I know that I am simplistic and dull witted, but I can’t figure out why the Supreme Court ruling on “Obamacare” is going to have the dramatic implications as some would think. I for one, have health insurance through my employer along with a vast majority of others in the nation. I also have owned a few stocks such as Wellpoint and Centene in the past as well as Amerigroup at present. Over the past decade there has been a constant hand wringing that these insurers were not going to be able to keep up with expenses with higher premiums when in fact they have done quite well. Now there is a belief that the court is going to strike down the individual mandate and hold the insurers to the accepting the pre existing conditions and this will in turn bankrupt the insurers. Really? As long as the pre existing conditions are distributed across the whole industry, it really does nothing to the industry since they all will elevate premiums to every insurance consumer. To me the insurance companies are the modest reward, low risk, and as easy as falling off a log investment to make in the healthcare industry. I know people are fascinated with some new fangled drug that will cure diabetes or some new hybrid powered mechanical blood pumping device, but what they really fail to realize is that when these new products are sold; not only does the company that brought it to market reap the rewards but the insurance company also takes their cut as they bump premiums on everyone else. It doesn’t matter where the cost come from in the healthcare industry; drugs, devices, equipment, wages, or the electric bill. The bill always comes back to the consumer and right before the consumer is the insurer and they always take their cut.There are two major risk to insurers. The first one is a government run health plan and the second is that Americans will stop smoking, eat healthy, and exercise. I’ll take my chances on either of those happening. ;-)C2H5SH
C2H5SH Aside - as a chemist, your username always makes me cringe, knowing what that stuff smells like.I for one, have health insurance through my employer along with a vast majority of others in the nation.It is a bit over 50%, a majority, but lower than one would think. Part of the problem in my opinion is that we've come to see health insurance as a 'benefit' rather than the expense it is, or appreciate how it could be costing us in lost wages. But perhaps a rant for another time.I know that I am simplistic and dull witted, but I can’t figure out why the Supreme Court ruling on “Obamacare” is going to have the dramatic implications as some would think.Three scenarios are likely coming out of the hearings.1) The bill is entirely overturned. This would be good for insurers, and a return to the old way they operated. They can again cap policies and deny per-existing conditions and increase margins.2) The bill is left alone. This would be good (in my opinion) for the large insurers. They should benefit the most from scale and be the most competitive on a price basis when the states set up the required insurance exchanges. They should also benefit from the influx in insured from the mandate (we'll see though, a great many simply can't afford this even with assistance).3) The bill is upheld, but the mandate overturned. This would be bad for insurers as the provisions that hurt, such as the caps and per-existing condition coverage would stay in place, but not be offset by the influx. This has been the situation the past year or so, as the mandate is not in place yet, but should be a strain moving forward. There will be little incentive to get insurance before you need it under such a scenario.While 3 seems unlikely, or at least the odds low, I think it is what will happen, having listened to the hearing. Blogged on it in CAPS. The market heard otherwise, as evidenced by the recent run in the larger insurers.http://caps.fool.com/Blogs/ViewBlog.aspx?t=01004587832930584...Overtime, insurance will do fine.TMFHelicalHome Coverage Fool
There are two major risk to insurers. The first one is a government run health plan and the second is that Americans will stop smoking, eat healthy, and exercise.Quibble on this. There is already a government run plan called Medicare/Medicaid. Insurers benefit from this a great deal, as it tends to take on the most expensive patients.Insurers would absolutely love a healthier America. It would result in lower payout and fewer chronic conditions. Over time, the margins would revert to the mean, as this almost become a regulated industry in that consideration.TMFHelicalHome Coverage Fool
"I can’t figure out why the Supreme Court ruling on “Obamacare” is going to have the dramatic implications as some would think."The basic problems remain the same: 1) The US spends more of its GDP on health care and more money on health care than any other nation. Yet the stats show that our results are mediocre in terms of like expectancy, child survival rates, etc compared to the rest of the developed world.2) Rising costs mean that all of us are being squeezed in all directions. Employers have trouble coming up with additional funds to pay premiums. That cost comes at us again and again in rising retiree costs, public employee costs, costs of churches, charities, any organization with employees. All are screaming for more money. The alternative is to drop coverage or increase deductibles and copays or employee contributions until eventually people are uninsured or underinsured.3) Ditto Medicare. The essence of the problem4) Ditto Medicaide. The rolls should be exploding due to loss of insurance coverage.5) Declining heath care coverage means shorter life expectancy and declining quality of life--especially for the poor or disadvantaged.And then you have the issue that Social Security and Medicare are required insurance programs. If the Supreme Court rules that Congress cannot make such laws, lawyers will get rich, but who knows how this will come out in the US. The whole system deteriorates.And not for the benefit of the middle class.
