Medical Bankruptcies

[Jay Reynolds]

I had a moment to check up on this play's claim that most bankruptcies were due to medical debt.

"Inability to pay medical bills is the number one cause of personal bankruptcy in America!" [54:00]

Likely, the claim is based on this Examiner article from the heat of the heathcare debate.

Debunked already, George.

 

[Mick West]

I had a moment to check up on this play's claim that most bankruptcies were due to medical debt.


Likely, the claim is based on this Examiner article from the heat of the heathcare debate.

Debunked already, George.

The actual study is probably the place to look there:

http://www.washingtonpost.com/wp-srv/politics/documents/american_journal_of_medicine_09.pdf

BACKGROUND: Our 2001 study in 5 states found that medical problems contributed to at least 46.2% of
all bankruptcies. Since then, health costs and the numbers of un- and underinsured have increased, and
bankruptcy laws have tightened.


METHODS: We surveyed a random national sample of 2314 bankruptcy filers in 2007, abstracted their court
records, and interviewed 1032 of them. We designated bankruptcies as "medical" based on debtors' stated
reasons for filing, income loss due to illness, and the magnitude of their medical debts.


RESULTS: Using a conservative definition, 62.1% of all bankruptcies in 2007 were medical; 92% of these
medical debtors had medical debts over $5000, or 10% of pretax family income. The rest met criteria for
medical bankruptcy because they had lost significant income due to illness or mortgaged a home to pay medical
bills. Most medical debtors were well educated, owned homes, and had middle-class occupations. Three
quarters had health insurance. Using identical definitions in 2001 and 2007, the share of bankruptcies attributable
to medical problems rose by 49.6%. In logistic regression analysis controlling for demographic factors,
the odds that a bankruptcy had a medical cause was 2.38-fold higher in 2007 than in 2001.


CONCLUSIONS: Illness and medical bills contribute to a large and increasing share of US bankruptcies

The conclusion was that illness contributed to 62% of bankruptcies. The study appears to be of much higher quality than Diana Furchtgott-Roth suggests. The claim that most bankruptcies are due to medical debt is not entirely supported there. But it's certainly a common factor with over 50% of them having debt of over $5000 or 10% of pretax income.

 

[Jay Reynolds]

Mick, the conflict of interest statement at your pdf said NONE.

The Nation says otherwise.

To lie about a conflict of interest tells me the authors cannot be trusted. Period.

They should never be allowed to publish again, either.

How many people have medical debt of less than $5000 and go bankrupt you say? 8%?

Doctors routinely carry a $5000 debt. That is what I paid off for my second child's birth, and I had no insurance.
There must have been other mitigating causes for bankruptcy over $5000.00!

Self-reporting is always a source of bias, and in this study just the fact that respondents did or did not respond was yet another form of self-selection and negated the purported randomness of the original sample.
Doesn't sound like high quality to me, even if the authors had not lied about their role as advocates.

 

[Mick West]

Mick, the conflict of interest statement at your pdf said NONE.

The Nation says otherwise.

To lie about a conflict of interest tells me the authors cannot be trusted. Period.

They should never be allowed to publish again, either.

Clearly though there was not a strict conflict of interest, otherwise the article would have been retracted.

How many people have debt of $5000 and go bankrupt you say ?

I don't think the $5000 was total debt, just the illness related component.

 

[Jay Reynolds]

Clearly though there was not a strict conflict of interest, otherwise the article would have been retracted.
I don't think the $5000 was total debt, just the illness related component.

Not strict enough, maybe. Or the reviewers shared the bias.
You made my point Mick, the authors used a definition of "medical bankruptcy" that set the bar so low that even a $5,000 dollar medical expense
qualified them to be "medically bankrupt". A "conservative definition", they called it. My ass.

 

[Mick West]

Not strict enough, maybe. Or the reviewers shared the bias.
You made my point Mick, the authors used a definition of "medical bankruptcy" that set the bar so low that even a $5,000 dollar medical expense
qualified them to be "medically bankrupt". A "conservative definition", they called it. My ass.

It was conservative relative to the other definition, which was 17% higher.

Here's some more figures. Clearly this is something that varies on how you measure it. But in looking at ANY of the figures, it's very important to see exactly what is being measure. You can't reduce it down to a sound bite. Very clearly these studies are not measuring the same thing.

http://www.kunc.org/post/patients-go-bankrupt-medical-costs-soar

Some policy experts say Fague's story is far from unique. Harvard University researchers and medical doctors David Himmelstein and Steffie Woolhandler found that medical problems contributed to more than 60 percent of all bankruptcies in 2007. Another analysis, performed by Northwestern University's Kellogg School of Management, puts the figure much lower, at 17 percent. The U.S. Department of Justice also examined 5,203 bankruptcy cases filed between 2000 and 2002 and found that of those reporting medical debts, those debts accounted for 13 percent of total unsecured debt.

