Death Bonds: Wall Street Teams Up With Insurance Companies to Kill People, Reap Profits

Any remaining doubt that a for-profit, private monopoly of our nation's health care system is a dangerous idea should be removed by the recent news that Wall Street plans to reap profits from people not living to collect their life insurance policies.

False accusations of plans for government "death panels" was ironic enough, given that private insurance companies have long entrenched real death panels deep within their profit-driven bureaucracy. One woman from Tennessee told a frightening story of how a hospital wouldn't give her husband a CAT scan because the hospital had cut a deal to not use the machine too often, which would cost the insurance company too much money. The financial interest of the insurance company was to provide less care to make more profit.

Now come "death bonds" to take things one step further. Having already ruined the mortgage market and plunged more families into foreclosure than ever before, Wall Street needs a new way to make money. And profiting off the sick and elderly has worked so well for insurance companies, why not expand the sector?

People with frail health who have life insurance have the option of selling their policies before they die for a lesser amount than the full value. Say you have $500,000 in life insurance. Depending on your life expectancy at the time you sell your policy, you might be able to sell it for, say, $250,000 in cash. Whoever bought it is taking a gamble. According to the New York Times:

The earlier the policyholder dies, the bigger the return -- though if people live longer than expected, investors could get poor returns or even lose money.

Now Wall Street's latest scam is to bundle life insurance policies purchased from the sick and the elderly into securitized death bonds and funds. The earlier the group of policyholders die, the bigger the return.

Insurance companies already had a financial incentive to deny care and increase profits. Now Wall Street banks are adding another incentive -- the sooner people die, the sooner death bond prices rise. And since it's really the same super-rich investors benefiting from both enterprises, the grand conclusion is simple -- poor health is good for profits. If the opponents of health care reform have their way, the quality of our health care will only get worse.

The stupidity of designing a health care system that gives a monopoly to private companies that puts profits ahead of patients is so self-evident that the only way to preserve this twisted system as-is is to attack and undermine any reasonable alternative. And so opponents of reform have tried to convince us that a publicly funded insurance program that puts the public and patients first is a bad idea while a big-money private monopoly that puts profits first is somehow virtuous and in the best interest of our nation. (Yet another example of the contortions required to make these warped arguments is columnist Charles Krauthammer arguing that preventative care is not cost effective and therefore not in the public's best interest!)

From health care to education to war, private companies have spent billions of dollars in advertising and messaging to try and convince us that private industry is better at providing public services than, um, the public is. In fact, the health care industry is spending $1.4 million per day trying to kill a public health insurance option. They have to fight so hard because the truth is so obvious -- public institutions are inherently better at looking out for public needs. Private health care will drop you if they can't make a profit off you, kill you if your care is costing to much. Public health insurance wants you to live because public health insurance cares about the American public -- all of us.

It's fitting that Congress returns to work on health care reform legislation just after Labor Day, which commemorates hard working Americans rising up to protest the profit-driven abuses of factories at the turn of the century. Everything from the 40 hour work week to restrictions on lead paint to seat belts came from the recognition that, left to its own devices, big, for-profit corporations would never put the health and safety needs of the American public before their own private profit. We continue to spend more on health care than any industrialized nation and yet have worse health outcomes on almost every measure. If the private insurance companies are so confident they can care for us better than publicly-funded insurance, what are they worried about? The public option makes them nervous because they know it will care for us better while cutting into their obscene profits.

When securitized bundles of subprime mortgages went sour, people lost their homes. When death bonds and the private insurance monopoly reach fruition, even more people will lose their lives. That, in addition to the piles of money we're already pouring down the insurance monopoly drain, is a tremendous price to pay to preserve a false ideology of private market supremacy in matters of the public interest.

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Comments

[KeenaMadblood]

Just to set the record straight regarding the New York Times article cited here, “Life Settlements” or the business of selling your life insurance policy to a third party is a legitimate industry that empowers the consumer to receive a higher return on said policy when faced with the only other alternative, surrendering the policy or simply letting it lapse by which they get nothing for years of paying premiums.

With $24 Trillion of life insurance enforced in this country, 90% of which is forced upon the consumer by their employers as a benefit in their compensation. The basic strategy of the insurance company is to collect premiums out of paycheck your entire working life, then hope that you surrender the policy when you retire, or just stop paying the premiums because you don’t need it anymore. The idea that any given life insurance policy is going to result in a claim for the face value (after you die I might point out) is simply unrealistic.

With a life settlement, a retired consumer has an option now of selling the policy for more than the surrender value offered by the insurance company, so in effect, get some of their money back that they paid to the insurance company. This makes life settlements a viable alternative to being completely fleece out of potentially hundreds of thousands of dollars over a life time.

[JJeter]

In his excellent essay,Economy and Pleasure,written in 1988,Wendell Berry said this:

"If one person is willing to take another's property or to accept another’s ruin as a normal result of economic enterprise,then he is willing to destroy that other person’s life as it is and as it desires to be.That this person’s biological existence has been spared seems merely coincidental;it was spared because it was not worth anything."

Progress through “innovation”these past twenty years has brought us to the point where we,the people,are one of the primary raw materials of the economy.We are,essentially, prey.And since our government seems ready and eager to deliver us up to any new innovation that comes along,we should have little confidence Berry’s concluding observation will hold true much longer.

[GardenerNorCal]

Why is this even legal?

[madhollywood]

US Supreme Court decision in Grigsby v. Russell (1911)