Health Care Reform: Back to the Drawing Board

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Updated March 18, 2017 at 10:30ET

Nearly 24 million more people would be uninsured under the Republican plan to replace Obamacare, according to the nonpartisan Congressional Budget Office, creating an up hill political battle for a proposal that would reduce the deficit by more than $300 billion.

How’s the CBO’s Record on Scoring Health Care Plans?

Back in 2010, the CBO’s forecast was for nearly 24 million to be on Obamacare health plans by 2017. Only about 9 million people came on board.  The CBO missed by a country mile, listen to their predictions with caution.

The 24 million (lost insured) over 10 years hurts the GOP sales case, especially heading into the midterm elections, it’s tough vote for Republicans to wear heading into 2018.  Sure the States can pick up some of lost insured but the media will hammer 24m across social media and cable television. It’s back to the drawing board, the ugly CBO headline speaks to more work to be done by the GOP.

“Ryan has also, according to Trump ally Sen. Rand Paul (R-KY), misled President Trump into believing that Ryan’s bill can pass Congress. Paul and others believe the bill is dead on arrival in the U.S. Senate since a number of GOP senators have come out against it, and there are serious questions about whether it can pass the House. This is the first major initiative that Trump has worked on with Ryan—and the fact it is going so poorly calls into question whether Speaker Ryan can lead” (Trump’s growth agenda in 2017).

Breitbart, March 14, 2017

With nearly 300 S&P handles riding on Trump and Ryan’s ability to navigate an aggressive growth agenda through Congress, institutional investors we spoke with feel Ryan is in some trouble with the White House.

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Cost of Default Protection on Hospital Companies has been Heading Lower

Hospital CDS

What’s going on here?  As you can see, heading into the election credit risk on hospitals was moving substantially wider, the cost of default protection was surging.  After the election of President Trump CDS on Tenet Health rose to 860bps, today she’s less than 500bps.  The cost of default insurance is the cheapest in well over a year.

Default protection on hospitals is the ultimate expression of the GOP’s Freedom Caucus’ strength (or lack there of) in Washington.  Credit default swaps (CDS) are telling us Rand Paul is correct, the proposed Republican led healthcare legislation looks more like Obamacare-lite than a radical transformation.  Hospital credit default protection is extremely tight (cheap) relative to possible (short term) headline risk curve balls.  Bottom Line: Hospital credits have figured out there’s no way on God’s green earth the second and third stages of Obamacare replacement get on the President’s desk without 60 votes and Democrats.  In other words, after a shift right to land the Freedom caucus on board, the final stages of Obamacare replacement will come barreling back to the center.  Click on the link below to receive our full report and trading ideas:

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