President-elect Donald Trump has repeatedly called Obamacare a "total disaster."
He also said in an interview over the weekend that he is nearing completion of a plan that would replace President Obama's landmark healthcare law. “We’re going to have insurance for everybody,” he says.
Whatever this means for actual U.S. policy, one thing is clear. The U.S. Medical Economy remains over-extended even after a terrible third quarter earnings season. Healthcare stocks don't seem to reflect this reality.
The negative tone from the third quarter has all but evaporated following the Presidential Election. We noted improved tone at the JP Morgan Healthcare Conference last week (indicating a less-worse 4Q16 earnings season) but we think 2017 guidance remains a sector risk.
Headwinds abound.
After the largest expansion in insured medical consumers in a generation between 2014 and 2016, growth in medical consumers will revert to pre-ACA levels in 2017, alongside continued deterioration in affordability, payment reforms, company leverage at 15-year highs, and multiples still near 10 year highs, is a recipe for downside.
Our Healthcare analysts Tom Tobin and Andrew Freedman are hosting a "Themes Call" tomorrow afternoon at 1pm ET. They will provide a comprehensive update of our #ACATaper and Healthcare #Deflation themes with new datasets and analysis. They will also share new work which more definitively links insured medical consumers by payor, medical consumption, and employment across the US Medical Economy. And (as always) theu will offer updates on our current longs and shorts as well as new themes and stocks we are working on for 2017.
THE POLICY PULSE | REPEAL & REPLACE
In addition, Emily Evans, Director of Health Policy at Hedgeye, will be joining the presentation and sharing her views on major policy initiatives including block grants, Medicaid expansion and Repeal and Replace, among other topics that will significantly impact our fundamental views.
For example, the #ACA2.0 environment so far has added more Congressional scrutiny and oversight of Medicaid eligibility and enrollment determination. We see this as a developing risk as many states have enrolled more people into Medicaid than live at or below 138% of the poverty level.
California, for example, has 12 million Medicaid enrollees, but only 9 million people at or below 138% of the federal poverty level. We've identified 28 states that have similarly over-enrolled at the expense of federal outlays.
