Elizabeth Warren and a Scholarly Debate Over Medical Bankruptcy That Won’t Go Away

Elizabeth Warren is still sparring with academics over a paper she published in 2005.

The latest round came Wednesday, in The New England Journal of Medicine, where she and her co-authors critiqued a recent paper that argued that medical problems cause a much smaller share of personal bankruptcies than many people think.

One of the reasons many people think medical bills cause so many bankruptcies is Elizabeth Warren, now a U.S. senator and possible Democratic presidential candidate. In 2005, she, along with David Himmelstein, Deborah Thorne and Steffie Woolhandler, published a paper in the journal Health Affairs documenting a memorable statistic: More than 40 percent of all bankruptcies in America were a result of medical problems, they wrote. In 2009, they updated that research with an even more startling number: Medical bills were responsible for more than 62 percent of all U.S. bankruptcies.

Woolhandler and Himmelstein are physicians, public health researchers at Hunter College and longtime advocates of a single-payer health care system. Thorne is a sociologist, now at the University of Idaho, who studies bankruptcy. Warren was a Harvard law professor longing to bring data to questions that her colleagues often answered with theory.

Their research was important, both among researchers and policymakers. The authors, in their discussion of their findings, emphasized the financial toll that comes with being uninsured or without comprehensive health coverage. Their work was often mentioned by politicians interested in expanding health insurance coverage in the country — particularly Barack Obama, who talked about it on the campaign trail and again when stumping for the Affordable Care Act.

It helped propel Warren’s own political career. She ran for Senate largely on the themes she had explored in her scholarship, about the ways that public policy had made it hard for middle-class Americans to get ahead. She also connected the work to her personal experience, noting that her father’s heart attack had caused a financial shock in her family.

The research also mattered to scholars, who realized there were underexplored questions on the effects of medical bills and health shocks on many Americans’ finances.

“I started becoming interested in medical bankruptcy partly after reading this paper,” said Neale Mahoney, a health economist at the University of Chicago Booth School of Business, whose research has focused on questions of medical debt.

But from the beginning many economists questioned the paper’s approach, which relied on surveys of nearly 1,800 Americans who had declared bankruptcy in 2001 and interviews with about half of them on their views about the causes of their financial woes after the fact. The researchers counted a bankruptcy as due to injury or illness if a person had a medical debt of more than $1,000; said illness or injury caused a bankruptcy; missed more than two weeks of work because of illness; or mortgaged a home to pay medical bills.

Mahoney, for example, said the team “wrote the paper in a way that was deliberately provocative, and they got out ahead of their skis.”

Craig Garthwaite, a health economist at the Kellogg School of Business at Northwestern, who also studies medical debt, offered a more negative assessment: “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.”

Writing in Health Affairs in 2006, David Dranove and Michael Millenson, then both on the faculty at Kellogg, analyzed the underlying survey figures differently and concluded that medical problems were probably responsible for less than 20 percent of all American bankruptcies. Warren and her co-authors pushed back in a letter and defended their interpretation — noting that the authors had received financial support from the insurance industry.

Dranove said he was taken aback by the aggressiveness of their response, which he described as “disparaging our motives,” rather than engaging in a scholarly discussion about the best way to arrive at the right answer. (In an email this week, Himmelstein again noted Dranove’s industry funding.)

Last March, a team of economists from the Massachusetts Institute of Technology, Northwestern University and the University of California, Santa Cruz, published another paper, making use of a California database of every hospitalization in the state. By examining the credit reports of all the hospitalized people to see who filed for bankruptcy afterward, the researchers concluded that medical shocks related to hospitalization could explain 4 percent of all bankruptcies.

Their paper was published in The New England Journal of Medicine under a bold title: “Myth and Measurement: The Case of Medical Bankruptcies.” The authors argued that their paper was the first to definitively demonstrate that medical shocks did cause some people to go bankrupt. It found that missed work caused by illness was often a bigger contributor to financial difficulties than medical bills themselves. There is, of course, a huge difference between 4 percent and 62 percent.

Amy Finkelstein, a professor at MIT and one of the authors, said the Warren paper’s approach is akin to trying to find out how to be successful in business by interviewing big technology entrepreneurs about how they got their start. Such a study, she said, might lead to the conclusion that you need to drop out of college to succeed, even though most college dropouts do not become billionaires.

“The original paper was extremely problematic precisely because it limited its analysis to the set of people who went bankrupt, and said how common really large medical bills are in that sample of people,” she said. “It says nothing about how common really large medical bills are in the nonbankrupt population.”

Another possible problem with using surveys of bankrupt people is that they might choose to emphasize sources of debt that make them seem sympathetic, while playing down others. Several outside experts said the new research was revealing because it avoided those problems, coming closer to isolating the degree to which medical problems caused bankruptcies.

The new paper also echoed one of the less publicized messages from the original Warren research: It’s not just medical bills but also lost work due to illness that can disrupt people’s finances. The Affordable Care Act has substantially broadened access to comprehensive health insurance. But there are few policies that protect people when their careers are disrupted by a health problem.

The newer research also has some limitations, and its authors acknowledge it probably undercounts the rate of medical bankruptcies somewhat. It focuses only on people who went to the hospital, which means it could miss those who became bankrupt because of high bills for doctors visits, expensive drugs or work missed because of related disability without ever experiencing a hospitalization. It also does not take into account bankruptcies that might have occurred because of a relative’s illness. David Cutler, a health economist at Harvard, noted that many people with serious mental illnesses or musculoskeletal injuries might accumulate medical bills and lose income without ever being admitted to a hospital. “If you look at the reasons why people are really sick today, they don’t have a lot to do with hospitalizations,” he said.

Warren and her co-authors, in their letter, also emphasize the possible undercounting of medical bills outside the hospital setting.

Still, their new letter ends with a sharp line: “Characterizing debtors’ self-reports as ‘myth’ is demeaning to people struggling with health care costs, and artificially narrowing the definition of medical bankruptcy does not improve understanding of its causes.” In an email, Himmelstein said the “Myth and Measurement” article “both misrepresented our research, and presented a highly slanted statistical analysis.”

When asked about the letter, Warren issued a milder statement. The March study “significantly adds to our understanding of the links between illness and financial hardship,” she wrote, adding, “I’m glad to be part of both the ongoing discussion and the work to find meaningful solutions.”

Ray Kluender, a co-author of the “Myth and Measurement” article, said that he was disappointed by the new letter but that he was delighted to see a U.S. senator engaging on research that could influence public policy.

“As long as she does not view us antagonistically, which I hope she doesn’t, I’m personally very excited about it,” he said. “This is why I decided to pursue economics as a career. I’m excited to have her attention.”