“Half of Bankruptcy Due to Medical Bills–US Study.” At least so said the Reuters headline in last week’s story. And similar stories in newspapers across the country agree. Soon it will be repeated as gospel on Capitol Hill and by the chattering classes everywhere. Understandably, middle-class Americans have started to feel a little queasy about their health and about the adequacy of their health insurance.
The fundamental problem is that it isn’t true. Despite what the authors have encouraged us to believe, the Harvard study, entitled “Illness and Injuries As Contributors to Bankruptcy,” isn’t really about medical bills, crushing or otherwise. It’s about bankruptcies that can–at least if you’re willing to stretch things a bit–be classified as medically related. It finds that 54.5 percent of all bankruptcies have “a medical cause.” But “medical cause” is used as a term of art here. In fact, the study does not claim that injury or illness was the primary cause of those bankruptcies. And, perhaps more importantly, it does not claim that the bankruptcies were caused by the crush of medical bills.
Don’t get me wrong. Some bankruptcies are caused by crushing medical debt. But they aren’t half of all bankruptcies, and the only way to create the impression they are is to jimmy the figures. For example, the study classifies “uncontrolled gambling,” “drug addiction,” “alcohol addiction,” and the birth or adoption of a child as “a medical cause,” regardless of whether medical bills are involved. Yes, there may be situations in which a researcher might legitimately want to classify those conditions as “medical,” but a study that is being used to prove that Americans are going bankrupt as a result of crushing medical bills is not one of them. A father who has gambled away his family’s mortgage payment is not likely the victim of crushing medical bills. Similarly, new parents who find they can no longer afford their previous lifestyle now that one of them has to stay home with the baby will usually find the obstetrician’s bill the least of their problems. Babies are a financial hardship even when hospitals give them away free.
Maybe that’s why only 28.3 percent of the surveyed debtors themselves agreed with the authors that their bankruptcy was substantially caused by “illness or injury.” The rest put the blame elsewhere, even when the study labeled their problems as at least in part “medical.”
Buried in the study is the fact that only 27 percent of the surveyed debtors had unreimbursed medical expenses exceeding $1,000 over the course of the two years prior to their bankruptcy. Presumably 73 percent–the vast majority–had medical expenses during that two-year period of $1,000 or less. Had that figure been recited up front, it would have been obvious that the proportion of bankruptcies driven by unmanageable medical debt was nowhere near half.
Nobody likes to pay $1,000 in medical expenses even when they get two years to do it in, but for most Americans (particularly those with enough at stake to seek the protection of bankruptcy) it is not catastrophic. Indeed, for many families it is utterly routine. Something else is going on in the overwhelming majority of these bankruptcies, whether it’s gambling debt, drug or alcohol addiction, child care expenses, divorce, loss of a job, or just plain out-of-control spending. The authors’ decision to include any case in which the debtor had paid out more than $1000 in medical expenses in the course of two years as a bankruptcy with a “medical cause” is not just questionable. It’s downright misleading.
What would be significant for the public to know is how common the cases of bankruptcy due to crushing medical debt actually are–debt in the range of $10,000 or more in single year. That, however, is something the study is careful not to disclose, even though the raw data behind the study would appear to be sufficient to make such computations possible. Instead, at every turn, the authors present the data in ways that encourage the reader to misidentify medical expenses as the leading cause of bankruptcy.
For example, at one point the reader is told that the mean out-of-pocket medical expenditure for an illness-related bankruptcy is $11,854. But this is not the average for the 54.5 percent of bankruptcies that the study holds to have “a medical cause;” it’s the average for the much smaller group (28.3 percent) in which the debtor agreed that illness and injury played a substantial role. And the $11,854 figure is not for the year or two prior to the bankruptcy, but for the entire period of the illness, which may be many years or even decades. Finally, and most importantly, it is a mean and not a median. Just one truly catastrophic illness costing a total of $6 million over the course of any length of time would be enough to put the group’s mean at above $12,000, even if nobody else in the sample ever spent a dime on medical bills. It’s hard to see why a serious scholar would use the mean instead of the median if the point of the study is to demonstrate fairly that a large proportion of bankruptcies are caused by medical bills. Means don’t show that.
At least one of the authors–Dr. Steffie Woolhandler, a Cambridge Hospital internist and associate professor of medicine at Harvard, makes it clear that she does indeed have an agenda–health-care coverage that is universal and comprehensive. “Covering the uninsured isn’t enough. We must also upgrade and guarantee continuous coverage for those who have insurance,” she said in a statement. She went on to condemn employers and politicians who advocate what she called “stripped-down plans, so riddled with co-payments, deductibles and exclusions that serious illness leads straight to bankruptcy.”
But Dr. Woolhandler’s diagnostic skills leave something to be desired here. If medical debt is not the problem in these bankruptcies, more comprehensive health-care coverage is not the solution. Indeed, in some cases, it may even be counterproductive. For employers (and employees), coverage without deductibles and copayments will mean more expensive health-care coverage. Some may try to make up the difference by cutting corners on disability insurance or by hiring fewer employees. Will that in the long run lead to fewer bankruptcies? Or more? This study sheds no light on those questions. Only by torturing to data has Dr. Woolhandler made it appear that it does.
–Gail Heriot is a professor of law at the University of San Diego.