While the contrasting data shows that it's difficult to determine exactly how many Americans fall into bankruptcy because of mounting medical expenses, it's clear that consumers are drowning in medical debt.

A 2007 survey by the Commonwealth Fund, a private foundation that supports independent research on healthcare issues, found that 41 percent of working-age Americans – 72 million people – have medical bill problems or are paying off medical debt. That figure is up from 34 percent in 2005. If the number of elderly adults who are dealing with the same issues are included, the total rises to 79 million.

 

[Jay Reynolds]

Mick, I am an independent thinker. I thought about this and researched it independently, just as I did to debunk the geoengineering claims of chemtrail advocates.

here is my line of thinking:

Claim:

The claim is that medical bills are the main cause of bankruptcy, and 62.1% of US bankruptcies in 2007 were "medical".
Solution: National Health Care

Question:
How could this claim be put to the test?

Hypothesis:
If medical bankruptcy were a significant cause of bankruptcy in the US, and National Health Care were a panacea, then a country with National Health Care scheme would be expected to have a significantly smaller per capita rate of bankruptcy.

Test:
Fortunately, to our north is a country which offers us a perfect example for comparison, Canada.

Data:
The US paper shows that 118,308 US personal bankruptcies were filed in 2007.

Canadian statististics show that 100,552 Canadian Consumer bankruptcies were filed in 2007.

Analysis:
The rate of US bankruptcies per capita:
bankruptcies/population = 118,308/301,580,000 = .0392%

The rate of Canadian bankruptcies per capita:
bankruptcies/population = 100,552/33,115,000 = .3036 %

Conclusion:
Based on per capita rate of bankruptcy, there is no demonstrable relationship showing a decreased level of total bankruptcies between the US, with no national health care scheme, and Canada, which has had such a scheme since 1984. In fact, the US has a significantly lower level of personal bankruptcy.

Based on the Canadian example, the data shows that it is possible to have a much higher level of bankruptcy in a nation with a national health care scheme than in the US, without such a scheme. The data shows no clear relationship between the total level of bankruptcy between a country with national health care and one without.

One can conclude that a national health care scheme is not a pancea for prevention of bankruptcy, medical or otherwise.
================================
Personal note:
It is probable that the original paper is an example of intentional confirmation bias, created by a biased random sampling and more than a few nudges here and there.

I conclude that the authors of the original paper are wankers!

 

[Mick West]

The main cause of bankruptcy is not having enough money. The claim is that medical related costs are significant component in US bankruptcies. The percentage of "medical" bankruptcies depends on how you define "medical".

Your comparison with Canada would be fine if all things were equal. But they are not. Canada and the US do not have the same bankruptcy laws, and the US laws were greatly tightened just before your sample year. The countries also do not have the exact same economic ebb and flow. Similar claims have been made before, and I agree with the following debunking:

http://rabble.ca/news/2009/08/fraser-institute-spins-bankruptcy-facts

Why, though, didn't the Fraser authors use 2008 data? It's not that it wasn't available. The Fraser study is dated July 7, 2009, and the footnotes indicate they were checking Web sites up to June 17.
The United States Bankruptcy Courts released its 2008 bankruptcy statistics on March 5, 2009, and the office of the superintendent of Bankruptcy Canada's annual insolvency-rates Web page was last modified on March 10, 2009. Skinner and Rovere could easily have used the 2008 data.
But this new data shows that in contrast to 2006 and 2007, the U.S. bankruptcy rate was higher than Canada's.
Nor is 2008 the only year American bankruptcies surpassed those in Canada. The Fraser study claims "we should expect to observe a lower rate of bankruptcy in Canada compared to the United States, all else being equal." But all else is not equal. The U.S. revamped its bankruptcy law in 2005—the Bankruptcy Abuse Prevention and Consumer Protection Act—making it more difficult for consumers to declare bankruptcy. In 2006, the first year used in the Fraser study, American bankruptcy rates plummeted.
In the six years before the law came into effect, the Canadian rate averaged 3.8 per thousand population, while the average American rate was 6.7 bankruptcies per thousand—nearly 75 percent higher.
In fact, 2006 and 2007 are the only two years in the past decade in which Canadian bankruptcy rates exceeded the American ones. And they are the only two used in the Fraser analysis.

and this one:

http://www.creditslips.org/creditsl...bankruptcy-figures-from-fraser-institute.html

For both 2006 and 2007, the Fraser Institute study reports a Canadian bankruptcy filing rate of 0.30% of total population or 3.0 for every 1,000 persons. As the table to the right verifies, the Canadian bankruptcy rate for those two years is lower than in the United States, hardly a surprising result given the draconian 2005 U.S. bankruptcy law and the artificial dip in U.S. bankruptcy filings at that time. Here is the thing: ​

for any other year in the past ten years, the U.S. bankruptcy rate is higher than 3.0

. Examining the most recent data, as the Fraser Institute study purported to do, would have shown a higher 2008 rate for the United States. For 2009, my projection (approx 1.45 million bankruptcy filings) suggest a U.S. bankruptcy filing rate of about 4.7 per 1,000 total population.
​

​

I'm sure we both have our cognitive biases here. I grew up in the UK, where free health care is taken for granted, like free policing, and free fire protection. I grew up very poor, yet doctors bills were never anything to worry about. The US is unique in developed countries in its lack of universal health care, and I'm very much in favor of it getting it. I will attempt though to remain dispassionate and objective regarding the statistics behind the arguments, and I appreciate a contrary viewpoint to keep things honest.

