Wednesday, December 09, 2009

Is the proposed Healthcare Legislation good for us? Watch healthcare stocks!

I was wondering what the reaction would be to the latest Senate move to drop the Public Option from the proposed Healthcare legislation. A group of 10 Senate Democrats, under the direction of Sen. Harry Reid, were asked to try to craft a compromise bill on the question of how to resolve the "Public Option" issue, which the House had passed in its legislation. There were 5 Progressives in the group and 5 Moderate Senators. They reached agreement to drop the "Public Option" in favor of extending Medicare Benefits to make people 55 years or older eligible for the program. I was wondering whether this is a sellout of those Americans who want the Public Option, because they feel it is the only way for true competition to keep costs down in Healthcare, or whether they would view this as a net positive to do this. I didn't know where to look as this idea has floated around in the news media since the weekend publicly. Where should I look for that tidbit of a clue as to the answer to that question? I found it. It was to look at the change in price of healthcare stocks!

So I looked at the stocks of WellPoint and United Healthcare to give me the answer. In the 1 month chart above you can see the answer to that question if you look at the last 2 trading days. I think that the United Healthcare 1 month chart above is the most revealing, as it clearly shows a reversal in the price of the stock in the past few days. Now it is heading up. The Wellpoint 1 month chart shows more upward movement as well, the past 2 days. So, if you think this proposed Healthcare Legislation banging around in the Senate is good for the average American, you are wrong.

It will be good for the Health Insurance companies and so those owning their stocks will benefit. There will be a lot of smoke and mirrors, used by the Senate, to sell this as "good for America" but I am not going to believe it. The stock market response is a reasonable way to determine whether this is good for the average American and the data is already in. Don't wait for the Congressional Budget office data to say anything to the contrary. They will show this helps reduce costs in some fashion.

As to the Healthcare companies stocks, I'll bet that today both of those stocks rise again. Check back tomorrow and watch for the overall stock market to rise as well as there is more at stake than just these two companies. The healthcare sector will be one sector of several which leads the markets higher today .

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