Betting On Companies That Tame Health Care Costs

It isn't often that macroeconomists give stock market advice, perhaps for good reason. Not so A. Gary Shilling, head of his own economic-forecasting and investment-advisory firm. In a recent report, Shilling and his colleagues recommend investing in the health care industry, specifically in companies that can capitalize on bringing escalating health care costs under control.

U. S. health expenditures are up from 6% of GNP in the early 1960s to nearly 12% in 1990. It has gotten so bad that national health insurance proposals are getting a serious hearing in Washington. But any fundamental reform is years away, the firm argues. In the meantime, the system is evolving away from one with emphasis on high-tech medicine, with little regard to cost, to one that offers basic care to individuals at a stable cost. To help investors make money off cost-consciousness, the Shilling report highlights a few efficient hospital-management companies, such as Humana; outpatient-service providers such as Baxter International; and those companies, such as Novacare, that offer specialized rehabilitation services.

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