In recent stories I have highlighted several health care stocks that I think would be strong candidates for small portfolios (Part 1 and Part 2) that would be safe and pay high yields. These include: Johnson and Johnson (NYSE: JNJ), Abott Laboratories (NYSE: ABT) and Novartis AG ADS (NYSE: NVS). I have been thinking about these companies and how others will fare in the health care debate.While Washington debates the merits of various health care bills, the health care companies lobby to influence the outcome. Businesses and employees are resistant to taxing current health care benefits but very few people are opposed to taxing those that get big paychecks.
I think we are heading down the wrong path regarding health care "reform" once again. There is no question that most people want to improve health care in many respects, including but not limited to, the quality, cost, and delivery, but the devil is in the details and we may end up no better off than we started except of course with more complexity and greater cost.
Complexity translates into bureaucracy and waste when the government gets involved. However, I am not opposed to government involvement when it is required for setting guidelines, policing the system, and perhaps creating a safety net. Does anyone believe that government is remotely capable of simplifying anything? I think history thoroughly undercuts this notion.
Something that seems to have escaped the debate altogether is how much of our total GDP should be spent on health care in the aggregate, not just what the speculated cost of current reform ideas might be and how to pay for them.
Is there a maximum percentage of our resources that we as a nation should spend on health care? Why are we ignoring that we are spending an ever increasing amount of our total resources on health care without any discussion about what is appropriate? What is affordable? We speak of affordability but that is a nebulous idea.
The following excerpt is from a 2009 fact sheet published by the National Coalition on Health Care:
- By several measures, health care spending continues to rise at a rapid rate and forcing businesses and families to cut back on operations and household expenses respectively.
- In 2008, total national health expenditures were expected to rise 6.9 percent -- two times the rate of inflation.1 Total spending was $2.4 TRILLION in 2007, or $7900 per person1. Total health care spending represented 17 percent of the gross domestic product (GDP).
- U.S. health care spending is expected to increase at similar levels for the next decade reaching $4.3 TRILLION in 2017, or 20 percent of GDP.1
- In 2008, employer health insurance premiums increased by 5.0 percent – two times the rate of inflation. The annual premium for an employer health plan covering a family of four averaged nearly $12,700. The annual premium for single coverage averaged over $4,700.2
Something that I have been thinking about lately has to do with the scale of the system as it stands now and how comparisons between the United States and other countries may not be fair or reasonable.
Comparing the US to Canada, or Great Britain, or Germany, Denmark, Finland or any of the usual nations is not appropriate. Comparing a nation with populations that are 10% to 25% of our size does not seem right. How does the US measure up to China, India, Indonesia, Russia, or Brazil? Yes, I know this seems misguided too because we consider these to be poorer, less industrialized countries. However, we may also find for this reason we are unique in many respects to both the former western nations or the latter larger ones.
I have many more questions and issues to discuss but I will follow up with those after getting some feedback from this story.
Some of these issues include whether it is fair to pay the same price for a procedure when all doctors are not the same and there is no rating system. Will taxing high income earners really work when much of that income can be moved from salary to capital gains, as is common practice based on our current tax structure? Is the congress even remotely capable of simplifying anything? Should people be able to opt out of a program? The most sensitive issue we keep avoiding, but will have to reconcile eventually, is whether it is reasonable to spend hundreds of thousands of dollars (or more) to do quadruple by-pass surgery on someone that is 90 years old.
Here is one question that needs no polling but I will anyway:
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of Johnson and Johnson.











Reader Comments (Page 1 of 1)
7-22-2009 @ 7:50PM
Chris R said...
I am a Canadian living in the US. The bureaucracy is in the current system regardless of whether the government gets involved or not. It seems the only solution that I can see is to move to a single payer system. All you here in this country is how public systems are bad, or how the Canadian system is a disaster. Well according to one poll 90% of Canadians would not choose the US system if it was an option for them. Interestingly, the politician who was responsible for establishing the single payer system in Canada over 40 years ago was recently voted in a country wide poll as the greatest Canadian who ever lived. It is overall a successful system that I miss having now that I live in the US.
7-22-2009 @ 10:50PM
william lindblad said...
While this is a perplexing problem, there is one thing that remains clear - when scaled on total health care cost the U.S. is the most expensive in the entire world. Unfortunately, it is not the best.
The cost per individual is around 7,000 while the 2nd place nation is around the 4,800. There is a great deal of cost disparity and, since 9 of the top ten are in this range, it is worth a review. Change the order and look at the effectiveness of the health care and that rank makes more sense. The U.S. should be at the top, but it is far from it.
Therefore, it is a simple deduction that we are paying more but getting less.
This would sound like I am supporting Michael Moore's rendition, which I am not. His film is as biased as one could make it, designed to create fervor, and solve nothing. Making comparisons to countries like Denmark, the U.K. or Canada is apples and oranges. Population size, tax structures, etc. - completely different.
If anything, we need some kind of structured insurance system in which all providers are paid on a basis of tier experience/education and hospitals paid on regional cost.
There are so many factors that have to be considered that a quick and easy answer will never be available. Hospitals in the U.S. range from "for profit" to charitable. Many receive direct and indirect taxpayer support from the local or county tax base and yet charge full rates as they are still a "for profit institution". It is the myriad of methods providing the health care base that is providing the better mousetrap. Enter government support and donor's (financial) and it gets even crazier. The doctor end is just as bad but the insurance companies usually pay on a skill level, which is about as good as they or anyone else could do. However, skill level and medical board complaints? I think we can blame the AMA for that one as they tend to cover up for the bad apples of their profession. It's not much better than the union rep trying to explain why he is defending someone who is always late for work and frequently drunk!