There are two major risk to insurers. The first one is a government run health plan and the second is that Americans will stop smoking, eat healthy, and exercise.====Insurers would absolutely love a healthier America. It would result in lower payout and fewer chronic conditions. Over time, the margins would revert to the mean, as this almost become a regulated industry in that consideration.This seems intuitively so, but it is surprisingly hard to confirm it, and it may in fact be untrue. Insurers, whether public or private, are, despite the name, not insuring against bad health, but are insuring against the cost of health care. Nothing could be better for a health insurer's bottom line than a devastating stroke, or an unannounced fatal arrhythmia. Even lung cancer, which typically only lasts about a year, between diagnosis and death, is relatively affordable. What really costs a lot is chronic, degenerative diseases, things like Parkinson's, Alzheimer's, or any other slowly dementing illness, and other age-related illnesses like prostate cancer can really add up, what with 10-20 years of treatments. Of course, the dream case for an insurance company is the healthy non-obese non-smoker whow lives to 95 and never visits a hospital, and dies after a one-week pneumonia. But their real nightmare is the 65 year old early Alzheimer patient who is also a non-obese non-smoker, who never catches anything, and might well live to 85 but with huge health care costs during those 20 years. Tobacco companies sometimes make this case, that the vice they promote actually saves money, and they tend to get laughed out of court, but they may have a point.In other words, it is no sure thing that healthy living will be good for insurers' bottom lines. Good for us, maybe, and good for some people's bills, but very bad for others. Overall, I don't know, and if I had to choose, I would cover the fat smokers with dramatic ends, not the healthy non-smokers with lengthy demises.Regards, DTM
1) The US spends more of its GDP on health care and more money on health care than any other nation. Yet the stats show that our results are mediocre in terms of like expectancy, child survival rates, etc compared to the rest of the developed world.Mediocre? That is understatement.OECD statistics here.http://www.oecd-ilibrary.org/content/book/health_glance-2011...IncludesLife Expectancy from Birthhttp://www.oecd-ilibrary.org/life-expectancy-at-birth_5kg23t...Life Expectancy from age 65http://www.oecd-ilibrary.org/life-expectancy-and-healthy-lif...The US is below average in both of these.AlsoPer capita cost of carehttp://www.oecd-ilibrary.org/health-expenditure-per-capita_5...Cost of care per GDPhttp://www.oecd-ilibrary.org/health-expenditure-in-relation-...The US is crazy high in both of these.Lots more good stuff as well (have fun).TMFHelicalHome Coverage FoolSupports some form of universal coverage, but doesn't like the mandate for slippery slope / repercussion reasons (though I live under one in MA).
