WAPO of all places calls out left wing lies about "medical bankruptcy" in America

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WAPO of all places


Written by Meagan Mcardle - a prominent quasi-libertarian who has been massively critical of Obamacare all along.

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Referencing a study by the NEJM.

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During the push to pass the Affordable Care Act, President Barack Obama often described the “crushing cost of health care” that was causing millions of Americans to “live every day just one accident or illness away from bankruptcy” and repeatedly stated that the high cost of health care “causes a bankruptcy in America every 30 seconds.” Stories of illnesses and injuries with financial consequences so severe that they caused households to file for bankruptcy were used as a major argument in support of the 2010 Affordable Care Act. And in 2014, Senators Elizabeth Warren (D-MA) and Sheldon Whitehouse (D-RI) cited medical bills as “the leading cause of personal bankruptcy” when introducing the Medical Bankruptcy Fairness Act, which would have made the bankruptcy process more forgiving for “medically distressed debtors.” But it turns out that the existing evidence for “medical bankruptcies” suffers from a basic statistical fallacy; when we eliminated this problem, we found compelling evidence of the existence of medical bankruptcies but discovered that medical expenses cause many fewer bankruptcies than has been claimed.

Policymakers’ beliefs about the frequency of medical bankruptcies are based primarily on two high-profile articles that claim that medical events cause approximately 60% of all bankruptcies in the United States.1,2 In these studies, people who had gone bankrupt were asked whether they’d experienced health-related financial stress such as substantial medical bills or income loss due to illness. People were also asked whether they went bankrupt because of medical bills. People who reported any of these events were described as having experienced a medical bankruptcy. This approach assumes that whenever a person who reports having substantial medical bills experiences a bankruptcy, the bankruptcy was caused by the medical debt. The fact that, according to a 2014 report from the Consumer Financial Protection Bureau, about 20% of Americans have substantial medical debt, yet in a given year less than 1% of Americans file for personal bankruptcy, suggests that this assumption is problematic. Clearly, many people face medical debt but do not go bankrupt. Even after correctionfor overly broad definitions of “medical” expenses,3 the existing, widely cited evidence on medical bankruptcy is built on the fallacy that when two things occur together there is necessarily a causal relationship between them.

To understand the problem, consider an analogous line of inquiry: suppose we want to know which factors increase a person’s chances of becoming a technology billionaire. Investigation of recent technology giants might suggest that dropping out of college is a high-return strategy (think: Bill Gates, Steve Jobs, and Mark Zuckerberg [dropping out of Harvard seems to have a particularly high payoff]). By examining only college dropouts who have already became technology billionaires rather than all college dropouts, this analysis misses the fact that most college dropouts do not go on to lucrative careers in the tech business. A similar problem pervades the current literature on medical bankruptcy. The studies mentioned above examine the experiences only of people who went bankrupt, but it is impossible to infer the role of medical expenses in causing bankruptcy without information on the proportion of the population with large medical expenses that did not go bankrupt.

To estimate the share of bankruptcies actually caused by medical factors, we therefore selected a sample of people who were admitted to the hospital in California and tracked information on their annual credit reports, including whether and when they filed for bankruptcy. Because we examined the relationship between when people go to the hospital and the timing of any bankruptcy, we were able to estimate the increase in bankruptcy filings caused by illness or injury, rather than the fraction of people filing for bankruptcy who happen to have substantial medical expenses.


The Effect of Hospitalization on the Likelihood of Filing for Bankruptcy.
Our study was based on a random stratified sample of adults 25 to 64 years of age who, between 2003 and 2007, were admitted to the hospital (for a non–pregnancy-related stay) for the first time in at least 3 years. We linked more than half a million such people to their detailed credit-report records for each year from the period 2002–2011. The graph shows the results of our analysis.

The results show a clear effect of hospital admission on bankruptcy: the rate of bankruptcies rises sharply in the years after hospital admission, and this change is statistically significant (at conventional levels) both 1 and 4 years after the admission, after which bankruptcies appear to level off. This finding indicates that the expenses that result from the illness or injury that caused the hospital admission — for example, out-of-pocket medical costs and lost labor income — cause some people to file for bankruptcy. However, the magnitude of the bankruptcy effect is much smaller than previously thought: we estimate that hospitalizations cause only 4% of personal bankruptcies among nonelderly U.S. adults, which is an order of magnitude smaller than the previous estimates described above.

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