Trader Talk

Published: Thursday, 18 Jun 2009 | 3:06 PM ET

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Healthcare stocks rebound, so is significant reform dead? Healthcare stocks have been moving off their lows since Tuesday and are up significantly today after moving almost straight down in June.

What happened? The Congressional Budget Office (CBO) said earlier in the week that Senator Kennedy's health care reform bill could cost at least $1 trillion and only cover 16 million people, and that EXCLUDES certain key components like expanding Medicaid.

Ouch. Even the Democrats aren't going for that.

The Senate Finance Committee was expected to begin markup of their healthcare bill this week, but that now will be put off until after July 4th. Chairman Max Baucus indicated he wants bipartisan agreement on the outline of the bill before markup begins.

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The search is on for something less expensive. Based on discussions with traders, the Street is beginning to conclude that:

1) A Medicare-linked, large-scale government controlled public insurance plan is likely dead. The main argument: that the main government-run healthcare program, Medicare, is too expensive and would further increase medical costs.

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There's no doubt the House version will include a heavy dose of public involvement, but the Street believes it isn't going to happen.

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2) Taxation of employee health benefits is still a possibility, but the chances are much less likely and the taxation, if it does occur, is likely to be light.

What does that leave? It's likely some reform will pass--reformers have a persuasive case that it is a moral imperative to find insurance for the over 40 million Americans who have no healthcare.

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Look for efforts to reduce existing costs to help pay for some reform. The Finance Committee is likely to support Medicare Advantage (private plan) competitive bidding which might save $100 million or more.

But the fear that a massive government program would blow out all private health insurance companies is now fading fast.

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