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Published: August 17, 2009
Government spending
cuts would utterly devastate most companies that rely on Uncle
Sam for business. But there's one company that would almost
certainly earn hundreds of millions of dollars more if
the federal government would make a very specific spending cut,
one that lawmakers propose nearly every year.
As the national debate about health care continues, I've spent
hundreds of hours researching companies that would be affected
by the proposal currently before Congress. And in the process, I
found something I've never seen before. It's a unique situation
involving one of the most popular and successful government
programs on the planet -- Medicare.
Medicare is the largest customer in the $2.4 trillion-a-year
health care market. And for one treatment -- and one only --
Medicare is the only purchaser. If you need this critical,
life-saving treatment, you'll be enrolled in Medicare regardless
of your age.
There's one catch. If you're under 65 and are still working,
then your health insurance will be responsible for most of the
treatment expenses for the first 30 months of your care. (This
treatment is typically required for the remainder of the
patient's life, unless an organ transplant is performed.)
The treatment is dialysis.
Though Uncle Sam pays for most of the dialysis treatments in the
United States, dialysis providers don't make much money from
Medicare. They basically break even on every treatment Medicare
pays for. Instead, profits in this industry come from the
treatments that private insurance pays for during patients'
initial 30 months of care.
Just how much money do dialysis providers make on treatments
paid for by insurance providers? Well, in some cases, insurance
companies pay ten times what Medicare pays -- even though
the treatments are exactly the same. (I swear I'm not making
this stuff up.)
The bottom line is
that the more private-insurance patients a company has -- or the
longer it can bill those insurance companies -- the more profits
the dialysis providers will make.
Now, surely this is one program that no one would ever propose
cutting, right? But don't think it can't happen. It does. During
most budget cycles, a handful of powerful politicians regularly
propose this type of budget cut. Specifically, they put forward
that the government could save money by decreasing the dialysis
benefit. In 2007, for instance, the House wanted to ax $500
million from dialysis funding -- a cut that could have meant
billions in additional profits for dialysis providers.
It happened again the following year. President Bush's 2009
budget sought to extend the period during which insurance must
pay for dialysis treatments (before Medicare takes over) from 30
months to 60 months for large employers. The move would have
saved Medicare $1.1 billion over five years, but it would have
meant many times that in additional revenue for dialysis
providers.
Remember, all the treatments are exactly the same, but the fewer
that Medicare pays for -- and the more that private insurers pay
for -- the more profits dialysis providers will generate.
In the latest issue of my premium newsletter --
Government-Driven Investing -- I explain the dialysis benefit in
detail. I also give my readers complete details on the one stock
that would benefit the most from this type of government
spending cut, and I show them precisely how to make money from
it.
In addition to my top dialysis pick, I've also identified two
other health-care companies that are poised to do well no matter
what the outcome of the health-care debate on Capitol Hill.
Click here to learn more.
-- Andy Obermueller
Editor
Government-Driven Investing
P.S. One of the best ways to profit in today's boom-and-bust
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Remember, every time the government spends a buck or passes a
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