Beat the Crowd by Kenneth L. Fisher

Author:Kenneth L. Fisher
Language: eng
Format: epub
ISBN: 9781118973073
Publisher: Wiley
Published: 2015-03-13T00:00:00+00:00

Figure 6.1 S&P 500 Health Care Versus S&P 500

Source: FactSet, as of 10/9/2013. S&P 500 Health Care and S&P 500 Total Returns, 12/31/2009–10/8/2013. Indexed to 1 on 12/31/2009.

During the 2008 Presidential campaign, there were 44.7 million uninsured people, 14.9% of the population.10 Obama claimed his health care reform plan would insure about 35 million of them. Well, one year in, he overshot. Most sources estimate that the net reduction in the nominal uninsured population from 2013 is between 7 and 10 million, but this is somewhat skewed by population growth. Private and government estimates both show the percentage of uninsured folks in 2014 declining to levels a bit below 2008. Health and Human Services and the Centers for Disease Control and Prevention (CDC) put it at 13.1%; Gallup polls say 13.4%.11 Either way, that 35 million increase didn’t happen.

Why is this important? With the ACA, folks first feared and priced the cost of subsidizing insurance for 35 million folks, and markets couldn’t quickly discover the likelihood of sky-high costs. As Nancy Pelosi infamously quipped, Congress had to pass the ACA for anyone (including them) to find out what was in it. Markets initially digested that much bigger outcome, then gradually came to realize the ACA wouldn’t work as intended. In the end, it cost about 10% to 15% of what folks initially assumed, for a 10% to 15% increase in the insured population. There are mountains and there are molehills.

In the end, we went through all this rigmarole for a few million folks who weren’t insured before but are now—maybe 1.1% of the total US population.12 If someone had said in 2008 that insurance premiums would rise 4% to cover 1.1% of the population, the world might have looked at it differently. If someone says, we’re creating a new program for 35 million people, that’s huge! For 3.5 million, it’s much smaller. Markets would have known the ACA wouldn’t bring down the broader world the way people feared it would. Instead of massive subsidies to cover 10% of the population, we’re talking about 1%. For the 99%, the piece of the cost to cover the 1% is much lower. This smaller-than-expected outcome gave markets relief. I think. Maybe I’m wrong.

There was an elephant in the ACA, but it wasn’t market-related. In all the hubbub, folks forgot Obama’s goal was to take 45 million uninsured down to 10 million. Very few realize that for all the cost, hassle and aggressive marketing, coverage improved just modestly—evidence government programs don’t work. That’s the elephant. In this day and age, and few fathom this, it is nearly impossible for the government to “do” much. Too much arteriosclerosis.

The ACA’s ultimate fecklessness stared us in the face from day one. Think of it this way: Wal-Mart’s global empire wasn’t built in a day—Sam Walton started small, with one store in Arkansas in 1950. It took decades of trial and error and organic growth to build an efficient, massive marketplace. If it took a genius businessman like

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