How would "national healthcare" affect health care stocks?

Factual Questions
1

OK, I’m asking that this thread doesn’t get turned into the pros and cons of national health care.

Lets say that in the next few years, the Federal gov. finally succeeds in instituting a “single payer” system of healthcare(with the fedgov being the single payer). I tend to think its inevitable, but thats beside the point.

What would be the effect on the shares of those corporations which are in the health care business?

I’m not sure it would actually hurt those companies, since a lot of things the fedgov subsidizes, like education and welfare, has a lot of money thrown at it. I think that the high rate of inflation in higher education is caused by the easiness of obtaining student loans, for example.

Then on the other hand, I could see where health care could be rationed under that system. The fact that medicare doesn’t pay as much for a procedure as other insurances. In fact, I’ve read a lot of doctors have stopped accepting medicare patients because of the low rate of reimbursement.

The reason I ask is because I’m thinking of investing in health care mutual fund http://flagship4.vanguard.com/VGApp/hnw/FundsSnapshot?FundId=0052&FundIntExt=INT

It costs 25K to buy in, and I’m just curious about the potential ramifications of nationalized health care on the share prices.

2

Well, let’s look at the old Clinton proposal. The proposal would, essentially, have enrolled every American in group health insurance. The groups would have been arbitrarily assigned, IIRC, but would have had considerable bargaining power. It would have reduced the insurers’ ability to exclude certain unprofitable people, and would possibly have brought on government oversight of pricing policies, but the increased scope of the insurance business might have been a long-term gain.

3

A monopoly (or dominant) purchaser of any product or service is generally able to bargain prices down (just like a monopoly supplier can hike them up) so that would tend to reduce health care providers margins, and their profits, and their stock prices.

On the other hand, presumably many more Americans would have health cover, so the volume of services supplied should rise, which should be good for stock prices.

So: higher sales, lower margins. Overall effect on profits? Could go either way.

4

It would depend rather heavily on what sort of scheme were implemented, so I doubt that there is a factual answer to your question.

A small point to note is that prices are themselves rationing devices.