TMFHelicalSupports some form of universal coverage, but doesn't like the mandate for slippery slope / repercussion reasons (though I live under one in MA).I can understand opposition to Obamacarm based on wanting some respect of the US Constitution, and pinning it on the fact that the Federal Govt is allowed to regulate interstate commerce seems weak. Arguably, as Romney has said, it should be states that do this, not the feds.However, under the general principle of the mandate being a slippery slope, US law already obliges providers to give service whether people are insured or not, paid for by the insured. In other words, the new law does not introduce universal coverage (already present), it introduces universal payment. If the alternative to the individual mandate is to do what almost every other developed country does, which is to provide universal payment via taxes, then I would think the repercussions of overturning the law would actually be worse.Not that I like the law. If I had my druthers, it would be overturned based on Scalia's quip: "What happened to the 8th Admendment?" Any law that takes 2,800 pages to explain, that no legislator has read or understood, that can't be explained in less than 3 hours, should be thrown out regardless of anything else. And especially if it is chock full of expensive promises that aren't affordable and does very little to address the high costs of what is easily the world's most expensive health care system already.Regards, DTM
There are two major risk to insurers. The first one is a government run health plan and the second is that Americans will stop smoking, eat healthy, and exercise.Quibble on this. There is already a government run plan called Medicare/Medicaid. Insurers benefit from this a great deal, as it tends to take on the most expensive patients.It's more of a public/private partnership in most states now or at least that is my understanding. This has been a good thing as long as the Feds pay the premiums. I should have been more specific and stated that a single payer government run plan would be disaster for the insurers. Insurers would absolutely love a healthier America. It would result in lower payout and fewer chronic conditions. Over time, the margins would revert to the mean, as this almost become a regulated industry in that consideration.The reason I made this comment is because I did owned a few shares of Progressive a few years ago. The main reason why their top line growth was stalling out was that cars had become much safer. The airbags, seatbelt laws, and anti-lock brakes all contibuted to much safer car and one where personal injuries were significantly lower than what they were ten years previous. You may think, and I did as well, this would be great for insurers, but in a competitive environment it drives premiums lower. Now if we took all the seat belts and airbags out, removed all speed limits, and took out all the yellow lights, then we could all be paying 5X or 10X on our premiums and the car insurers would be growing top line revenue like crazy. That is until all the drivers kill themselves. :-( So if everyone lived to 90 and then tipped over dead without ever seeing a doctor, it would negate any need for insurance. Risk and premiums go hand in hand. C2H5SH
Insurers don't make money on the premium, they are quite happy to break even on the insurance side of the business. The profits come from the investing side, ask Buffett! It's the float that counts.Now, if cars are safer then premiums drop and the float to invest is less and the insurance company's profits are lower. At the limit, if there were no risk at all, there would be zero float and zero profit.The problem health insurers face is selective coverage. People who are not at risk don't buy insurance and those at risk do. The risk profile of this self selected group is higher than the risk profile of the entire population. If the insurance company cannot charge a higher premium for this riskier group, the premium loss cannot be made up with investment profit. Group policies tend to minimize this problem. Universal coverage would be just peachy for insurers: no self-selected risk and the largest possible float without having to waste money on a sales force. That's more or less how the old Ma Bell used to rip off subscribers: a government sanctioned monopoly. Of all the systems humans have tried for lowering costs, there is nothing like cutthroat competition. What's one of the first questions an investor asks? "Where's the moat?" The less moat, the more competition, the less profits. Denny SchlesingerBTW: Buffett's insurance philosophy is to run a very conservative portfolio, just don't lose premium money. If a competitor undercuts Buffett, he is quite happy to see a competitor losing premium money.
