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Investment trends often fail to consider social issues and their influences, often until the effects are part of the secular makeup of things. Today we look at one of the pillars of President Obama's health care "reform," preventive medicine, or as the new buzzword describes it, wellness.
Wellness, is basically about eating well, exercising, and reducing stress, either by meditation, yoga, spending more time with family or just plain getting away from all of the toxins, stresses, and bad things that shape modern life.
As health care "reform" continues to barrel forward, lawmakers are focusing a great deal of effort on disease prevention. Yet, history shows that the approach is a dead end. So here is another example of Washington wanting to make something happen based on an ideal rather than facts.
The U.S. already engages in a great deal of preventive medicine. And yes, it can provide benefits. But as The Wall Street Journal points out: "The problem is that when testing becomes too widespread, or heavy investments are made in monitoring people with chronic diseases, the rewards often fail to match the costs."
In fact "The Congressional Budget Office, in a December report, concluded that greater use of preventive care would at best generate modest reductions in costs over 10 years, and might even result in increases," according to The Journal.
In effect, is that programs are hard to implement due to the logistics involved, as often "much of the money spent on disease prevention goes for people who aren't going to get sick anyway. Also, people have trouble making difficult lifestyle changes, such as taking up regular exercise or eating healthier food."
And there is more data that is likely to be ignored: "A report published in the New England Journal of Medicine last year examined 279 spending ratios in published studies of health-oriented prevention measures, and another 1,221 on treatments for people who were already sick. Some measures clearly saved money, like screening men in their early 60s for colorectal cancer. But the report concluded that most preventive measures reviewed didn't save money. For instance, screening all 65-year-olds for diabetes would cost $590,000 for every healthy year of life it adds over just screening people that age with high blood pressure."
Even the government has its own reports that prove the point. According to The Journal: "Medicare has conducted seven pilot programs in the past decade testing the theory on some of the most costly chronic diseases. Each showed little if any cost savings or measurable improvement in patients' health."
A Medicare sponsored program that included over 200,000 patients and that involved visits by nurses to patients in order to monitor and instruct them on prevention, as well as mailing out brochures and pamphlets "didn't reduce the group's rate of acute-care hospitalizations, hospital readmissions, emergency-room visits or death, according to a summary of the pilot program's first phase. It didn't meet its goal of lowering patients' Medicare payments in an amount equal to the cost of the prevention services, which ranged from $67 to $118 a month."
So why do we pursue this strategy? Human nature is all about what we want to see, and what we want to have, not always what is clear.
Conclusion
Somewhere along the way, someone decided that health care costs are the root of all evil when it comes to spending money in Washington. Thus, ever since the Clinton years, "reform" has been attempted, either by trying to change the system or by adding new layers to the system, as with Mr. Bush and his Medicare drug program and the big push into Medicare managed care provided by private insurers.
But, no matter what happens, costs continue to increase. And with the latest set of proposals that are being floated, it's clear to see that more trouble is ahead.
Oh, some good has come from Medicare drug plans and Medicare managed care programs. In this scribe's practice, there are patients who have access to medication and to basic care that otherwise wouldn't have it. The real question is whether they have benefited from the access to medical care. And the answer is that sometimes they do and other times they don't.
For example, some of those patients have access to their medications until the "donut hole" comes along. That's when the insurance company doesn't pay for the medicines until the patient has spent certain amounts of their own money. It's when that pause hits, which is often several months, that the patients don't buy their medicines. And that's when they end up in the hospital with a hear attack, decompensated congestive heart failure or uncontrolled blood sugar levels.
So, you can see what may happen with preventive medicine approaches. Folks will eat their vegetables and go to the gym, until vegetable prices rise too far because China is increasing their consumption. And they'll stop going to the gym when they sprained a knee on the treadmill as they got a bit too aggressive on their fitness routine.
What we're saying is that a healthy lifestyle is a good thing. But to expect that one fact to be a significant contributor to lowering health care costs is at this point little more than wishful thinking. And to tie physician pay to preventive measures, as some are proposing, and as is apparently being tested in the Veterans Administration system, is a bad idea, that will eventually lead to gaming the system and could discourage people to go into the profession in the future.
In other words, there are too many variables involved in health care for one approach to be successful for all persons. Yet, on they go in Congress without exploring other options such as abolishing earmarks, or giving the president the option of the line item veto.
Do we have an answer? No. All we can do, with our physician's hat on, is to wonder fearfully about what may lie ahead. The market analyst looks for trends, and sees little to be positive about, except continuing to look for short selling opoprtunities in health care. When that time comes, the Ultrashort Health Care ETF (NYSE: RXD) is an excellent vehicle. And we expect to get a chance to use it as some point in the future. Our recent foray into short selling health care stocks, in February and March of 2009, as the health care debate heated up, led to a 30% profit in about two weeks.
Chart Courtesy of StockCharts.com
As for patients, all we can do is deal with each one of their issues one at a time. Here is sobering thought, though: '"Changing behavior takes time," said Christobel Selecky, chief executive of LifeMasters Supported SelfCare Inc., an Irvine, Calif., company that withdrew early from the test. While such efforts can be successful, she said, "I would hope that nobody thinks that this is a silver bullet."'
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