Health-Care Reform Is Dead. Probably.

It looks like health-care reform, as we know it, might be dead.

In President Obama's State of the Union speech last night, health care was buried in the middle, taking a back seat to jobs and even the cost of college tuition. Remember, this is a president who dedicated an entire speech to Congress on how to reform health care.

Sure he called on Congress to pass reform. But given the placement and time dedicated to the topic, the plea seemed half-hearted at best. The president clearly understands that it's an uphill battle now that Democrats have lost their filibuster-proof majority in the Senate.

New name, same enemy
The mention was brief, so you're excused if you missed it, but here's what Obama said yesterday: "And it is precisely to relieve the burden on middle-class families that we still need health insurance reform."

Did you catch that? It's no longer health-care reform; now it's health insurance reform. Insurers like UnitedHealth Group (NYSE: UNH  ) , WellPoint (NYSE: WLP  ) , and Aetna (NYSE: AET  ) can't be happy to hear that.

Health insurers have always been the bad guy in the debate, but the president appears to be rallying the troops against health insurers: "I took on health care because of the stories I've heard from Americans with preexisting conditions whose lives depend on getting coverage; patients who've been denied coverage; families -- even those with insurance -- who are just one illness away from financial ruin."

It's almost as if the fight for uninsured Americans doesn't matter, and the president is pressing for a slimmed-down bill that just changes the way health insurance works in this country.

How's that going to result in lower costs?
There's a problem with just instituting health insurance reform without any other changes to the system: Every additional requirement results in an increased cost that has to be passed along through higher premiums. Insurers don't deny coverage to people with pre-existing conditions and put caps on payouts to be mean -- they do it because, if they didn't, they'd have to charge extra for the added benefits, or end up losing money.

Health insurers could absorb some of the added cost, but their net margins aren't outlandish by any means. The only way I see to increase insurers' requirements and keep costs down is to get healthy individuals to pay into the insurance pool through a mandate. But then the government will need to supplement the payments for many low-income Americans. To pay for that, we'll need Medicare reform. And suddenly we're back to a bloated bill that currently seems dead in the water.

That's the problem with breaking up the bill
Legislators have also been mulling around the idea of breaking up the health-reform bill into bite-size pieces, but I don't see how that's really possible; the cost savings and added benefits are completely intertwined.

For instance, look at the pledge of pharmaceutical companies like Merck (NYSE: MRK  ) , Pfizer (NYSE: PFE  ) , Johnson & Johnson (NYSE: JNJ  ) , and Eli Lilly (NYSE: LLY  ) to fill in some of the Medicare doughnut hole. They're willing to do their part to decrease health-care costs for seniors, but they've made their support contingent on the rest of the reform bill passing. I doubt the Pharmaceutical Research and Manufacturers of America (PhRMA) will have their lobbyist out supporting a bill that will cost the industry $80 billion if an increase in the number of insured Americans, which will benefit the industry, isn't part of the same bill.

What's an investor to do?
It seems that we're back in the same place we were last summer. It's nearly impossible to know what the future holds when it's decided at the whim of politicians. The president is interested in compromising, even suggesting that legislators come up with ideas that are better than his. But a stalemate that keeps the status quo seems like a good possibility right now.

That would be a fine solution for health-care companies -- at least in the short term. In the long term, escalating health-care costs can't go on forever. For now though, the death of health-care reform should give the companies a little boost.

What do you think? Is health-care reform dead? Is that a good or bad thing for your portfolio and/or your pocketbook? Let us know in the comment box below.

Pfizer, UnitedHealth, and WellPoint are all Motley Fool Inside Value selections. UnitedHealth is also a Stock Advisor recommendation. Johnson & Johnson is an Income Investor recommendation.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool owns shares of UnitedHealth and has a disclosure policy.


Read/Post Comments (12) | Recommend This Article (21)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 28, 2010, at 5:35 PM, TakeCareToday wrote:

    The change from healthcare reform to health insurance reform happened months ago. When the efforts to dispel the myths about reform were posted on WhiteHouse.gov website months ago, the administration had already switched to health insurance reform. The following is a sentence from President's letter dated Sept 18th. "Now is the time to move forward, and I am working to get health insurance reform done this year."

  • Report this Comment On January 28, 2010, at 5:38 PM, TakeCareToday wrote:

    The switch from healthcare reform to health insurance reform happened months ago. When the administration tried to dispel the myths about healthcare reform on whitehouse.gov, the references were about health insurance reform. The following sentence is from the President's letter dated Sept 18th. "Now is the time to move forward, and I am working to get health insurance reform done this year." Nothing new here.

  • Report this Comment On January 28, 2010, at 7:32 PM, estebanlr wrote:

    As a self-employed American, and an investor, I reject the premise (seemingly accepted at face value by most) that we, the most advanced country on the planet, are incapable as a society of figuring out how to make sure ALL of our citizens have access to basic health care. I believe we have come to accept our present socially irresponsible insurance system as necessary just because "it has always been like that" - for most of us it's all we've know since day 1.

