More fun with bankruptcy and medical bills

A critic says medical-bill induced bankruptcies are falling, not rising. Did Elizabeth Warren get her facts wrong?

By Andrew Leonard

Published June 5, 2009 7:30PM (EDT)

Duty requires me to note that Megan McArdle is on the warpath against the study I posted about yesterday, which asserted that "between 2001 and 2007, the proportion of all bankruptcies attributable to medical problems rose by 49.6 percent."

McArdle's main beef appears to be that by focusing on the "proportion" of bankruptcies attributable to medical problems, the researchers were obscuring that the overall number of medical bankruptcies had actually sharply declined over the same period. She also makes a big deal of a point that I failed to mention, which is that one of the co-authors of the study is Elizabeth Warren, a bankruptcy expert at Harvard who is now more well-known for her job as chair of the TARP oversight committee.

From McArdle:

What Warren et. al. neglect to mention is that bankruptcies fell between 2001 and 2007. In fact, they were cut in half. Going by the numbers Warren et. al. provide, medical bankruptcies actually fell by almost 220,000 between 2001 and 2007, a fact that they not only fail to mention, but deliberately obscure.

Now, it is true that there was a dramatic drop in bankruptcies after the passing of the 2005 bankruptcy law. There are two logical reasons for this. First, bankruptcy filings just before the law was enacted spiked way up, as people afraid that they would not be able to file for bankruptcy afterward rushed to file. Second, after the law was passed, it actually became harder to file for bankruptcy.

But as even McArdle admits, bankruptcy filings have risen steadily since their post-2005 plunge, and as the data I cited from Robert Lawless shows, in May they hit a new post-law high.

Given the distortions in overall numbers caused by the law, isn't the proportion due to medical bankruptcy more important than the overall number? And given that the overall number is climbing rapidly again, isn't it likely that medical-bill-induced bankruptcies are also rising?

McArdle also takes issue with the raw data as compiled by Warren, which isn't that surprising either, as she has been a dogged critic, dating back at least a year, of Warren's basic thesis about how the middle class is getting squeezed to death in the United States.

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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