 

[Jay Reynolds]

The main cause of bankruptcy is not having enough money. The claim is that medical related costs are significant component in US bankruptcies. The percentage of "medical" bankruptcies depends on how you define "medical".

Your comparison with Canada would be fine if all things were equal. But they are not.

Not exactly, the play's actual claim was:

"Inability to pay medical bills is the number one cause of personal bankruptcy in America!" [54:00]

Even your equalized figures show no "significant" reduction in bankruptcy within Canada, which has national health care.

If the "number one cause" of bankruptcy in the US were medical costs, or even a "significant" cause, one would expect a "significant" difference in the resulting bankruptcy rates between the two countries. The data does not show such significance.

Good debate!

I grew up in the UK, where free health care is taken for granted, like free policing, and free fire protection.

BTW, despite claims, nothing the government gives anyone is free!

I gambled for 28 years, never had health insurance, paid all medical expenses out-of pocket.
I've had insurance since 2005, and actually believe its pretty good. In doing this research, I saw that an issue which people who went bankrupt had were putting the out-of-pocket expenses on a credit card, which greatly multiplied their debt until it became unmanageable. Most people who pile up credit card debt do so likewise with other consumer expenses, so that was probably a factor in their bankruptcies. I also saw that many bankrupts who had health insurance, and that included many of those in the original study, had very poor coverage policies with lots of exclusions. A good policy should never result in bankruptcy from medical costs.

 

[Steve Funk]

Personal bankruptcies went up 87% between 2007 and 2010. We didn't get 87% sicker, but real estate crashed, leaving people underwater on mortgages with little or no down. But this source does say that about half of filers had experienced a serious medical problem.

 

[Steve Funk]

http://www.willoughbylaw.com/bankruptcy/facts-about-bankruptcy.html

This law firm brochure cites the Harvard study in one bullet, then cites another study saying only 28% of filers blame medical problems.

 

[Mick West]

Not exactly, the play's actual claim was:

The play's claim was an simplistic and inaccurate paraphrasing. I'm debating the Himmelstein study. It's a complicated situation with a LOT of variable.

Even your equalized figures show no "significant" reduction in bankruptcy within Canada, which has national health care.

Not sure how you can say that, when before the tightening of US bankruptcy law the US rate was roughly double that of Canada. (But of course correlation is not causation, and there are confounding factors).

I gambled for 28 years, never had health insurance, paid all medical expenses out-of pocket.
I've had insurance since 2005, and actually believe its pretty good. In doing this research, I saw that an issue which people who went bankrupt had were putting the out-of-pocket expenses on a credit card, which greatly multiplied their debt until it became unmanageable. Most people who pile up credit card debt do so likewise with other consumer expenses, so that was probably a factor in their bankruptcies. I also saw that many bankrupts who had health insurance, and that included many of those in the original study, had very poor coverage policies with lots of exclusions. A good policy should never result in bankruptcy from medical costs.

I suspect your perspective might be a bit different had you not been so lucky. It's quite easy to rack up tens of thousands of dollars in debt from a simple car accident. My wife tore her ACL after a simple fall, and the resultant reconstruction and physical therapy was well over $50,000. Luckily we had insurance. Other people have to take out a second mortgage for similar accidents. And not everyone can afford "a good policy". When I was shopping for insurance the price range was anything from $150 per month for a poor policy up to $1200 per month for a good one. Back when exclusions for pre-existing conditions were allowed (i.e. last year), some people could not get insurance at all.

I think it's clear that medical expenses are a factor in many bankruptcies (and we can disagree on the definitions and figures). I also think they tend to be the tipping factor because they are large and unexpected.

An interesting thing about tightening up bankruptcy requirements is that it does not actually change the debt and poverty of those who would be bankrupt before the change, but now cannot be. It simply forces many of them deeper into debt and poverty before they can declare. So you'd expect to see a spike as people rushed to file, then a dip in the rate as people could not, and then the rate to somewhat recover as those people reach the bottom. That seems to be what happened looking at the figures above.

[Edit] And:
http://www.creditslips.org/creditsl...filings-at-same-level-as-before-2005-law.html

And over a larger time frame, showing the artificial nature of the drop: