Five Must-Knows About Your Most Important Asset

Our 'late-summer series'... Five must-knows about your most important asset... Our Thomas Carroll explains... Don't hate your insurance company – invest in it... The 'Platinum Age of Health Care'... Don't miss the details of the coming retirement 'shock'...

Editor's note: Over the next few days, we're taking a break from our usual Digest fare to bring you a special "late-summer series" of essays, highlighting the most recent investment opportunities and ideas a few of our editors are excited about.

First up is an idea from our colleague Thomas Carroll, a longtime expert in the health care sector...

I (Corey McLaughlin) don't know anyone who knows the ins and outs of our complicated health care system better than Thomas. Fortune magazine once ranked him as the top health care analyst in the U.S.

Thomas has long described health as folks' "most important asset" and says we should consider investing in it, just like our portfolios. In today's essay, he explains why, and also illustrates the opportunities to profit from a sector that makes up 20% of the U.S. economy...

Today, more than ever, please accept this simple fact...

Your health is your most important asset, and it needs to be managed just like anything else.

That doesn't just mean eating right, exercising, and not smoking or drinking excessively. It also means understanding the rules of the playing field.

You need to appreciate the structure of our massively complicated system...

Why? Because it's the one part of the economy in which we are all customers.

The "product" you must purchase could mean the difference between living with a chronic illness or understanding how to fix yourself. It could mean personal bankruptcy... or knowing how to avoid irrational costs. Understanding it may even mean the difference between life and death.

That's why back in February 2020, I (Thomas Carroll) spoke during our Stansberry Research Immersion Week at the Canyon Ranch Wellness Resort in Tucson, Arizona...

The presentation was one I've given many times: "The Five Things to Do Today to Make You a Better Health Care Consumer." And it's always a crowd-pleaser. That's not because I'm a great speaker. It's because the information is so valuable... It sheds light on a topic that most people just don't understand.

Today, I'll share the tips from that presentation...

No. 1: Understand the health care dollar...

Despite attending graduate school at the Johns Hopkins Bloomberg School of Public Health, I'm not a clinician.

That said, my entire career has been devoted to studying the health care system, educating investors, and investing my own capital into innovative startups.

In my experience, when most people are thrust into the health care system, they have little to no knowledge of what to do or how much it's going to cost... It's the same whether they're going in for an elective procedure, abruptly suffering an accident or injury, or battling a disease like a cancer diagnosis.

We all need a better understanding of where our dollars go. The average family of four spent more than $28,000 on health care in 2019 – and that was before COVID-19. Where does it go? Insurance companies? Drugmakers? Doctors?

You might be surprised to hear the biggest piece of the health care pie: hospitals.

Between inpatient and outpatient care, these important institutions account for about 50% of total health care spending every year. If we don't address this major driver of costs, we'll struggle to lower annual health care inflation.

No. 2: Stay out of the hospital unless absolutely necessary...

Besides being expensive, hospitals are also dangerous places to be.

If you are admitted to a hospital, I guarantee your final bill will meet and likely exceed whatever deductible your insurance carries (regardless of services rendered). If you're uninsured, expect to pay full retail price – thousands more than what an insurance company would have to pay.

But why are they dangerous? Simple – hospitals are where all the sickest people are.

Despite best efforts, it's difficult to keep bacteria and viruses at bay within hospitals.

Hospital-acquired infections afflict 1.7 million people annually and kill 99,000 of them. That is almost a 6% mortality rate.

Moreover, physicians and other clinicians are humans – they make mistakes. A 2016 study found that every year, between 250,000 and 440,000 deaths are directly related to a provider mistake. This makes physician error the third-leading cause of death in the U.S.

And the pandemic has layered more risk on top of all this.

I know I'm being pretty hard on hospitals. Look, sometimes you really do need to visit the emergency room. But it's a good idea to avoid the hospital whenever possible.

In particular, I argue against hospital use for primary-care services. Urgent-care facilities can handle many issues if you don't have a regular doctor... And, of course, this is all the more reason to take preventive care seriously.

No. 3: So you're 65 – what's this Medicare thing?...

Once you reach the glorious age of 65, you become eligible for Medicare.

This is the health care program you've paid for all your life through taxes. Now you get to collect the benefits. People who reach age 65 and become eligible for Medicare can expect to live for 21 more years.

Medicare will cover about 65% of your expected health care spending during those 21 years. The other 35% is on you.

How much will that be?

You'd better know – because it's a lot. It needs to be part of your retirement planning. If not, your plans may need changes when it's already too late.

On average, people on Medicare for those 21 expected years will spend about $200,000 of their own money on health care.

An alternative is to consider the Medicare Advantage ("MA") program. This is a successful partnership between the government and private-sector health care companies.

This is a way to get all your Medicare benefits plus others not included in Medicare for much less.

Don't take my word for it. About 40% of Medicare recipients get their benefits this way today. And that level has been rising for the last 10 years.

