The large for-profit insurers and hospitals will still find ways to grow their businesses, whether or not the GOP's health-reform bill is passed this summer, analysts said.
On Tuesday, the Senate delayed a closely watched vote on the bill, which will impose deep cuts in spending on Medicaid.
In the wake of this news, analysts at Citi initiated coverage of insurers Humana and Aetna with a buy rating, saying the firms have the potential to see greater profits from their Medicare and Medicaid businesses.
"When you step back from the uncertainty created by the current political landscape and consider the larger economics around how managed Medicaid helps states to save money and improve outcomes, it is likely to continue to be an indispensable piece of the solution for the future of health care," wrote Citi analyst Ralph Giacobbe in a research note.
Aetna now derives 13 percent of its revenue from Medicaid, the safety net health program for the poor, and the health insurer is looking to gain market share in the program, with recent contract wins in Nevada and Virginia, as states look for ways to stretch health-care dollars, Giacobbe said.
Humana already derives about 80 percent of its revenue from the Medicare market, yet despite its dominance, the Citi analyst said, there remains room for growth as more baby boomers reach age 65 and qualify for the government health insurance program.
"We expect Humana to capture more than its fair share of this market growth and see the current government backdrop as relatively supportive of Medicare Advantage," Giacobbe wrote.
Just over one third of seniors now are enrolled in private Medicare Advantage health plans, but analysts expect that new retirees will increasingly be drawn to the plans that work more like employer plans rather than traditional Medicare.
On the other hand, they say the potential for a regulatory boost to growth in MA is more uncertain.
"Republicans have also historically been more in favor of privatizing parts of Medicare and this continues to remain a key pillar for House speaker Paul Ryan, although given recent hurdles around Republicans repeal and replace efforts realization of this goal near-term is likely off the table," Giacobbe said.