New Entry for Worst Study of the Year Award
President Obama frequently parrots the thoroughly discredited "statistic" that one third of personal bankruptcies are medical bankruptcies. The propagandists of "medical bankruptcy" have now upped the ante with a new study published this week, in which Drs. David Himmelstein, Steffie Woolhandler, and colleagues, report that 62 percent of personal bankruptcies in 2007 were "medical bankruptcies." The authors are leaders of the Physicians for a National Health Program, who have promoted government-monopoly medicine for decades. Unfortunately, the media swallowed their new report uncritically.
As with previous studies of medical bankruptcy, this study puts forward a number of definitions of "medical bankruptcy" and defines any bankruptcy with any one of these conditions as suffering medical bankruptcy. The one that immediately stands out is "medical bills over $5,000 or 10 percent of household income on medical care." (So, if Donald Trump had gone bankrupt in 2007 with $5001 of medical bills, he would be "medically bankrupt.") Megan McArdle at The Atlantic has done a very thorough debunking of this study, pointing out that the study itself implies that medical bankruptcies, even according to the authors' definition, shrunk from about 750,000 cases in 2001 to 2007. I share Ms. McArdle's horror that one of the authors of this inept study, Elizabeth Warren, is now overseeing Congress' TARP bailout!
The study has a couple of other implications which Ms. McArdle didn't note. First, it reports that: "at illness onset, 77.9% were insured: 60.3% had private insurance as their primary coverage; 10.2% had Medicare; 5.4% had Medicaid; and 2% had Veterans' Affairs/military coverage….. By the time of the bankruptcy, the proportion of patients with private coverage had fallen to 54.1%, while the percentage with Medicare and Medicaid had increased to 16.4% and 9.9%, respectively."
You do the math: the proportion of "medically uninsured" with insurance (private or public) increased from 77.9% to 80.4%, over 2 points, between "onset of illness" and "time of bankruptcy," and most of the increase was moving from private to public coverage. The move to Medicaid I understand: get sick, lose your job, go on Medicaid, and declare bankruptcy. But the huge move to Medicare is harder to understand, unless a significant number of the medically bankrupt were 64 years old at the "onset of illness." That may be the case: the median age of the medically bankrupt was 45, whereas the median age of the U.S. population is 37.
So, what we likely observe here is the classic story of people failing to adequately save for retirement (discussed in today's Wall Street Journal by Janice Nittoli, and, of course the subject of another NCPA blog).
Here are two takeaways: (1) Don't rely on the government (Medicare) to bail you out; and (2) health-insurance status has very little (perhaps nothing) to do with bankruptcy.
“A more recent study by another group, approaching it another way, indicates that in 2007 about eight-tenths of one percent of Americans lived in families that filed for bankruptcy as a result of medical costs. That rings a little less loudly than “one every 30 seconds.”
Only an idiot would believe less than 1% of bankrupt people have huge medical bills. After all, employer-based insurance simply terminates the health insurance on cancer patients who are too sick to work. I thought everybody knew that.
These socialists are more correct than those that want to maintain the employer-based system but their solution is incorrect.
We don’t need to Socialized American health care just because employer-based health insurance is terminating their sick consumers. The CATO Institute puts dangerous employer based insurance on their own employees. Exactly like all the think tanks.
I did some math on the Medical Bankruptcy claim by President Obama. He claims that “every 30 seconds” and American goes bankrupt from Medical Care. That would equate to 1,051,200 bankruptcies per year from medical care. I debunked this myth last year in the FMA Council on Medical economics Newsletter.
Basically, bankruptcies from medical bills are about 5% of all personal bankruptcies and the TOTAL # of personal bankruptcies in 2007 was 822,590 — LESS THAN THE # of Medical bankruptcies claimed by Obama!!!!!
MORE IMPORTANTLY — The study that is the source of Obama’s claim stated that there was no difference between being insured and uninsured in incidence of medical bankruptcy. So much for the benefits of “universal coverage!”
