The Biggest Market Opportunity: Health-Care Stalemate?

Anyone else think that a stalemate on health-care reform is becoming increasingly likely? The bipartisan "Gang of Six" seems all but broken up. Proposals by one side are hated by the other, and the bipartisan proposals are hated by all.

If health care reform turns out the same way it did in the early 1990s, I've got three ways to play it.

Get them while they're down
If we're headed down the path of status quo, it seems reasonable to assume that we'll see a significant bump in shares as the fear of lost profits subsides.

The health-care industry has been knocked down over the last couple of years -- the recession hasn't helped -- and, stunted with fear, health insurers haven't been able to gain it back on the latest rally.

Source: Google Finance.

Fellow Fool Shannon Zimmerman likes UnitedHealth the best, and I tend to concur. Its large size alone should help it dominate, provided there are few changes in how health insurers operate.

Higher costs, sunken ships
It's estimated that health care will make up 18% of our GDP this year, potentially rising to 28% in 2030 and to 34% in 2040 if no reform is enacted. That's going to sink many companies if they continue to offer health insurance. Alternatively, if they decide that the cost is too great, they might lose good employees to the competition.

As a quick screen, take a look at these S&P 500 companies that made the least per employee. It's based on the highest net income over the last five years -- to give companies with a rocky year or four the benefit of the doubt -- and the last recorded number of full-time employees:

Source: Capital IQ, a division of Standard and Poor's.

I didn't check whether these companies offered employer-sponsored health insurance, though I know that Starbucks does. Remember, that per-employee number represents the best year of the last five. How much of an increase in coverage costs can companies like these afford? You should be doing this simple calculation for all the companies you own, to see how much rising health-care costs could hurt their bottom line.

Get subsidized
If the U.S. won't fix its growing health-care problem, then a simple solution is to find companies located elsewhere in the world where countries subsidize health care. China, for instance, has made a major push to expand and upgrade health care for its citizens.

Of course, those subsidies are borne in part by the taxes the companies pay, but the costs may stay more in line with the growth of their economy, rather than spiraling out of control. Some countries even artificially hold down drug costs for their citizens, causing the U.S. to bear a larger percentage of the development costs.

Betting on failure
Since so much of our economy is dictated by the moves of politicians, it's just as important to keep your eye on Washington as it is to watch the numbers coming out of Wall Street.

If you're going to bet on a lack of health-care reform, history is certainly on your side. Just keep in mind that we've never been closer to actual reform than we are now under the current administration. While it still looks like a compromise might be difficult to achieve, I'd be careful going all-in before a final decision is made; stranger things have happened in our nation's capital.

Where would you invest your money to take advantage of the health-care mess?  Let us know in the comments box below.