On average, using an MA plan will cost $130,000 out of your pocket during those 21 years. Wouldn't you rather spend the remaining $70,000 on something else?

No. 4: Don't be spooked by health care reform...

More and more, health care is becoming a major deciding factor in elections...

The COVID-19 pandemic has crystallized its importance.

While the U.S. health system needs reform, nothing on the horizon suggests major changes. That's good for investors, as uncertainty about the government changing the rules would drag on health care stocks. There will, however, be some tweaks.

What do I expect? Overall, the most likely scenario will march the U.S. toward a deeper version of the Affordable Care Act ("ACA").

We'll likely see ideas added to the ACA structure focused on strengthening the health care backbone against future pandemics. (Mark my words – what we're seeing with COVID-19 will happen again.)

I know what you're likely thinking...

But despite being one of the most politicized and polarizing laws ever passed, the ACA is actually a good baseline to start from. Over time, it will be strengthened... Its original problems will be solved.

If supported, the ACA might be a major step toward universal health care delivered by private-sector entrepreneurs.

You might not like the sound of that... But don't worry or get worked up over it. Life is too short.

Instead, keep in mind that reform efforts will take years. They usually lead to a better system over time. And, ultimately, everyone will benefit... especially society as a whole.

No. 5: Don't hate your HMO – invest in it!...

From 1966 to 2016, health insurance premiums rose 10.7% annually, on average. This is more than the S&P 500 Index returned over this time period (9.7%). Wouldn't it be great to somehow profit from this trend?

We can...

You see, health insurers are the middlemen that reflect these cost increases. They are the companies and government agencies that pay the hospitals, doctors, pharmacies, and other care providers.

These companies consolidate all health care spending into a single price paid for all services. Their revenue must grow by the same rate as underlying costs. Otherwise, they'd go out of business.

If health care costs are expected to rise 9% in the coming year, a large health insurer will set its premiums to rise by at least that same amount. Said differently, these companies have a built-in price inflator that has averaged more than 10% for 50 years.

For you small-business owners, wouldn't it be great to raise your prices every year by this amount?

As a health care analyst, this idea was the central focus of my investment thesis for health insurance companies. It has held up for more than 20 years as these companies evolved into the modern-day players they are today.

These stocks have been some of the best-performing investments in health care.

We are currently in what I call the "Platinum Age of Health Care." The pandemic launched new technologies, therapies, and interventions in this field. It also accelerated technologies that already existed – like telemedicine. The private sector will put these new approaches in place in coming years.

If we're all better educated, we can influence how this health care system is shaped. If not, the government will reshape it for us. And that will not be the best possible outcome.

So take the time to learn as much as you can so you can protect your most valuable asset – your health.

It will save you frustration. It may save you a lot of money. It will support your investment goals.

It may also save your life.

Editor's note: If you want to hear more, Thomas recently joined Stansberry Research partner Dr. David "Doc" Eifrig as Doc delivered a rare and brand-new prediction about a retirement "shock" that he expects to hit the U.S. in the decade ahead... and the message is all about health care.

Doc and Thomas talked in depth about how the $4 trillion health care industry is entering a new age... how the pandemic kicked this into gear... and why even the smallest changes we're about to see could be worth billions as money changes hands.

For folks who understand how to navigate this rapidly changing health care system, the rewards can be massive... both personally – to strengthen your "most valuable asset" – and financially, to grow and protect your portfolio.

For one thing, as Thomas wrote, health care stocks have proven to be an incredible hedge against both inflation and recession throughout history. And for another, Tom says not enough people know are paying attention to the sector today, which means opportunity. As he told Doc...

Market implosions are painful, but also a gift. Times like these are when we want to use those rainy-day funds to add to stocks.

And specific to health care... this is a super defensive sector right now, and we are at a renaissance for the sector.

This is a great time to make your portfolio more defensive AND buy some of the best companies that will change our lives for the better.

As an example, Thomas mentions one health care stock that's actually up since the start of the year. Whether you're nearing retirement age or simply looking for investment gains in today's tough environment, you need to hear this message now... Get the details here.

New 52-week highs (as of 8/12/22): Automatic Data Processing (ADP), AutoZone (AZO), Centene (CNC), CTS (CTS), Comfort Systems USA (FIX), W.W. Grainger (GWW), Huntington Ingalls Industries (HII), Cheniere Energy (LNG), ShockWave Medical (SWAV), VICI Properties (VICI), and Waste Management (WM).

In today's mailbag, a subscriber writes in about the latest Friday Digest from our colleague Dan Ferris. Tell us what's on your mind at feedback@stansberryresearch.com.

"The stock market rally after the July inflation report was not because people like 8.5%, but because our POTUS stated unequivocally that there was no inflation. 'ZERO inflation.'

"Evidently some are dumb enough to believe it." – Paid-up subscriber Tom G.

Happy living and investing,

Thomas Carroll
Baltimore, Maryland
August 15, 2022