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Markets Salivate at Prospect of Healthcare Reform's Defeat

The reaction of the financial markets to the prospect of an upset in the Massachusetts Senate race showed that investors would very much like to see healthcare reform defeated. One might even say that investors are anti-social: whatever is good for the country is bad for them, and vice versa. We clearly saw that earlier as the same banks that precipitated the financial crisis racked up big profits as a result of investors' return to stocks. As Main Street swooned, Wall Street had one of its biggest years ever, with buoyant bonuses to boot. And now, as Democrats shoot themselves in the foot once again in Massachusetts, investors are pumping up healthcare stocks in the hope that reform will fail and that the free market will continue to push up health costs-and profits for the healthcare industry.

Partly because of gains in healthcare stocks, the Dow Jones Average on Jan. 19 jumped 116 points to a 15-month high. Big gainers include Aetna, which rose $1.30, or 4.2 percent, to $32.66; UnitedHealth Group, which leaped $1.38, or 4.1 percent, to $35.13; Pfizer, which advanced 51 cents, or 2.6 percent, to $20; Merck, up $1.15, or 2.91 percent, to $40.62; and Humana, which vaulted $3.43, or 7.07 percent, to $51.94 at the bell.

It's obvious why insurance companies will benefit from the victory of Scott Brown over Martha Coakley in the Massachusetts race, which will provide the 41st Senate vote to block reform. Humana, in particular, stands to gain if reform goes down to defeat, because cuts in Medicare Advantage would be postponed. The pharmaceutical companies, meanwhile, are being pressured to fork over more to close the "doughnut hole" in seniors' drug plans; and, in a reformist environment, Medicare might gain the right to bargain on drug prices.

My favorite quote of the day is this one from Carmine Grigoli, chief U.S. strategist at Mizuho Securities USA in New York: "A Republican win [in Massachusetts] would be a positive for the markets since it would mean increased potential for gridlock in Washington. This is probably especially true now, given the very large social agenda of the Obama administration."

In other words, the best thing for investors is business as usual (unless, of course, they cause a financial panic). Of course, this doesn't always work out so well for patients. For example, the financial incentives in the system-coupled with human greed-could have led to the recently reported situation at St. Joseph Medical Center in Towson, MD, which has notified hundreds of patients that they may have received stents unnecessarily at the hospital. Reform would begin to change those incentives.

Another aspect of reform is comparative effectiveness research. If we'd been doing this all along, we might have known years ago what a study in the Archives of Surgery just told us: that many inflamed appendices would never burst and are removed unnecessarily. While it's not known how many are in this category, appendectomies are the most common surgical procedure in the U.S.

And finally, let's not forget that 45,000 Americans die each year as a result of not having healthcare insurance. When the Republicans tell us that we can't afford to expand coverage, our answer should be that we can't afford not to. As President Obama is fond of saying, it's who we are.