- The Washington Times - Monday, July 9, 2018

Health-care-related bankruptcies, touted as a key justification for passing Obamacare in 2010, are not nearly as prevalent as reform proponents such as Sen. Elizabeth Warren have claimed, researchers say.

Findings of an exhaustive report published in the American Economic Review this year have sparked a lively debate as the Trump administration rolls back key portions of the health care law.

Matthew Notowidigdo, an associate professor of economics at Northwestern University, and fellow researchers looked at the rate of first-time health emergencies and resulting debt levels for patients. The result: About 4 percent of insured patients and 6 percent of uninsured patients ended up filing for bankruptcy.

That was a far cry from the claim advanced in a 2009 study by Ms. Warren and internal physician Dr. David Himmelstein that over 60 percent of bankruptcies in the U.S. were caused by extreme medical debt. Ms. Warren at the time was one of the country’s best-known bankruptcy law specialists.

The 60 percent figure created a furor at the right time. The U.S. was crawling back from the Great Recession, and health care reform was being packaged as a savior to American livelihoods.

But critics said the high number didn’t accurately reflect the nuance and complexity of medical debt, and the American Economic Review reinforced the skepticism.

“The fact is it’s very difficult to parse out the cause of bankruptcy and to separate the medical costs from other financial strains,” said Sung Hee Choe, vice president of Avalere Health, a policy consulting firm.

“The most common-sense definition of a medical bankruptcy is a bankruptcy that would not have happened had there not been the medical event,” said Mr. Notowidigdo. “In economics, we say that’s a counterfactual question. You have to figure out, ‘What would have happened had something not happened?’”

That was exactly what he and his co-researchers did.

Medical bankruptcies are real, they concluded. “They’re just more rare. To the extent that you wanted to motivate health care reform based on bankruptcy, that might be misguided,” they said.

Ms. Warren and her co-researchers said the study helps clarify the relationship between unexpected health care bills and economic distress, but they filed a defense of their own work last month in the New England Journal of Medicine.

“Contrary to their claim that our inferences about the causal relationship between medical bills and bankruptcy did not align with our respondents’ experiences, almost everyone we labeled ‘medically bankrupt’ explicitly told us that medical problems caused their bankruptcy,” they wrote.

But Mr. Notowidigdo and Amy Finkelstein and Raymond Kluender of the Massachusetts Institute of Technology responded that relying on patient testimony was repeating a flaw in the original research.

“It is akin to asking patients with cardiac disease what caused their heart attack; they probably do not know whether it was poor genes, poor diet, stress, or other factors,” they wrote, adding that the social stigma of bankruptcy may have colored the answers.

Talking point

Congress passed the Affordable Care Act in 2010, and supporters used the issue of medical bankruptcy as a main talking point.

“The cost of health care now causes a bankruptcy in America every 30 seconds,” President Obama said in a March 2009 White House speech kicking off the drive for a bill.

Citing Dr. Himmelstein’s findings, Reuters reported that year that “Medical bills underlie 60 percent of U.S. bankrupts.” CNN followed with “Medical bills prompt more than 60 percent of U.S. bankruptcies.”

In July 2009, Dr. Steffie Woolhandler of Harvard University, a co-author of the Himmelstein report, told the House Judiciary Committee that a single-payer health care system was the only protection for many Americans against financial ruin resulting from an illness.

“The striking conclusion from the study is really that private insurance is a defective product,” she said in her remarks.

But bankruptcy is an extremely personal and legal decision and, researchers argue, it’s difficult to put the responsibility for the decision on a single cause such as medical debt.

“High health care costs can be a problem. Bankruptcy can be a problem. But the overlap between these two problems isn’t large,” Timothy Taylor, managing editor of the Journal of Economic Perspectives, wrote in an email to The Washington Times.

Mr. Taylor, an author and frequent commentator on his Conversable Economist blog, called aspects of the original research naive and said it mixes up association and causation. Many people who declare bankruptcy have a lot of medical debt, but it does not follow that medical debt caused their bankruptcy.

“In terms of social science, it shows the difference between a naive reading of survey data and an actual research design,” Mr. Taylor wrote on his blog discussing the debate last month. “In terms of politics, it shows the allure of a more glamorous and striking claim, even when incorrect, over a similar claim that is less flashy but actually true.”

The 2009 Himmelstein report homed in on the total number of people who had declared bankruptcy. Through surveys and follow-up questions, they asked people to self-report the main contributors to their debt. They had responses from over 2,300 people and detailed interviews with over 1,000.

“You can say that’s apples and oranges,” Dr. Himmelstein said in a phone interview about the findings of the two research teams. “I would say, if what you’re trying to look at is how big a problem is medical bankruptcy in society as a whole, ours is maybe oranges and theirs is rotten apples.”

Financial hardship

Despite their differences, both camps of researchers agree that medical costs constitute significant financial hardship in the U.S.

“I think [the 2009 findings] were used, probably, as one of the arguments for why we needed better protection against the cost of illness for people and part of it about why we needed health care reform,” Dr. Himmelstein said. “I think it remains part of that debate, but by no means the only thing.”

Ms. Warren, Sen. Sheldon Whitehouse, Rhode Island Democrat, and Richard J. Durbin, Illinois Democrat, introduced the Medical Bankruptcy Fairness Act of 2016, meant to waive certain bureaucratic procedures and forgive some debt when medical bills cause bankruptcy.


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