How to Destroy the Private Sector via Health Care Reform

Now that Obamacare has become the law of the land, be prepared to see the destruction of the private sector. You have likely already heard about the cost to Caterpillar of an additional $100 million in expenses due to Health Care Reform. Below, I am going to illustrate to you the potential impact on another company, Stryker Corporation.

Stryker Corporation is a manufacturer and marketer of orthopedic implants and MedSurg equipment. Under Obamacare, there is going to be a new 2.9% tax on sales for Stryker Corporation.

For the year 2010, Stryker Corp is expected to earn $7.15 billion dollars. The new tax, 2.9% of sales, amounts to $207.3 million dollars. This tax will come directly out of profits, reducing the profitability of Stryker Corporation by over 16%.

Just imagine what this does to a company that is only slightly profitable. They will now be unprofitable. It could drive them into bankruptcy. It could delay their profitability for years to come if they are able to survive.

The skeptics in the crowd are certain to argue that companies such as Stryker Corporation will just raise their prices to cover this expense. So how much would prices need to rise for Stryker to return the same amount of profit to it's shareholders?

Stryker would need to raise the prices on it's devices so that it would generate $8.545 billion dollars in total sales. To do so, they would need to raise prices by 19.51% Perhaps now would be a good time to ask how Obamacare was going to lower costs. If this is the touted “bending of the price curve”, we are all in trouble.

It's my belief that if Stryker Corporation and others would be able to charge higher prices, they would already be doing so.

So the only other option is to believe that shareholders will be forced to accept a drop in income of over 16%. I assure you, investors will find other places to invest. Even if that means they invest elsewhere in the world.

Stryker Corporation may find some ways to reduce the impact. If they are like other companies, employees are likely to suffer first. Fewer employees. Lower salaries. Reduced benefits. And that will just be the beginning. Multiply the effects across the entire industry, and what was once a bright spot for the US economy begins to look very dim.

When investors begin to remove their funds, the innovative products that are developed by Stryker Corporation and others will slow down considerably, eventually coming to a halt. Money for research will dry up. It will be too difficult to be rewarded for the effort and monetary risks taken to bring products to the market.

And that is how you destroy a private sector. When all of those who were supposed to benefit under Obamacare then suffer because there are no products available for them, or the innovative products that seemed so close a few years ago now seem like a fantasy.

That is how you destroy the private sector. Even if it is not on purpose, it will be the result. And to be honest, I cannot believe it is not on purpose any longer.


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