No single issue is more divisive than President Barack Obama's
health care initiative.
The Affordable Health Care Act for America - better known as
"Obamacare" - is the biggest change to our health care system
since the launch of Medicare and Medicaid in 1965. And it's at
the heart of the current government shutdown . . .
Regardless of whether you support Obamacare, the
transformation of health care presents both profit opportunities
and potential pitfalls.
At its most basic level, Obamacare aims to bring health
insurance to every American. The nonpartisan Congressional
Budget Office has estimated that uninsured Americans will decline
60% by 2019. And that means 32 million additional Americans will
be insured and more likely to seek health care.
One big winner from more insured Americans are the
That's because hospitals operate as for-profit businesses that
provide a public health service. Because of the public
service component, hospitals are required to provide care to any
individual, regardless of whether they have insurance or can
afford the care.
That can saddle hospitals with huge losses. In 2011 for
example, hospitals provided $41 billion of services for which
they were not paid.
If Obamacare ever is implemented, more Americans will have
health insurance than ever before. And than means that
newly insured people are likely to visit the doctor more
frequently. That may translate into fewer emergency room visits.
But it also means that if they do show up in the E.R., their
insurance will pay the bill.
As a result, routine medical care revenues should grow.
And the bad debt incurred by hospitals will similarly decline.
That could boost both top-line revenues and profit margins for
health care providers.
That's just one of the reasons that health care stocks have
been performing well. The
iShares U.S. Healthcare ETF (
is a fund that tracks 114 big health care stocks. It's up 24%
year-to-date, easily beating the 13% gain for the S&P
But ETFs like this often are heavily invested in big
pharmaceutical companies. For example, the IYH has 27% of its
portfolio invested in the three biggest pharma stocks. If you're
looking to invest directly in the health care service providers,
you're far better off picking individual stocks.
It's no surprise that hospital stocks have been strong
performers this year. For example,
HCA Holdings (
is up 46% and
Tenet Healthcare (NYSE: TCH)
is up 38%. And that outperformance is likely to continue if
Obamacare is actually implemented in 2014.
So who are the losers in all of this? Sadly, it's the
Americans who already have insurance that get the short end of
Here in Vermont, the cost of individually purchased insurance
for a 40-year-old male will rise by 104%. And in the 13 states
plus Washington, D.C. - where health exchange rates have been
published - the average increase is 24%.
At Wyatt Investment Research, we provide health insurance for
our employees. Come 2014, we'll be participating in the
Vermont health exchange. Like most states that are
implementing a health exchange, there have been numerous delays
and considerable amounts of misinformation here in
While the exact numbers haven't yet been made available, one
thing is clear: premiums will be up at least 10% and deductibles
will be considerably higher. That will impact the pocket of
either employers or employees.
I know I can't stop Obamacare . . .nor can I change the facts
about rising health insurance costs. But I know that there
will be winners in the next several years as more Americans begin
relying on health care services.
And with the tailwinds of Obamacare and an aging population of
baby boomers a reality, it's time to buy health care
I want to hear from you. What do you think of Obamacare?
How are you investing your portfolio to profit from the health
care sector? What are your favorite health care
stocks? Please send me an email - I'll be sharing your
ideas in an upcoming Reader Mailbag issue of
My email address is email@example.com. You can expect
more on this in the weeks ahead . . .