It is so disgusting to read people argueing over whether the study is accurate to the letter or not. The arguement itself detracts from the major problem…. health-insurance is:
1) un-affordable
2) un-accessible
3) is useless in the face of illness
4) is equivalent to racketeering
5) has American’s in a strangle hold that Washington is unwilling to face let alone solve
6) interferes with any patient-doctor relationship
7) determines a person’s care and treatment
8) in un-reliable scince they can and will cut you off when you get sick
9) Leads not only to personal bankruptcy, but also destroys every facet of life by destroying a person’s credit
10) Practises wanton and legal blackmail against american buisnesses
11) Determines if you are even employed
12) Rations care
It constantly amazes me to hear all these things as reasons not to have a national health-care policy as if these thing do not already happen. It is a lie that American’s have swallowed for years. Conservatives do not want to fix the system.
ANY case of medical banckruptcy is one case too many. people should not be ruined for life because they get sick and yet that is what conservatives are standing up for. Conservatives are supporting the near criminal activity that destroys the lives of hundreds of milliions of Americans. Stop with the fear tactics and deal straight. If you want to critisize the study then also critisize the present industry and do it without resorting to ruling through fear.
Conservatives have a hard time when called upon to talk straight talk without resoting to fearmongering. They cannot allow the truth to come out because it takes ALL the wind from their sails. If your arguement is based on falsehood then your entire arguement is invalid. Conservatives would do well to remember that fact. Almost the entire conservative platform is invalid for this reason.
We don’t need to Socialized American health care just because employer-based health insurance is terminating their sick consumers. The CATO Institute puts dangerous employer based insurance on their own employees. Exactly like all the think tanks.
To comment on this quote. The sick become uninsurable and the current practise increases that likelihood according to the quote. Then, if fortunate enough the sick get insurance from the government!. John your supposition regarding the numbers not adding up also negate this implication of why the numbers don’t add up. As one who with insurance currently spends approximately 1/3 of my income on medical expenses and no I am not minimally paid I find much of this rhetoric quite honestly an offense to my position regarding the high cost left to be borne by the sick in this country.
Sincerely a sick person not yet bankrupt, not rich enough to afford choices not poor enough to get help. Incidental colleges ( education resources do not take medical expenses into account when accessing need). I truly doubt any would wish to be in my position!
“So, what we likely observe here is the classic story of people failing to adequately save for retirement”
To respond to this
I have never saved less than 10% of my income toward retirement, currently I save 34%. This will not be enough to cover my health care costs in retirement!.
Hence 1/3 on current health care 1/3 on future health care 1/10 in taxes and hence I live on 1/5th of my income including trying to send my fifth kid to college.
It seems to me I come last and all others come first!
Mr. Greiner: I’m not sure where your introductory quotation comes from, but I think your criticism of it comes from misunderstanding the denominator. It looks to me like the denominator for the “8/10ths of 1%” figure is the total number of all U.S. families, not just those who went bankrupt for whatever reason.
I’m at a think tank which provides employer-based health benefits, but we do it for the same reason as everyone else: The tax code prejudices us from doing it any other way. Believe me, my SVP Administration & Finance would love to just pay us the money and wash her hair of negotiating health benefits.
Mr Graham, dangerous employer-based health insurance is really expensive even if it’s 100% deductible. Why would someone pay twice as much for a service just because it’s 100% deductible?
Trust me, your employer-based health insurance will terminate all dependent childrens’ insurance when they are no longer full time students or reach the age of 24. Any child that is diagnosed with MS, like my daughter, would prefer coverage that they can keep at standard rates when they reach a majority age and have the ability to move from coast-to-coast in America.
Basically Mr Graham, I’m saying your think tank’s health insurance is very dangerous for employee’s children. At least you understand if you get bone cancer and become too sick to work you will be terminated off your 100% deductible employee health insurance.
Think tanks put their employee’s children in danger.
Long ago, in a much different time, before the advent of the “miracle of modern medicine”, and before so many people became so ill with so much money being spent on health care, it was a more simple issue.
The key to the “health care” crisis is that “wellness” can’t be monetized (or doesn’t need to be). That is, health is basically free to anyone–all it requires is not being lazy, being careful about what you eat and drink, and staying away from drugs and doctors. Therefore, there is no benefit to the “health care” industry to pursue health, so they pursue “sickness care”. This is why the drug cos, doctors, hospitals, insurance cos, and the government, all deal in sickness care–it is where the money is. It is the same reason that food processor cos. pump out junk food–healthy food is not profitable, whereas potato chips are.
