Medical Bills Do Not Cause "Half of All Bankruptcies"

This veers a bit from the mission of this web site, but I really feel I need to put one common myth to rest. In the health care debate, many people claim that "half of bankruptcies are caused by medical bills".

Michael Moore is the most recent prominent person to make this claim, and CNN doesn't even bother to challenge this important point, while they engage him on other aspects of his recent film "SiCKO". The claim comes from an oft-cited but poorly understood 2005 Harvard study. There is a copy of the misleading AP report (which is all most people read) here.

The claim is simply not true unless you stretch the meaning of "caused" and other words in the English language to lengths they were not intended to go.

The biggest problem is the study considered any medical bills over $1000 to be the "cause" of the bankruptcy, no matter how much other debt the family racked up. This is explained very well on the "Volokh Conspiracy" legal web site:

"...the authors do not compare the amount of medical debt they found to other debt or obligations that bankrupt debtors had. So, for instance, they would count as a medical bankruptcy a debtor who had $1,001 in medical bills, even if that debtor had say $50,000 in student loans, car loans, and other debt. It would be absurd, it seems to me, to say that the $1,001 in medical expenses "caused" that bankruptcy. Nonetheless, it would counted in this study, because the authors do not control for medical debt as a percentage or in relation to the debtors overall debt."

There were some other huge problems with the study as well. It included "uncontrolled gambling," "drug addiction," "alcohol addiction," "death in the family", and the birth or adoption of a child as "a medical cause". Now, yes, some people can chalk up gambling or drug/alcohol addiction as a mental health illness, but it is misleading to conclude that because someone gambled away his family savings, that constitutes a "medical cause".

Birth/adoption of a child does run up a lot of bills, but, for the average person, the majority of those are not medical. Similarly "death in the family" can rack up expensive funeral and legal costs, but not medical at all, unless there was a lengthy hospitalization beforehand. In that case, however, it's the hospital care that caused the medical debt, not the death afterwards.

Lest there be any doubt, however, even most of the surveyed group didn't look at their own problems as medical: "only 28.3 percent of the survey group claimed that their bankruptcy was substantially caused by "illness or injury."

Not surprisingly, one of the co-authors of the flawed study was Steffie Woolhandler, well-known as a die hard advocate for a nationalized health care system. If we are going to set up universal health care, let's do it under an honest debate. This is too important to play these kind of games.

And I should point this out too - everyone says the Europeans have it, and it works, so why can't we? My family has used the German health care system and it is very good. But the United States has two problems it would need to fix first, otherwise universal health care would become phenomenally expensive and untenable (even more so than now):

1) You can't have open borders and a generous welfare state at the same time. Even the most die-hard socialists grudgingly concede this. Many border hospitals have already gone bankrupt (most estimates say 60 in California alone) due to illegal immigration. Right now, hospitals have to treat anyone with emergency care, which already caused plenty of bankruptcies (including one in Bisbee, AZ, not far from where I lived at that time). Adding routine care to that would be astronomical (of course, preventive care sometimes reduces emergency care in the long run, but most of the burden of that is on the individual: eat right, exercise, not smoke, etc. The hospital can't do that for you).

The USA also has the additional distinction of being one of the few (if not the only) western industrialized nation that grants citizenship to anyone born there, even to illegal immigrant parents. That's already a huge incentive for people to cross the border illegally; add onto that all expenses paid, courtesy of the US taxpayer, and the lure is more attractive still.

2) Our current tort system would massacre it (this could take up a whole column by itself). Bottom line is, US health care costs are already enormous due to the never-ending lawsuits against doctors, hospitals, and drug companies, who have to pass that cost on to the consumer. Right now, lawsuits are generally limited by the amount of the insurance policy of the doctor or hospital (although some self-insure, or go without). But the federal government has far deeper pockets than any insurance company - the nation would go broke either being sued left and right, or be forced to pay to bail out hospitals driven into bankruptcy.



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