Bankruptcy

How to Count Medical Debt in Bankruptcy

By Bob Lawless

Most Credit Slips readers will be familiar with the debate about the role medical debt plays in consumer bankruptcy. A big part of that debate is one about methodology with disputes about how to count "medical debt." Personally, I've always thought one of the most damning accounts of the role medical debt plays in bankruptcy came from Aparna Mathur, a scholar from the American Enterprise Institute (AEI). In a paper that heavily criticizes the other accounts, such as co-blogger Elizabeth Warren and Debb Thorne's work with David Himmelstein and Steffie Woolhandler, Mathur concluded "nearly 27 percent of filings are a consequence of primarily medical debt." If you do not like Himmelstein, Thorne, Warren & Woolhandler's count that more than 1 in 2 of all bankruptcies have a connection to medical debt, an AEI-affiliated scholar says it's 1 in 4. Either figure is a disgrace for a country with the wealth and resources of the United States.

An important new paper on the topic of medical debt now comes from Melissa Jacoby at the University of North Carolina (who helped us to found Credit Slips) and Mirya Holman at Duke University. They looked both at court records and survey responses from the Consumer Bankruptcy Project. (Disclosure: I am affiliated with the CBP.) They conclude, "By combining the methods, we find that nearly four out of five respondents had some financial obligation for medical care not covered by insurance in the two years prior to filing, but only about half of the court records contain identifiable medical debt, and of substantially more modest amounts." As someone who has just spent a lot of time thinking about research methods, these findings are a ringing endorsement for a multimethod approach to solving difficult research problems.

Credit Slips readers, however, are people who spend a lot of time thinking about credit and bankruptcy. If that describes you, this paper is a must read. Jacoby and Holman also have a couple of blog posts (here, here, and here) over at The Faculty Lounge discussing their findings

Full post as published by Credit Slips on August 07, 2009 (boomark / email).