Great thread, gang, thanks.So I'm curious what objections folks on this board have, from a socioeconomic perspective to a single-payer, Medicare for all system? Obviously if you're a sharehlder in UHC or some other for-profit company it would be a disaster for your investment (and therefore perhaps this is for another board) but since the thread has included some commentary on non-stock-related issues:I would argue that a Medicare for all (with or without extra "Cadillac" plans available for an extra fee to those who might want them) system would: - Save an enourmous amount of money currently spent (I would argue wasted) on overhead, executive compensation and other perks, the business of getting paid from both the doctor/hospital and the insurance company side... I've seen figures as high as $400 billion per year in administrative waste. That's enough to pay for the healthcare of every currently unisured American. Medicare as it stands now has far lower overhead.- Provide coverage to all Americans, including those without jobs and those with chronic conditions (whose care we all pay for anyway, in the end, when they show up in the ER late in their disease state)- Pass Supreme Court muster (because an act of congress would create it as a tax. not as an unconstitutional personal mandate) - Be in line with the rest of the industralized world in how they provide health care. (And do it cheaper and more effectively). - Not require one to work for a large company just to get decent health care (If I or my wife or my daghter were to get cancer tomorrow, I'm going to have to close my business and go work for somebody else just to get health insurance... because my current carrier would first double my rates, then triple them, then find a way to cancel me altogether)- Cut down on the confusion and expense that currently surrounds billing and collecting, which wastes a lot of time and money.- Allow for better systems of quiality control and patient-incentivizing in the interests of health. Which should ultimately save money.Our unique employer-based system of health insurance occurred as a matter of happenstance over many years, and doesn't make a lot of sense... unless your goal is to punish those who want to be entrepreneurial or who for whatever reason don't want to or can't get a job with a largish company. It's not a system of healthcare any reasonable person would think up if their goal was to "provide healthcare" to a population.The best way to kill an insurance company is for it to insure ONLY the highest risk entities. This is what we're asking our current taxpayer funded insurance system to do. It makes no sense, and incrementally adding more and more qualified members piecemeal doesn't solve the underlying problem.Seriously, what am I missing here?Respectfully, BC
Understanding that I don't necessarily agree with all these points (and then perhaps the discussion should go to METAR or elsewhere:1. Virtually ALL the major innovations have come at the local/state level (remembering that Medicare/Medicaid are run there as well). It's the value of a Federation. On the other hand, many of the worst faults are there too.2. Rural Nebraska is different from urban Las Vegas/LA or DC, from border Texas towns, from elderly Florida, etc.3. As some have suggested, prevention doesn't work (I really don't agree with that one).4. State government [now] is pretty lean, and the federal government is pretty fat. Fulfilling every need every where may not make financial sense. It's easier to say "NO" at the state level where they actually have to balance an eventual budget.5. During the last great healthcare debate (when Hillary Clinton was First Lady) there was created a game I loved called "Sim-Health" by the same people who brought "Sim-City." The great take away was that there are MANY divergent stakeholders and somehow someone has to "lose." There will ALWAYS be a ox who has been gored in this discussion.HP
Our unique employer-based system of health insurance occurred as a matter of happenstance over many years, and doesn't make a lot of sense... unless your goal is to punish those who want to be entrepreneurial or who for whatever reason don't want to or can't get a job with a largish company. It's not a system of healthcare any reasonable person would think up if their goal was to "provide healthcare" to a population.BC,I basically agree with you. The whole individual mandate, although originally dreamed up by my side (right wing), makes less and less sense to me. I see the point of trying to force people to pay for something which we are currently forcing providers to give them for free. But you can't force someone with no money to buy anything, period, especially not very expensive things like health care insurance. So then, you set up a program to help them to pay, out of humanitarian grounds. But when you think about it, this is about the most expensive possible way of doing it, involving all the expense of the private insurance system, PLUS removing personal responsability for using scarce resources wisely.I think a far better plan is something like what you suggest, a bare bones program available for free for poor people and for rich people like me who want to pay cheap rates because they don't believe expensive medicine is very often more useful than cheap medicine. Calling it Castrocare would be too sarcastic, so let's call it Medicare. Nothing fancy, very little in the way of specialist care, all generic drugs, no fancy transplants and no $75,000 chemotherapy, just the basic vaccinations, deliveries, antibiotics for infections, appendicectomies, gall bladders, fixed femurs, etc.Then a free for all for all the rest, with people paying out of pocket or via insurance, or not at all, no tax deductions, a competitive market with less regulation and less licensing restrictions, with a few government agencies as watchdogs and raters, some reasonable tort reform, and I think you would solve 90% of the problems in today's medicine.Not going to happen, since only a nut like Ron Paul would promote such a scheme, but a guy can dream...Regards, DTM (md)
