Do Medical Bills Correlate with Bankruptcy Filings?

Elizabeth Warren, along with David Himmelstein, Deborah Thorne and Steffie
Woolhandler, continue to face controversy over their paper published in the journal Health
Affairs in 2005 and updated in 2009. This paper, based on surveys and testimonies from 1,800
Americans, estimated that 62% of bankruptcy cases are caused by medical bills. Warren’s paper
opened a discussion amongst scholars as well as politicians who used her research to further the
Affordable Health Care Act.

I agree that medical bills do create a hardship on debtors to repay any type of loans from
mortgages to credit cards and certainly student loan debt. In a separate story by the NY Times
about the private student loan company NJ HESSA, a man named Chris Gonzalez became
diagnosed with cancer and shortly after fired from his job at Goldman Sachs, yet his loans
persisted. One injury or diagnosis can severely change someone’s ability to maintain a job and
steady flow of income. Warren’s statistic is not surprising since over 48 million Americans in
2010 had no health insurance, not including American with inadequate health care to cover their
ailments. Since the Affordable Care Act, the number significantly decreased to 28 million in
2016 and allowed for people to stay on their parents’ health plan until they turned 26.
However, other scholars and economists believe that Warren’s paper is inaccurate and
her statistics do not accurately represent the correlation between medical expenses to bankruptcy.
Warren relentlessly pushes back against these opinions like one paper in 2006 by David Dranove
and Michael Millenson in Health Affairs that claimed the percent of bankruptcies was closer to
20%. Warren accused the authors of receiving funds from insurance agencies as a way to
discredit their research. A different study by economists from M.I.T, the University of
California, and Northwestern University examined the credit reports of hospitalized people using
the California hospital database and found that only 4% filed for bankruptcy. They found that
more people filed for bankruptcy because of the missed workday recovering from their injury
than the actual hospital bills. The issue with this study is that it discounts bills for doctor’s visits,
medication, ongoing disabilities, the illness of a relative, etc., that do not require a hospital visit.
Warren’s research undoubtedly benefited Americans by creating laws that allowed for
more accessible healthcare, despite the questionable statistic. Perhaps the statement made by
Craig Garthwaite, a health economist at the Kellogg School of Management at Northwestern, is
correct: “There are no reputable economists who I deal with who believe the number in the paper
or the methods in the paper are appropriate in trying to get at the true underlying question.”