The Future of our Healthcare System

Yesterday I told you my story of dealing with the healthcare industry.  I’d be happy to hear yours.  But I’d be even happier to hear a sensible non-partisan solution to our big healthcare mess that would give consumers more choice, give doctors more control, and wrest control from the insurance companies.

Our healthcare system has come a long way since the 1950s, but it’s bankrupting us.  We spend more than 15% of GDP on health care–more than any other industrialized country.  We have the highest cost per person, as well.  Yet some 45 million people in the U.S. are uninsured.  And the total quality of healthcare in the U.S. is abysmal, no doubt in part because of those uninsured, a large number of whom are illegal immigrants.

President Barack Obama hopes to improve the system, and I dare say most Americans are willing to let him; they fail to see how it could be much worse.

Here are a few of my own thoughts.

The advances of the past decades have been wonderful, for the most part, but they’ve come with an increasing price.  At the same time, our lifestyles have become less healthy.  Yes, we’ve given up smoking, but we’ve become sedentary; three-fourths of us are overweight.

By far, the simplest path to good health is healthy living.  We tax alcohol and cigarettes and I think we should tax Snickers bars, Twinkies and Coke and all similar nutrition-negative foods and drinks as well.

I’d love to have a clause in my health insurance policy that says if I use less than a certain amount of health care this year they’ll reimburse me the difference … perhaps on a sliding scale.  But we’re just not good at rewarding health; the profits are in the medical and insurance industry!

So I’ll focus on the medical and insurance industries, just as the folks in Washington will.

Back in the ’50s the doctor was in charge.  Today the insurance companies are in charge.  They make a very nice profit.  I’d like it to be less.  In fact, I’d like the right to deal directly with a doctor, and pay cash for something simple like getting a thumb sutured.

But today, if I want to circumvent the insurance company and pay cash for a Super-Glued thumb, I’ve got to pay $840.

This seems backwards to me. So backwards, in fact, that despite my distaste for growing federal power, I look forward to seeing the insurance companies lose some of their power.

Now, I recognize that the insurance companies aren’t going to give an inch without a fight.  But I do think government influence over the healthcare industry will continue to increase.  At one time it was zero.  Now, government sources (federal, state, and local) account for 45% of U.S. healthcare expenditures.  I’m not saying I like it, but it’s a trend I recognize.

I do think that the Obama administration is likely to get some sort of drug price control mechanism implemented, the result of which would be shrinking profit margins for drug manufacturers and thus shrinking P/E ratios.  Shrinking margins would also shrink drug pipelines, which would also shrink payrolls.   And all of it would shrink drug stock prices in a way no one has imagined yet.

I look at the charts of the pharmaceuticals group and I see a great bull market in the 1980s and 1990s.  Remember the fun of investing in Pfizer and Bristol-Myers back then?  But in the past decade the group’s charts have flattened out, and technical analysis says this long top could well set the stage for a long decline.

If so, beware of those big well-respected winners, including Pfizer (PF), Bristol-Myers Squibb (BMY), Novartis (NVS), GlaxoSmithKline (GSK), Merck (MRK), Lilly (LLY), Sanofi Aventis (SNY), Wyeth (WYE) etc. The bigger they are, the harder they fall.