Posted on February 28, 2006

AHIP pays for Dranove and Millenson's swift boat tickets


Medical Bankruptcy: Myth Versus Fact
This response to a widely cited paper by David Himmelstein and colleagues challenges the basis of its conclusions.
By David Dranove and Michael L. Millenson
Health Affairs
28 February 2006

The great enemy of the truth is very often not the lie-deliberate, contrived and dishonest-but the myth: persistent, persuasive and unrealistic.
-President John F. Kennedy, Commencement Address at Yale University, 11 June 1962.

It is no secret that bad health and bad debt often coincide. Unexpectedly large medical bills can impose a sizable burden on those who are already physically and economically fragile. In some cases, medical debt can contribute to a collapse of creditworthiness that forces some people to declare personal bankruptcy.

David Himmelstein and colleagues contend that this scenario is pervasive. “Medical problems contribute to about half of all bankruptcies,” they write. They warn that “solidly middle-class Americans.face impoverishment following a serious illness,” and they propose a solution: comprehensive national health insurance such as that offered in Canada and Western Europe.

Unfortunately, a closer examination of their paper suggests three reasons why their conclusions are also unrealistic.

First, they fail to provide a causal relationship to support the claim that medical spending contributes to “half of all bankruptcies” (54.5 percent).

Second, the authors’ methodology does not provide a definitive answer to the policy question they implicitly pose: how national health insurance would affect the rate of personal bankruptcy.

Lastly, their suggestion that national health insurance would greatly reduce the number of bankruptcies linked to medical spending is misleading.

According to Himmelstein and colleagues, 28.3 percent of respondents stated that illness or injury was a cause of bankruptcy. They also reported that medical bills contributed to the bankruptcy of 60 percent of this group.
Multiplying the two figures together, we conclude that 17 percent of their sample had medical expenditure bankruptcies.

Congressional Budget Office: The CBO review cites many factors that contribute to bankruptcy, including large medical bills, divorce, loss of income as a result of unemployment, and poor debt management. Even so, the CBO reports that “researchers have made little progress in judging the relative importance of the factors that lead people to file.”

Fay, Hurst, and White: They conclude that bankruptcy is the response to an accumulation of debt, not to one particular factor such as a health problem.

2005 Commonwealth Fund: The survey found that 41 percent of adults ages 19-64 had a high rate of medical bill problems or incurred medical debt. Sixty-two percent of these nonelderly adults had insurance when the problem occurred.

Domowitz and Sartain: They first reported that “high medical debt (in excess of two percent of income) has the greatest single impact of any household condition variables in raising the conditional probability of bankruptcy.” Accounting for prevalence of various sources of debt, Domowitz and Sartain found that “the largest single contribution to bankruptcy at the margin is credit card debt.” Other data on credit card payments support our previous contention that those with trouble paying all of their bills, not just medical expenses, are most vulnerable to bankruptcy.

Gross and Souleles: Gross and Souleles used multivariate regression to predict personal bankruptcies, with one of their predictors being health insurance coverage. Overall, it is difficult to draw firm conclusions from Gross and Souleles’ analysis.

There is one methodological problem that occurs in all the papers cited above, including that of Himmelstein and colleagues. They all fail to address the problem of reverse causality-that is, whether medical spending causes bankruptcy or whether financial turmoil causes medical problems (for example, because of stress). The resulting endogeneity bias will therefore overstate the extent to which medical bills cause bankruptcy.

Himmelstein and colleagues omit any reference to personal choices, such as taking on debt, even in their household interviews. In this they act more like good doctors than good economists or policymakers. For although it is good medical practice to work as hard to save the life of a careless drunk driver as a sober careful one, it is equally good economics and public policy to penalize the careless driver with higher insurance rates and possible criminal prosecution.

…weaving a medical-cost safety net that could protect virtually every person from bad behavior or bad luck might actually poke holes in the safety net for other vulnerable citizens. Good intentions are not enough. The Book of Job, far older than the Roman laws cited by Himmelstein and colleagues, teaches the hard lesson that no amount of good fortune is irreversible. Some combination of illness, job loss, and personal problems can assuredly dislodge even the most firmly rooted member of the middle class.

