Health-Care Reform: Two-Thirds Finished

The U.S. Senate voted this morning to pass the health-care reform bill, moving us closer to capping off the long process that's weighed on health-care stocks this year. If it's made into law, the $871 billion bill will represent the largest expansion of health-care coverage since the creation of Medicare in 1965.

Of course, we're not quite done; the Senate's bill must be merged with the House version before it can become law. Here's a look back at the health-care-reform debate, and a preview of what to expect in January, once the fight heats up again.

The disappearing, reappearing option
Considering how many times it flip-flopped in and out of the Senate bill, the public option would make a mighty fine politician. In the end, a government-sponsored plan ended up out of the final Senate version, but in the House version.

I expect this will be the biggest sticking point in the negotiations between the two houses. Liberal members of the House will fight to keep it in, but if the combined bill contains a public option, the Senate may not have enough votes to end debate and pass the bill.

Expect health insurers like UnitedHealth Group (NYSE: UNH  ) , and WellPoint (NYSE: WLP  ) to use their clout to fight against the public option. The companies are worried about competing with a nonprofit entity, which might compress their already thin margins.

I don't have much confidence in the government running anything efficiently, so I'm not convinced investors should be worried about whether the public option ends up in the final bill. Insurers are a resourceful bunch; they'll figure out how to make it work.

Insurance for all (whether you like it or not)
Both the House and the Senate bills contain provisions that require most Americans to carry health insurance or pay a fine. The requirement doesn't exactly follow the tradition of American freedom -- in fact, some Republicans are trying to question its constitutionality -- but I think it's the best part of the bill.

Getting everyone, even the relatively healthy, into the insured pool allows health insurers to spread the costs around. In exchange, health insurers are required to cover everyone, regardless of preexisting conditions. Americans will no longer be tied to their employer for health insurance, because they'll be free to get health insurance on their own if they choose to leave their jobs.

The other advantage to requiring coverage is that it could actually cause health insurance premiums to go down. Currently, insured people indirectly pay for the expenses incurred by the uninsured. Since hospitals can't deny emergency coverage, the money that they can't recover from uninsured patients ultimately gets paid through higher costs for those who do have insurance. According to the president, your bill runs about $1,000 a year. Ouch.

A taxing endeavor
Someone has to pay for this thing, and it's been interesting to see who has the most clout in Washington. Pharmaceutical companies negotiated early. Medical-device companies like Boston Scientific (NYSE: BSX  ) and Medtronic (NYSE: MDT  ) looked like they were going to get a big hit, but managed to whittle down their tax considerably. And cosmetic treatments like wrinkle removers and breast implants made by Allergan and Johnson & Johnson (NYSE: JNJ  ) managed to get their proposed tax removed altogether. Tanning salons (and their customers) apparently don't have that great of a lobby; they've been slapped with a 10% tax, which will raise an estimated $2.7 billion over the next 10 years.

The only question now is whether the companies will end up being able to pass the costs along to consumers. Will investors have to pay for health-care reform with their portfolios or their pocketbooks?

All I want for Christmas is my conference committee
While it's been exciting watching health-care stocks trade at the whim of legislators' latest idea to overhaul the industry -- not unlike AIG (NYSE: AIG  ) and Citibank (NYSE: C  ) -- I'm looking forward to going back to valuing health-care companies based on fundamentals. Let's just hope the conference committee doesn't drag too far into 2010.

UnitedHealth is a Motley Fool Stock Advisor recommendations. UnitedHealth and WellPoint are Motley Fool Inside Value recommendations. Johnson & Johnson is a Motley Fool Income Investor pick. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool owns shares of UnitedHealth Group, Medtronic, and has written puts on Medtronic. The Fool's disclosure policy ran for mayor of Documentville, but was beat out by a rich Will.


Read/Post Comments (21) | Recommend This Article (9)

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 December 24, 2009, at 11:49 AM, TMFBigFrog wrote:

    On the contrary, Brian.

    There is a very real chance that this bill will reduce the number of Americans with health insurance, while simultaneously increasing the cost for those of us with it.

    In addition to making health insurance mandatory, it removes the ability of insurance companies to exclude preexisting conditions. There's a portion of the country that carries health insurance not because they need it today, but because they want to retain their insurability for later, should they develop an expensive condition.

    Without the ability to exclude preexisting conditions, insurance companies have no defense against people signing up for coverage only after they have an expensive condition. From the perspective of a healthy person, the decision becomes: pay a few hundred dollar fine for not carrying insurance or pay several thousand dollars per year for insurance they don't think they need.