Intelligent people are opting out of using the “health care” industry by going at their own expense to wellness, and to healthy foods. But, other people, especially lower income people, will flood into the government scam of “health care reform” and will be trapped in it forever; will remain unhealthy, and will vote for those who promise even more and cheaper “health care”. And, the battle will rage on, and we will pay for it, even though we don’t use it. The good news is that in a few years of following the current thinking, the system will collapse, when no one can pay for it, and then we can start on something that makes sense.
A lot of comments here are missing an important point: A thoroughly discredited and untrue study is being coverd by the national news media as though it were legitimate.
It’s very hard to have a rational debate over health polilcy when reporters give credence to and repeat such clap trap.
What I find disturbing about the study is their definition of “medical bankruptcy” – including allowing self-reported bankruptcy for medical reasons. Self-reported data is always suspect in economics. This suggests people could gorge on consumer goods and then, when hit with unexpected medical bills, blame medical costs for pushing them over the edge when consumer spending was the more likely cause.
Moreover, two weeks of lost-income due to medical bills in the past two years seems questionable as a cause for declaring a subsequent bankruptcy “medical.” You could be in bed sick with the flu twice in two years without significant doctor bills and still lose two weeks pay. Since this is a common enough occurrence, I would not consider it to be a travesty of our health care system.
Nor would I necessarily assume having medical bills that exceed 10% of take home pay to be serious enough to result in a medical bankruptcy. Many people have health coverage that equals 10% of take home pay. What is the difference between spending the money on coverage versus spending it on care? Yet public health advocates often assume responsible people should have comprehensive (i.e. costly) health insurance but worry when the uninsured face costly medical bills that are no more expensive than the coverage would have cost.
Taking out a second mortgage to cover medical bills does not seem to be sufficient reason to declare a subsequent bankruptcy to be exclusively caused by medical bills. Paying a bill out of savings is the equivalent of paying for a service with past earnings. Paying a bill by taking out a loan is the same as paying with future earnings. Having to borrow isn’t necessarily worse than paying with savings. Both concepts are about smoothing consumption to match earnings over time.
Joe S is correct about the prevalence of clap trap in the health care debate. Some even surfaced in these comments.
The claim that health insurers dump the sick is silly on its face given that MEPS estimates suggest that private insurers and private individuals paid for an estimated 62 percent of all health expenses in the US in 2003. People who don’t like employer health insurance are free, in most states, to purchase their own policy. Often those are considerably less expensive and, when combined with a HSA, provide better coverage.
Employer policies are generally guaranteed issue. State laws generally prohibit raising rates on sick people with individual policies unless everyone in a rating class gets a rate increase. Federal law requires that every state make arrangements so that people who have had coverage but lose their job and cannot be medically underwritten be able to purchase individual health insurance either via a high risk pool or an insurer of last resort. These programs are heavily subsidized and rates are reasonable given the fact that one gets to purchase insurance after one is seriously ill.
Finally, claiming that wellness programs will eliminate the need for health insurance suggests that a good diet and exercise will eliminate high dollar trauma cases, cancers, Type I diabetes, auto-immune diseases, schizophrenia and other brain based mental illnesses. Medicine is properly oriented towards people who are sick, not those who are healthy.
[…] A series of papers by long-time single-payer advocates, David Himmelstein and Steffie Woolhandler, claim more than half of personal bankruptcies are due to medical bills (critiqued here) and most recently 62.1 percent (critiqued here). […]
Ten bucks says Himmelstein, Woolhandler et alii share the next Nobel for Economics.
Saying that community rated group insurance is more expensive than individual coverage is like saying snakes have two heads. As categorical statements, both are false. If you were able to obtain firm quotes for comparable individual coverage on everyone who currently receives employer-based coverage, the average prices would be about the same.
Ten bucks says Himmelstein, Woolhandler et alii share the next Nobel for Economics.
Saying that community rated group insurance is more expensive than individual coverage is like saying snakes have two heads. As categorical statements, both are false even though you can find contrary examples. If you were able to obtain firm quotes for comparable individual coverage on everyone who currently receives employer-based coverage, the average price would be about the same for both kinds of insurance.