From the archives: The truth about medical bankruptcies – AEI – American Enterprise Institute: Freedom, Opportunity, Enterprise11th January 2019
On December 31, 2018, Elizabeth Warren formally launched an exploratory committee to run for president. The former Harvard academic and politician is one of the better known Democrats in a large potential field.
A bankruptcy and commercial law professor, Warren came to prominence with a co-authored 2005 report “Illness and Injury as Contributors to Bankruptcy” claiming more than half of all bankruptcies in 2001 were caused by health expenses and that there had been a surge in such bankruptcies. President Obama used the research when he said “the cost of health care now causes a bankruptcy in America every 30 seconds.”
The study has been put under the microscope by several economists, including AEI’s Aparna Mathur, who wrote about the its flaws when the 2005 study and a subsequent one by the same authors appeared. In addition to written rebuttal, Mathur testified multiple times on Capitol Hill for both the Senate and the House of Representatives.
Mathur’s testimony for the Subcommittee on Commercial and Administrative Law was on legislation designed to deal with medical bankruptcies. The legislation was intended to address the so-called “surge” in such bankruptcies. Mathur questioned the premise, noting that exaggerating the number of medical bankruptcies does little to help society deal with the real ones.
Recently, Mathur revisited the controversy in a Forbes column, wherein she calls the original Warren report’s methodology “inherently flawed,” and questions the very definition of the term “medical filers.” Mathur concludes:
The Warren studies also should have allowed for the possibility that other household characteristics, such as the filer’s work status and other kinds of debt, could have influenced the filing. Broader economic conditions could have played a role as well. The 2007 sample was likely affected by the beginning of the Great Recession, as well as the changes to bankruptcy law in 2005. What else is going on in the household, and in the economy, that could have driven individuals to file for bankruptcy? The answer is unclear; none of this is included in the limited multivariate regression analysis presented in the paper.