Wall Street’s Casino … of DEATH!

Dun dun duuuuun!

Not surprisingly, the New York Times’ article about the creation of life settlement securities has caused a bit of an uproar within the community of people who can read boring articles about financial arcana and muster a sense of outrage (Naked Capitalism, for one.  As her post title suggests, Yves Smith is seemingly not so bothered about the same issues as Taibbi, predictably, is outraged about).

Nutshell summary of the article:  There are these things called life settlements, where someone takes over, in a manner, someone else’s life insurance policy.  The original policy holder gets cashed out at a reasonable fraction of what the eventual policy payout would be, getting money when they’re above ground to spend it, and the ‘investor’ gets to cash in at the death of the original policy holder.  Especially if the policy holder dies nice and early, which would provide the greatest return on investment.

The financial wizards on Wall Street apparently want a piece of this hot action, and so want to get a vig on every future transaction of this type by creating a market to package and distribute (and, of course, market) these settlements as securities, so more investors can engage in this type of morbid gambling, and I suppose diversify they’re investment at the same time.  All while our surviving major financial institutions collect fees on the securities’ transactions.

Get it?  Good.

It’s a rather gruesome subject but actually does merit some consideration on numerous points that the two posts address.

To start off with the sexy (and, in my mind, most obvious point): Holy crap, we’re betting on when people will die now?

That was Taibbi’s response in one sentence.  Understandable response, and certainly my first reaction to the news of life settlements many months ago.  But aside from the obviously repugnant notion that each stroke and heart attack is accompanied by a dark suit on Wall Street doing a fist pump and shouting “Cha-CHING!”

But there is another party involved: the original policy holder (if I keep calling them that, I’ll forget they’re people… an integral component of financial innovation).  As much as the original policy holder may have intended for his or her life insurance policy to ensure that surviving family would be taken care of and the horrific financial turmoil of our wedding-level-extravagant Western burial ceremonies would be less taxing, shit happens.  If those loved ones who were so much the center of concern in the writing of the policy need money a bit sooner than you need eternal rest, a life settlement sounds pretty damn logical.  I certainly wouldn’t want to feel like my rigorous constitution were keeping my kin in financial distress.

And, of course, there’s the less Oscar-bait-plot and much more entertaining scenario: That your loved ones have grown dickish in your declining years and you’d rather their ecstasy from the news of your passing be tempered by the surprise that the beneficiary of your life insurance is a pension fund or numbered company: A drop kick from beyond the grave, if you will.

And having read Matt Taibbi’s articles since he wrote for the now renamed The Exile, the disappointing Buffalo Beast, Rolling Stone Magazine, and his numerous blogs (Alternet and The Smirking Chimp no longer gets updated since he moved to True/Slant, it seems), and having read even a few of his books, I can safely speak as much as for Taibbi as he could himself:  Taibbi LOVES that dropkick from the grave scenario.

So why the hate, Taibbi?  Beyond that your arch-nemesis, Goldman Sachs, appears to be prominently involved.  Can’t an old man enjoy the the fruits of his misfortune while he still draws breath?

Now the less sexy and more serious issue is brought up by Naked Capitalism (of course).   And really, how many other blogs would skip right past the whole “betting on granny’s weak heart” component and go straight to:

“On a small scale, this is a useful service to people who are in a bind. But the ramp up that Wall Street intends, of marketing the idea more aggressively and securitizing the policies, is likely to put all life insurance customers at a disadvantage.

The big reason is that many policies lapse (as in the owner of the policy fails to make payments. Those lapses are included in current pricing models. Investors will not miss payments, which means insurance providers will pay out more often than in the past on life insurance policies, which in turn means their profits will deteriorate, which means they will raise rates on everyone.”

[Apologies for the big snip today:  I highly recommend reading Yves' post in full, which goes into detail about how Japan's approach to financial innovation differs and the very practical relevance of Japan's system to a large scale proliferation of these securities]

So Yves surprisingly portrays life settlements, especially it’s wider adoption, entirely in the negative.  I do not mean to disagree with her conclusion that there will be higher numbers of life insurance payouts due to the understandably more diligent payment of premiums by investors, but why is this depicted only as a negative for policy holders in general?  I feel Ms. Smith woefully neglects counterpoint that many of those who have perhaps paid premiums for years or decades and allow their policies to lapse due to distraction (being on your death bed, I imagine, could cause that) or due to financial stress (being on your death bed, I imagine, could cause that too) are able to obtain a healthy portion of their eventual payouts.

Due to life settlements’ wider adoption, many more are likely to receive a partial payout rather than pay premiums for years only to fail to maintain coverage at the very end.  Insurance companies will lose profits as a result, and will likely pass on leaner profits into higher premiums, but these profits are a direct transfer to financial institutions and investors (perhaps not a very sympathetic group at the moment), as well as the elderly and their families who find themselves under financial strain.

Is that so awful? [Aside from the whole rooting for death's speedy embrace of a financially desperate stranger thing]

… and the cow goes moo

Health Care Madness IIc ! Rationing and Adjusting the Incentives

The author (not Simon Johnson) of this post at The Baseline Scenario (found via Some Assembly Required) operates on the very logical assumption that rationing exists and will continue to exist, and tries to devise a not-too-complex (it’s health care.  It won’t be simple) modification to our current system, in broad strokes, that would accomplish many of the goals being sought after.

Go check it out.  Lots of jazzy charts to start and a simple proposal to end with.  The assumptions are fair and logical, without being unduly laborious in supporting references, and the outcome itself is palatable to almost all parties.

