Investors Are Dumping Healthcare Stocks, Scared Of Bernie’s Medicare For All

Written by Ann Brown
medicare for all
Sen. Bernie Sanders, I-Vt., introduces the Medicare for All Act of 2019, on Capitol Hill in Washington, Wednesday, April 10, 2019. (AP Photo/Manuel Balce Ceneta)

The concept of Medicare for All is shaking up a lot of people up. And it seems to be causing havoc on health-care stocks.

Last week, the XLV health-care sector ETF dropped more than 4 percent, marking its worst week of the year and sending the group negative for 2019.

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The XLV ETF includes companies Johnson & Johnson and Pfizer. On April 25th, it ended the trading day just below $86. This move to $74 marks a 14 percent downsides.

“This is 100 percent a response to the possibility of Medicare for All becoming a reality which would crush the sector,” Mark Tepper, president and CEO of Strategic Wealth Partners, told CNBC.

According to Craig Johnson, chief market technician at Piper Jaffray, this does not look good for the entire healthcare sector.

“No question that the health-care sector has caught a cold,” said Johnson on CNBC’s “Trading Nation.” “The relative underperformance of about 950 basis points versus the S&P has been very painful over the last 30 days.”

And it all could be because of the growing discussion about Medicare for All.

Many of the Democratic presidential candidates have express support of Medicare for All, including Bernie Sanders, Elizabeth Warren, and Kamala Harris. And the most vocal about it has been Sanders.

“There are several Medicare for All proposals circulating in Congress, some of which would basically abolish private insurance while others would simply create a public option and leave private plans largely in place,” CNBC reported.

Some in the healthcare industry say this could doom them. UnitedHealth CEO David Wichmann said that a Medicare-style single-payer program would cause a “wholesale disruption” in health care.

“Shares of UnitedHealth, the country’s largest health insurance companies, are slumping after CEO David Wichmann weighed in on the ambitious public health insurance plan backed by Sen. Bernie Sanders and several other Democratic presidential hopefuls as a solution to soaring U.S. medical costs,” CBS reported.

“The wholesale disruption of American health care being discussed in some of these proposals would surely jeopardize the relationship people have with their doctors, destabilize the nation’s health system and limit the ability of clinicians to practice medicine at their best,” Wichmann told Wall Street analysts. “And the inherent cost burden would surely have a severe impact on the economy and jobs all without fundamentally increasing access to care.”

But Tepper said the sector needs to have patience, that this turndown will turn around and healthcare stocks will be favorable.

“Long-term I like them. Quite frankly this is all political. This is 100 percent a response to the possibility of Medicare for All becoming a reality which would crush the sector,” Tepper said on “Trading Nation.”  

He added: “I don’t think Medicare for All happens so I think there’s a huge opportunity here. In the short run I do think there’s political headwinds but as a long-term investor I think you have the opportunity to get in at a good price point now.”