Saturday, June 23, 2012

Life After Obamacare

All eyes are now on the US Supreme Court, which is soon to hand down a decision on the constitutionality of "Obamacare", the health care reform law passed by the Obama Administration back in 2010 after a year. The vast majority of people expect the US Supreme Court to hand down its decision some time in the last days of June 2012, yet the ruling could, in theory, come any time between now and November 2012.

According to Intrade, there is a 77% chance that the mandate will be struck down by the high court. However, the probability that the rest of the law will remain intact will depend heavily on when the ruling is handed down as a couple of charts of the S&P 500 will show:

Scenario 1 -- Health Care ruling handed down in June 2012 (Optimistic scenario)

Bear market rallies end on good news, and a Minor degree bear market rally should end on great news. We are on the verge of completing Minor wave B up (Oct 2011 - June 2012) of Intermediate wave (W) down, so a Minor degree bear market rally is about to wrap up if nor already completed.

A scenario where the mandate gets struck down, but the rest of "Obamacare" is left intact would be seen as great news by the American people, especially those that have already benefited from the new law. A scenario where a ruling in favor of "Obamacare" takes place as Minor wave B up reaches completion would work very well for a Minor degree bear market rally ending on great news.

Scenario 2 -- Health care ruling handed down in October / November 2012 (Pessimistic Scenario)

There has been a lot of debate about what would happen if the US Supreme Court strikes down the entire law. The issue has been debated on CNBC, Yahoo news, and Huffington Post, as well as countless other places. One thing that is certain is that if the entire law is struck down, the fallout would be massive as millions, if not tens of millions of Americans that have already benefited from the law will suddenly have the rug pulled out from under them. Given the bearish social mood that is in play now, this is a recipe for a backlash and even a full blown panic. There are already predictions of a full blown panic if the entire law is struck down as outlined in the article, making the case that the panic could hit doctors and providers as well.

There are already a number of economists and analysts that see striking down the entire law as bullish for the stock market. If the entire law is struck down, the ruling would most likely be handed down in the October / November 2012 time frame when the center of Minor wave C down is in play with a bearish Intermediate degree "point of recognition" reached shortly afterwards. The result, of course, would be the "Panic of 2012" as a massive backlash unfolds in the aftermath of the ruling.

No one knows when the US Supreme Court will hand down its ruling on the constitutionality of "Obamacare". Although the outcome of the ruling will certainly matter for the millions of Americans that are benefiting from the law in the short term and the intermediate term, the outcome won't matter on the longer term. The health care in the United States is on an unsustainable path with an insurance death spiral currently unfolding. As I demonstrated here and here, it is only a matter of time before the entire health care system collapses with the collapse most likely to take place between 2015 and 2020, and the collapse will happen regardless of which way the US Supreme Court rules on "Obamacare".


  1. You do realize, don't you, that most people hate this law, and doctors, by and large, hate it even more. So, I am a little puzzled by your analysis.

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