As with previous studies of medical bankruptcy, this study puts forward a number of definitions of “medical bankruptcy” and defines any bankruptcy with any one of these conditions as suffering medical bankruptcy. The one that immediately stands out is “medical bills over $5,000 or 10 percent of household income on medical care.” (So, if Donald Trump had gone bankrupt in 2007 with $5001 of medical bills, he would be “medically bankrupt.”) Megan McArdle at The Atlantic has done a very thorough debunking of this study, pointing out that the study itself implies that medical bankruptcies, even according to the authors’ definition, shrunk from about 750,000 cases in 2001 to 2007. I share Ms. McArdle’s horror that one of the authors of this inept study, Elizabeth Warren, is now overseeing Congress’ TARP bailout!
The study has a couple of other implications which Ms. McArdle didn’t note. First, it reports that: “at illness onset, 77.9% were insured: 60.3% had private insurance as their primary coverage; 10.2% had Medicare; 5.4% had Medicaid; and 2% had Veterans’ Affairs/military coverage….. By the time of the bankruptcy, the proportion of patients with private coverage had fallen to 54.1%, while the percentage with Medicare and Medicaid had increased to 16.4% and 9.9%, respectively.”
You do the math: the proportion of “medically uninsured” with insurance (private or public) increased from 77.9% to 80.4%, over 2 points, between “onset of illness” and “time of bankruptcy,” and most of the increase was moving from private to public coverage. The move to Medicaid I understand: get sick, lose your job, go on Medicaid, and declare bankruptcy. But the huge move to Medicare is harder to understand, unless a significant number of the medically bankrupt were 64 years old at the “onset of illness.” That may be the case: the median age of the medically bankrupt was 45, whereas the median age of the U.S. population is 37.
So, what we likely observe here is the classic story of people failing to adequately save for retirement (discussed in today’s Wall Street Journal by Janice Nittoli, and, of course the subject of another NCPA blog).
Here are two takeaways: (1) Don’t rely on the government (Medicare) to bail you out; and (2) health-insurance status has very little (perhaps nothing) to do with bankruptcy.
This blog entry originally appeared in John Goodman’s Health Care Policy Blog.