America woke this morning and the sun still rose; the Earth
was still spinning on its axis. Fourteen months after its initial
proposal -- two days after street trash posing as concerned
citizens called one of the great civil rights leaders of modern
times a "nigger" and the man always regarded by both parties as
the smartest man on Capitol Hill a "faggot" -- and a few weeks
after I wrote it was hopelessly dead, health care reform passed
Congress to be signed into law by the President on Tuesday.
Will it work? Some parts of it will - more people will have
access to health care; many more people, over time, will see
insurance premiums be more muted than they otherwise would have
been. Other parts of the legislation that depend on future
Congressional bravery -- a rarity at the best of times - will
not, namely cost controls. This makes the reforms a typical piece
of legislation - put off the hard part for future votes someone
else may have to take.
The journey started roughly one hundred and thirty years ago
when Otto Von Bismarck, Chancellor of the newly united Germany,
created the first modern social security system to tie German
workers to the new German Empire and the new German Emperor,
Kaiser Wilhelm I. The street trash wearing red white and blue and
calling Pelosi, Lewis and Frank et al communists and Stalinists
(in addition to calling them "bitch," "nigger" and "faggot") did
not know history, as to be expected; the Republican Congressmen
wearing red white and blue lapel pins urging them on from the
balcony of the Capitol did not know history, also to be expected.
And herein lies the reason the bill - and our medical system - is
so fiendishly complex, hard to manage and full of
inconsistencies. In the twenty first century, we all have agreed
sick people need not die due to a lack of funds - not one
Republican, well, perhaps people who agree with Ron Paul,
disagree. That means the government has to intervene through
subsidies. And, in the twenty first century, we continue, as we
should, to insist on choice - and that means government
intervention must be severely circumscribed.
This clash would work - it works in almost all other parts of
the American economy and system of governance except public
education K-12 - except for one big factor. First, physicians and
other medical providers in the US make far too much money based
on unspeakable inefficiencies to allow the intervening parties -
the US and state governments - to just stand by and write checks
as they do for other social welfare systems. And this clash has
placed us in a hybrid system that is neither efficient nor fair
to those who make less than needed to pay for adequate medical
care. Hence the legislation. A flawed set of reforms passed in
the hope it will save a failing system.
The big fight is over - according to the Congressional Budget
Office by 2014 97%-98% of Americans will have access to what they
deem "affordable health care or health care insurance." The
mop-up - cost controls - will take a generation with a major
flare up in about five to six years when Medicare goes broke,
assuming Congress does not restructure that program in the
interim. For sometime in 2015-2017, Medicare will run out of
money and come to Congress to tap revenues from the general fund,
forcing the ongoing battles between generations into the public
eye. And Medicare will lose - the cost of the program is
unsustainable and includes far too much waste, indulging far too
much choice by people who are not paying for their insurance.
Who? People with diabetes who do not monitor their glucose
levels, creating more health problems; smokers who refuse to
enter smoking eradication programs; terminally ill cancer
patients receiving hip transplants at the age of eighty five.
Where does this leave investors, always the bottom line?
• For the next few years, companies that enable cost reduction
- from new treatments and devices that lower costs, such as MRSA
and C difficile testing from Cepheid (
) to electronic medical records - will be in the headlines and
should gain traction in the marketplace.
• For the foreseeable future, companies with innovative
treatments and tests that meet unmet and critical needs will also
prosper - the classic biotech or bioinformatics startups such as
) or Compugen (
). An emphasis on cost reduction will not totally compromise the
inner engine of the US (or Israeli) medical industry -
• Starting today, big providers - HMOs and hospitals - will
begin planning for an age of fewer unpaid bills, more elective
procedures and more emergency room visits funded (poorly) by
Medicaid - a net gain to the bottom line. And in five years they
will see the prices they are able to charge begin to fall and in
some areas, fall dramatically.
• Starting today Big Pharma (the PPH) - the dinosaurs known as
) and Merck (
), et el - will plan for more patients and more pills and ignore
they will get them at lower unit prices and even slower overall
revenue growth than today - not to mention the impact of $20
billion or so in patent expirations in the next 24-30 months.
That also means the big generics companies such as Teva (
) and the innovative ones such as Impax Labs (
) will prosper.
• And what about insurance companies? A stock picker's playing
field - the good ones will evolve, the typical ones will do all
right and the weak ones will evaporate.
America entered the twentieth century last night - the question
is how long it takes us to move to the twenty first century when
disease prevention upstages disease treatment. In the interim,
there is money to be made.
Amedisys Positioning to Become the 800-Pound
Gorilla of Home Healthcare