Not going to happen, since only a nut like Ron Paul would promote such a scheme, but a guy can dream...Regards, DTM (md)Have you heard of Physicians for a National Health Plan (www.PNHP.org)Lots of good stuff there, and the support for single-payer might be greater than you imagine.Thanks for the reply,BC (md)
I'm not sure it's amusing or depressing to see a discussion on this topic, among this self selecting bunch of money minded people, go on this long, with the apparent assumption that the only real improvement can come from a .gov program or intervention.I. What about tort reform? That's a huge component of US healtcare costs. Reportedly on the order of 25% of the cost problem right there. II. What about health care exchanges? Why not allow people to purchase insurance across state lines? Why not allow small businesses to band together and purchase insurance cooperatively?III. Why the resistance to allowing personal Medical Savings Accounts (MSA's) for anyone? Those funds can roll over and accumulate from year to year (unlike Flexible Spending accounts that have a low cap and are "use it or loose it" every year)? That allows more people to purchase high deductible insurance.In addition to puttting downward pressure on insurance costs wouldn't expanded use of MSA's drive down treatment costs? People paying directly from an MSA for some portion of medical treatment is like a cash transaction. It takes a huge amount of non-valued added processing and billing costs out of the loop. I realize the plural of anecdote is not data but fwiw, A colleague of mine went up the street from our office and negotiated an annual cash payment with a dentist to do all the routine exams, cleaning and fillings for him, his wife and his 4 kids. Crowns and root canals were extra but at good cash price. Worked out to less than cost of his optional dental plan and deductible. Made him ride his kids hard on daily care of their teeth and gums.
NozRydr,I agree entirely with those 3 ideas. It seems that the very easiest place to start fixing things would be with tort reform, both because it adds huge legal expense, and because it seriously degrades the practice of medicine if you have to always be worrying about trivial suits. Health care exchanges and medical savings accounts: why not? Surely they can't hurt.We should also mention the deregulation of the industry. Does it really make sense that a nurse can't give you health advice, because she would be illegally practising medicine? Do we have to always treat the public like imbeciles? People know what a doctor is, and what a nurse is, and they are able to make judgments about whether a nurse's advice will be useful or whether they want a more expert opinion. As long as the nurse is not calling himself a doctor, let him (or the pharmacist, or the chiropractor, or the massage therapist) put up his shingle and see whether people want to pay to get some cheaper health advice, or get their cut stitched up by a nurse, or get antibiotics for their sore ear from their pharmacist, or if they want to pay a bit more to get advice from a GP or a specialist.These simple things would go a long way to solve any country's health care problems, and the USA is clearly behind as far as tort reform goes. You still will need some sort of last resort humanitarian care for people without insurance, many of whom do not even qualify for a driver's licence because they are in the USA illegally, but the problems would be a lot easier to solve if bare minimum care could be obtained inexpensively.To steer this back to investing, none of this has much relevance to investing in health insurance companies, or at least, none that I can see for the moment. If I had to guess, the mandate will not be rejected, Obamacare will be maintained, Obama will be reelected, and the major reforms will only be done in 5-10 years when the country is in a financial crisis. In the short term, that is probably good for HCA and so forth, in the long term, in the macro picture, the USA is in big trouble, the health care mess will make it a lot worse, and I don't see a lot of hopeful signs that any intelligent reform is going to save us, and the big HC companies will be worse hit than anyone. So my only major (well, medium-sized) investment in the area is in generics, Teva.Shalom, DTM
