What Do Health Care, Credit Card Companies, and Bankruptcies Have in Common?

Credit card companies continue to bombard us with invitations to use their products, yet guess who was the impetus behind the most recent changes in US bankruptcy laws, which, by the way, make it much more difficult for those who need it most to declare bankruptcy?

It's been a while since I studied how banks make money, but I remember enough to know that if you say "out of thin air" you'd be close enough. Bankers and credit card company tycoons are some of the richest people in the world. Yet when it comes to bankruptcy law, guess who was behind making it much harder for the average Joe Blow to declare bankruptcy?

I've opined before that people get into bankruptcy because they buy too big of houses. It turns out that that's not nearly as big a factor as I thought.

Since at least 1997, bankers and credit card moguls have been pressing for a squeeze on the little guy, and in 2005 they were successful.

The 500-page legislation won final congressional approval last week after being pushed for eight years by banks and credit card companies...

It's common anymore for lobbyists to write the legislation they are advocating, and I wouldn't be surprised in the least if such a thing happened in this case. Meanwhile, it becomes harder and harder for the little guy to get by.

What's the greatest cause of bankruptcy? Inability to pay health care costs. Incidentally, two of the largest lobbies in the US Congress represent the pharmaceutical companies, who want to keep the way open to make money hand over fist, and the trial lawyers, who want to make sure that large legal settlements related to health care will still be de rigueur. No wonder health care is cheaper in socialist Canada. The corruption of Socialism works at least as good as corrupt capitalism. It appears that in this instance, it's working better. I don't advocate a single-payer socialist system like Canada has. What I recommend is cleaning the cockroaches out of America's cupboards.

By the way, the lawyers probably don't like Texas much anymore, which moved to limit malpractice settlements in court, the result of which is a mass migration of doctors to Texas. I hope Utah follows Texas' example.

In an interview with DemocracyNow.org, David Swanson of DebtSlavery.org noted the following:

The truth of the matter is that bankruptcies are up, because debt is up, dramatically. And in fact, in relation to debt, bankruptcy filings are down. And debt is up in large part because of the neglected health care crisis. A well-done academic study found that about half of bankruptcy filings are the result of medical costs. Another 40% are due to job loss, divorce, or a death in the family. Most of the others are due to natural disaster or call up to fight in Iraq or identity theft or victim of a crime.
The money changers claim that the legislation was for a different reason.

The financial services industry argued that bankruptcy frequently is the last refuge of gamblers, impulsive shoppers, divorced or separated fathers avoiding child support, and multimillionaires who buy mansions in states with liberal homestead exemptions to shelter assets from creditors.

“In recent years too many people have abused the bankruptcy laws,” Bush said. “They walked away from debts even when they had the ability to repay them.”

That doesn't appear, however, to be really true. Over 95% of people who declare bankruptcy don't do so for any of the reasons the money changers claim.

It's interesting that when some people grow rich, all they want to do is get richer. The money lenders did not need this legislation; their pockets are already sufficiently lined.

What is really needed is to fix the problems that cause so many people to go into debt, such as making health care affordable. It's time for Congress to kick the pharmaceutical and trial lawyer lobbyists out of their office and tell them to never come back. For those like Orrin Hatch, who have been re-elected in large part due to the deep pockets of these lobbyists, it's time for an elective replacement.


  1. Utah already has limits on the recovery in medical malpractice actions, and has for years.

  2. Rep. Jim Matheson voted for the bankruptcy bill, which is one reason I refused to vote for him in the last election.

  3. You echo the talking points of the left and your research is rather lopsided.

    Having worked in the banking industry, and even with delinquent loan collections, I can assure you that many people are pushed over the edge by medical bills, divorce, and job loss have first done a very poor job of managing finances to begin with. Many are living in debt up to their eyeballs, buying all kinds of stuff on credit. They manage OK until the least thing goes wrong, and then they immediately fall behind. The fact is that if people used debt minimally and saved for a rainy day, many of these people would never have to think about bankruptcy.

    Financial institutions are also at fault. They have worked not only to make credit omni-available, but to make it the default way of life for Americans. Their incessant marketing campaigns draw people into debt at the earliest possible age and make minimal credit card payments, car payments, financed vacations, and purchasing stuff at stores on credit a fact of everyday life.

    The financial industry is not lily white in all of this, but you are too quick to absolve people of their responsibility to handle their own finances.

    When you claim that the Canadian health care system is cheaper, you are looking at the wrong figures. Many of the costs are buried. Other costs in loss of quality of life cannot be measured in money.

    Be careful about believing the left's talking points.

  4. You're right about people not managing their finances correctly in the first place, but still the costs of health care are enormous and getting bigger all the time.

    I don't know much about the Canada health care system--just some comparisons I have seen. I would be very interested in the buried costs, if you have some sources I can check into.



