How to Make Money from the New Health Spending Law?

[samclem]

Well, the health spending law has been passed. There's no doubt that it is huge and will cause a lot of "turbulence" as businesses adapt to the new environment. With turbulence comes opportunity.

Do you see investing opportunities resulting from the new law? Especially any ones that may be presently undervalued by the market?

The obvious first thought is insurance companies. An interesting article in today's WSJ puts it concisely

[Regarding the position of health insurers]
But from the beginning, the industry was his [President Obama's] ally because he set out to solve its biggest problem—which is not the same as America's biggest problem.

We'll let Angela Braly, CEO of insurer WellPoint, take the story from here. She was recently hauled before Congress to justify her company's proposed 39% rate hike in California. She explained the source was two-fold: rising medical costs and healthier customers dropping their coverage, forcing the sick to pick up the tab.
Now this sounds like two problems, but for WellPoint and other insurers it's really only one problem. Once everyone is required by government mandate to buy insurance, the industry's survival is no longer threatened: It can just pass its skyrocketing costs along to customers. Once customers can no longer refuse to buy the industry's product, the problem of costs won't be fixed, but it no longer is the insurance industry's problem.
. . . .

For insurers, the check is in the mail: So watered down is the individual mandate that it must accelerate the industry's death spiral if not for the massive subsidies the government now has obliged itself to provide to keep the industry afloat and allow insurers to continue scalping their 15% off the top for serving as gatekeeper to a tax loophole.
When all is said and done, with unerring accuracy, ObamaCare has ended up doubling down on the system's existing perversities. The one thing it doesn't do (though it would be perfectly consistent with the Democratic goal of universal access) is incentivize a health-care marketplace based on competition in price and quality.

So, according to this view, supply and demand will now cause health spending to significantly increase, and the only counterweight to this is government price controls. On the face of it, this puts insurers in a situation analogous to public utilities, and similar securities analysis techniques should probably guide us in determining the proper price for their stocks.

Regarding other health stocks (e.g. medical equipment manufacturers, drug companies, care providers)--it's also unclear. When price controls are put into place, we'd expect their margins to fall. But, when the waiting lists grow, people will still need to get their MRIs and lifesaving drugs. Will they buy these things in an unsubsidized private US market outside the new government controlled one? If the government responds by clamping down on such a market (as happened in Canada) will there be more medical tourism, maybe to the Caribbean where these businesses can function without government interference? There could be some intersting, high-risk startups. Maybe someone will buy a surplus USNS medical ship and park it 12 miles off the US coast and perform surgery?

Opportunites abound. I'm a believer in efficient markets, but that's not the same as believing that prices are always rational. Even if you love the new health spending bill, you can vote your convictions in the marketplace! Just short the stocks the companies driven to higher stock prices by the current fear/apprehension.

 

[deserat]

Well, I wouldn't necessarily buy into medical device companies or pharmaceutical companies - the pharma companies are expected to lose $90B in profits over the time line of the bill per Ms Sebelius. Medical device companies will have extra fees imposed upon them for being medical device companies. These costs will be borne by heatlhcare providers.

I might buy into EMR companies with ARRA pumping $19B into economy for adoption of electronic medical record (EMR) applications - just need to make sure that particular company's application is certified to provide meaningful use as defined by HITSP - oh, and they haven't figured out who can actually certify those EMRs.. Might invest in insurance companies possibly in the short-term, long-term, many will go out of business or will have their profits capped (see pharma above). One thing I do see possibly growing is remote monitoring or home health care or the "home as a hub" - these programs may be accelerated to drive down costs of healthcare, especially due to the aging of America and increase in lifestyle diseases (CHF, COPD, Diabetes). Also, one may invest in the infrastructure needed for this remote managements (network bandwidth and network access at the home).

I would look at healthcare industry market in Europe for an indicator of how the US might fare under this health care legislations - they are not the first adopters of technology usually and they are looking at remote monitoring to help reduce the costs of healthcare and access to healthcare.

