Morningstar - Q1 2021 - 7

Letter From the Editor

Healthcare Wins

Jerry Kerns

As soon as moderate Democrats coalesced
around the candidacy of Joe Biden in early 2020,
ending the chances of Bernie Sanders
and Elizabeth Warren capturing the Democratic
nomination for president, U.S. healthcare
companies found themselves in a comfortable
no-lose situation during the election season. The
sector prospered under Donald Trump's
administration, and there was no reason to believe
that wouldn't continue in a second term.
Unlike Sanders and Warren, Biden isn't a fan of
the biggest existential threat to the industry-
" Medicare for All. " Instead, he favors a continuation
of the public/private partnership that
has lucratively run the U.S. healthcare system
for decades.
So, when Biden beat Trump in November and
Democrats won an unlikely, albeit slim, majority
in the Senate in January, the outlook for the
industry remained positive. As Morningstar equity
analyst Julie Utterback details in our cover
article, " Business as Usual, " Page 29, our analysts
have not changed the fair value estimates
or moat ratings of any healthcare company they
cover as a result of the Democratic sweep.

The healthcare issue that's been top of mind for
most people, however, is COVID-19. Since
the beginning of the pandemic, Morningstar
equity strategist Karen Andersen has been
providing investors with in-depth research on the
progression of COVID-19 and the development
of vaccines. Her work has been the basis
of analysts' projections in other sectors of the
economy on how quickly businesses will be able
to recover. From the get-go, Andersen was
bullish on vaccines being developed, approved,
and administered to the public within a
year. She was spot on. States began vaccinating
people with the Pfizer PFE/BioNTech BNTX
and Moderna MRNA shots in December.
In " Herd Immunity in Sight, " Page 35, Andersen
looks at how quickly the United States and
other countries can reach the threshold of herd
immunity-the point at which the virus
essentially runs out of people to infect. If all goes
right, she thinks the U.S. can reach the threshold
in May. Let's hope.

In her article, Utterback argues that the most
dramatic change in healthcare we're likely
to see in the near term actually had occurred a
decade ago: the passage of the Affordable Care
Act. Republicans have fought to pare back
the ACA ever since it was enacted in 2010, and
Utterback thinks the Biden administration's focus
will be to shore it up. Biden is expected to quickly
reverse Trump's executive orders intended to
hinder the law and then work on strengthening it
to reach his goal of covering 97% of Americans
with affordable health insurance. The sector most
affected will be insurance, of course: Biden's
plan could get more people into private insurance
plans, but if public options are expanded, that may
mean slightly fewer private participants. Other
healthcare sectors will feel moderate effects, if any.

morningstar.com/lp/magazine

7
http://www.morningstar.com/lp/magazine
Morningstar - Q1 2021

Table of Contents for the Digital Edition of Morningstar - Q1 2021
