After months of rancor and vitriol, the health care bill looks like it is on the way to passing (as I understand it, the Senate needs to sign off on a couple of changes made by the House). According to this article from the AP via Yahoo, the plan is targeted at 32 million Americans who lack health insurance but it is unlikely that 32 million is the number of people that can't get health insurance. Some portion of the 32 million can afford it but choose not to get it.
Either way it is truly amazing that something initially conceived for about 10% of the population was put together and marketed in such a way as to be so divisive. The Democrats seem to be relying an awful lot on projections that intuitively seem unreliable, and the Republicans believe this is pure socialism. We'll get an early indication come November and then we'll see how the economics play out in future years.
In general it seems that the investing community has not been in favor of the bill, so its passing could trigger a negative reaction of some sort in equity prices. I do not know how serious of a reaction there will be (maybe very little), but whatever the market does we have been through this kind of thing before.
The health care bill is a big, bad scary event that has created uncertainty. Well, this has happened more times than most people can remember (do you remember the fear triggered by CEOs having to sign off on their earnings back in 2002?) and will happen many more times in the future.
Based on past experience, we can expect the market to take in this news, digest it for some period of time and then revert to worrying (or not worrying, as the case may be) about everything else it has been worrying about. If the reaction is a fast decline... well, fast declines often retrace quite quickly.
Of course, there could be more of a meaningful impact on certain types of health care stocks. I've never held a hospital stock or a health insurance stock for clients and I think these areas would feel it most. Ultimately how and how much these companies are paid could be changed as could how we buy pills, I suppose, but if you need a pill you are still going to buy it one way or another.
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Wednesday, November 21, 2012
Stocks and the Healthcare Reform Bill
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