How financial markets are responding to the Medicare-for-all push

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"Health-care stocks have a Washington, D.C., problem that is likely to linger," said Charley Grant at The Wall Street Journal. Companies across the health-services industry, from insurance giant UnitedHealth Group to Johnson & Johnson and pharma firm Abbott Laboratories, have been getting hammered in the stock market in recent weeks even though they've posted strong earnings. The reason is that investors are panicking about a future threat to those earnings: Medicare-for-all. Pushed by Sen. Bernie Sanders and other leading contenders for the Democratic Party's presidential nomination, the policy would broaden government-run insurance to cover all Americans. It might be a death sentence for private health insurance companies, and — by giving the government the power to negotiate more favorable terms with providers — would likely slash profits "for hospitals and manufacturers of drugs and devices." The sell-off is "reviving memories of the 2008 financial crisis," said Cristin Flanagan and Tatiana Darie at Bloomberg​. Insurance and hospital stocks lost $28 billion in market value in one day last week. While this kind of volatility is not unprecedented ahead of a presidential election, a full recovery could "hinge on whether it appears a single-payer policy would truly ban private health insurance policies."

Investors need a dose of reality, said Jeff Sommer at The New York Times. Sanders is the front-runner among the Democratic aspirants now, but it's "far too early to divine whether Medicare for All has even a modest chance of coming into existence after the 2020 election." Other top Democrats — including House leader Nancy Pelosi — have not supported it. And the giant health-care companies, which have enormous influence on Capitol Hill, are determined to block it. Perhaps the current slump is simply a readjustment. Health-care stocks have rocketed in the decade since the passage of Obamacare, which investors also hated initially. UnitedHealth, for example, has seen its shares return 1,345 percent in the past 10 years. "At some point, stocks that fly that high simply drop in value. For health-care stocks, this may just be one of those times." But if major health-care firms keep posting strong returns, "their share prices could begin to stabilize."

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Health-care stakeholders are taking no chances, said Dan Diamond at Politico, and some are going on the offensive. The Massachusetts Health & Hospital Association, which represents some of the state's largest health-care facilities, has come out against Medicare-for-all, saying it would "inhibit access and harm health-care quality across the country." Yet shaking up our health-care system still has "potent political appeal, and not just for those on the Left," said Max Nisen at Bloomberg. Sanders received cheers when he brought up the idea at a Fox News town hall last week. UnitedHealth CEO David Wichmann has tried to push back, saying radical reform isn't needed because "health care's relative burden on society has lessened" over the past 16 months. But Americans are painfully aware that they spend more than any other country on health care and get worse results. If the "stock slide says anything, it's that health-care companies need to sharpen their arguments."

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