Senate Finance Committe passes Baucus bill 14-9
This afternoon the Senate Finance Committee passed the $829 billion (over 10 years) Baucus health care bill.
The vote was 14-9 with only Republican Senator Olympia Snow (Maine) crossing over to join the 13 Democrats in voting “Aye.”
The Senate Finance Committee is the last of the five committees in the House and the Senate with responsibility for health care legislation to report a bill out of committee. The battle now moves to the Senate floor where Senators will try to somehow hammer conflicting bills into a single piece of legislation. That bill still has to be reconciled with whatever emerges from the House of Representatives.
A major step in the process but still a long way from a done deal.
Buy Teva Pharmaceutical (TEVA)
No matter exactly what health care reform bill (even no bill) emerges from Congress this year, the pressure to get costs out of the healthcare system is just going to get more intense. (For why see my October 13 post, http://jubakpicks.com/2009/10/13/losers-and-5-winners-from-health-care-reform-and-why-well-be-fighting-over-who-pays-for-a-decade/ )
In that effort requiring that health plans replace proprietary drugs with generics is an easy way to cut costs (or to look like you’re cutting costs).
So generic drug makers win once, because any legislation will expand the number of insured able to afford drugs, and twice, because economics will continue to move patients, doctors, and health care bill payers to generics.
No wonder that Teva Pharmaceutical Industries (TEVA) is guiding Wall Street to 30% earnings growth in 2010.
Losers and 5 winners from health care “reform”–and why we’ll be fighting over who pays for a decade
We know what the health care reform legislation due today for a vote in the Senate Finance Committee will cost: $829 billion over ten years.
We know that it will extend coverage to 94% of all Americans, up from 83% now.
And, thanks to the blessings of the Congressional Budget Office we even know that it will pass that committee. And, startlingly for those of us who winced through the August town hall meetings that roasted members of Congress, we even know that something like the committee bill, or stronger, is going to pass Congress.
What you and I as investors now want to know is what stocks are going to make money from health care reform legislation. I think the best way to answer that question is to apply the economics of “externalities” that I explained in my October 6 post http://jubakpicks.com/2009/10/06/capitalism-could-still-get-a-stem-to-stern-overhaul-to-keep-score-in-the-revolution-track-something-economists-call-externalities/
Hope you didn’t think I’d spent all those words building a tool that I wasn’t going to use for stock picking.
Capitalism could still get a stem to stern overhaul. To keep score in the Revolution track something economists call “externalities.”
“A crisis is a terrible thing to waste,” said Stanford economist Paul Romer way back in 2007 near the start of the recent (or should that be “current”?) global fiscal and economic crisis.
You certainly understand why if you take a look at U.S. economic history. Most of the time the structure of our economy seems ruled by inertia. It takes a crisis to change anything significant. It took the repeated financial crises of the late nineteenth century to produce the Federal Reserve, antitrust rules, and the Income Tax. The Great Depression to produce Social Security, the Securities & Exchange Commission, and the National Labor Relation, and more. (Hey, it was a BIG crisis.)
And what do we have to show for the crisis that has bankrupted the next generation?
Bubkis is the common conclusion. A tweak of CEO compensation here. A little cosmetic gussying up of bank balance sheets. Maybe, just maybe, some feeble protection against rapacious credit card lenders. Oh, and health care reform that is either “The path to socialism” or “Gee, I wish it went further” depending on your politics.
But compared to the bar set by the Great Depression, the Great Recession seems to have produced remarkably little change.
Well, I say it ain’t so. We’re engaged, final score isn’t in yet folks, in the most far-reaching effort to change the way that capitalism works since Bismarck invented the old age pension.
Health care reform is an even bigger deal in China–and it will change the way to invest in that country
Health care spending has doubled from 2002 to 2007.
Tens of millions of people aren’t covered by any health insurance and as a result of the global economic crisis and the consequent economic slowdown millions who had insurance have lost it.
Despite the rise in health care spending the population isn’t getting any healthier. Infant mortality rates, which had steadily declined since World War II, have plateau-ed. Diseases once under control have re-emerged.
And too many people live in fear that they’ve only one illness away from poverty.
Yep, things sure are bad…in China. So bad that in January the Beijing government announced a plan to spend $124 billion by 2011 to provide some form of health insurance to 90% of the population.
That’s a huge amount of money. The dollars being thrown around in our own healthcare debate seem much larger—the draft bill now being debated in the Senate Finance Committee carried a price tag of $856 billion when first introduced by Senator and committee chair Max Baucus (D-MONT). But that’s what adding coverage for the 30 million uninsured in the United States would cost over 10 years. At $124 billion for two years the Chinese price tag is impressively large.
Especially if you remember that China is still a relatively poor country. U.S. GDP (gross domestic product) hit $14.3 trillion in 2008, estimates the CIA World Factbook. Depending on how you adjust for China’s undervalued currency, the CIA World Factbook puts the size of China’s economy at either just $4. 4 trillion (at the official exchange rate) or $7 trillion at what’s called purchasing power parity. (Purchasing power parity attempts to adjust official figures to take account of what people in different countries actually pay for the same goods and services.)
Either way you look at it—whether China’s 1,340 million people live in an economy half the size of the U.S. economy inhabited by 310 million people or one just one-third the size–spending $60 billion a year to improve health care in China has the potential to be revolutionary.
And I think it will be exactly that. Especially if it is, as I think likely, just the first wave of government spending in areas such as health care, education, retirement pensions. We are looking at the beginning of revolutionary change in the Chinese economy.
And for investors that revolution will totally change how to make money in China.
