[this is the entire text of a research note from Merrill Lynch this morning]

Quant Analysis & Strat: Thought for the Day

Analyst: Richard Bernstein

Something to Watch: Health Care Becomes a “Competitive Disadvantage”?

We’ve recently noticed several corporations complain that they are at a competitive disadvantage operating in the US because of health care costs. These firms claim that it is to their advantage to employ workers outside the US or to cut US benefits because health care systems in many other countries are nationalized. Thus, these corporations believe they can become more competitive by operating outside the US because they do not have the semi-fixed cost of US private sector health care benefits.

This is an interesting twist to the health care debate, and should be watched closely as next year’s mid-term elections approach. The political environment might force both sides of the aisle to suggest programs to counteract that competitive disadvantage and save/create jobs in the US.

We find this somewhat disconcerting from an investment strategy point of view. This could be a risk to our highlighted, but admittedly hardly out-of-consensus, overweight of the Health Care sector.