Successful investors have the ability to separate policy from politics – and to completely disregard the latter. Understanding the link from policy to profit is important because it affects both market activity and behavior and therefore prices, which then helps investors to either capitalize on, or hedge against, expected market trends. Healthcare is a great example.
The AFFORDABLE CARE ACT (ACA), a.k.a. Obamacare, was rammed through Congress in a most unconventional way. Up until Congress passed the ACA on Christmas Eve 2009, all major pieces of legislation required at least 60 senatorial votes. But the 60th vote in favor of the sweeping healthcare law, Massachusetts Democrat Ted Kennedy, died before the vote was taken.
Now one vote short, Democrats totally reversed position and now argued the law, which essentially took control of the entire healthcare industry, wasn’t that drastic at all, and in fact, simply a tax matter. Budget matters such as tax increases don’t require 60 senatorial votes, and instead can be passed with a simple majority under the authority of what they call, “budgetary reconciliation.” And so the law was enacted in March 2010 without a single Republican or Independent vote.
Standing as one of the few Americans to read the entire law, several things were certain to occur with the ACA’s passage:
1) Deductibles had no choice but to rise dramatically because the law insisted on it;
2) Patient options and services had no choice but to become strained — and more expensive — due to the basic laws of supply and demand; *
3) Insurance premiums had no choice but to rise because the law allowed insurance companies great pricing flexibility in order to cover those who weren’t paying into the system;
4) Healthcare had no choice but to become more political because government was now more involved in it; and finally,
5) Care had no choice but to be someday rationed* because that is always a resulting condition over-reaching governments inflict on people and markets, which is the reason the ACA is riddled with bailout provisions to service providers – so they can control the behavior they dictate in exchange for money.
While those conditions may seem as obvious as Monday morning quarterbacking they were just as easy to see at the time – if you read the law.
In my first healthcare blog written in the aftermath of the Supreme Court’s first hearing on the ACA (July 2012), SUPREME LETDOWN concludes, “The ‘healthcare boom’ begins today – and that includes price inflation – and will continue until another major fiscal crisis erupts. Sorry to say.”
Two years later in, GRUBER ACKOWLEDGES SUPREME LETDOWN, I highlighted how ACA policy translated into market activity this way:
“For those who believe the stock market is a leading indicator of the economy, consider that since SUPREME LETDOWN was written the Dow Jones Industrial Average (a.k.a. “the market”) is up 36% and United Healthcare is up almost double that, 68%.
As a side note, my group insurance policy is up 27% in the same time.”
Higher premiums in combination with higher deductibles and generous government subsidies had no economic choice but to produce greater profits to health insurance carriers. That, of course, was the major reason United Healthcare (UNH) was added to my 15-51i portfolio in 2012 when the ACA cleared the Supreme Court hurdle. The explosive impact Obamacare had on UNH profits was featured in a much later blog, THE FAILURE OF OBAMACARE SHOWN IN ONE STOCK, posted in April 2019.
Governments control markets with laws and regulations that affect markets and are ultimately revealed in the stock market, as shown by the ungodly rise in United Healthcare’s stock price trend, now up 1,082% since Obamacare was enacted. See below.
It is intuitive to recall that the first part of Obamacare didn’t go into market effect until 2014 – the exact time UNH’s stock took flight.
And now here we are in the Covid-19 year of 2020 and the government is in full control of individual behavior, production capacity, and everyone’s ability to spend and earn while attacking every basic tenet in the American ideal – all made possible by the illegally ratified and unconstitutional Affordable Care Act.
What gives the government standing to shut down an entire economy indefinitely and force millions of workers onto the rolls of unemployment and state welfare dependency?
Obamacare – in the name of public health and safety.
What gives government standing to strip away the constitutional right to worship freely?
Obamacare – in the name of public health and safety.
What gives government standing to restrict freedom of movement and mandate citizens to wear masks against their will?
Obamacare – in the name of public health safety.
What enabled government to mandate hospitals to ration care so to save room for a massive wave of Covid-19 patients that never transpired?
Obamacare – in the name of public health and safety.
Thomas Jefferson once said, “I prefer dangerous freedom over peaceful slavery.” But men back then were real men, scared not of an enemy Empire nor flu virus.
I don’t know about you but I am sick and tired of hearing every politician at every level of government, Democrat or Republican, blame Covid-19 for our economic woes. The virus caused nothing but illness and death – like every other flu virus or SARS-like pandemic in world history. Loss of life is unfortunate indeed, but the blame for the virus should end there. Economic destruction is solely at the feet of government reaction and subsequent policy.