Oh. I forgot the drug companies. Glory be, why do they sell at product in other places at different (usually lower) prices? Why do they enjoy extended patent protection? why do they systematically rape the U.S. Public? That answer is simple. They have to show an ever increasing profit to wall st. - year after year.
We do have a lot of problems! The drug companies are not alone.
7-22-2009 @ 11:55PM
Donna said...
I would love to see the insurance companies get the boot, expand medicare to include everyone, people are already paying toward medicare in their paychecks, and unless you have a generous employer, you pay at least part of your health insurance premiums already too. If you cut out insurance CEO pays, all the paperwork and administration, and grief that these companies give people, and their profit motives, the medicare premiums would be bound to be cheaper.
7-23-2009 @ 6:12AM
BHarrison said...
Government mandated national health care will be a total disaster, especially if both Congressmen and government employees are excluded from having to participate in (and pay for) the same program as mandated for the average American citizen. There can be no equity if government workers are covered by a separate and different heath care program.
7-23-2009 @ 7:14AM
JDM said...
Let's be realistic. The current system is a mess and will implode, affecting largely working class families. The wealthy will likely still have the resources to afford care, which is why they oppose being taxed.
So it doesn't surprise me that CEO of a small private investment firm doesn't like the current healthcare plan that calls for people like him to help finance health care for the workers at companies in which they invest.
Yet I think he's being short-sighted. He should not be looking at his own accounts and wondering how much the government will take out of them. He should instead be looking at the accounts of his investments. What will happen to them if the system is allowed to implode? Will the investments in US companies bear fruit if they are saddled with massive healthcare costs? Will they be able to compete with foreign interests due to those costs?
If GM and Chrysler are any indication, the answer is no. Start moving all your investments to China!
7-23-2009 @ 1:17PM
James W said...
I wonder what Thomas Malthus would say about our healthcare system.
7-25-2009 @ 7:54PM
Beltway Greg said...
As someone who has lived in both Canada (Quebec) and the US I think I can shed a little light on the Canadian Vs. United States debate as it relates to health care. Remember though, shed some light means exactly that in this instance, it doesn't mean I can solve anything. Though many Canadians claim not to want anything to do with the US system I can tell you that many of them are just about as ignorant about us as we are about them. In many areas of Canada for pay clinics are opening up in close proximity to hospitals and many Canadian citizens travel to the US for complex procedures or to get cat scans or MRIs. The Canadian system does seems to do a better job of providing the basics but once it goes beyond that it gets complicated. I wonder how many of those Di Vinci machines that are built by your best friends at ISRG have found a home in the Great White North? Also, many Canadians seem to believe that we in the states are literally stepping over the dead and dying on our city streets. I've seen many stories in the Canadian newspapers about hospitals that suffered from a lack of items as basic as rubber gloves and catheters. (Catheters are something that you really don't want to reuse.) I completely agree about trying to compare countries. Once I was involved in a debate about the treatment of minorities and when I asked him which country did the best in his opinion in terms of fair treatment he said Finland and the other Nordic countries.
The point? The Nordic countries are basically very heterogeneous and relatively difficult to enter with few deep pockets of urban or rural poverty.
Sooner or later, we start playing god. A friend who is a well respected heart surgeon in the Northeast told me about how he has done angioplasties on 80+ year-old citizens who are suffering from dementia. Not by the request of the patient, but by request of the family.
In closing, I support what Obama has been doing because simply the time has come to have this debate. If the republicans can do it better by all means, show me your plan, and I will gladly oppose the president. It is amazing what an economic near death experience can do
to focus the politicos and the populace on this issue, medicare, and social security. Let the games begin.
7-25-2009 @ 10:18PM
Dan Ramthun said...
As Donna said "I would love to see insurance companies get the boot", congress is betting on our "love to hate" insurance companies attitude as the only chance they have of ramming, this so called healthcare reform, down our throats. But the reality is that there is no healthcare reform, they ARE only trying to give insurance companies the boot! So if the insurance companies aren't there to pay for the bloated cost of healthcare, who will flip the bill??? We will, by way of the government becoming the insurance company ,and anyone who has EVER had ANYTHING to do with ANY government agency can tell you how inept they are! Anyone who thinks the government can do ANYTHING more efficiently than a business is living in a fantasy world. Health Insurance profits only account for 3% of your cost of health insurance, while government fees take 5%! Has anyone out there READ the 1018 page HR bill? Well, I have and it is a disaster waiting to happen! A government appointed commisioner will be the one deciding what insurance you HAVE to buy, how much it will cost you, what coverage you will have, what treatments you can or cannot have, where you will have to go to buy it and control over anything else insurance related. This is just the tip of the iceberg! It will not make insurance more affordable, in fact the only affordable health insurance options, for those who have to buy their own insurance, will be eliminated. It will not provide more choice, in fact it will only have 3 options, as opposed to 100's of options that are currently available. It will not provide better coverage, in fact the mandated coverage the plan provides, are far less than any quality healthcare plan has now. There are many more devastating parts to this bill, too many to go into here.
Instead of worring about WHO will be our insurance provider, we should all be asking what will this bill do for me, what will this bill take away, what will it cost, why aren't we addressing the things that make quality healthcare so expensive? And we should NOT get onboard with anything until we get clear concise answers!
This far too important, and far too costly to rush into change just for the sake of change! The mistakes they make will cost us dearly!!!