Donald Johnson's  Instablog

 The future of health care reform seems to be so uncertain that speculators in the stocks of health insurers, health care providers, medical device makers and exchange traded funds that track health stock indexes aren’t sure which way to turn.

On Wednesday, as expected, health insurers’ stocks lost part of the gains they made Tuesday when it looked like insurers wouldn’t face competition from President Obama’s government-run public option health plan, or government HMO. Late Tuesday, Obama reasserted his support for a public option, which is why insurers’ stocks fell Wednesday.

But the correction didn’t take away all of Tuesday’s gains. The reason is pretty simple. Chances that a health insurance reform bill won’t make it through either house of Congress by Obama’s August 1 deadline are growing despite what Congressional leaders are promising. Congressional Democrats are so divided on health insurance reform and financing the new health spending bill that they have a lot of work to do before they can agree on anything. That the bill might be delayed through August increases the probability that a bill that means anything won’t pass this year or next.

While insurers’ stocks dropped Wednesday, three ETFs that track health stocks rose a bit even though the stocks of hospitals, drug makers and medical device makers were mixed.

Insurers’ health ETFs’ charts are here. Medical device makers’ and pharmas’ charts are here. Hospitals and other providers are here and here.

Why the mixed returns?

There are several possible answers. If the Government HMO is back on the table, demand for medical devices and some supplies may slip. Members of Congress are again talking about more cuts for Medicare and Medicaid providers, which would hurt providers and their suppliers. That some hospital chains were up could be because speculators recognize that the industry’s deal to take $155 billion in Medicare payment increase cuts over the next 10 years can be and probably will be reversed by a future Congress.

And speculators who are paying attention know that the Democrats again are talking about taxing people making over $250,000 to raise funds for the health spending bill that’s being touted as a health care reform bill. That, of course, would work against a near-term economic recovery. It would be bad for all stocks, including health stocks, which seems to be okay with Obama and most Democrats in Congress.

So, now, all investors have to watch the health care reform circus in Washington, not just patients, workers, employers and speculators in the various health stocks.

Disclosure: I own BDX.