Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 0

Health care providers would not be affected by rising health care costs that much.  The health care providers raising their rates is what is causing the rise in health care costs.  (Kinda like OPEC raising the price of oil drives up the price of oil.)  Health care could be a good sector.  Something like 60% or more of all of the money we spend on health care throughout our entire lifetime is spent in the last 10 years of our life.  (I think the percentage is actually higher, but I don't remember the exact percentage so I figured I would be conservative.)  As people age, their health problems tend to increase, (cancer rates among the Over-60 crowd is many times the rate for the Under-60 crowd), and the Over-60 crowd tends to take a lot more prescription medicine, (for high blood pressure, high cholesterol, etc.).  Plus, can you say Viagra?  Therefore, an aging population could lead to more usage of prescriptions, medical products, (Incontinence products, etc.), and medical services, (doctor and/or hospital visits).  Also, the makers of medical devices, (CAT scanners, MRI equipment, etc.), might be a good thing to look into if you are worried about regulations or the actions of a Democratic Congress/President.  The device makers sell their products to hospitals and doctors, so the government doesn't directly foot the bill for these pieces of equipment.  Therefore, the government will tend not to set the prices of the equipment like they might set fixed prices that hospitals can charge to use the equipment, (saying the Medicare will only pay the hospital $50, for example, for a covered X-ray instead of the $100 that the hospital might want to charge).  Now granted, if the government sets the price that they will pay for a covered proceedure too low, then that will affect the sales of the equipment, (if it costs the hospital $100 to take the X-ray and the government will only reimburse $50, then hospitals will purchase fewer X-ray scanners as using them is unprofitable). 

I'm not sure the form a nationalized health care system might take.  It might be like Imperial says, where a lot of it could be private.  However, the government likes to be in control, so they could just expand the Medicare system to cover everyone.  In that case, they could put a lot of the HMO/PPO/etc. systems out of business.  This still might be OK for hospital chains though.  Right now, people without health insurance go to the emergency room, where by law they have to be treated by the hospital.  Since this is the most expensive part of the hospital to run, this can often mean losses for the hospital.  (In fact, this is why a lot of hospitals have been shutting down their emergency rooms, as they were a drain on the hospital's finances in a for-profit hospital).  If the governement insures everyone, it is possible that what the hospital loses in other sections of the hospital, (due to low government reimbursement standards), could be offset by lower losses in other areas, (such as the emergency room).

It might be good for other healthcare companies also.  Even if the government cuts the price that they will pay for pharmaceuticals and other items, the vast increase of the amount of people covered could offset the lower prices.  For instance, most of the world outside of the U.S. pays much less for prescription drugs and people in the U.S. pay.  Now some might say that the covered Americans are subsidizing the rest of the world, (the drug companies make their money off of Americans so can virtually afford to give the drugs away for free to everyone else), but I also think that part of that is that most other First World nations have some type of national health care system, so everyone is covered, making penetration rates higher and distribution somewhat easier.  (You only need to get one approval to cover everyone, instead of like in the U.S. where you have to get dozens of healthcare insurance companies to agree to pay for your drugs to get anywhere near majority coverage for most Americans.)  

Anyway, enough of my rambling.  Good luck with your investing.  May all your picks be winners.


Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.