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Counting Medical Bankruptcies

posted by Elizabeth Warren

About half of the families filing for bankruptcy do so in the aftermath of a medical problem (various calculations range from 46% to 63%.  Since my coauthors and I published a handful of academic papers on this, there has been a lively debate about whom to count among medical bankruptcies.  Those with big medical debts are counted, but measurement can be tricky as debt migrates to credit cards or home equity lines of credit.  Similarly, some people will pay the doctor, then put groceries on the credit card.  Others may have medical debts paid by insurance companies, but several weeks of lost time from work puts them under water.

But none of these ways of counting would cover this family that turned up in our bankruptcy sample.  Here is an excerpt from the telephone interviewer's side notes:

He described sitting outside the ER debating with his wife whether they should go in, while as it turns out he was having a major heart attack, because they knew they couldn't afford the resulting bills. He described how the bankruptcy made his wife disappointed in him to the point that she has now said that she is going to leave him. Also that he believes that filing bankruptcy is morally wrong and that he will never recover from the shame. 

The story is a reminder that people try to cope with unaffordable medical expenses in many different ways.  For some people, the answer is to deny themselves medical care.  They may try to avoid a medical bankruptcy, but at a staggering human cost.  Human costs cannot, of course, be discharged in bankruptcy.

Categories are necessary for quantification, but families--especially troubled families--don't always fit neatly into pre-determined categories.  Reality is messy, both for statisticians and for the people who live those lives. 


Mrs. Warren:

I would love to see you get similar information on foreclosures as well. Anti-predatory lending shills love to yell out about foreclosures and predatory lending, but it is pretty hard to get anyone to share any specific data as to the actual causes of foreclosures.

Most folks will tell you that the vast majority of foreclosures have nothing to do with predatory lending, but with issues such as medical problems, job loss, etc. In fact, much of the subprime lending was actually cash out refinances to people who were already having financial problems and subprime lending essentially gave them a temporary reprive until the house ATM ran dry. In addition, about half or more of the foreclosures (Cali, Nevada, FL, AZ which are driving the foreclosure rates nationally) are actually speculators and investors who thought they were going to get rich quick in real estate.

My point is, just like in your bankruptcy figures, the foreclosures statistics aren't telling the whole story and I would bet anyone will be hard pressed to find any valid data that shows that a significant number of foreclosures are being caused by mortgage brokers taking advantage of little old ladies which seems to be the cause du jour.

Russ, will you favor us with the source of your statistics?

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