One of my Duke classmates posted a Facebook status update that prompted a discussion. I thought responding in long form would be more appropriate than continuing a comment chain.
Here's the chain so far:
JP: If healthcare passes I guarantee the stock markets will drop tomorrow.
Me: So?
BR: David, doesn't a drop in the stock market after the passing of a monumental legislation like the healthcare bill indicate investors feel that the bill will be a detriment to the healthcare sector? Doesn't that seem significant to you?
RZ: It won't just be the healthcare stocks that will drop. It's an added cost/uncertainty for all businesses, and the considerable legal issues will start almost immediately.
AS: B/R,
The stock markets might drop, as health care is such a major factor in the GDP (I think it's 12-15%). But then, if health spending comes down, individual consumption might go up, so retailers and manufacturers would benefit. That benefit would only play out over a 12 month cycle.
Also, while this is more subjective, I think if it lowers the overall long-run, firms might ramp up hirings. One of the biggest issues in the past decade has been jobless recoveries and jobless growth.
RZ: That would be great if it lowered spending, but even the scam artists themselves admitted that the bill is not about cost containment.
My biggest question is, since the CBO scoring assumes taxes for 10 years, but 6 years of "benefits", what are we going to do in the second decade? Or, are we supposed to take a presidential term off once per decade and just be content with our health?
First, the tribulations of panicky investors don't matter much in the medium- or long-term. Some people will dump their insurance-company shares tomorrow, and others will dump their shares across the health sector, but it will be a blip. So what, let some share prices flop for the next few days, then cooler heads will start buying up the bargains.
What bargains? Well, I don't expect the future profits of health-insurance companies will be as high as in the past, but that's kind of the point. So those stocks will never have the value they had on Friday. To me, good riddance. Because instead of wasting 30% of U.S. health-care expenditures on administrative expenses, instead of dropping people who have the temerity to make claims against their policies, instead of denying coverage to people who once had a runny nose, insurers have to run leaner operations in which they actually pay health care claims. They're not going out of business; they'll just have to compete in a marketplace that requires them to spread risks. You know, like auto insurers, all of whom suffer terrible indignities like the steady profits of a guaranteed market.
No, for bargains look at health-care providers, like hospitals, technology companies, drug manufacturers. (OK, maybe not drug manufacturers.) If I had a ton of cash right now, I'd short Aetna and, a couple of days from now, go long on a portfolio of health-care service providers.
Think about it: 65 million people who don't have health insurance now will start buying it. And those people will start consuming health care services in ways they haven't before, for instance by getting preventative care and not using the E.R. as a first resort. This will mean, most likely, more health-care spending in general.
So, yes, the legislation isn't "about cost containment," as RZ complains, but it's an excellent value for the country. Two things will happen once the U.S. joins the rest of the world in providing health care to all its citizens. First, people will be healthier. Second, because they're healthier, they'll be more productive. When you spend money on something today so that you realize greater gains tomorrow, that's not "cost containment," it's "investment." And actually, according to the CBO, the effect on GDP will be a wash. In other words, we'll provide health care to everyone for about what we're spending now. Maybe it'll cost taxpayers another $20-25 per year, each.
This isn't really a debate about the costs, though. Of course we should consider the costs—and I think we have. No, ultimately, this is the end of a century-long debate about whether Americans should have a legal right to basic health care. There is no objectively correct answer to the question. There is, however, a political process to resolve it.
It may seem like an argument to the people to point out that a majority of Americans believe we should, but in this case it isn't fallacious. That's why we've spent years—decades, even—going through this process. In the U.S. we have strong protections for minority views, but sometimes, just sometimes, the majority prevails. If the bill passes tonight, the majority wins. If not, all the things about health insurance that people hate will get worse. And that will cost us more than we have to spend in the future.