Q&A #24 - Is Universal Health Care Good For Investors?

Q: Is Universal Health Care Good For Investors?

A:  The answer is NO.  That’s the easy part.  Explaining why the answer is NO is a little more difficult.  I re-wrote this a few times before I was satisfied that it explained things without being too complicated.

First of all, let’s define Universal Health Care.  My definition consists of three things:

1. Everyone must be forced to take it.  No exceptions.  People who cannot afford the insurance will have to be subsidized in some manner.
2. If someone is sick, or was sick in the past, and applies for the health insurance, they still get it.  No turndowns.
3. Pre-existing conditions will be covered.  The only exception will be for those who try to game the system by not having insurance while they are healthy, and signing up when they are sick.  These people should not be able to have their existing conditions covered for 12 months after getting the insurance.  This provision seems drastic, but it will prevent people from jumping in and out of the program, depending on their health.

Notice I have not gotten involved in all the rhetoric about having a government option or not.  This is a side issue, and it just confuses things.  Get that square in your mind.  The issue is “Should all people have access to the same health care plan.”  The issue is not “Who should offer that health care plan, the government, private industry, or both.”

Before I explain why a plan that encompasses my definition is bad for investors, let me state unequivocally that I think we absolutely should have Universal Health Care.  So don’t accuse me of being a bad person. I am 100% behind a plan that meets my three criteria. 

Let’s pretend that all the politicians stop squabbling and actually pass a bill that gives us all three points.  Why would it be bad for investors?

Simple.  It will cost investors more than the status quo. 

Why will it cost more?  Because the poor people who do not have insurance now will be given insurance, and we will subsidize the cost.  When I say “we” I mean the taxpayers and all US corporations.

• If we, the taxpayers, subsidize the poor, we will have less money to invest.
• If the corporations subsidize the poor, they will have less money to pay salaries to the taxpayers who work for them.  If the taxpayers have lower salaries, they will save less and invest less.
• In addition, if corporations subsidize the poor, they will be less profitable.  This means their stock prices will languish, which means investors will be screwed.

So there you have it.  A simple explanation why Universal Health Care will be bad for investors.

Will Universal Health Care happen?  No, because the politicians don’t have the guts.  They will probably pass something that incorporates points 2 and 3.  But they won’t give the coverage to the poor people, because they are afraid that the cost of the program will get them un-elected.

If they at least give us points 2 and 3 it’s a good start.  But eventually, we have to find a way to make sure that poor people have adequate health care.  I don’t know when that will happen.

By the way.  New Jersey and New York already have laws that give us points 2 and 3.  Massachusetts has laws that give us points 1, 2, and 3.  If you do any internet searching about the Massachusetts plan, which is fairly new, you will see that the costs far exceed what was anticipated.  The politicos are trying to figure out how to deal with the incredible expense, but don’t have a solution yet.  New York and New Jersey don’t have the really high costs of the Massachusetts plan because they don’t give the insurance to poor people.  But the monthly costs of their plans are very high relative to other states.  There are various reasons for this.  One of the reasons is that sick people use more medical services than healthy people.  So if you have to accept all the sick people, you will have higher claims.  It’s that simple.