Sunday, April 26, 2015

Money Power and... Health Care!

Morbidly fascinated by the 2008 financial meltdown that destroyed Bear Sterns, bankrupted Lehman, brought AIG to its knees, froze the credit markets and destroyed gazillions of dollars of real estate worth?

Even if you aren't, Frontline's report Money Power and Wall Street may still be worth your time.  Insightful nuggets abound.  For example, the Disease Management Care Blog learned that "collateralized debt obligations" (CDOs) were the clever weekend invention of a small cabal of 20-something financial brainiacs.  They had discovered an unregulated way to uncouple and transfer risk from a host of otherwise capital intensive loan instruments that freed up their customers' balance sheets. The DMCB also found out that that the crafty candidate Obama had an "insider" feeding him key intelligence during the frenzied Treasury attempts to restore order to the U.S. markets. 

Most telling of all was the astonishing inability of very sophisticated investors to understand what they were getting into. Not only did a huge secondary trading "market" for CDOs spring up, synthetic CDOs fueled the feeding frenzy. Once the risk materialized, it all achieved critical mass and invaded the financial system's "blood stream." Too-big-to-fail titans of industry had no choice but to grab ahold of Uncle Sam's Troubled Asset Relief Program (TARP) lifeline.

All of which prompted the DMCB to wonder if the titans of the health care industry really understand all of the dimensions of risk transfer collectively referred to a shared savings. After looking at this New England Journal of Medicine article several times, many of the assumptions underlying Medicare's version of accountable care organizations (ACOs) are way out of the DMCB's depth. This table only makes things more scary.  Will bad mistakes lead some too-big-to-fail health systems having to be rescued?  Are there other young brainiacs out there, figuring out how to mischieviously move nebulous health insurance claims and risk around?

Maybe the DMCB is getting too paranoid thanks to watching too much Frontline. Time will tell if the financial markets are all that different from health care. 

The DMCB says stay tuned.

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