HJ-ED-DHJHerald Journal Columns
August 6, 2007, Herald Journal

Medical bankruptcy not a threat


Two Harvard professors testified mid-July before Congress that 54.5 percent of all bankruptcies have a “medical cause,” and 46.2 percent of all bankruptcies have a “major medical cause.”

Actually, we shouldn’t use the term “testify,” because their 2005 study may be one of the most misleading pieces of research ever placed before Congress, according to Todd Zywicki, professor of law at George Mason University, and Gail Heriot, professor of law at the University of San Diego.

The Harvard professors are David Himmelstein and Elizabeth Warren, and their study is named “Illness and Injury as Contributors to Bankruptcy.”

It sounds scary, but the law already provides safeguards for medical bankruptcy, according to Zywicki.

What Himmelstein and Warren did to make their study into junk social science was to expand the definition of medical bankruptcy. “The study uses trick after trick to classify as many bankruptcies as possible as medical,” Zywicki said July 26 in the Washington Times.

For example, uncontrolled gambling, drug or alcohol addiction are considered “medical causes.” If a person gambles his life savings, home mortgage payments, and grocery money away at the casino, then his debt is equally as “medical” as someone who has had open heart surgery, Himmelstein and Warren claim.

The birth or adoption of a child also is classified as a “medical cause.” Even if obstetricians delivered babies for free, parents still are financially responsible for their children until they are 18, a major expense even for people who don’t continuously rely on credit cards, Zywicki pointed out.

That’s not the worst part of the study, though. The authors classified bankruptcies as having a “major medical cause” if the debtors had more than $1,000 in accumulated out-of-pocket medical expenses, uncovered by insurance, in the two years before the bankruptcy.

However, in the same year the study was conducted, 2001, the average annual per capita out-of-pocket medical expenses were $683. That means the average person spent 30 percent more than what the study counted as crushing medical debt.

So if a debtor had $1,001 uncovered medical expenses, and $50,000 on a Bloomingdale’s credit card, his debt counted as a “medical bankruptcy” in the study, he said.

According to the Executive Office of the United States Trustee, in the most recent study of 5,203 bankruptcy filers, three times as many filers as in Himmelstein and Warren’s study, only 5.5 percent of the total debt was for medical expenses, Zywicki said. That’s not even close to half.

Why would a congressional subcommittee even consider revamping bankruptcy law or the entire health care system based on junk social science? It’s a good question.