… and the cow goes moo

Health Care Madness IIb ! A Brief Addendum…

One more thought on my last post:  I wonder how many people who express such fear and contempt over the idea of rationed care are organ donors themselves?

I am, mostly to gain karma points with the Gods above who decide whether or not I should be catapulted from my motorcycle.  And those people on television are old.  I’m young and my body is pretty.  You must agree that allowing to have mine chopped up would be the greater sacrifice.

But how many of these people on TV who express outrage at the idea of granny not getting the health they deserve have signed on to have their corpses cut up to reduce the number of people dying on waiting lists?  Do they care enough to donate chunks of their soon-to-be-rotting corpse?  Or just enough to donate their outrage?

… and the cow goes moo

Healthcare Madness II ! Obama Will Ration My Mama’s Meds!

(this was supposed to be a more frequently-updated series; I’ve been meaning to follow-up this post for quite some time)

One of the interesting, but entirely misrepresented (intentionally at times, due to ignorance and parroting at other times) concepts considered at the center of the debate would be: RATIONING.

Rationing, triage, actively deciding who gets what, or constructing a system that makes the decision based on certain factors is a very interesting and messy topic that no one wants to talk about, but that is what rationing is.  And that is the decision afoot.

The debate, not surprisingly, revolves around the word and the negative connotations to it (ideas of poverty and government distribution) rather than the very complex matter of actual rationing.

The fact is, when someone doesn’t get the exact medical attention that they desire and could benefit them, we are looking at rationing.  And believe it or not, in Barack Obama’s America and even before it, we will have medical rationing.  Sadly, this is a statement so obvious that it rarely merits mention.  Sadder still, some people seem to be unaware of it entirely.

The entry of the term “rationing” in the health care debate has been KILLING me for the past few months, as no one seemed willing to point out the obvious that health care is rationed to a much greater degree now than should any prospective plan including a public option or insurance mandate be enacted.

Thankfully, this very obvious fact is finally making inroads, warranting mention in Jon Stewart’s unwatchable mess-of-a-debate with Betsy McCaughey (CDN link here, US here), the one informative bit of that entire 10 minute trainwreck, and getting solid treatment in this Matt Taibbi blog posting about the attractively pouty and vapid Maria Bartiromo’s interview with Congressman Anthony Weiner.

Taibbi’s post is, as usual, worth reading in its entirety but here is the segment that I hope to see more of:

“It drives me crazy when people make this argument. Fuck a fancy boutique drug like Erbitux — I have a very expensive private plan and I can’t even go to a doctor, not even to ask a simple question, unless it’s an emergency. [...] Hell, forget about paying for Erbitux, if I wanted to get a colonoscopy to find out if I needed Erbitux, I wouldn’t be able to — I’d probably have to wait until I was a fully symptomatic cancer patient before I could even have that conversation on my insurer’s dime. And I’m one of the lucky ones, I actually have money to pay for care out of pocket, if I had to. No country in the world rations care more than the U.S.”

Exactly.  Why does it take the closest thing we have to a renegade major journalist to point out that Americans don’t get all the treatment they want either!

Worse yet, uninsured (or under-insured, or simply less wealthy) Americans may be prone to skipping out on the most cost-effective care: preventive care, as Taibbi implies.

The great fear, living under an Obama regime, is that a screening system would be designed that would preclude older people from getting the best treatment available if the costs were too high to justify (by some crazy liberal metric) being spent on someone who might not live that much longer regardless of the care they receive.  Kind of like those organ waiting lists that everyone-but-Steve-Jobs is mercy to: With a finite resource such as transplant organs (as opposed to the apparently infinite resource of health care dollars), we must invest wisely.  Currently in America, organs are provided to those in greatest need, with the highest chance of benefiting (i.e. surviving the transplant and extending the quality or length of life as a result of a successful transplant).  Oh, and being “a youngish, white male with a big bank account and great health insurance” helps too, according to this article interviewing Dr. Benjamin Samstein, MD, assistant professor of surgery at Columbia University College of Physicians and Surgeons.  Of course, being youngish is less important if you’re a man of means, say $6 billion or so, who can move to Memphis to get equal treatment to locals on a much shorter waiting list than that of his actual state of residence.

Now, how horrible does applying the terms of transplant organ distribution to other forms of medical treatment sound?  As the good doctor Samstein says about organ ‘rationing’: “one of the fairest and most advanced we have for the allocation of healthcare resources here in the US.”

If politicians who support health care reform would just admit that there, of-fucking-course, will be rationing under any new system, and just explained how an imperfect system would be devised to replace our currently very imperfect system, we might be able to choose between the health care options that provide the best, you know, care.  And in an even crazier world, we could have a real debate about who Americans think deserve and don’t deserve every degree of care available.  Rather than trying to throw scary sounding words at a reform movement and hope they stick.

HEALTH CARE IS A FINITE RESOURCE, MOTHERFUCKERS!  HOLY CHRIST!

[Sorry.]

… and the cow goes moo

NYT Headline Hits the Nail on the Head (in Japan)

Just a quick thought comes from this headline and capsule summary in my New York Times daily e-mail:

Japan’s New Leadership
“The end of economic decline and political stagnation will take real leadership, not just trading one group of politicians for another.”

I guess I find myself wishing more comments like these were made by the left-leaning papers in regards to US leadership.  Though ‘political stagnation’ would be quite a euphemistic manner of describing the state of Washington.

… and the cow goes moo