Most Bankruptcies Because of Medical Debt? Uh, no.

August 18, 2009 | Filed Under Barack Obama, Budget, Business, Democrats/Leftists, Economy/Finances, Free Trade, Government, Corruption, Health, Journalism, Liberals, Media Bias, Society/Culture, Warner Todd Huston |

-By Warner Todd Huston

Early in June The New York Times was all aghast that overwhelming debt from medical bills will cause “nearly two out of three bankruptcies” in the US. Since then the White House has also used the statistic as a way to sell Obamacare policies and frighten voters into accepting a nationalized healthcare system. But is it true? Are medical bills the culprit of more than 60% of American bankruptcies?

The stark claim that medical debt is the scourge of citizens everywhere comes from a study published in The American Journal of Medicine. Its findings are certainly alarming with an outrageous rate of 62% of bankruptcies being caused by medical bill debt, such debt supposedly having risen 49% between 2001 and 2007. If true, this is a disastrous finding.

But is it true? Not according to the American Enterprise Institute’s Aparna Mathur. Mathur finds a very different story when looking over the available studies and statistics. In testimony before the House Committee on the Judiciary in July, Mathur finds a far less threatening picture.

For one thing, Mathur finds that the methods and definitions of the AJM study by Himmelstein, Thorne, Warren and Woolhandler are fatally flawed. Mathur says that bankruptcies assigned to “medical reasons” are too loosely defined and that statistics are “overstated.” He concludes that the findings by Himmelstein, et al, are in “stark contrast to findings reported by other surveys that rely on a larger sample size and a stricter definition of a medical bankruptcy.”

In Mathur’s estimation bankruptcies because of medical bills are much smaller in number than the alarming 62% stated by the AJM study.

Mathur concludes with this:

To summarize, data from surveys, including the Himmelstein et al. studies, would suggest that by the respondents’ own estimates, the fraction of bankruptcies caused by medical debts ranges from around 16 to 29 percent. The upper bound may be an overestimate since the respondents in the Himmelstein et al. survey also do not specify whether medical bills were the immediate cause or the most important cause of the filing. The only survey that asks the right questions is the PSID, which estimates that between 1984 and 1996, an average of about 16 percent of filings were due to medical bills. Given that “goods and services” debt, which includes medical debt, as a fraction of all debts has actually declined between 1998 and 2007 from 6 percent to 5.8 percent of all debt (SCF, 2007), it is hard to imagine that medical bankruptcies have increased tremendously over this period.

So Mathur finds that the president’s stats are overestimated by well more than half again as much. Certainly every bankruptcy is painful and should not be discounted as meaningless, but with less than 20% of actual bankruptcies resulting from medical debt this does not seem the “emergency” that Obama is trying to sell us on.

There is no reason not to slow down this headlong rush to healthcare “reform,” and medical bankruptcies should not be used as a scare tactic to spur us to hasty action.
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Warner Todd Huston is a Chicago based freelance writer, has been writing opinion editorials and social criticism since early 2001 and is featured on many websites such as NewsBusters.org, RightWingNews.com, StoptheACLU.com, TheRealityCheck.org, RedState.com, Human Events Magazine, AmericanDailyReview.com, and the New Media Journal, among many, many others. Additionally, he has been a frequent guest on talk-radio programs to discuss his opinion editorials and current events and is currently the co-host of “Life, Liberty, and the Pursuit of Conservatism” heard on BlogTalkRadio. He has also written for several history magazines and appears in the new book “Americans on Politics, Policy and Pop Culture” which can be purchased on amazon.com. He is also the owner and operator of PubliusForum.com. Feel free to contact him with any comments or questions : EMAIL Warner Todd Huston

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