    As a result, this bill actively creates an incentive for healthy people to drop insurance and only pick it up when they need it. That does not make insurance cheaper for the rest of us.

  • Report this Comment On December 24, 2009, at 12:53 PM, creek138 wrote:

    BigFrog, if everyone is mandated to have health insurance, then how do they "wait" until they have a preexisting condition?

  • Report this Comment On December 24, 2009, at 1:05 PM, tite8888 wrote:

    The US Constitution is The US Constitution.

    All Senators and House Reps and the President are under Oath to "Preserve and Protect The US Constitution of the United States of America."

    There exists No leeway here in this oath.

    Article 1: "No US Government shall never force any US Citizen to purchase anything from the Government.."

    No variations here either. Isn't this Treason or am I the only one to see this?

    68% Of America says this bill is bad, 85% are happy with their current health care and yet this bill will eventually cost us all $6 trillion by 2019, not $787 Billion.

    (Cato Institute)

    I agree on reform yet not violating the Constitution to obtain it when all is needed is to open state lines competition in the Free Market. The very same market that gave America the very best health care in the World. (Where will the foreigners go now?)

    And yet we must pay now, use later? Isn't that the same that was said about social security?

    Ponzi Scheme that makes Madoff appear to be a Smarter than the rest of us.

    The other end of the spectrum is attorny's will be quite busy and overloaded with clients suing states or the government, or both. Because the first American whom is deprived of his/her liberty due to not paying for health care, well, just imagine..... what the streets of this Great Country will be filled with?

  • Report this Comment On December 24, 2009, at 1:13 PM, TMFBigFrog wrote:

    Hi creek138,

    "if everyone is mandated to have health insurance, then how do they "wait" until they have a preexisting condition?"

    Because the penalty for not carrying insurance is a fine that is very small compared with the cost of carrying insurance. Say insurance costs $10,000 per year but the fine is $750 per year for not having it. If you're healthy, which would you rather pay? Over 10 years, that's $100,000 vs. $7,500, assuming no increases in insurance costs...

  • Report this Comment On December 24, 2009, at 1:21 PM, IIcx wrote:

    Thanks for taking the time to post this article Brian.

    This source is conservative and some of the language is slanted but thankfully it contains information about many of hidden issues.

    http://www.examiner.com/x-3704-Columbia-Conservative-Examine...

    Its source was this article from Fox News: http://www.foxnews.com/politics/2009/12/22/health-care-face-...

    The Bill contains a provision that "forbids the Senate from amending the legislation in the future--EVER". For this reason alone, the current Bill should be pressed before the Supreme Court for a ruling.

    A majority of Americans do not support this version of the Bill and it needs to be amended.

    Have a Great Holiday

  • Report this Comment On December 24, 2009, at 1:23 PM, IIcx wrote:

    Thanks for taking the time to post this article Brian.

    This source is conservative and some of the language is slanted but thankfully it contains information about many of hidden issues.

    http://www.examiner.com/x-3704-Columbia-Conservative-Examine...

    Its source was this article from Fox News: http://www.foxnews.com/politics/2009/12/22/health-care-face-...

    The Bill contains a provision that "forbids the Senate from amending the legislation in the future--EVER". For this reason alone, the current Bill should be pressed before the Supreme Court for a ruling.

    A majority of Americans do not support this version of the Bill and it needs to be amended.

    Have a Great Holiday

  • Report this Comment On December 24, 2009, at 1:24 PM, IIcx wrote:

    sorry, I didn't think the first one posted.

  • Report this Comment On December 24, 2009, at 1:25 PM, eddietheinvestor wrote:

    Now the House and Senate are behind closed doors trying to merge the two bills. What about Obama's promise that everything would be out in the open, that all negotiations would be on C-Span? This bill is being passed with bribes, behind the scenes deals, and threats from the White House. None of these things would be necessary if the bill was one that would help the American people. It's politics as usual, dishonest political maneuvers.

  • Report this Comment On December 24, 2009, at 1:43 PM, TMFBiologyFool wrote:

    TMFBigFrog and creek138,

    The trick is to make sure that the fine is high enough to ensure that it's more advantageous to buy insurance rather than sign up only when you're sick.

    I'm not convinced the fine is high enough right now, but presumably that can be adjusted if too many people are abusing the system. Massachusetts, which has a state-wide health-insurance requirement, is running into that problem, but it's relatively minor (compared with covering all the additional low-income residents in state programs)

    It's a touchy subject because the people that are most likely to have to pay the fine are those on the fringe. Too rich to qualify for government programs, but too poor to be able to afford health care on their own.

