Will Health-Care Reform Hurt Investors?

The results are in. Most Americans seem on board with reforming our health-care system, according to a recent Harris Interactive/HealthDay Poll:

• 78% are in favor of letting Medicare and other governmental entities negotiate with pharmaceutical companies for lower prices on drugs.
• 69% of all adults like the idea of requiring all children to be covered by insurance.
• 60% think positively about a national health insurance exchange, where people could choose from plans offered by private insurers and others.

That's the good news -- at least for consumers.

Where's our crystal ball?
The bad news here is that there's quite a bit of uncertainty around this issue, and that some health-care-focused companies may end up suffering.

For example, as my Foolish colleague Brian Orelli recently explained, the Obama administration's health-care proposal calls for "insurers such as Humana (NYSE:HUM) and UnitedHealth Group (NYSE:UNH) to bid for Medicare Advantage members rather than use the current formula that helps the companies rake in 14% more than the cost of government-sponsored Medicare."

That may end up putting pressure on their profit margins. It could be great for American consumers, but not so great for Humana and UnitedHealth shareholders.

If drugmakers end up having to sell their wares for lower prices, their profit margins, too, will shrink:

Data: Yahoo! Finance.

It's true that these margins are fairly generous. But with concerns about future patent expirations and thinning pipelines of new drugs, many of these companies could see margins erode even without health-care reform.

Bye-bye, $3 trillion
It's hard to envision how much of a bottom-line impact health-care reform could have on our economy, especially since the scope of reforms has yet to be decided. But that hasn't stopped some from making estimates.

The Commonwealth Fund Commission on a High Performance Health System, for instance, issued a report proposing a comprehensive set of reforms that could slow the growth in health spending by a whopping $3 trillion in a decade.

Let's ponder that for a moment. That averages out to $300 billion per year, which is more than the following companies take in annually, combined.

Data: Yahoo! Finance.

That might make you gasp, but it shouldn't. It's not like these particular companies will get wiped out. Instead, some or many of them may simply see revenue drop. (Note that our entire health-care spending has been pegged by some to be about $2 trillion per year, with about 30% of that spent on hospitals, 21% on doctors, and about 10% on drugs.)

And don't forget about those companies that could stand to benefit from potential reforms: generic-drug makers and companies providing information technology to the health-care system, for example. And increased health coverage could lead to more drug sales, as more people would be able to afford medicines.

When assessing how developments in the push for health-care reform will affect your portfolio, it's mandatory that you put on your thinking cap. (It's up to you whether aspirin is needed.) Now is a time of great opportunity, and you shouldn't bypass researching stocks in the health-care sector out of fear about change.