But all of the above is jut my humble opinion - could be wrong! Hopefully my Wellesley will ride all of this out......

 

[clifp]

Ok I posted this over in the other thread , but it really belongs here.

I think there will nice market for advice for self-employed, contractors, early retirees, on how to maximize your government subsidy.

I am thinking something like FIRECalc along with an E-book. It will discuss ways of reducing you income but not you living standard, income shifting etc. I think we can probably draw a lot from the forum threads...

Perhaps we can donate the profits to reducing the government deficit...

 

[samclem]

I think there will nice market for advice for self-employed, contractors, early retirees, on how to maximize your government subsidy.

I am thinking something like FIRECalc along with an E-book. It will discuss ways of reducing you income but not you living standard, income shifting etc. I think we can probably draw a lot from the forum threads...

Yes, ERD50 made a similar observation, but concentrating on the interconnectedness of all of this (tax planning to maximize deductions/credits, how best to use any built-up CG losses to maximize medical subsidies, etc). It would quickly grow to a very huge and complex undertaking, but everyone would need it. And, because the laws are sure to change constantly, people would need to buy an ongoing subscription to be assure they hadn't lost out on any of the honey dripping from the federal pot.
An eBook would be helpful, but the interrelationships could probably only be captured with a very complex modeling program.
And what about a drop-in H&R Block type service to advise people of their optimum courses of action? It might even be done on a contingency basis--with all the money at stake, it's a sure bet that someone asking the right questions and using the software envisioned above could save/make the average middle-income client a few thousand dollars per year.
And, I've got a name for this whole thing that you can have for free: Call it "MyShare" to capitalize on MySpace's popularity.

 

[clifp]

Yes, ERD50 made a similar observation, but concentrating on the interconnectedness of all of this (tax planning to maximize deductions/credits, how best to use any built-up CG losses to maximize medical subsidies, etc). It would quickly grow to a very huge and complex undertaking, but everyone would need it. And, because the laws are sure to change constantly, people would need to buy an ongoing subscription to be assure they hadn't lost out on any of the honey dripping from the federal pot.
An eBook would be helpful, but the interrelationships could probably only be captured with a very complex modeling program.
And what about a drop-in H&R Block type service to advise people of their optimum courses of action? It might even be done on a contingency basis--with all the money at stake, it's a sure bet that someone asking the right questions and using the software envisioned above could save/make the average middle-income client a few thousand dollars per year.
And, I've got a name for this whole thing that you can have for free: Call it "MyShare" to capitalize on MySpace's popularity.

Sam I'm glad you are getting into the spirit of the thing. Though it is possible that there is a tiny bit of sarcasm in your post.

I truly love MyShare and if by some chance I go through with this enterprise, I'll be sure to give you credit for the name

 

[donheff]

I agree that there will be huge opportunities. Unfortunately, I don't trust myself to pick them. But it will be fun to watch you folks handicap the opportunities as they start popping

 

[Htown Harry]

Maybe someone will buy a surplus USNS medical ship and park it 12 miles off the US coast and perform surgery?

"Honey, grab the suntan lotion and your dancing shoes...we're going on the appendectomy cruise!"

 

[Nords]

I might buy into EMR companies with ARRA pumping $19B into economy for adoption of electronic medical record (EMR) applications - just need to make sure that particular company's application is certified to provide meaningful use as defined by HITSP - oh, and they haven't figured out who can actually certify those EMRs.. Might invest in insurance companies possibly in the short-term, long-term, many will go out of business or will have their profits capped (see pharma above). One thing I do see possibly growing is remote monitoring or home health care or the "home as a hub" - these programs may be accelerated to drive down costs of healthcare, especially due to the aging of America and increase in lifestyle diseases (CHF, COPD, Diabetes). Also, one may invest in the infrastructure needed for this remote managements (network bandwidth and network access at the home).

It's like investing in the railroads, automobile, and aviation industries... they've done wonderful things for society and passengers without actually having any reliable benefits for their retail shareholders. Very challenging to pick out the half-dozen companies that are going to survive from the flock of contenders.