Biggest guessing game in Washington? Health reform
WASHINGTON (Reuters) - Winners and losers among drugmakers, insurers and other health companies could emerge as soon as next week as U.S. lawmakers prepare to unveil their long-awaited healthcare reform proposals.
Congressional leaders are preparing legislation to expand health insurance to the nation's 46 million uninsured while seeking to cut costs elsewhere to pay for wider coverage. Much of the deliberations have taken place in private, creating suspense over what kind of changes the industry will face.
"Everybody's just anxious to know how they're going to start fleshing out the details and making the tough decisions," said Kim Monk, a healthcare analyst with Capital Alpha Partners. "Right now, everything's still on the table."
Some options include creating a government-run health insurance plan to compete with private payers, requiring all Americans to buy some kind of coverage and taxing health benefits now provided to workers by their companies.
Details could come in June, with members of the House of Representatives and the Senate aiming to pass legislation before Congress' August recess.
Insurers and other healthcare companies, which have been bracing for major changes long before U.S. President Barack Obama took office, already saw their shares take a hit. Some fell as much as 19 percent in February when Obama released his initial federal budget plan which proposed some cuts for drugmakers and insurers, although some have recovered.
"Some of the healthcare reforms could potentially damage either the pricing power or the competitive dynamics (of) the industry," Morningstar analyst Damien Conover told Reuters.
Managed care companies such as Humana Inc, UnitedHealth Group Inc and Wellpoint Inc, as well as pharmaceutical companies have the most at stake, Conover said.
Congress is looking at all possible avenues to save money and has its sights trained on the Medicare and Medicaid government-run programs for the elderly, disabled and poor.
"A lot of other (healthcare) industries will be impacted as well, but it's not going to hit them as dramatically," Conover said.
Other industries that could see their stocks rise or fall include hospitals, medical device makers, nursing and long-term care facilities and home healthcare companies.
Hospitals may have the most to gain. The addition of millions of paying customers could ease their burden of treating uninsured patients for little or no payment.
Other potential winners include generic drugmakers that can make cheaper versions of brand-name medicines and companies that specialize in digital medical records.
The uncertainty is unnerving what has been a thriving sector even amid the U.S. recession.
Health spending is roughly 16 percent of the U.S. gross domestic product and rises each year at about twice the rate of inflation, making it a fairly stable source of profits and jobs -- but also a ripe target for cuts.
Earlier this month, nearly every health industry group joined an effort promising to save $2 trillion over 10 years. Executives said they could trim spending on their own without hurting their companies.
"We're talking about redirecting the rate of growth" to other areas, Health Net Inc Chief Executive Officer Jay Gellert, whose company manages healthcare benefits through private and government-sponsored health plans, told reporters at the time.
Congress is likely to redirect it further, by potentially reducing certain Medicare and Medicaid reimbursements, curbing payments for privately-run Medicare plans and boosting coverage of screening tests and health promotion programs.
Obama, who must sign any eventual bill into law, has also said he wants to see lower prescription drug costs and expanded technology and wellness efforts.
Reduced payments could be offset by basic coverage to millions more patients, but the impact to companies' bottom lines remains to be seen.
For most of the biggest companies "comprehensive health reform legislation is a positive," said Rick Weissenstein, a healthcare analyst with Washington Research Group.
Drugmakers and insurers have publicly committed to reforms, going so far as to participate in a White House health summit and showing a more unified front than was seen the last time such an overhaul was sought under President Bill Clinton.
But the two groups took clearly different paths.
Managed care companies have agreed to some market reforms that would require them to cover a wider swath of patients, even sicker ones, in exchange for a mandate requiring healthy consumers to buy a policy.
Drugmakers have offered broad support for expanded coverage and greater disease prevention but have not made any similar concessions or outlined changes specific to their sector.
When asked how drug companies would voluntarily save money for the healthcare system, Merck & Co CEO Richard Clark pointed to actions that could take years. Cutting drug development costs and offering generic versions of biotech drugs were among the ways, he told reporters this month.
If a bill passes, it will still take months if not years for some policies actually to be put in place, making it tough for investors and analysts to judge long-term industry impact.
Meanwhile, "there's going to be anxiety up until the day this is signed," Washington Research Group's Weissenstein said.
(Editing by Matthew Lewis)
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