Poverty demoralizes. A man in debt is so far a slave; and Wall-street thinks it easy for a millionaire to be a man of his word, a man of honor, but, that, in failing circumstances, no man can be relied on to keep his integrity.
– Ralph Waldo Emerson, Wealth
Liberty Blitzkrieg readers know that I’ve been extremely critical of our modern U.S. economy for nearly a decade now. I’ve used harsh, but entirely appropriate language, such as rent-seeking, parasitic and criminally corrupt to describe our current financial/economic system. These are not words I use lightly.
I have absolutely no problem with wealth differences within a society, even large discrepancies are fine as long as the general population benefits substantially from overall growth trends. This is not the case in today’s economy.
I support a real free market economy where barriers to entry are low, and in which small business and competition thrives. Unfortunately, this is not the case in today’s economy. Rather, America has largely become a neo-feudal society where a mass of debt slaves are lorded over by government protected, monopolistic, rent-seeking oligarchs and racketeers.
Societies work when people think the system is fair enough and have genuine opportunity for success and standard of living improvement. Societies work when the people who become fabulously wealthy are individuals who have created a product or service that benefits society at large. In contrast, people shouldn’t become wealthy by preying on their fellow citizens and driving them into destitution and debt bondage, but that’s precisely what is happening in many industries today. Our society rewards the worst sort of behavior, and as we observed in the aftermath of the financial crisis, protects and further empowers white collar criminals for destroying the global economy.
Going forward, I believe two issues will define the future of American politics: student loans and healthcare. Both these things (as well as the Federal Reserve intentionally reflating a housing bubble) have crushed the youth and are prevented a generation from buying homes and starting families. The youth will eventually revolt, and student loans and healthcare will have to be dealt with in a very major way, not with tinkering around the edges. Today’s article will examine a couple of disturbing trends in both areas.
Long-time readers will know how offensive and predatory I find America’s healthcare system to be. Here’s an excerpt from last year’s article titled, The Health Insurance Scam – “Coverage” Doesn’t Mean Affordability or Access, which you should read if you missed it the first time around:
While a greater number of Americans having health insurance is a good thing when it comes to protecting against unexpected catastrophic events or extended hospital stays, it doesn’t tell you anything about two very important variables: 1) How much does it cost? 2) What kind of access does it provide? As usual, the devil is in the details.
We’ve all seen headlines about higher monthly premiums, but that’s just the tip of iceberg. Once you’ve paid your premium, you’re far from off the hook. Another one-two punch of deductibles, copays and out of pocket maximums appear which can collectively run into the thousands if not tens of thousands of dollars for families.
Meanwhile, it appears insurance companies may have recognized the politically toxic nature of higher premiums, so their focus has turned to deductibles as the most efficient way to suck more money from the public for no comparable increase in service.
Healthcare costs are obscene, something I’ve become intimately aware of since getting on individual plans several years ago. Even worse, it seems the predatory behavior continues to get worse and worse with each passing year. Which brings me to a MarketWatch post I became aware of yesterday titled, This Hidden Fee is Becoming Increasingly Common — and It’s a Nasty Surprise on Medical Bills.
Here are a few excerpts:
When Jackie Thennes decided to switch doctors earlier this year, the hospital system in her Chicago, Il. suburb seemed like the natural choice. She’d been to the immediate care facility multiple times before for screenings, and the doctor was in-network.
But Thennes, who is 50 and looking for work, got a nasty surprise when the bill arrived in the mail: along with an anticipated charge for the doctor’s visit, she was also charged a “facility fee.” At $235, the fee was slightly more than the doctor’s visit itself.
Thennes tried to contest the charge with the hospital system, but to no avail. And while she said she won’t go to the facility again, she worries about getting hit with the same fee somewhere else.
This is “going to deter me from getting the medical attention I need,” she said. “I’m going to get sick just worrying about it.”
These kinds of facility fees are common at hospitals, where they help pay the hospital system’s overhead costs. But as doctors’ offices increasingly are being bought up by big hospital systems, patients are being charged facility fees of up to hundreds of dollars out-of-pocket without warning and without the ability to contest them.
The rate of hospital-employed doctors increased by almost 50% between July 2012 and July 2015, according to an analysis conducted by the nonprofit Avalere Health for the Physicians Advocacy Institute. By July 2015, nearly 40% of doctors were employed by hospitals, the analysis found. The trend occurred across the country but was especially prominent in the Midwest.
It’s hard for patients to research which doctors charge facility fees, since there’s no comprehensive resource to track it, said Chuck Bell, programs director for Consumers Union, the policy and mobilization arm of Consumer Reports.
There is one foolproof option, though, Bell said: ask pre-emptively.
Still, “why should patients have to do this?” Bell said. “Health care has become this outlier bad, terrible customer experience. Even a mechanic has to tell you up-front what the estimate is for working on your car.”
Moving along, let’s take a look at a very disturbing trends happening with regard to student loans, which as you know are almost impossible to get rid of, even in bankruptcy. They essentially follow you to the grave.
Also from MarketWatch:
Sens. Ron Wyden (D-Ore.) and Sherrod Brown (D-Ohio) introduced a bill with several prominent co-sponsors last week that would prohibit the government from garnishing borrowers’ Social Security disability and retirement checks to pay for defaulted student loans. This marks the second time the Senators have tried to curb this practice; they introduced a similar bill in 2015 was never enacted into law. And given today’s highly partisan lawmaking environment, getting the bill through this time may not be much easier.
“It’s a challenge,” Brown told MarketWatch. Still, he said he’s hopeful lawmakers will respond to growing concern on this topic from constituents. “Senators and House members are hearing about this problem more and more. We’re hearing all kinds of people calling us surprised that [the government] can do this.”
And indeed, the government can. The federal student loan program provides many options borrowers can use to manage their debts, but once borrowers default, the government has extraordinary powers to get its money back, including garnishing tax refunds, Social Security checks and wages.
A growing number of borrowers are losing out on a portion of their Social Security checks to pay back student loans. The number of borrowers over 65 facing this predicament jumped 540% between 2002 and 2015, according to a report released by the Government Accountability Office in December.
Multiple factors explain that spike. For one, over the past several years we’ve witnessed rapid growth in the number of students going to college or returning to school during their career. But perhaps more important, rising college costs over the past few decades means that it’s more likely that an older adult would have taken on a student debt either to pay for their own schooling or that of a child.
The challenges these older or disabled borrowers face paying back their loans is increasingly pushing them toward the financial brink. The 1996 law that allows the feds to garnish Social Security benefits over student loans requires that they leave the borrower with a minimum of $750 in benefits. But that floor hasn’t been adjusted since the 1990s to account for the rising cost of living. In 2015, about 67,300 borrowers over 50 had their benefits garnished below the poverty line from just 8,300 borrowers in 2004.
Student loans and healthcare are both ticking time bombs and I see no real effort underway to tackle them at the macro level where they need to be addressed. Watch these two issues closely going forward, as I think fury at both will be the main driver behind the next populist wave.