    -Brian

  • Report this Comment On December 24, 2009, at 2:54 PM, Fool wrote:

    1)

  • Report this Comment On December 24, 2009, at 3:41 PM, Clint35 wrote:

    tite8888, I agree with you completely. I think the idea of the government forcing us to buy anything is unconstitutional and un-American. But they'll probably get away with it since they've already been forcing us to carry liability insurance on our autos for a long time. And also because most of them don't care about us as citizens. They do what lobbyists want and they do things to make themselves look good so they get re-elected. That's why they wanted to change the healthcare system in the first place, to make themselves look good. If we're all forced to buy insurance who does that help the most? The insurance companies. So the people that really wanted this so-called reform were probably the insurance companies. It wouldn't surprise me if the whole thing was their idea.

  • Report this Comment On December 24, 2009, at 7:40 PM, xetn wrote:

    First, read this article by noted economist Gary North:

    http://www.lewrockwell.com/north/north794.html

    Then, ask yourself if this bill is so great why don't the parasites, that are so eager to give this to you, have opted out of it for themselves. It seems to me that they should have to "eat their own dog food".

    This bill will ultimately lead to greater unemployment as many companies will be unable to afford the added expense and will just lay off more workers. Additionally, I believe a lot more jobs will be exported off-shore because of the level of government regulation (over 70000 pages in the federal register) is costing (as of March 2005) over $1.4 Trillion dollars per year for compliance. See:

    http://mwhodges.home.att.net/regulation_a.htm

    for details.

    The only "insurance" that makes sense now, is gold. The US deficit is out of control and when banks start lending again, prices are bound to increase greatly due to the lower purchasing power of the dollar. This will drive up the dollar value of gold.

  • Report this Comment On December 24, 2009, at 8:03 PM, mtracy9 wrote:

    When the head of Medicare is making $150,000 a year and is providing better service than the

    private insurance industry CEO who is making $12 million a year, it's time to take another look.

  • Report this Comment On December 24, 2009, at 8:04 PM, mtracy9 wrote:

    Interesting that France's health care system is rated #1 in the world. And the French pay only half of what Americans (ranked #37) pay. No wonder the neo-cons at Faux News don't like the French.

  • Report this Comment On December 24, 2009, at 8:05 PM, mtracy9 wrote:

    Interesting that France's health care system is rated #1 in the world. And the French pay only half of what Americans (ranked #37) pay. No wonder the neo-cons at Faux News don't like the French.

  • Report this Comment On December 24, 2009, at 10:39 PM, VintonCounty wrote:

    Both the House and Senate health bills are unconstitutional. That's because legislating on the subject of healthcare is not a power of Congress. All the powers of Congress are listed in Article I. Section 8 of the Constitution. Healthcare is not mentioned. Amendment X says that if a power is "not delegated" to Congress, Congress is forbidden to legislate as if it were. Of course the Supreme Court will say Congress has this power, because the Supreme Court is as corrupt as the rest of the government. One of the nice features of the Constitution is that it is written in plain language, so ordinary citizens can understand it without help of judges.

    When I mention constitutionality, people ignore me and my point. That is very foolish. I would not take investment advice from a foolish person.

  • Report this Comment On December 24, 2009, at 10:49 PM, TMFUltraLong wrote:

    Socialism has begrudgingly arrived.....Canada or Europe...which to choose, which to choose....

    UltraLong

  • Report this Comment On December 24, 2009, at 11:09 PM, laughtrack wrote:

    Why can so many countries do this better than the US? Why don't we have this much concern about the cost of useless wars? I give up...

  • Report this Comment On December 25, 2009, at 1:00 AM, richie54 wrote:

    You're correct about the public option. The government can't even run the post office anymore.

  • Report this Comment On December 25, 2009, at 3:20 AM, ET69 wrote:

    Every time I here someone call this 'Socialist' I know they are utterly ignorant. If this were Socialist we would nationalize all businesses related to health care (Big Pharm, Hospitals, Doctors etc.), with NO COMPENSATION.

    In fact, the health care bill is CAPITALISM forcing the working class to buy their product with NO public option. Insurance companies must love this as they will profit big time. Ultralong should change their name to Ultralight...........Happy New Year

  • Report this Comment On December 25, 2009, at 3:25 AM, g42l wrote:

    laughtrak

    What country does what better then us?

    What difference does it make what other countries do? This is still (for now) America, we do things differently here, that's why so many have been coming here for so long.

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