On the campaign trail Obama said that he would if elected cut the overpayments to Medicare Advantage plans by about $15bn a year. Once elected he confirmed that he would.
Stupid me thought that this would mean people on Wall Street would listen and that this freely available information would have been priced into the stocks. After all Bob Laszewski and I have been asking each other about this for quite some time!
So did I spend the last few weeks building up a big short position in the for-profit health insurers? No, this news was well known and already reflected in the stock price.
And when Obama’s budget came out today and essentially showed that it would cut Medicare payments by about the same amount he said he would (OK the cut proposed is $17.5 bn not $15bn but close enough). So did the stocks stay flat? Err… look at the chart
They’re all off 10% today alone, and Humana, one of the biggest Medicare players is off 20% today and 40% for the week! Were you short? Or were you too clever—just like me?