Unfortunately, expansive proposals to protect all of us distract from the pressing need to protect some of us, such as the forty-five million Americans with no health insurance and millions of others who are underinsured and vulnerable. “First, do no harm” is not just good advice for physicians; it should apply to those who would make health policy as well.

The authors are grateful to America’s Health Insurance Plans for supporting this research.


America’s Health Insurance Plans

Welcome to America’s Health Insurance Plans (AHIP), the voice of America’s health insurers. AHIP is the national association representing nearly 1,300 member companies providing health insurance coverage to more than 200 million Americans.

Our goal is to provide a unified voice for the health care financing industry, to expand access to high quality, cost effective health care to all Americans, and to ensure Americans’ financial security through robust insurance markets, product flexibility and innovation, and an abundance of consumer choice.


Discounting The Debtors Will Not Make Medical Bankruptcy Disappear
By David U. Himmelstein, Elizabeth Warren, Deborah Thorne, and Steffie Woolhandler
Health Affairs
28 February 2006

David Dranove and Michael Millenson seem determined to deny that financial fallout from illness pushes middle-class families into bankruptcy. Anxious to erase the headline that three-quarters of U.S. medical bankrupts had health insurance at the onset of their illnesses and the resulting spotlight on inadequate coverage and insurance cancellation practices, they ignore most of our data and misrepresent the rest. They dismiss families’ explanations of their difficulties and blame those ruined by illness for their own problems. However, the data from the bankruptcy courts are undeniable. Bankruptcies affect mainly middle-class, privately insured families, and about half are triggered, at least in part, by illnesses.

Let’s be clear: Every number, percentage, and variation in how to interpret the data that Dranove and Millenson seize upon in attempting to dismiss our work came from our manuscript. We offered detailed breakdowns of our numbers so that different readers could weigh the data. Unfortunately, these commentators manipulate the data far beyond legitimate reinterpretation.

Their central claim is that no more than 17 percent of bankruptcies are medical-far lower than the 54.5 percent figure they attribute to us (in fact, we gave a range of estimates, from 46.2 percent to 54.5 percent, in anticipation of different possible interpretations of the data). In their effort to whittle down the number of medical bankruptcies, they ignore huge chunks of the data we reported. First, they assert that only the 28.3 percent of debtors who gave “illness or injury” as the specific reason for filing for bankruptcy could possibly be classified as “medically bankrupt.” Next, they narrow this group to include only the 59.9 percent who also cited bills from medical providers as a major contributor to bankruptcy. (These latter data came from our interviews with a subset of 331 debtors, not, as Dranove and Millenson state, from our questionnaire survey of 1,771 filers.)

Thus, their calculation rests on responses to two items from our data, disregarding the hundreds of other pieces of data we collected that give a fuller and more accurate picture of the reasons for filing for bankruptcy. Moreover, they misrepresent both items.

Dranove and Millenson portray medical debtors as irresponsible deadbeats, their plight a result of bad choices analogous to those made by drunk drivers. But medical catastrophe is not a choice. And, unlike other expenses, most medical debt is not voluntary, any more than breathing is voluntary. Most medical debtors had taken the prescribed steps to protect themselves: Three-quarters had health insurance when they got sick. But for many, private coverage lapsed when they lost work because of illness. In other cases, the insurance they bought in good faith had so many holes that it left them unprotected. To families financially hard-pressed by illness, Dranove and Millenson preach acceptance of the hard message of the prophet Job. Instead of blaming ruined families, or the wrath of Jehovah, they should take a hard look at the defective products sold by their funders in the insurance industry.

To Dranove and Millenson, a safety net strong enough to cushion the impact of illness is inconceivable. Yet many other countries have implemented comprehensive health and disability coverage that does the job quite well.


