Welcome to Thoughts on the market.

I'm Michael Zizis, head of public policy and municipal strategy for Morgan Stanley.

Along with my colleagues bringing you a variety of perspectives,

I'll be talking about the intersection between U.S. public policy and

financial markets. It's Wednesday, July 10th, at 9 a.m. Eastern. This week we're

looking ahead to the 2020 election and what will likely be one of its

defining issues, health care reform. With Democrats 2018 midterm gains tied, at least in part,

to campaigning heavily on the issue,

and presidential candidates campaigning on a variety of ambitious reform plans,

investors have started asking what proposed changes could mean for the economy and the markets.

Fortunately, we have a few observations.

First, let's talk about the fundamental impacts of policy change to the most affected sectors,

healthcare service providers, namely managed care organizations or

MCOs and hospitals.

For MCOs, Medicare for All would be an obvious problem as that policy seeks to largely remove

private insurance from the market.

But that's very unlikely for a variety of political and procedural reasons in our view.

Other proposals, such as Medicare X, Medicare 50, and Medicare for America,

do not present the same level of risk.

However, we argue they would grow the public insurance market

and probably create margin pressure for companies.

For the MCOs, that means the stocks of companies with larger, more diversified businesses

...