Congress has a hot topic on its hands this summer. A proposed immigration reform bill is making its way through the halls of Capitol Hill. While lawmakers argue the pros and cons of the legislation on immigration, the bill also would make a major impact on health care in the U.S.
According to the Congressional Budget Office, around 8 million unauthorized residents would gain legal status and 10.4 million additional residents would be added to the U.S. by 2023. The CBO says that federal spending will increase by $262 billion over the next decade due largely to refundable tax credits and higher health care spending.
That higher health care spending goes primarily to two areas: Obamacare and Medicaid (including the Children’s Health Insurance Program, or CHIP). Additional spending on Obamacare health insurance exchange subsidies will amount to $82.3 billion through 2023, according to the CBO, with another $5 billion hit from lower revenue. Medicaid and CHIP will require $29.3 billion added spending during the same period with the proposed immigration reform.
Medicare spending would only increase by $0.8 billion, but this highlights a larger issue. The CBO only scores the budgetary impact for the first 10 years. Most unauthorized immigrants wouldn’t qualify for Medicare until many years from now — well beyond the CBO’s cost calculation time frame.
The CBO did take a stab at going out further in time, with projected increased health care spending of around $470 billion in the 10-year period ending in 2033. However, according to the Center for Immigration Studies, the average age of unauthorized immigrants was around 42 in 2010. Newly incoming immigrants tend to be much younger, with an average age of less than 30. This means that even estimating through 2033 doesn’t give a good picture of the ultimate health care costs for the proposed bill.
We should note that the CBO expects increased revenue will exceed the higher costs incurred. Through 2023, around $459 billion of higher revenue is expected resulting from additional taxes paid by legalized residents and new immigrants. These higher taxes assume higher employment levels, according to the CBO, “because the larger population would boost demand for goods and services and, in turn, the demand for labor.”
One clearly positive impact from the proposed immigration bill would be in enabling more physicians to remain in the U.S. In particular, non-resident physicians who work in areas that have a shortage of health care professionals or at Veterans Administration hospitals will have an easier path to staying in the U.S. with the current immigration reform legislation.
I call this clearly positive because the U.S. faces a physician shortage. The New York Times reported last year that the nation will have nearly 63,000 fewer doctors than needed by 2015, with that number doubling by 2024. A recent research study led by Dr. Candace Chen of George Washington University confirmed that critical physician shortages loom ahead, especially in rural areas.
Current doctors echo these concerns. A 2013 Deloitte survey found that nearly three-quarters of physicians think that fewer individuals will consider a career in medicine. 62% of respondents said that more physicians will retire early because of changes in the practice of medicine.
More investment ideas?
As always, The Motley Fool looks for an investing angle with any story. How can investors take action based on immigration reform’s potential impact on health care?
The best approach would be one that should be successful regardless of whether the bill ultimately becomes law. Focusing on investment alternatives that address the physician shortage issue raised in the immigration reform debate seems to meet that criteria. Even if more physicians from other countries are allowed to stay in the U.S., it won’t be enough to fully solve the problem.
With this in mind, telemedicine offers potential to help by enabling physicians to provide care for patients in other geographical areas. Companies that facilitate effective use of telemedicine should do well over the long run. Cisco Systems, Inc. (NASDAQ:CSCO) looks like one good pick. Technology research firm Technavio touts Cisco as one of the key leaders in telemedicine video conferencing. The firm expects the telemedicine video telecommunications market to grow 18% annually over the next few years. Cisco Systems, Inc. (NASDAQ:CSCO)’s Telepresence video conferencing product should rack up big gains if those projections prove true.
Neither stock appears too expensive right now. Cisco Systems, Inc. (NASDAQ:CSCO) has a forward price-to-earnings ratio of less than 12, while QUALCOMM, Inc. (NASDAQ:QCOM)’s forward multiple stands a little below 13. However, QUALCOMM, Inc. (NASDAQ:QCOM) seems to have the better overall growth opportunities, so it could be the better value between the two.
Both stocks also offer decent dividend yields. Cisco Systems, Inc. (NASDAQ:CSCO)’s dividend yield stands at 2.8%, while QUALCOMM, Inc. (NASDAQ:QCOM) isn’t too far behind with a 2.3% yield.
Congress must deal with immigration reform this summer. In the meantime, investors can buy two stocks that help address one of the areas that immigration reform hopes to tackle. Hot topic, hot stocks — I say go with the stocks.
The article Immigration Reform’s Big Impact on Health Care originally appeared on Fool.com is written by Keith Speights.
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