The healthcare sector is one of the largest in the U.S., with spending expected to account for 20% of the American economy as it reaches $5.2 trillion in 2025, according to NerdWallet.

But the healthcare sector is likely to suffer considerably in the wake of the passage into law of the so-called Big Beautiful Bill. The industry’s pain will result from a roughly $1 trillion reduction in Medicaid spending through 2034, according to the Congressional Budget Office.

These cuts are likely to cause widespread pain. For example, 15.9 million Americans could lose Medicaid coverage, according to the Urban Institute. Hospitals' expenses for Medicaid patients could fall by $37 billion, estimated the Commonwealth Fund; to offset the lower revenue, hospitals, nursing homes, and doctors' offices could eliminate 477,000 jobs, according to the American Association of Medical Colleges. And many rural hospitals may be forced to close, forcing patients to travel further for care, noted the American Hospital Association.

Nevertheless, the growth of companies providing high-value solutions to painful problems whose business models are relatively impervious to Medicaid cuts could provide attractive opportunities for investors.

Healthcare consists of interconnected industries including the following:

From this sector, the following stocks stand out.

Dublin, Ohio-based Cardinal Health distributes pharmaceuticals and medical products to more than 100,000 locations – controlling roughly 50% share of the market. Cardinal Health’s stock rise can be attributed to a 2% boost, to $8.18, in analysts’ 2025 consensus earnings per share due to stronger-than-expected growth and profitability in the company’s pharmaceutical distribution and medical products segments, according to AInvest. Moreover, the stock could rise should the company report better than expected second quarter 2025 earnings. Due to Cardinal Health's “cost discipline, supply chain stability, and rising demand for healthcare services post-pandemic,” analysts anticipate the company will report EPS of $2.04 – two cents above the Zacks consensus.

Cardinal Health is on my list because investors have recognized the company is improving its operations, and many anticipate the company will exceed investor expectations. If demand remains strong and profitability rises, its shares could rise more.

Medicaid cuts pose a significant risk to the healthcare sector, including Cardinal Health. Yet the company’s diversified business model could enable it to withstand the worst damage from these cuts, AInvest reports.

Conshohocken, Pennsylvania-based Cencora – formerly known as AmerisourceBergen – is a drug wholesaler and contract research organization. Cencora’s stock rise is likely due to the company’s faster than expected growth in the first quarter of 2025. This growth resulted from higher unit volume, a boost in demand for diabetes and weight loss drugs, and a 2% increase, to $15.83, in the company’s fiscal year 2025 earnings per share guidance, according to StockTwits.

Although the pharmaceuticals distribution industry is intensely competitive, Cencora is expected to deliver solid profit growth and to exceed investor expectations. Specifically, investors anticipate the company’s profits will rise 12.8% over the next five years in the wake of delivering 6% better than expected EPS for each of “the trailing four quarters,” noted Zacks.

I included Cencora due to its track record of beating investor expectations. However, Medicaid cuts could reduce drug sales as millions of Americans lose their Medicaid coverage – thus cutting into Cencora’s revenues, noted AInvest.

However, the company's focus on growing areas like specialty pharmaceuticals and its acquisition of a retinal care company could help offset the likely negative effects of Medicaid policy changes, according to Zacks.

San Francisco-based Hinge Health develops healthcare software for musculoskeletal care, acute injury, chronic pain and post-surgical rehabilitation. The company’s stock market rise flowed from its torrid revenue growth – up 420% in the quarter ending in March, according to Google Finance.

Hinge Health stock rose 23% after the company’s May 2025 initial public offering. The stock is propelled by strong investor confidence in the company’s digital musculoskeletal care platform and positive financial performance, according to BusinessInsider.

Hinge Health is on my list for these same reasons. What’s more, since the company primarily targets self-insured employers and is partnering with major health plans to expand into the Medicare Advantage market, this diversification could mitigate the pain of Medicaid cuts, noted AlphaSense.

Nevertheless, Hinge Heath's stock price will likely rise only if the company beats expectations and raises guidance when the company next reports quarterly earnings.

Foster City, California-based Gilead Sciences researches and develops antiviral drugs used in the treatment of HIV/AIDS, hepatitis B, hepatitis C, influenza and COVID-19.

Gilead’s stock rise resulted from expectations-beating earnings in the first quarter, coupled with an optimistic forecast for 2025 EPS due to strong sales of existing products and new treatments, according to Reuters. In addition, the company’s 99.9% effective HIV drug Sunienca received regulatory approval in the U.S. and Europe.

Gilead is on my list because of its strong growth and bright prospects. However, since about 25% of the company’s revenue is exposed to Medicaid – notably to its HIV drug Biktarvy – the Medicaid cuts could reduce the company’s total revenue by 1% to 2%, according to Fierce Pharma.

Healthcare is a huge, complex industry. Medicaid cuts could take a sizable bite out of many industry participants’ revenue. The four companies described above – Cardinal Health, Cencora, Hinge Health, and Gilead – are likely more impervious to these cuts than owners of hospitals – particularly rural ones. Investors should scrutinize whether the relatively high dividends paid by some of these companies are worth the uncertain revenue impact of the Medicaid cuts.

• What Is Unusual Whales? A Platform For Options Flow And Congressional Trade Tracking