Nozrydr,I. What about tort reform? I agree that the medical malpractice climate in this country, especially in certain states, contributes a lot to the doctor and hospital over-spending side of the equation. No argument. And as soon as we get the lawyers out of Congress and the State Legislatures, I'm sure we'll get right to work on that. How's it going in your state?(1>II. What about health care exchanges? Doesn't eliminate the problem of administrative waste in the system. The insurance companies and the supporting infrastructure is still a terribly inefficient and needless cost burden unless the system is fundamentally changed. An exchange or a marketplace doesn't solve that.III. What about Medical Savings Accounts? I have no problem with MSA's (I have one myself) but it's another work-around and doesn't put affordable health insurance within reach of very many currently uninsured people. I'm 43, my wife is 44 and our daughter is 3. None of us have any medical problems, we take no regular medications, don't smoke and exercise every day. We own our own medical practice. We pay $360 a month to Humana for a pretty standard policy that has a $10,000 annual deductable, no dental. And the premium has gone up a minimum of 10% per year, for the last 3 years. We're fortunate in that my wife and I are both physicians and can afford it, and because we're family docs we don't need to go to the doctor for minor things. But when we do, the first $10,000 is out of pocket every year... and for that privilege we pay $4400 a year in premiums, that will be $6000 in 3 years and $12000 + /yr in 10 years, if it's even available to a couple of 55 year olds. What if we have a chronic disease or two by then and we're still 10 years away from Medicare? A MSA only helps you if you're insurable and there's a cap on your out-of-pocket; if you're not insurable, you're one medium-sized illness away from bankruptcy. It's scary out here. And unfortunately, an MSA in conjunction with an insurance policy (like we have) doesn't put downward pressure on prices nor does it avoid the big expensive ball of red tape - the bill is submitted to the insurance company, who applies the discount and kicks it back to the patient's deductable, and then the patient is sent a bill by the treating physician. An MSA in the absence of a high deductable insurance plan is not a tenable solution for someone who is not independently wealthy. Bad car accident followed by surgery and 6 weeks of PT... or an appendectomy with complications and a 4 day ICU stay? You can kiss your MSA balance AND your house goodbye.IV. What about cash-paying and negotiating fee for service?Seriously? Crowns and fillings are one thing. Medical care is pretty expensive. Sure, I give people a break who pay cash all the time. You can see me for a physical with lab work and all the trimmings for under $100. Treat your strep throat or your chlamydia infection for $50. I'll do both at the same time for $75. No problem. But have you ever tried negotiating with a cardiologist about paying cash for your angioplasty? Or a surgeon who needs to take out you colon cancer? Yikes.
So I'm curious what objections folks on this board have, from a socioeconomic perspective to a single-payer, Medicare for all system?Who would be able to afford it? Or who pays that gap between what it costs and what can be afforded?The current $100+ monthly premiums only pay a small percentage of total health care cost (hospital + doctors + drugs). The vast majority of costs for current beneficiaries are paid for by payroll taxes.
To steer this back to investing, none of this has much relevance to investing in health insurance companies, or at least, none that I can see for the moment. Shalom, DTMOn the contrary, lawyers and politics increase the uncertainty of any investment increasing the risk factor. Just today I sold a position because the company got "seriously" sued by another that is likely to have deeper pockets. No need for that kind of uncertainly. I'm keeping an eye on the company to get back in when the legal stuff is cleared up.Denny Schlesinger
Not to get off topic or was it to get back on topic(?) If you read between the lines of my first post, I implied that insurers are going to grow top line revenues at the same rate as the total healthcare sector. If they can maintain the same payout ratios as they do now, then there bottom line growth should also be tied to the growth of healthcare. Then why are there valuations so much lower for insurers than drug and device makers? Any new device or drug that will drive up cost of healthcare and will invariably drive premiums up also to some extent.I also think that there is a lot less risk in their business versus the drug and device makers. There is no R&D sucking up cash only to have the product flop, or releasing a product and 6 months later having to yank it because of a manufacturing flaw along with a flood of malpractice suits, and then have the product go off patent so some company in India can flood the market with a cheap generic. In my perfect world, drug and device comapnies would have P/E of around 8 and the insurers would be around 22.When I owned Centene a few years ago and I was introduced to the sweetest two words to a shareholder "Instantly accretive". The industry it seems is fairly fractured and the companies can and do mesh together well when they are merged or acquired. In regards to seeing my first post as the "post of the day", I would like to quote Groucho Marx. "Please accept my resignation. I don't care to belong to any club that will have me as a member".Return to the regular political debate.C2H5SH
