The document discusses recent trends in the US healthcare sector, including the performance of biotech stocks, healthcare costs, and political candidates' stances on healthcare reform. It notes that healthcare inflation has outpaced CPI for decades but the gap is narrowing. While Obamacare reduced the uninsured rate, it did not curb premium growth. The scenarios presented argue that US employers dropping coverage could make the country more competitive, but price controls or government discounts could challenge trends of above-inflation price increases for the healthcare industry. Uncontrolled healthcare inflation could also act as a "tax" on the overall economy.

1. Healthcare Hijinks
28 October 2015
War Room

2. HiddenLevers War Room
Open Q + A
Macro Coaching
Archived webinars
CE Credit
Idea Generation
Presentation deck
Product UpdatesScenario Updates

3. Market Update
ObamACAre in Review
US Healthcare Sector
Scenario: US Healthcare Costs
Healthcare Hijinks

4. HiddenLevers
MARKET UPDATE

5. IPO Market
Dangerous Waters
Market Update
sources: HiddenLevers
1
Oil Rally Head Fake
China Rate Cut
+
ECB QE
Best Oktoberfest Ever
2
3

6. Budget Deal – Debt Ceiling tabled until 2017
4
sources: HiddenLevers, NY Times
Cuts for
Medicare
providers
Cuts for
SS
Disability
Medicare
premiums
NOT rising
debt ceiling
won’t impact
election
total
spending up
1%

7. 2011 US Debt Downgrade: First HL Success
Research
+
Model
Accuracy
+
Functionality

8. HiddenLevers
OBAMACARE IN REVIEW

9. TREND: Healthcare Inflation vs CPI
sources: HiddenLevers
CPI > Healthcare Inflation
-4 times in the last decade
-4 times in the 5 decades prior
-Overall, gap is narrowing
CPI above
Healthcare
Inflation
1957-’05
CPI above
Healthcare
Inflation
2005-’15

10. TREND: Insurance Premiums
sources: Kaiser Family Foundation, Academy Health
-Premium growth unchanged by Obamacare
-Third Party Payers are the real culprit
-Costs passed to individual as higher deductibles
Worker Contributions for Employer-
Sponsored Family Health Plans, 1999-2015

11. OBAMACARE: Report Card
SUCCESS FAIL
35% drop in US uninsured rate
Medicare cuts sticking
Supreme Court upholds ACA key tenets
sources: Fox News, The Hill, Health Affairs, Gallup, Families USA, CBO.gov, RAND
2015: 16.9M enrolled, below 20M estimate
Canceled policies + premium shocks
Incomplete Medicaid rollout–20 states left

12. OBAMACARE: Candidate Platforms
sources: HiddenLevers, Time, NY Times, Politico, NPR
Hillary
Clinton
REPEAL
OBAMACARE
RETURN TO
PRE-ACA
LESSEZ FAIRE
HEALTHCARE
Bernie
Sanders
Ben
Carson
Marco
Rubio
Jeb
Bush
REPEAL
OBAMACARE
HEALTH
INSURANCE
TAX CREDITS
ATTACK BIG
PHARMA TO
LOWER DRUG
COSTS
FINISH WHERE
OBAMA LEFT
OFF
CREATE
BONAFIDE
SINGLE PAYER
SYSTEM
LOOK TO
CANADA FOR
GUIDANCE
REPEAL
OBAMACARE
CREATE
PRIVATE
HEALTHCARE
ACCOUNTS

13. HiddenLevers
US HEALTHCARE SECTOR

14. HEALTHCARE: Performance Comparison
sources: HiddenLevers
Biotech has outpaced Nasdaq + S&P Health Care Index by 3X
Biotech:
+450%
Nasdaq:
+130%
S&P
Health
Care:
+130%

15. HEALTHCARE: Biotech Fundamentals
sources: HiddenLevers, Kaiser Family Foundation
-New Drug Approval relatively flat since 1970.
-Biotech Sector has surged anyway in last 6 years.
-Reasons: Pharma pricing power, QE fuel

16. HEALTHCARE: Biotech Crash
source: HiddenLevers, Investment News

17. HEALTHCARE: Opportunities
source: HiddenLevers
healthcare
REITS
wearable
tech
preventive
care
healthcare
IT
drugstores
MACRO SCREENER

18. HiddenLevers
SCENARIO: US HEALTHCARE COSTS

19. 2014 – ACA new + Obama v GOP
Scenario Update
costs
contained
via ACA
costs
contained
despite ACA
Runaway
costs
2015 – New Voices + Biotech Bearishness
Obamacare
US Healthcare
Costs

20. GOOD: Employers Drop Coverage
source: HiddenLevers
corporations, large + small, done as providers
ACA penalties
cheaper than
plans
Business can
drop plans and
hike pay to
attract workers
“Cadillac” tax
removes tax
deductibility
No healthcare
costs = higher
margins

21. BAD: Price Controls Hurt Sector
Let Medicare
negotiate = drug
price crash
new regime puts the squeeze on healthcare sector
source: HiddenLevers
Clinton
mention
tanked biotech
New specialty
drugs priced in
six figures
Biotech (eg Valeant)
biz model IS price
hikes

22. UGLY: Runaway Costs Hurt GDP
Healthcare
sector
outperforms
source: HiddenLevers, EIA, DOT, Business Insider
All other sectors
negatively
impacted
prices spiral despite government efforts
Healthcare
spend crowds
out consumer
spending
Healthcare
inflation
doubles to 4.5%
Medicare
solvency again
in doubt

23. SCENARIO: US Healthcare Costs
healthcare
inflation
4.5
S&P
-12%
healthcare
inflation
2.0
S&P
0%
healthcare
inflation
1.2
S&P
10%
US employers could
become more competitive
globally if they drop health
care coverage or increase
deductibles significantly.
Healthcare sector has
enjoyed price increases
above inflation for decades
– price controls or bulk
government discounts
could challenge this trend
High healthcare inflation
might act as a “tax” on
GDP, lowering consumer
and business spending and
driving markets lower.
Good
employers
drop
coverage
Bad
price
controls
hurt sector
Ugly
runaway
costs hurt
GDP

24. Healthcare Hijinks – Take Aways
Healthcare cost deflation
pre-dates Obamacare
Biotech + big pharma face headwinds
previously avoided
Link between employer + healthcare
is ending
Healthcare inflation outpacing
CPI is due to third party payers