Medical Bankruptcy: Dranove And Millenson Respond
By David Dranove and Michael L. Millenson
Health Affairs
28 February 2006

In responding to our study, David Himmelstein and colleagues state that we “seem determined to deny that financial fallout from illness pushes middle-class families into bankruptcy.” This is simply untrue. Our paper denies neither the presence of medical bankruptcies nor their serious impact on families. Rather, we carefully critique the methods they used to analyze those bankruptcies. Nothing in Himmelstein and colleagues’ response suggests that our criticism of their methodology was incorrect. They continue to offer only one direct causal measure: namely, that medical bills “contribute” to 17 percent of personal bankruptcies. The remaining anecdotes and correlations they offer do not constitute systematic empirical research, and they do not establish causation or the magnitude of the problem. Thus, it is impossible to determine from their study whether and by how much the expansion of health insurance coverage would reduce the personal bankruptcy rate.

We admit to being unprepared for the political attack-dog tone that dominates their response. One might have thought that our paper, rather than appearing after rigorous peer review, had been issued as a press release by insurance industry magnates. In fact, although our time was paid for by America’s Health Insurance Plans, our work was completely independent, and we, along with the journal’s editors, insisted on the peer-reviewed publication process. Perhaps Himmelstein and colleagues are simply taking out on us their frustration that middle-class American voters have ignored their decades-old advocacy of a Canadian-style health system.

We agree with Himmelstein and colleagues that too many vulnerable Americans are financially devastated by the cost of illness. They seem to regard with a sense of outrage our objective examination of the methods they use to establish just how many such individuals there are. We, in contrast, continue to believe that passion to right a wrong does not justify abandoning dispassionate analysis of the best way to do so.


Bankruptcy Is The Tip Of A Medical-Debt Iceberg
By Robert W. Seifert and Mark Rukavina
Health Affairs
28 February 2006

Medical bankruptcy, whatever its actual frequency, is an extreme example of a much broader phenomenon. Medical debt is surprisingly common, affecting about twenty-nine million nonelderly adult Americans, with and without health insurance. The presence of medical debt, even for the insured, appears to create health care access barriers akin to those faced by the uninsured. Policymakers, researchers, and medical providers should consider medical debt a risk factor for reduced health access and poorer health status. Simply reducing the number of uninsured Americans would be a hollow policy victory if the problems arising from medical debt persist.

Recent research findings cry out for new measures to assess how well our country is addressing the health care access issue. It is now documented that medical debt resulting from being uninsured or having inadequate insurance reduces access to care and undermines the financial security of American families. Thus, this debt is, in itself, a risk factor for reduced access and poorer health status.

Policymakers, researchers, and medical providers should all be encouraged to focus attention on this risk factor. Financial protection must be a tenet of health insurance. Requiring additional costs to be borne by the patient will likely have a detrimental effect on access, particularly for those with chronic illnesses, although low-wage workers and even middle-income families may be at risk as well.

To truly improve health care access for Americans, it is time to expand our policy vocabulary beyond insurance coverage and begin to examine the adequacy of that coverage in ensuring health access and improving health status and financial security.

Comment: By Don McCanne, M.D.

There is no disagreement on the fundamental issue here: Medical debt is pervasive, and, directly or indirectly, contributes to a significant portion of personal bankruptcies.

So what is the point of the article by Dranove and Millenson? It is clearly a blatant “swift boat” effort to discredit the messengers, and by implicit but invalid extension, to evade the message that there is a pressing need to effectively address the issue of medical debt through comprehensive reform. The opinion of the authors was purchased by an industry that is compounding the problem of medical debt, and is threatened by the single payer model which would be the most effective in insuring against financial loss in the face of medical need.

Dranove and Millenson state that “expansive proposals to protect all of us distract from the pressing need to protect some of us, such as the forty-five million Americans with no health insurance and millions of others who are underinsured and vulnerable.” They have it wrong. The private insurance industry, which leaves forty-five million Americans with no health insurance and millions of others who are underinsured and vulnerable, should not distract us from an expansive proposal that would protect all of us with an equitable, efficient, comprehensive, affordable system that would do far more to prevent medical debt than would the flawed policies of the private insurers.

Sadly, the damage is done. Whenever the issue of medical debt is raised, the opponents of national health insurance will dismiss it with the statement that the bankruptcy issue is a myth (while remaining silent on the consequences of medical debt). Those in the policy community who really do care will understand, but the public at large won’t. All that they’ll understand is the myth that private insurance provides the best protection.