BCheese,<<(1>II. What about health care exchanges? Doesn't eliminate the problem of administrative waste in the system. >>The primary point of that isn't to reduce waste.What is does is open up markets across state lines, thereby increaseing competition. Add some review and requirements for not cherry picking to see that pre-existing and chronic sufferers are able to join in the pool.Since you mention it though, is should allow the more efficient insurer provide to be more competitive (and profitable) on price. That should put pressure on competitors to catch up by improving their efficiencies.<<III. What about Medical Savings Accounts? >> It's not a panacea. It serves to involve more people in the insurance market. More healthy people joining in the major medical insurance pool (volutarily) is a good thing for all insured.<<And unfortunately, an MSA in conjunction with an insurance policy (like we have) doesn't put downward pressure on prices nor does it avoid the big expensive ball of red tape>>See item 2 about larger markets increasing competition.<<IV. What about cash-paying and negotiating fee for service?Seriously? Crowns and fillings are one thing.>>Most people are relatively healthy most years. The big expense is the little expenses. <<But have you ever tried negotiating with a cardiologist about paying cash for your angioplasty? Or a surgeon who needs to take out you colon cancer? Yikes.>>Seems to me you spoke to this in isolation without regard to Items I, II, or III. High deductible major medical insurance for <ahem> major medial things like colon cancer, lower costs due to tort reform and insurance exchanges yadda yadda.fwiw, yeah I can remember a time when the doc got paid direct by most of his patients. Long ago and far away before 3rd party insurance changed the game completely Dad was administrator of a small town hospital and many of our closest family friends were overworked country doc's (not quite Doc Hollywood but...) . No I don't want to go back to those days or levels of medical technology but the introduction of a 3rd party between the patient and doctor really mucked some good stuff up. On balance I think we could something less of that role.
I. What about tort reform? That's a huge component of US healtcare costs. Reportedly on the order of 25% of the cost problem right there. Reported by who? I've not seen a number anywhere close to that. I agree that something should be done, but the effect won't likely be dramatic.Letter from Hatch on the subject quotes CBO evaluations and sees a 0.2% effect on medical spending by the gov.http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/106x...Here is a paper that considers it could have an adverse effect on cost (increase them), but overall finds that the effect would likely be lower but again modestly (though with lots of uncertainty).http://papers.ssrn.com/sol3/papers.cfm?abstract_id=995270II. What about health care exchanges? Why not allow people to purchase insurance across state lines? State health exchanges are part of PPACA, and at risk if the bill is struck down. But part of our federalist system is to give states a lot of say in what is done, and a 'nationalized' program would take away state rights. Difficult to do this (as it has been with education), and I'm not sure we want to go their. Setting a core for coverage does make some sense though.III. Why the resistance to allowing personal Medical Savings Accounts (MSA's) for anyone? MSAs are employer programs, I assume you mean HSA's which have been termed Health-IRAs (Health savings accounts). They are MSAs that roll-over (sort of - see link). They exist, but have not caught on heavily. I'd expect them to be popular options on the state exchanges with the young should insurance be mandated.http://en.wikipedia.org/wiki/Health_savings_accountTMFHelicalHome Coverage Fool
That's a huge component of US healthcare costs. Reportedly on the order of 25% of the cost problem right there. Reported by who? I've not seen a number anywhere close to that. I agree that something should be done, but the effect won't likely be dramatic.Doubt anyone really knows for sure but ask a doctor...most doctors.....how much "defensive medicine" they practice and the answer is "substantial". By itself, tort reform may not reduce costs at the outset but it would seem logical that this would be a first step to establishing a path toward cost efficiency in medicine.There are many "guidelines" in medicine that conflict with one another so a doctor following one may be adverse in another......easy fodder for PI attorneys.As to "value" in purchasing for US medicine, the oft quoted data on where the US sits in infant mortality, life expectancy, etc........they are misinterpreted IMO as they imply that medicine can fix societal bad habits of obesity, diabetes, smoking, violence, etc.If one looks at obesity and diabetes rates in US vs. other industrialized nations, one can see how the cards are stacked against the US data. The oddity about the argument that the US doesn't have good healthcare data is that these very same antagonists want MORE healthcare for the people. If US healthcare were so ineffective, why expand it further???I am not arguing that we have an efficient medical system......just that the arguments made to measure it are spurious at best.Oddly......the fix (aka Obamacare) does little to "fix" anything and was done seemingly without the various professionals most capable of changing it.......the doctors. OTOH, if you have a serious medical condition, where does the world come for care?? But back to where the investments could be "IF" Obamacare is overturned (and we do not know what SCOTUS will do for sure), IMO:1) Buy technology equipment suppliers (taxed under Obamacare)2) Sell insurers.....all that money they counted on from the young and restless at risk3) Buy biotech......same as suppliersBut IMO, these investments are always a shorter term thesis because even without Obamacare......something else is coming regardless.....just has to.
