Fisher Investments Flashcards
What is the Beta vs the S&P 500 of the Healthcare Sector?
Around .7, the lowest of all industry verticals
What is a “managed health” company?
A health insurance firm
What are the two broad GICS groups for Health Care?
(i) pharmaceuticals, biotechnology & life sciences (anything related to prescription drugs but not pharmacy benefit managers and ~75% of entire sector) and
(ii) Health Care and Equipment Services - med device/health insurance/ hospitals /etc
What % of the All Country World Index does Healthcare account for?
Around 9-10%
What are the 5 general characteristics of Healthcare equities?
1- less economically sensitive and less volatile than broad market due to inelastic product demand
2-heavy government involvement
3-large, global market
4-mostly characterized by big cap, growth companies
5-dominated by US firms
What are the two general reasons for why Healthcare costs so much in the United States?
(1) demand for services exceeds supply of services
(2) the US system is massively inefficient
What are the 5 primary demand drivers of the US Healthcare consumption?
(1) imperfect information - patients don’t know cost of products/services since its usually paid for by someone else
(2) Asymmetry - providers have far more knowledge of products/pricing than customers, leading to incentives to sell more products than necessary
(3) preventable diseases - caused by smoking/obesity
(4) defensive medicine - running excessive tests to limit legal liability
(5) external demand - selling to foreign governments comes with price caps leading US patients to get overcharged
What is a “managed care plan”?
Insurance plan that tries to manage health costs by arranging a network of health providers at discounted rates in exchange for giving providers a larger customer base (Medicare and private plans with copay are an example)
What is an HMO?
Health Maintenance Organization - A private insurance plan where a patient selects a primary care physician from a designated network and that doctor can then refer a patient to a specialist. Out of network physicans are generally not covered. Co-pays for services are made
-Least expensive plans and have capitated contracts with providers
What is a capitated contract?
An agreement between an insurer and providers, under which they pay a fixed monthly fee for services, regardless of how often a patient sees a doctor
-a feature of an HMO
What is a PPO?
Preferred Provider Organization - A private insurance plan where members can select doctors in or out of network, but fees are higher for out-of-network doctors.
-no co-pays; have a $ deductible and % coinsurance (PPO pays 80% going forward and patient pays 20% up to a stated maximum out of pocket expense)
What is a POS plan?
A hybrid of HMOs and PPOs where a network primary care physician is chosen as a point-of-service contact and the doctor may refer to the patient to out-of-network specialists (at higher fees to patients)
What is a Consumer Directed Plan?
A plan with a high initial deductible (a few thousand dollars) after which expenses are funded by the insurer
-high deductible makes insured have more skin in the game and can be funded with HSA
What is Medicare? How is it financed?
- Medicare is a government health insurance program for disabled persons and people age 65 or over
- It is financed by payroll taxes, general revenues, member premiums and taxes on social security benefits
What is CMS?
The Center for Medicare and Medicaid Services, which runs the programs
What is Medicaid? How is it financed?
- Medicaid is a government health insurance program that provides benefits to low income people
- its funded by general revenues from federal and state governments on an an as-needed basis but managed by the states
What is VHA?
The Veterans Health Administration
What is SCHIP?
- The State Children’s Health Insurance Program
- provides coverage to uninsured children whose family incomes are not low enough to qualify for Medicaid
What is HHS?
- The US Department of Health and Human Services
- responsible for health care regulation and providing health care to the less fortunate
What are the 4 primary types of U.S. private health insurance plans?
- Health Maintenance Organization (HMO)
- Preferred provider organization (PPO)
- Point of Service
- Consumer-directed plans
What does “universal health care coverage” loosely mean?
That all residents of a nation have access to health care coverage
What is a single payer system?
when the government pays for health care whether it’s delivered through a private system, a public system, or one in which public and private compete