  5. Isn't the purpose of capitolism to get richer and richer? Funny how companies want Laissez-faire until private citzens sue them for soddy work...then they demand government intervention. If they can't perform a surgery in canada then they pay for it to be done abroad. You can also buy private insurance in Canada. It would be interesting to see a comparison in price and care to private American insurance. Anyway, my experience with the canadian healthcare system has been positive and my sister, who lives there, has no complaints about it.

  6. It is not difficult to come up with information on the hidden costs of Canada's universal health care system. Bear in mind that most figures cited by single-payer proponents totally ignore the costs Canadians pay out of pocket privately (often illegally) outside of the government system.

    There's a chilling thought. Want a hip replacement in the next couple of months? You're not going to get it under the legal system. You're going to have to go on the black market to get it.

    After describing a variety of human costs that are difficult to measure economically, Brett Skinner of Canada's Fraser Institute wrote in this article (published in the Chicago Sun Times 6/23/07):

    "Canada’s cost advantage is also an illusion. True, Canada spends less per GDP on medical care than America -- but so does Ethiopia. Such comparisons are meaningless without considering value for money. And compared to Americans, Canadians get relatively little in return for the money they spend. Canada’s single-payer system does not cover many of the advanced medical treatments and technologies that are commonplace in America, and Canadians have access to fewer doctors, fewer treatments and fewer new drugs."

    If you want something more empirical, consider this study.

    Canada's system works just fine for the healthy. Not so much so for the ill.

    What should we do about the problems in our American system? Following Canada's lead will not help, but will make matters worse. Instead, consider the arguments in this book, which documents how government meddling is the source of many of our health system's problems. The authors show how we can improve quality, increase access, and decrease costs through consumer choice and competition.

  7. Ryan,

    Your sister is probably in very good health.


    Thanks for the references. I'll find some time to study them and report on the highlights here. But so far, the quote you provide gives me a whole new perspective on the Canadian system.

    I still do think, though, that America could improve its health care situation markedly by putting limits on the pharmaceutical, legal, and insurance lobbies.

  8. It's actually my nephew that has had the health problems. I would say vomiting at least once a day isn't in good health.

  9. I'm sorry to hear that. I hope that the Canadian system helped his situation. I thinking as well in terms of people getting cancer, heart problems, etc.

  10. Lost in all of this is the one free, proactive means of managing health care costs: namely prevention.

    As you have alluded to elsewhere, as a populace we have largely moved from pathogen and accident-induced illnesses to self-induced ones (i.e. heart disease, type II diabetes). While not all diseases are avoidable simply through health maintenance and illness prevention, it's very clear that much can be done to dramatically reduce lifestyle-related diseases--with their attendant costs.

    I'm not certain any meaningful progress will ever be wrought if we keep hacking at the leaves (especially if politicians are wielding the tool) rather than attending to the root.

  11. That's an excellent comment, that I didn't think about because my focus has been so narrow. What would be interesting to discover is what percentage of US per capita health care costs (compared to other western countries) are due to the lifestyle choices we make.

  12. People didn't used to die from "self-induced" illnesses because they didn't live long enough to do so. The question is what to do about it.

    Do we penalize people like they are doing in the UK by denying coverage? Do we allow people to bear the economic burden of their choices? Or do we incentivize people to make better choices? And what would be the most effective way to do that while maintaining the maximum level of individual freedom?

  13. It would have made for an interesting epidemiological study if penicillin had been readily available in the mid 1800's. If people had lived longer, would they have been healthier, given greater physical activity, less pollution, etc.?

    As to the more pertinent point-what to do about our current problems-I agree that personal choice must be maintained; in fact I believe it is the only solution--long term.

    Unfortunately, I fear we may never proactively deal with the hard choices that need to be made to rein in healthcare costs. Inequitable programs like Medicare, and until very recently employer-paid health plans, shield many patients from the exponentially escalating costs of healthcare.

    Unless we de-politicize healthcare, and create some semblance of responsible usage of services (as President Bush rightly said recently "people have access to health care in America. After all, you just go to an emergency room"), we will never resolve this issue; until that inevitable time arrives that Medicare is bankrupt, insurance premiums are out of reach of the rest of us, and we suffer the grim consequences.

    I'm not certain we'll ever muster the courage to answer the tough questions until forced, but we should certainly ask the questions now, while we can.

  14. Roger,

    You make some excellent points.

    I was just listening to a lecture by a Dr. David Gratzer, who is licensed both in the US and Canada. He talks about the advent of penicillin in 1941 and the watershed event that was. He talks about Medicare going bankrupt. I will write some more on the notes I took from his lecture tomorrow. I just purchased his book "The Cure: How Capitalism Can Save American Health Care" from Amazon and can't wait till it gets here.

    He points out that comparisons with other socialistic systems cannot be accurate unless we realize that America's system is already very socialist, with 50% of health costs being paid for by some level of government.

    Gratzer would wholehearedly agree with your last statement "I'm not certain we'll ever muster the courage to answer the tough questions until forced, but we should certainly ask the questions now, while we can."


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