Tort reform? In Venezuela it is practically impossible to sue a doctor over malpractice. Just last week I met a fellow who almost died from a badly done colon procedure. There is no redress, on the contrary, the patient pays the extra costs to fix the mistake. A few years ago they gave me some food at the hospital that they were not supposed to. The procedure had to be delayed and the extra drugs were put on my bill, not on the errant hospital's bill. I guess I should be thankful the anesthesiologist checked and I'm still here. ;)Be careful what you wish for, you might get it -- plus the unintended consequences.Denny Schlesinger
But back to where the investments could be "IF" Obamacare is overturned (and we do not know what SCOTUS will do for sure), IMO:1) Buy technology equipment suppliers (taxed under Obamacare)2) Sell insurers.....all that money they counted on from the young and restless at risk3) Buy biotech......same as suppliersdumaflotchie: agree with your points. In particular, tort reform is often dismissed based on the fact that legal settlements are only a small part of health care cost. This ignores the serious overuse of all sorts of diagnostic and therapeutic procedures, motivated by fear of possible legal action. If you do a CAT scan of the head of 1000 youngsters who fell off their bikes, because you know one of them will have a fatal bleed, then you may not get sued, so there is no legal cost, but you spend a lot of money to avoid suits, and you may do a fair bit of harm from all that radiation.But back to the investing questions: Your 3 suggestions all make sense, if the SC overturns the Act. But (a) we don't know whether the court will overturn the act or not (current thinking puts the odds at about 50:50), and (b) we don't know how much of this is already baked into the price.To take one example, if you fear that insurance companies would be hit hard were the act to be overturned, then even if that is true, what do you do now? Other investors likely share this fear, and have driven down the price of the HC insurers correspondingly. Now if the Supremes say ixnay, perhaps the insurers will drop further, but perhaps this would be no great surprise? And what if the court lets the law stand? Then the insurers might jump back up to the pre-Obamacare price, whatever that is. As an investor today, to profit from this situation, not only do you have to have a good idea about what the court will do, but even more difficultly, you have to have some idea about how much that outcome is already included in the stock price. So to take a concrete example, say you think a HC insurer would be worth 20% more with the individual mandate. By how much do you think its stock price would go up if the court overturns AHCAA? And how much would it drop if the court lets the law stand? If it's 10% up and 10% down, respectively, and the ruling is 50:50 to go either way, as an investor today, not knowing what the ruling will be, that sounds like a wash.I like my investment in generics because no matter what the ruling is, cost control is going to be a big issue in our future, whether it is with or without a mandate or universal coverage. Drug costs are now about 20% of the total bill, and consumers, insurers and legislators will all be looking to that sector to control costs. At all 3 levels, a heavier use of generics sound like an easy way of significantly controlling costs.Regards, DTM
1) Buy technology equipment suppliers (taxed under Obamacare).....3) Buy biotech......same as suppliers1) Some. Definitely innovative technology. Also low cost quality equipment to help strained budgets and the expansion of health services into emerging markets. But I'm hesitant on very high-cost or latest bell and whistle type equipment.3) I hate the word biotech. Do you mean start-up pharmaceutical operations (biopharma or traditional). In that case it is still very hit or miss, and I'm not sure we'll get another Amgen anytime soon (but Biogen and Vertex type of success stories can happen).I like the 'tech' part of biotech, but favor the companies with products to sell outside the research community which relies heavy on government money. I think there has been a bit of a shift in genetic sequencing from favoring the companies that make it practical (Life, Illumina) to the ones that make products from it (Cepheid, Genomic Health). We'll see if that continues.TMFHelicalHome Coverage Fool
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