Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Magellan Health Services Inc (MGLN), UnitedHealth Group Inc. (UNH), WellPoint, Inc. (WLP): 3 Health-Care Stories You Should Know

Heading into this holiday weekend, health-care stocks continue to lead the S&P 500 in 2013. But behind the share-price gains is an industry undergoing dramatic changes. While fellow fool Sean Williams recaps the week’s biotech and pharmaceutical news, here’s a look at the top stories from the other parts of the health-care industry.

Two stories this week displayed the uncertainty that surrounds some forthcoming Obamacare changes. In addition, a Consumer Reports investigation showed which drugstores have the lowest margins on generic drugs.

Magellan Health Services Inc

The Volunteer State and Medicaid

Arkansas’ tentative permission to use federal Medicaid expansion money to purchase private insurance led many other states to pursue that route. But the matter’s a bit more complicated, and Sarah Kliff reports at WonkBlog that Tennessee has run into opposition from the Department of Health and Human Services.

The problem wasn’t the state’s desire to use the money for private insurance, but that Gov. Bill Haslam also proposed that the newly eligible Medicaid members should have similar co-pays to others in the health-insurance exchanges. And that could mean the government might spend far more than it would on a traditional Medicaid plan. The HHS remains open to negotiations, but Gov. Haslam seems firm in his proposal.

Tennessee’s Medicaid program includes Magellan Health Services Inc (NASDAQ:MGLN) as its pharmacy benefits manager and counts UnitedHealth Group Inc. (NYSE:UNH) and WellPoint, Inc. (NYSE:WLP) as its major insurance backers. So investors for those companies should keep an eye on this story.

Medicare cuts
Turning to the Medicare side of the Affordable Care Act, health plans rose this week on the suggestion that Medicare Advantage rates might see lower cuts than previously announced. Those rates were based on the assumption that Congress will go through with a 25% physician pay cut for next year, which would require the higher insurance rates for balance. But Congress hasn’t implemented the pay cut in more than a decade, so the rate cuts haven’t been necessary. We’ll find out for sure with the final rate announcement on Monday. Humana Inc (NYSE:HUM) is overly dependent on Medicare, and shares were up nearly 3% on Wednesday following the news.

Finding cheap drugs
Consumer Reports was out with a study showing which drugstores have the best prices on generic medications. Costco Wholesale Corporation (NASDAQ:COST) had the lowest prices, while CVS Caremark Corporation (NYSE:CVS) had the highest. The publication theorizes that the price difference comes from how much the pharmacy segment means to the overall business. After all, a big-box store like Costco can afford narrower margins on its generics because there’s more general store than pharmacy, while CVS is more dependent on its pharmacy to drive the bottom line.

The article 3 Health-Care Stories You Should Know originally appeared on

Brandy Betz has no position in any stocks mentioned. The Motley Fool recommends Costco Wholesale, UnitedHealth Group, and WellPoint and owns shares of Costco Wholesale and WellPoint.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.