Long Certain Health Insurers:
"It doesn't look like they're in the fight of their lives," said Les Funtleyder, an analyst with financial firm Miller Tabak. "If you remember the Clinton days, there was a 'Harry and Louise' ad on every couple of minutes. We're not seeing that anymore."
And stocks of insurance companies are way up over the past year — even beyond the gains in the broader market.
They don't look like they are in the fight of their lives because they have just gotten one of the the biggest kickbacks in the history of American business. No other industry has ever gotten a mandate for 31 million people to buy their product on pain of jail or fines. I'm sure some people will pay the fines but not enough to hurt their bottom line.There are restrictions but I'm sure United Health (UNH) will find some way to get around them. They might even tack on record premium increases before 2014 in order to "pay for the fixes."
However a company like Humana (HUM) that gets much of their income from selling Medicare Advantage plans will feel some pain in the short term. Look for companies that help roll out prescriptions and manage pharmacy services like Express Scripts (ESRX) and Medco (MHS) to go strait up as well. 31 million people might need quite a few more drugs.
Long Drug Makers and Really Long Biotechs:
Some people are saying that closing the "donut hole" in prescription drugs will be a 5% or better revenue gain for Big Pharma. Plus more people will see the doctor and thus get perscriptions for all sorts of things that they might have put off in the past. I can see the so-called "Death Panels" as prescribing more generics as well so a Teva (TEVA) will make a pile of money. However the big winner seems to be Biotech:
Obama's plan gives new biotech drugs 12 years of competition-free sales — a victory for the biotech industry. Consumer groups and the generic-drug industry had been pushing for exclusivity of seven years or less, saying it would bring down costs.
Suddenly, every Big Pharma firm will either start biotech arms (or pour billions of extra R&D funding into them if they are already in place.) Or they will simply purchase biotech companies.
The idea of cranking out a biotech drug and then getting 12 years of exclusivity sounds like a gold mine. Look for the Biotech industry to easily rival the size of current Big Pharma in the next several years. I can already foresee a Pfizer-Celgene Inc. (or some other Big Pharma/Big Biotech merger) coming down the line in the next few years.
Long Hospitals:
These stocks will be another big winner since many of them were held down by fear of uncertainty from what ObamaCare contained.
Increased insurance coverage will go a long way toward easing hospitals' financial pain.
With the expansion of Medicaid and a mandate to buy coverage, hospitals will erase most of their bad debt within five years, Mendelson said.
I can see these stocks going up as long as that Medicaid money starts flowing. The big loss-leader for hospitals seems to be people using the emergency rooms as a primary care physician or strait-up not paying for service. If the government pays so that these people can go to the hospital during office hours this will bring overall costs way down.
Plus, there is nothing like a government edict that forces 31 million more people to use your service. These newly insured might even overuse your service to the tune of future pricing power increases. Can you say "weekend appointment surcharge or hospital booking fee?" Jumping the line is a great way to increase your revenue.
They also cut a deal with Obama to keep Medicare cuts to less than $155 billion so this should settle the uncertainty that comes with how severe these cuts are going to be. It is $15.5 billion a year no matter what. That certainty puts a nice floor under these stocks. I have been looking at a few like: Community Health Systems (CYH,) Health Management Associates (HMA,) Lifepoint Hospitals (LPNT,) and Tenet Healthcare (THC)
One other intriguing stock in this space is Psychiatric Solutions (PSYS) which runs a number of inpatient behavioral health facilities and residential treatment centers. ObamaCare added this little tidbit:
Other provisions in the bill would require that insurance cover both rehabilitation and habilitation services in addition to providing mental health benefits.
In other words more cashola will go into the pockets of companies that run these behavioral health centers. It sucks to be forced to pay for some other guys mental problems or smoking cessation. But I will feel much better by being long a company that will benefit from this governments largess
Hold Medical Devices:
Although they didn't cut a separate deal with Obama I have to disagree with this:
Companies like Medtronic Inc. and Boston Scientific Corp. will face $20 billion in new taxes over the next 10 years, with little certainty they can make it up in new sales.
Analysts say hospitals may simply use medical scanners and other existing devices more often, without actually buying much more equipment.
Which would make sense but with more patients come more artificial knees and hips. By forcing insurance companies to take on people with preexisting conditions means more stents, and pacemakers for that 31 million more people joining the insured.You might also need to buy a few more MRI or mammogram machines with all these new customers suddenly flooding your hospital. The threat of $2 billion a year of new taxes will be passed right along to the consumer so that should not be much of a threat at all.
Hey, if you are long the right stocks you might even be able to afford that new "Gold" plan from United Health that you have to buy from the Obama Health Care minimart.
I mean it is either that or join a prison gang when you are forced to go to jail if you don't pay the "most glorious fine imposed upon the wreckers and anti-Communist sympathizers who fail to purchase the most excellent and virtuous Health Insurance." (The Chinese provided this name as a part of their American ownership rights.)
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