Recent media reports tout a forthcoming study in the American Journal of Medicine claiming that medical bills are responsible for 60% of U.S. personal bankruptcies. Putting aside the overly-generous criteria for counting a bankruptcy as “medical,” the figures reported in the study actually show that even by their criteria, medical bankruptcy is actually dropping. As Megan McArdle points out, the report’s figures indicate that the number of medical bankruptcies dropped from almost 671,000 in 2001, to only 502,000 in 2007. That’s a drop of over 25% in six years.
Why, then, to the authors claim that medical bankruptcy is a growing problem? Well, instead of reporting that the number of medical bankruptcies fell, they instead say the bankruptcies they count as “medical” are now a larger percentage of all bankruptcies. But the number of bankruptcies has fallen substantially, due to a change in the bankruptcy law. It should not be surprising that when it becomes more difficult to file for bankruptcy, more of those who do really are in dire financial straits, and if some of those really are medical, their percentage would increase. As it happens, total bankruptcies dropped by almost 50%, but medical bankruptcies dropped by “only” 25%. This implies that the change in the bankruptcy law, which made it harder to file bankruptcies in general, affected non-medical bankruptcies more. It does not imply that the health care situation is causing more bankruptcies – because it isn’t.
The author’s comments in press reports are even more unfounded than the claims in their study. The lead author, David Himmelstein, is quoted as saying that “health insurance offers little protection,” citing alleged medical bills that vastly exceed the out-of-pocket limits for most health insurance plans. This is mystifying—it is as if they are claiming that bankruptcies occur because people aren’t bothering to file claims with their health insurance carriers and are filing for bankruptcy instead. Himmelstein also says that “[u]nless you’re Warren Buffett, your family is just one serious illness away from bankruptcy”—despite the fact that the number of serious illnesses vastly exceeds the number of bankruptcies. If the number of Americans with a serious illness was limited to the number of bankruptcies, we would be a very healthy country indeed!
Indeed, a quick look at the numbers shows that even by the study’s overly inclusive criteria, the prevalence of medical bankruptcy is hardly on the scale of serious health problems, or even lack of insurance. The study uses two different definitions for medical bankruptcy. By the one set of criteria, there were 502,000 medical bankruptcies, or roughly 1 for every 600 Americans. By the other, there were 452,000 medical bankruptcies, or roughly 1 for every 665 Americans. These numbers are miniscule compared to the number of Americans who are not Warren Buffet but suffer from “one serious illness,” or even to the number of American without health insurance.
Previous studies by the same authors have produced similar “results” by using highly questionable criteria. For example, a 2005 study by the same authors considered a bankruptcy to be “caused by” medical bills if there were more than $1000 of medical bills in the bankruptcy – even if that was only a small percentage of debt totaling tens or even hundreds of thousands of dollars. They also included several other criteria for counting a bankruptcy as “caused by” medical bills, even if medical bills were less than $1000, or even not included at all. The more recent study counts bankruptcies by both the old criteria and a new one that is only slightly less inclusive: medical bills exceeding either $5,000 or 10% of income, OR answering “yes” to a question asking whether medical bills were a reason for the bankruptcy, OR losing at least two weeks of income because of illness. This means a bankruptcy would be classified as “medical” if a filer had $5,001 in medical bills by $500,000 or even more in other debt.
Moreover, the authors propose a cure that is far worse than the disease. Co-author Steffie Woolhandler, who is a co-founder with Himmelstein of Physicians for a National Health Program, said that, “Only single-payer national health insurance can make universal, comprehensive coverage affordable.” In fact, single-payer national health insurance would necessarily impose a budget limiting the total amount that could be spent on health care in the U.S., regardless of how much care Americans need in a given year. This would require rationing and denial of care to anyone unfortunate enough to get sick after the money ran out. The result would be thousands of needless deaths – as shown, for example, by the higher death rates due to cancer and other serious illnesses in countries that already have national health insurance.
In short, even if we accept the doubtful claim that “your family is just one serious illness away from bankruptcy,” under single-payer national health insurance you are just one serious illness away from death.