As investors got washed through a cycle of volatility in October, one of the sectors that could see ample interest as growth-fueled tech continues to come out of favor is health care and with healthcare issues abound in Tuesday’s midterm elections, leveraged ETF plays like the Direxion Daily Healthcare Bull 3X ETF (NYSEArca: CURE) could move following the election results.
CURE seeks daily investment results equal to 300% of the daily performance of the Health Care Select Sector Index. The index CURE tracks includes domestic companies from the healthcare sector, which includes the following industries: pharmaceuticals; health care equipment and supplies; health care providers and services; biotechnology; life sciences tools and services; and health care technology.
According to an article in Reuters, health care has been in the forefront in the major sectors of the S&P 500 for the third quarter, rising as much as 13%. Prior to that, tech and consumer discretionary have been in pole position, but as investors begin to cycle out of growth, they could be looking to more value-oriented sectors like health care to lead them through the rest of 2018, into 2019 and beyond.
“Healthcare really is giving investors a lot of bang for its buck right now,” said Martin Jarzebowski, healthcare sector head at Federated Investors.
Health care won’t be immune to the hot-button topics present on this year’s midterm election ballots as voters head to the polls to decide on which healthcare issues matter the most to them. As such, this could change the landscape of healthcare companies that operate within the capital markets.
Related: Post-Election Day Tests Linger for Healthcare ETFs
Drug Prices
U.S. President Donald Trump has already lambasted the pharmaceutical industry for the rising costs associated with prescription drugs, notably his criticism of pharmaceutical giant Pfizer. This could give pause to other drug companies when it comes to further price raising.
Most political pundits and analysts alike are expecting the Democrats to take control of the House of Representatives and the Republicans to maintain control of the Senate, allowing for more political gridlock. This means that any efforts to reign control of drug pricing by President Trump would face further scrutiny.
“We expect that the anticipated mixed GOP-controlled Senate/Democratic House make-up of Congress will maintain the political stalemate status quo, making further implementation of Trump’s drug pricing blueprint more challenging, and this would be net positive for the sector,” RBC Capital Markets biotech analyst Brian Abrahams wrote in a note Monday.
Expansion of Medicaid
Idaho, Nebraska and Utah all have proposed legislation on their respective ballots to address increased access to their Medicaid programs for low-income individuals–a measure already taken on by 34 other states as part of the Affordable Care Act.
Healthcare analysts at Avalere posit that increasing Medicaid accessibility would translate to 325,000 more people having access to health care they wouldn’t otherwise qualify for.
“The popularity of Medicaid expansion has risen, particularly in states with high rates of uninsured,” said Chris Sloan, director at Avalere. “Although state legislatures can restrict the governor’s authority to expand Medicaid unilaterally in certain states, changing voter preferences around expansion may put pressure on legislators, many of whom also face reelection in November.”
Limited Payments to Dialysis Providers
In California, a heated debate is occurring over the payment to dialysis providers, which can prove costly. Medicare estimates show that it nationally spends $34 billion a year on dialysis treatment.
Should this proposition pass, it could mean a loss of $450 million for dialysis care provider DaVita Inc and other similar legislation in other states could follow. As such, dialysis providers are diametrically opposed to the passing of this California bill.
Because DaVita operates within a market space where there are not many competitors, they can charge exorbitant prices for a life-saving service.
“They don’t really have many rivals, and they perform a necessary, lifesaving service,” said Leemore Dafny, a professor of business administration at Harvard Business School. “If you’re producing something people want to buy and you’re the only one making it, people are going to buy it.”
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