Healthcare just got shoved off a fiscal cliff. Stocks tied to the industry are bleeding out. The sector’s underperforming the S&P 500 by the widest spread in over two decades. Through July 3rd, 2025, healthcare’s YTD return sits at -21.4%. Meanwhile, the S&P 500 crept up 6.2%. Delta doesn’t lie. Major insurers are limping: UnitedHealth down 39.8%. Elevance Health off 32.4%. Molina Healthcare clipped by 18.7%. Investors are pulling the plug.
Why? Medicaid’s being torched. The One Big Beautiful Bill Act cuts $793 billion from federal Medicaid funding over the next ten years. The ink dried last Thursday. No phase-in. No cushion. Nearly 20 million Americans could lose coverage by year’s end. The CBO ran the numbers, projects a 27% drop in Medicaid enrollment by January 2026.
Medicaid is more than patient subsidies. It’s hospital operating cash. It’s rural survival kits. Nearly 40% of America’s hospitals get most of their funding from Medicaid disbursements. That goes dark, places go under. Closures already underway in Kentucky, Idaho, and parts of upstate New York. Not mergers. Not buyouts. Full shutdowns. One facility in Boise laid off 173 workers last week and announced it’s going cash-only by October.
Insurance premiums follow blood trails. Here’s how: When people lose Medicaid, they either buy expensive private plans or fall back on employer coverage. Not all employers handle that well. Sick employees mean higher group risk scores. That spikes premiums for everybody under the company umbrella. Employers don’t eat that cost. It passes straight to worker paychecks. Some early numbers? Delta Air Lines raised employee premium contributions by 11.2%. Lowe’s bumped their copays 16%.
Premiums aren’t fair split. Insurance works off shared risk algorithms. But when 20 million seniors flood the private market, actuarial tables snap. People aged 65+ carry higher chronic risks, heart failure, diabetes, renal collapse. So their entry rebalances the books on the backs of younger employees. Congressional staff reports show average employee coverage premium could increase 13% by Q2 2026. That’s just baseline modeling.
Wait times spike when clinics vanish. Demand piles up. Fewer doctors left standing. Pediatric appointments in Tennessee already delayed by four months. Oncology consults in Ohio pushed into February 2026. The system’s losing capacity while demand explodes.
There’s also insurance fragmentation. People pushed out of Medicaid aren’t always ready for ACA marketplace plans. They buy low-tier short-term coverage. Limited networks. No hospitalization. When things go sideways, they land in ERs with unpaid bills. Hospitals eat that cost or close their doors. It’s a death spiral. CMS’s own data shows emergency department visits by uninsured seniors up 18% in Q1 2025. Expect worse by Christmas.
Sources:
https://www.cbo.gov/publication/60719
https://www.cms.gov/newsroom/press-releases/q1-2025-emergency-room-usage-data-uninsured-seniors
https://www.wsj.com/livecoverage/market-today-july-3-2025
https://www.kff.org/medicaid/issue-brief/trump-administration-medicaid-funding-cuts-2025-analysis/
https://www.bloomberg.com/news/articles/2025-07-02/medicaid-bill-passes-healthcare-sector-responds