By Jon Kamp
Universal Health Services Inc. (UHS) Chief Executive Alan Miller
believes state lawmakers who oppose the U.S. health-care overhaul
law's Medicaid expansion will eventually yield to political
pressure, which would help his company and other hospital
operators.
The expansion of the Medicaid program for the poor is one of two
main conduits--along with planned insurance marketplaces called
exchanges--aimed at covering roughly 30 million more Americans
combined under the health law. This expansion has investors
excited, sending shares of Universal Health and other publicly
traded hospitals up sharply this year, because it should mean more
paying customers.
However, there are still questions about how this expansion will
unfold, in part because it's still unclear whether some states with
large uninsured populations, such as Texas, will ultimately sign on
for Medicaid growth amid political opposition.
Universal Health founder Mr. Miller suggested they'll have to,
however, for fear of turning down federal dollars for the added
coverage.
"My guess is that you can't turn down free money," the CEO said,
speaking in an interview with Dow Jones Newswires. Any governor
that does "is very vulnerable," he said.
He also highlighted the political threat Republican governors
will face, perhaps in re-election campaigns, if they turn down
those federal dollars. "I don't know how you stand up to that," he
said.
Still, Mr. Miller expressed sympathy with critics who worry the
federal government's fiscal challenges will make it hard to cover
the growing Medicaid program. States and the federal government
typically share the Medicaid tab, but under the health-care law,
the U.S. is to pay the full cost of coverage for newly eligible
people for the first three years, and at least 90% of the cost in
subsequent years.
The Obama administration, for its part, has long said it plans
to keep its commitment to fund the Medicaid expansion at the rates
set out in the law.
Meanwhile, there are already signs around the country of
softening opposition among Republican state lawmakers. The
governors of Florida, Arizona and Ohio recently proposed that their
states expand the Medicaid program.
Texas hasn't joined that list, and Gov. Rick Perry has been a
vocal Medicaid-expansion critic, but the populous state would be a
big catch for hospital operators if it ever shifts gears. Universal
Health has seven acute-care hospitals and 21 behavioral-health
facilities in Texas that contributed nearly one-fifth of the
company's revenue next year.
Analysts have suggested models under consideration in some
states--which entail using federal dollars intended for Medicaid
expansion for private insurance instead--may help bridge the
political divide. Arkansas and Ohio are among states considering
this idea.
Shares of Mr. Miller's King of Prussia, Pa.-based company have
surged, climbing nearly 34% so far this year, and are currently
trading around all-time-high levels. The CEO said his company's big
focus on behavioral health has helped amid expectations the
company's traffic will grow as people gain mental-health coverage
through the health law.
Hospital stocks in general are surging, though, with companies
like HCA Holdings Inc. (HCA) and Tenet Healthcare Corp. (THC) also
showing sharp gains this year on broad hopes for coverage-expansion
benefits.
-Write to Jon Kamp at jon.kamp@dowjones.com
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