Medical Bankruptcy Far Less Common Than Elizabeth Warren Tells You

You could ask about other sources of financial distress too – car payments, food costs, etc….

Elizabeth Warren Demagog

Elizabeth Warren/IMAGE: ABC via YouTube

(Peter Ubel, Forbes) Elizabeth Warren describes medical bills as “the leading cause of personal bankruptcy” in the United States.

She bases that opinion in part on her own research, in which she and her collaborators surveyed people who had experienced personal bankruptcy, asked them whether they’d experienced health-related financial distress, and concluded that 60% of all bankruptcies in the U.S. result from illness or injury.

An article in the New England Journal of Medicine this spring convincingly argued that Warren’s estimates were seriously exaggerated due to faulty research methods.

I’ll briefly summarize that critique.

But more importantly, I’ll explain why even revised bankruptcy estimates still overstate the contribution of healthcare costs to American bankruptcy rates.

Here is a quick review of the issue.

Warren’s team surveyed people who had declared bankruptcy, asked them if they’d experienced health-related financial distress, and then blamed bankruptcy on health problems for anyone who reported such distress.

That’s a problem because it assumes that, lacking such health-related financial distress, none of these people would have become bankrupt.

But you could have asked all of these people about housing-related financial distress, and you’d probably find at least 60% reporting such distress, too.

Would that mean housing costs were responsible for their bankruptcies? You could ask about other sources of financial distress too – car payments, food costs, etc. – and you’d be left wondering which of these expenses caused them to experience personal bankruptcy.

But of course, for most people, it is the combination of expenses that puts them into bankruptcy…Original Source

Peter Ubel is a physician and behavioral scientist at Duke University. His books include Pricing Life (MIT Press 2000), Free Market Madness (Harvard Business Press, 2009), and Critical Decisions (HarperCollins).