    Are we really not smart enough, innovative enough, forward thinking enough, and/or compassionate enough to reinvent this in a way that is equitable, responsible and reasonably ("reasonably" being the operative word) profitable?

  • Report this Comment On January 29, 2010, at 2:04 AM, drphilkav100 wrote:

    Health Care Reform's death was assured with the passing of the drug 'reform' bill several years ago. It was and is so loaded in favor of big Pharma that it was clear that DC was bought and paid for at the time of its passage. President Clinton and now President Obama both began their terms naively. If, like myself and my colleagues they had been in practice for very long they would know that the unholy trinity of medical care in America are insurers, drug companies and the legal profession all of which make a handsome living from the people they profess to serve.

    The duplicity of the drug companies to find ways to extend patents by offering a long-acting or slightly altered form of a drug , cover up untoward side effects with too brief studies purchased from MD's in medical school laboratories and stifling imports from Canada and other countries are only a few of the tactics they employ successfully to continue assuring massive profit at the expense of the rest of us.

    Time for a 'real' third party in America.

  • Report this Comment On January 29, 2010, at 3:40 AM, Jdben518 wrote:

    every bodies forgetting that the dems losing the "super majority" was not good actually good for a health care bill to cover as many people as possible with the public option. the dems having been mulling over the use of reconciliation to pass the parts of the house bill that got cut out of the senate bill. if the dems do this the only need a simple majority (51) which means no liberman landru bacus or nelson needed to pass it. watch out for the dems to start passing bills quickly with .reconciliation. also watch for the dems to box the gop in and a couple bills where they have to vote with the dems or get hung out to dry back home

  • Report this Comment On January 29, 2010, at 10:47 AM, MizzouFanVan wrote:

    Jdben518, one caveat: Congress can only use reconciliation once per year. I've been reading they are thinking of combining a few bills together and passing them all as one to push them through. Too bad about the death of bipartisanship (how long ago did it die?)

  • Report this Comment On January 29, 2010, at 11:34 AM, BioMentat wrote:

    If the Democrats ever use reconciliation, they will never get another vote from me. This country is tearing itself apart due to the amazing level of partisanship going on, and those sorts of tactics will only ensure our demise. If Obama is a real leader (which is highly debatable) it is high time for him to govern from the middle and engage the Republicans. Blaming the Republicans for his lack of leadership ability shows a lot about this leader we have elected. A wise Democratic president once said: "The buck stops here." With his light touch, Obama has never effectively managed Congress, and he refuses to go against the far left of his base. Hint: most of the country is not in the far left (just as Bush learned that most of the country isn't in the far right either).

  • Report this Comment On January 29, 2010, at 11:56 AM, 27ancrum wrote:

    I don't think as a country we can afford to HOPE for heath reform at how many billions and counting? I am now going to start WISHING someone in Washington will start looking at the big picture instead of who is in their political pocket. Why is no one looking at the ridiculous costs that our hospitals, doctors, pharmaceutical companies, and other medical providers are charging?? Their profit margins are exponentially larger than the health insurance industry. We need to look at all angles and all contributors of this issue if want to get it right.

  • Report this Comment On January 29, 2010, at 12:03 PM, starbucks4ever wrote:

    And BTW, the Dems just chickened out when they realized what a hot potato they were about to carry if they passed the law. I say chickened out because nothing prevented them from passing the bill while the 60-vote majority still lasted.

  • Report this Comment On January 29, 2010, at 1:04 PM, actuary99 wrote:

    27ancrum

    It's clearly the insurance companies that are evil money-hoarding thieves! I know this because my father-in-law, a physician who makes $800,000 / year, tells me so.

    And thank God that all the enormous birthing rooms at the hospital where my wife gave birth were equipped with almost-never-used jacuzzis.

    Yep. Health insurers are clearly to blame. And add Life Insurers to the risk. Just like the evil health insurance companies turn away people with pre-existing conditions, life insurers turn away people with terminal illnesses.

    They act like they would just go bankrupt if they consistently made deals they knew they were bound to lose money on.

  • Report this Comment On January 29, 2010, at 1:55 PM, chk2595 wrote:

    There are too many details is this lengthy 2,700 pages of bill. Some of them are good but many are to changing the way we get treated and respect for individual freedoms. I f the bill was perfect when they tried to shoveit in June 2009, it has been altered and changed since not for health or for care but giving and getting just to pass it

  • Report this Comment On January 30, 2010, at 12:48 AM, burrowsx wrote:

    No, the filibuster is dead. Obama has sold Republicans rope enough to hang themselves, and they seem intent on following through with their ideological suicide. We may even see impeachment of the Supreme Court taken up by liberals, disgusted with the open-ended corporate giveaway which the Roberts majority recently engineered.

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