The improving economy is probably letting Americans take better
care of their health now. Citizens who delayed their treatments are
now able to afford the healthcare costs, eventually helping
healthcare spending to move up. A report from
PricewaterhouseCoopers's (PwC) Health Research Institute has
forecasted a modest 6.8% increase in healthcare spending in 2015.
Some may call the term 'modest' a misnomer as the forecasted growth
is in stark contrast to the five-year contraction in costs the
Along with the improving economy, the Patient Protection and
Affordable Care Act (PPACA) or the Affordable Care Act (ACA) or
"Obamacare" has also played significant role. Total health spending
will probably trend up as more people can avail the insurance under
ACA. The aging society, hospitals acquiring more in-house
physicians and costly technologies are among other factors that may
drive healthcare spending upward.
Before we suggest top-ranked healthcare funds, let's look at the
healthcare spending forecast and the Obamacare effects.
Healthcare spending is forecasted to rise 6.8% in 2015, up from a
6.5% increase expected this year. The increase may seem a bit tepid
compared to double-digit growth in medical inflation recorded ahead
of the economic downturn. However, this reverses the five-year
contraction, thanks to economic recovery. Ceci Connolly, managing
director of PwC's Health Research Institute and the report's
co-author said: "Now that overall economy has improved and come
back significantly, we see for 2015 that health spending is also
This is largely due to Americans being in a better position to
afford medical costs. "Folks who postponed some services - some
elective, some more serious - are going ahead and taking care of
it," commented Connolly.
Health Insurance Plan
The healthcare spending forecast is the difference in cost to treat
patients from one year to the next. This analysis tracks the cost
increase in employer-based health plan market that has 150 million
people under its ambit. The forecast combines the services cost and
the amount of services used.
However, the increase in healthcare spending is expected to have
"little effect on employer health spending". This is because
employers usually adjust the plan offerings based on the spending
trend. High-deductible plans are already rising and employers may
further increase employees' burden, i.e. the amount they are
required to pay before the insurance coverage is effective. "It
probably means some additional cost shifted to individuals,"
The net increase is thus projected at around 4.8%.
The PwC study also notes that 44% of employers are considering
health plans as the only insurance option for employees for the
next three years.
Affordable Care Act or "Obamacare"
Talking of insurance plan, the Obamacare should also up the
healthcare spending. "Obamacare" that was enacted in Mar 2010 and
was taken as a bitter pill is now unveiling the significance for a
systematic healthcare reform in the U.S. (Read:
Will Obamacare Happen Smoothly?
The World Health Organization had stated that healthcare
expenditure per person in the United States is the highest in the
Despite the large amount of money spent on health care, millions of
Americans lacked health insurance coverage or were underinsured.
This was mostly due to a dysfunctional system. To expand coverage,
President Obama introduced drastic health care reforms in Mar 2010,
which aimed at bringing down the country's uninsured rate.
The multi-year implementation of ACA is finally reflected in
positive signs from healthcare providers (in the form of improved
earnings), consumers (higher enrolments) and the market (wider
coverage at lower healthcare spending). This paves the way for
affordable healthcare facilities and expanded coverage for patients
with pre-existing health conditions, while also bringing about 32
million uninsured citizens under the coverage umbrella.
Additionally, the ACA aims to invest in information technology and
state-based exchanges to curb any fraud and mishandling of
policies, hence offering complete authentic health insurance
coverage in the long run.
As for the hospitals, the ACA is making the consumers stronger and
the hospital industry can no longer cherry-pick their customers.
Obamacare Plays: 3 Hospital Stocks to Buy
Jason Furman of the Council of Economic Advisers said healthcare
spending will most likely jump in coming quarters "as the millions
of people who gained health insurance coverage during the
Affordable Care Act's first open enrollment period begin to use
their new coverage". Many Americans got their insurance at the
first quarter end; thereby opening up the possibility of higher
3 Healthcare Funds to Buy Now
The rise in healthcare spending, if true, will increase business
for hospitals, diagnostic centers and healthcare related industry.
Eventually, the healthcare industry should benefit and help
healthcare funds be better investment potential.
Below we will share with you 3 healthcare funds that carry a
Zacks Mutual Fund Rank #1 (Strong Buy)
as we expect the funds to outperform its peers in the future.
Remember, the goal of the Zacks Mutual Fund Rank is to guide
investors to identify potential winners and losers. Unlike most of
the fund-rating systems, the Zacks Mutual Fund Rank is not just
focused on past performance, but the likely future success of the
These funds have relatively high returns year to date and over the
last one-year period. The asset allocation for non-US stocks is
ICON Healthcare A
(ICHAX) invests a lion's share of its assets in companies related
to Healthcare industry. It invests in common and preferred stocks
of firms irrespective of their market cap. This healthcare mutual
fund is non-diversified and has returned 12.8% year to date. In the
last one-year period the fund has returned 30.1%.
The top 5 holdings include Johnson & Johnson (JNJ), McKesson
Corporation (MCK), Celgene Corporation (CELG), Gilead Sciences,
Inc. (GILD) and UnitedHealth Group Inc. (UNH).
ProFunds Pharmaceuticals Ultra Sector Investor
(PHPIX) seeks daily returns which are 150% of the daily return of
the Dow Jones U.S. Pharmaceuticals Index. To achieve the desired
results, it invests in a mix of securities and derivatives. The
fund primarily invests in pharmaceutical companies. This healthcare
mutual fund is non-diversified and has returned 18.3% year to date.
In the last one-year period the fund has returned 31.6%.
The top 5 holdings include Johnson & Johnson, Pfizer Inc.
(PFE), Merck & Co., Inc. (MRK), Bristol-Myers Squibb Co (BMY),
Eli Lilly and Co (LLY).
ProFunds UltraSector Health Care Fund Service
(HCPSX) seeks daily returns which are 150% of the daily return of
the Dow Jones U.S. Pharmaceuticals SM Index. The fund invests in
equity securities and derivatives that in the opinion of the fund
advisors possess daily return characteristics identical to one and
a half times the daily return of the Index. This healthcare mutual
fund is non-diversified and has returned 16.1% year to date. In the
last one-year period the fund has returned 31.2%.
The top 5 holdings include Johnson & Johnson, Pfizer Inc.,
Merck & Co., Inc., Gilead Sciences, Inc. and Amgen, Inc (AMGN)
To view the Zacks Rank and past performance of all healthcare
mutual funds, investors can
click here to see the complete list of funds
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find
funds that not only outpaced the market in the past but are also
expected to outperform going forward. Learn more about the Zacks
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JOHNSON & JOHNS (JNJ): Free Stock Analysis
MCKESSON CORP (MCK): Free Stock Analysis Report
CELGENE CORP (CELG): Free Stock Analysis Report
GILEAD SCIENCES (GILD): Free Stock Analysis
UNITEDHEALTH GP (UNH): Free Stock Analysis
PFIZER INC (PFE): Free Stock Analysis Report
MERCK & CO INC (MRK): Free Stock Analysis
BRISTOL-MYERS (BMY): Free Stock Analysis Report
LILLY ELI & CO (LLY): Free Stock Analysis
AMGEN INC (AMGN): Free Stock Analysis Report
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