Trump, who initially ran on ‘Repeal and Replace Obamacare’ but was defeated by the ill-conceived John McCain, never had a better argument to terminate the over-reaching law than now – but you don’t hear him advancing the still legitimate cause to overturn one of the most un-American laws in our history.
Think of the destruction we are doing to our society with these boneheaded policies coming out of every level of American government…
Once thriving local economies have been turned into ghost towns. Manhattan is a prime example, or Asheville NC, as featured in this Washington Post article. Covid-19 didn’t do that. The government’s response to it did.
Scared of overwhelming healthcare supply chains – now apparently a government responsibility thanks to the Affordable Care Act – it was government’s decision to ration care and not allow “non-essential procedures” in order to “flatten the curve.” Since the ACA provided financial remedy to providers to do what government dictated, hospitals had no choice but to oblige. The alarming result was featured in this Wall Street Journal article, Covid-19 Outbreak Led to Dangerous Delay in Cancer Diagnosis. My oncologist affirmed such an instance was an “unfortunate common occurrence.”
My dear God. Is this what we want our future healthcare to be — a land where government defines “essential” and denies cancer patients from treatments indefinitely — when time is of the essence to save their lives?
This is not to mention the destruction government policies are inflicting on the next generation. “This could be permanently damaging,” said Lisa Cook, an economics professor at Michigan State University, who worked in the Obama White House. “The whole economy is going to be worse off because these kids are worse off. We are losing our future labor force. We’re settling for lower living standards in the future.”
Everyone has to stop blaming the flu for what government has done otherwise we will get more of the same – which is exactly what government is promoting.
Trump wants more stimulus spending. Pelosi wants it too. State governments, who bankrupted their own economies, also want federal bailouts while they continue to choke the remaining life from their markets and places of business. And of course their accessory after the fact, the Federal Reserve, is all too willing to make it easy by continuing to keep interest rates historically low while printing ungodly amounts of new money, without inflationary concern.
According to the Washington Post, Federal Reserve chair Jerome Powell compared the pandemic’s initial shock to “a case of a natural disaster hitting a healthy economy.”
Comparing Covid-19 to a natural disaster such as a tornado is like comparing the switch to the electric chair to a bolt of lightning. Powell, like every other politician in America including Trump, blame Covid-19 instead of the consequences of their actions. They switched the economy to the off position. Covid-19 has no such power.
So when will these damaging policies end?
To paraphrase, never, but in Powell’s words, “a stable turnaround must be in place before the central bank unwinds its interventions, which began in the early days of the pandemic and resulting recession.”
How are we supposed to believe that when the Federal Reserve still hasn’t unwound its interventions from the last crisis in 2008, more than 12 years ago?
The remedy for Powell, a monetary doctor if you will, is always about an endless supply of more new money – print it, lend it, and throw it around – and then demand the same from fiscal governors, Congress and the President — regardless of whether or not the policy is good or bad, correct or wrong, reasonable or ill-conceived, supportive or contrary to the American ideal.
And now that healthcare has become more about political science than scientific evidence, communists like Dr. Fauci have totally reversed course on the policy of masks, which at first he thought were useless, but now despite science and CDC data that prove his original belief correct, advocates them to be worn indefinitely.
Powell and Fauci, Democrats and Republicans, are all cut from the same cloth. Their big-government interventions will never end because they embolden their authority and power structure.
Masks indicate fear or shame and minimize individualism, all impediments to prosperity and vitality.
Government is growing at rapid speed and liberty is dying at the same pace.
Economic recovery can never occur until America is maskless, her people are fearless, and her economies proudly, and boldly reopen to full capacity. For that we need not more stimulus but more freedom.
That, unfortunately, is a long way away.
Live free or die.
Stay tuned…
[…] Nothing could be worse for an economy already severely wounded by the “two week shutdown” Trump unconstitutionally advocated in March that still lingers today, and in fact is worsening. Such policies would drain infinitely more wealth and life from an economy gasping for air and clinging to every last freedom. Recession would deepen, unemployment would rise further and benefits wouldn’t be enough to cover the shortfall – especially in the face of rising inflation, which would embolden fascist rioters to call for Universal Basic Income (UBI). All of this effectuates three obvious certainties: bigger government, more debt and deficit, less freedom and free market activity. […]