The Death Of Health Care Reform
You probably have better things to do with your time than follow the travel schedule of President Obama. I know I do. However, this week the President stopped by the great state of Arizona.
After visiting the Grand Canyon, The First Family traveled back down to Phoenix.
There, the President took time to speak to members of the VFW (Veterans of Foreign Wars). It’s interesting to note his entire speech focused on the military and security.
What the people really want is a discussion on healthcare.
Healthcare reform has become a hot potato issue in this country. People in favor of reform note inefficiencies in the system and millions of citizens uninsured. Those against reform highlight spiraling costs and government intrusion.
I like President Obama… but I’m starting to think he’s missing the bigger picture about healthcare reform. Reform may be needed. Reform may be wanted. But Americans are also sick of being taxed. And you can’t have meaningful healthcare reform (including a government program) without taxes going up.
And it won’t just be the wealthy footing the bill… the middle class will have to bear the burden as well.
The Presidential Election
When Obama won the Presidency, he rode a wave of change. He was going to mix-up Washington politics. He was going to turn the government on its ear. Unfortunately, change couldn’t happen fast enough. And the amount of change was never enough.
Now just a few months in, people are frustrated with the White House. The President’s approval rating is falling. And it appears Washington is seeing more of the status quo.
Right now we face a trillion dollar deficit.
Government spending is out of control. And the healthcare reform bills currently in Congress would add trillions more to the national debt.
If healthcare reform passes in its current state, those costs will be passed along to everyone.
No longer will tax increases be just for “rich folks” making $250,000 a year or more. Nope. Everyone’s going to see their tax bill increase. It’s a sad fact, but you and I are going to be hit with more and more taxes.
That’s why I hate healthcare reform.
There’s a huge problem with healthcare… and no elected official wants to point it out. At the risk of insulting all of those specialists out there – here’s the simple problem.
The people who pay for health care services are not the ones receiving the service.
Think about it.
If you go to a restaurant and order a meal, you’re looking for value. You’re not going to pay $75 for a salad (something you could make at home for $2.00). Nope, you’re going to look for the daily special. You’re looking for the prime rib dinner with all the trimmings for only $10 (and if you’re like me, you have a coupon).
You’re conscious of value.
However, if somebody else is paying… then who cares if you spend $75 on the salad. While you’re at it, toss on a steak for only $200 more – I’m not footing the bill. A little ridiculous, yes… but that’s happening in the health care system.
If there’s a medical problem, my doctor’s going to run every test in the book. Why? Because I don’t care about the cost. I don’t see the bill.
More often than not, the average patient with insurance thinks “my insurance is paying so test for everything”. When someone’s in the hospital, they’re not thinking about their insurance premiums going up next year.
That’s the risk with government mandated programs as well. People simply replace the “insurance company” with the US government. Now instead of the insurance company paying… the US government’s paying.
But that thinking is flawed.
When the US government picks up the tab, they get the money from you and I. All those extra costs are being passed right back to the citizens in the form of higher taxes. And with 50 million new people getting insurance under Obama’s plan, costs are sure to rise.
So, where’s the trade idea in all of this?
The sad truth is healthcare reform is going to fail. Regardless of if you support Obama or hate him… the truth is healthcare reform is dead. The current bill will die in Congress… The entire idea may be voted down, or a substantially trimmed down version of a healthcare bill will be passed.
What it means is more of the same in the health care industry.
On Wall Street, health care stocks have been held back by the threat of reform. As the threat weakens, investors become less fearful of reform and the unknown. As the fear falls away, we should see the health care industry as a whole start to move higher.
It’s like cutting the lead weights away from a balloon.
You can get good exposure to the entire industry with a diversified healthcare ETF. However, there’s one major biotech company I really like… Amgen (AMGN). The company has a $61 billion market cap and is trading very near its 52-week high. Amgen has a forward P/E of just over 11x, which is the lowest of the top five companies in the industry.
Consider adding Amgen to your portfolio. You’re sure to see it move higher as the threat of reform fades into the distance.
Category: Stocks
