Odds-on-Death Panels

To balance the furor over bureaucratic boards to decide whether the aged are worth saving with medical care, the financial wizards who brought on the mortgage meltdown have figured out a way to play roulette with their chances.

Bankers, the New York Times reports, "plan to buy 'life settlements,' life insurance policies that ill and elderly people sell for cash--$400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to 'securitize' these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die."

Gambling with Grandma's life expectancy is a free-market alternative to socialized euthanasia that may appeal to conservatives. They could invest in bonds that bundle policies from people with a mix of maladies--leukemia, cancer, heart disease, diabetes, Alzheimer’s--with due diligence to insure that not too many in the portfolio have an ailment for which a cure might be found. In that case, the value of the bond would collapse.

As the market develops, there could be the equivalent of socially responsible mutual funds, products that exclude those whom investors may find morally offensive such as sufferers from alcoholism or AIDS.

Yet, as in all investments, there will be risks. Even with computer simulations to estimate death rates, the new bonds will be taking a chance on the possibility that health care reform may be enacted and start to increase longevity.

If that were to happen and the market crashed, would there be another taxpayer bailout for bankers who bet wrong on American homeowners and then on their lives?