Fears of 'Medicare for All' Hit Health Stocks

Politics can be an ugly business. Health care politics, especially so. Health care companies that get mixed up in politics? That was $28 billion worth of ugly on Tuesday, and the stock market damaged continued on Wednesday.

"Presidential primary politics," said Evercore ISI analyst Michael Newshel, are "more in focus than fundamentals."

The slide began in earnest on Tuesday when UnitedHealth Group Inc. — treated by investors as a bellwether for the insurance sector — waded into the debate over "Medicare for All," which would expand government-administered coverage to most of the population and rewrite the businesses of U.S. health insurers, hospitals and doctors.

While it's a longshot to become law despite the backing of some contenders for the Democratic presidential nomination, the proposal has the power to upend company stock prices. Together, the shares of hospitals and insurers lost $28 billion in market value on Tuesday, according to data compiled by Bloomberg. The Tuesday losses capped the worst five-day stretch since 2011 for health insurers, despite UnitedHealth reporting earnings that beat analysts' estimates and raising its 2019 forecast.

The slide in hospital and insurance stocks continued Wednesday, wiping out billions of dollars more in market value from some of the biggest health companies in the U.S. UnitedHealth fell 3% at 10:30 a.m. in New York. Its competitor Anthem Inc. was down 4.8%, and Cigna Corp. slid 3.1%. Hospital chain HCA Healthcare Inc. dropped 2.5%, and Community Health Systems Inc. lost 7%.

For months, health insurers have kept largely out of the fray over the proposal to expand Medicare, the government program that covers about 60 million mostly elderly Americans. As UnitedHealth's chief executive officer began to wrap his remarks Tuesday morning during the company's call with analysts, that changed.

The proposal would be a "wholesale disruption of American health care," and would "surely have a severe impact on the economy and jobs — all without fundamentally increasing access to care," CEO Dave Wichmann said on the call.

As a source of coverage, UnitedHealth is almost as large as Medicare itself. It provides health-insurance services to 49.7 million people, and last year recorded revenue of $226.2 billion. Along with insurance, it operates physician practices, sells consulting and data services, and administers drug benefits. It also covers millions of people in private-sector versions of Medicare and Medicaid.

While UnitedHealth had kept a low profile, there are signs it was already becoming a target before Wichmann's remarks Tuesday.

Last week, Senator Bernie Sanders of Vermont, who is contending for the Democratic presidential nomination, discussed his support of Medicare for All at Fox News town hall in Bethlehem, Pennsylvania, on Monday night. Fox anchor Bret Baier asked the audience at the event to raise their hands if they had private health insurance from an employer.

"Now of those, how many are willing to transition to what the senator says, a government-run system?" Baier asked the crowd. There were cheers in the room as people raised their hands, and afterward Sanders posted a clip from the event, tweeting "raise your hand if you're sick and tired of your private health insurance company."

Last week, Sanders specifically called out UnitedHealth, saying in an April 12 tweet "your greed is going to end."

Sanders specifically referenced Steve Nelson, who is chief executive of UnitedHealthcare, the company's insurance division. Sanders cited a Washington Post story about remarks Nelson made at a company meeting.

According to the Post, Nelson answered a question from an employee about the insurer's role in the political discussion, saying, "the last thing you want to do is become the poster child during the presidential campaign."

A spokesman for the company said UnitedHealth has long supported the expansion of health care coverage.

—With assistance from Tatiana Darie.

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