uncertainty for executives in health care companies increased.

Judge Richard Vinson was the second federal judge to say that the mandate in the Patient Protection and Affordable Care Act, which requires nearly all individuals to buy health insurance, exceeds Congress’ authority under the commerce clause of the U.S. Constitution. But Vinson far exceeded the December ruling of Judge Henry Hudson by declaring that the individual mandate cannot be separated from the rest of the law, meaning that the entire act must be struck down.

“The market's uncertainty about implementing the Affordability Act just went up exponentially with a second federal judge ruling against it. And, there is nothing like the whole thing being thrown out in a suit 26 states have brought,” wrote health insurance consultant Bob Laszewski on his blog on Monday.

Others, however, said that health care investors already had substantial doubts about the future of the health reform law—even before Vinson’s ruling came down Monday afternoon.

Shares of Indianapolis-based health insurer WellPoint Inc. and Indianapolis-based drugmaker Eli Lilly and Co. rose slightly on Tuesday, but in line with the broader markets. Publicly traded hospital chains—none of which have significant operations in the Indianapolis area—received a similar response from investors.

Barron’s magazine cited Citi analyst Gary Taylor in saying that hospital stocks would have already been trading at higher values if investors truly believed health reform would go ahead unchanged. That’s because the law would create federal subsidies to help 16 million extra Americans buy health insurance and another 16 million get health benefits through the federal-state Medicaid program.

That means 32 million more paying customers for hospitals, insurers and drug companies.

But with the Obama administration appealing all decisions against the law, health care companies and their investors will likely have to wait 18 months before the U.S. Supreme Court settles the legal questions about the law, noted Brian Betner, an attorney at Indianapolis-based health care law firm Hall Render Killian Heath & Lyman.

And even then, there are movements afoot in Congress to alter the law—including House Republicans' vote in January to outright repeal it.

All these clouds make life quite difficult for executives trying to find a winning business strategy.

“If you are a provider, do you now spend millions of dollars developing an Accountable Care Organization? Do you build that new building or make a big technology purchase?” Laszewski wrote. “If you run an insurance company, do you make a big strategic bet on exchanges or [are they] now marginal markets?”

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  • The end is near
    Health care costs doubled from 8 to 16 percent of the economy in just the last 10 years. They are on track to double again to 32 percent in the next ten and may rise faster as the boomers retire. The middle class can't afford this and will not allow it to happen, mandate or no mandate. The health care executives had better cash in their stock options now and prepare to downsize because a bursting economic bubble is a rough ride on the way down! Once people and companies give up on health insurance, only cost effective health care will have a market and the industry has long forgotten how to provide it!

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  1. to mention the rest of Molly's experience- she served as Communications Director for the Indianapolis Department of Public Works and also did communications for the state. She's incredibly qualified for this role and has a real love for Indianapolis and Indiana. Best of luck to her!

  2. Shall we not demand the same scrutiny for law schools, med schools, heaven forbid, business schools, etc.? How many law school grads are servers? How many business start ups fail and how many business grads get low paying jobs because there are so few high paying positions available? Why does our legislature continue to demean public schools and give taxpayer dollars to charters and private schools, ($171 million last year), rather than investing in our community schools? We are on a course of disaster regarding our public school attitudes unless we change our thinking in a short time.

  3. I agree with the other reader's comment about the chunky tomato soup. I found myself wanting a breadstick to dip into it. It tasted more like a marinara sauce; I couldn't eat it as a soup. In general, I liked the place... but doubt that I'll frequent it once the novelty wears off.

  4. The Indiana toll road used to have some of the cleanest bathrooms you could find on the road. After the lease they went downhill quickly. While not the grossest you'll see, they hover a bit below average. Am not sure if this is indicative of the entire deal or merely a portion of it. But the goals of anyone taking over the lease will always be at odds. The fewer repairs they make, the more money they earn since they have a virtual monopoly on travel from Cleveland to Chicago. So they only comply to satisfy the rules. It's hard to hand public works over to private enterprise. The incentives are misaligned. In true competition, you'd have multiple roads, each build by different companies motivated to make theirs more attractive. Working to attract customers is very different than working to maximize profit on people who have no choice but to choose your road. Of course, we all know two roads would be even more ridiculous.

  5. The State is in a perfect position. The consortium overpaid for leasing the toll road. Good for the State. The money they paid is being used across the State to upgrade roads and bridges and employ people at at time most of the country is scrambling to fund basic repairs. Good for the State. Indiana taxpayers are no longer subsidizing the toll roads to the tune of millions a year as we had for the last 20 years because the legislature did not have the guts to raise tolls. Good for the State. If the consortium fails, they either find another operator, acceptable to the State, to buy them out or the road gets turned back over to the State and we keep the Billions. Good for the State. Pat Bauer is no longer the Majority or Minority Leader of the House. Good for the State. Anyway you look at this, the State received billions of dollars for an assett the taxpayers were subsidizing, the State does not have to pay to maintain the road for 70 years. I am having trouble seeing the downside.

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