Medical Debt

You would never know that positive changes are taking place in the health sector from the Commonwealth Fund’s newest paper, “Americans Driven into Debt by Medical Bills,” released yesterday. It says an estimated 77 million adults “have difficulty paying medical bills, have accrued medical debt, or both.”

But nowhere does the study attempt to quantify the level of difficulty in paying the bills or the size of the bills. Those surveyed might also have trouble paying transportation, housing, or child care costs, but we don’t know the relative burden. Nonetheless, this is another lightly veiled argument for government to step in with Medicare for all.

The new Commonwealth Study also takes a swipe at high-deductible health plans, saying that they “contribute significantly to families’ bill and debt problems.”

Two important counterpoints:

  • This new Commonwealth study quotes an earlier flawed analysis by Himmelstein et al that said medical debt “now accounts for as much as 40 to 50 percent of personal bankruptcies.”

    Jeff Lemieux of America’s Health Insurance Plans earlier produced a study that exposed the bankruptcy study’s faulty premises. Lemieux criticizes Himmelstein for failing to prove causation and for his overly broad definition of medical bankruptcy which included uncovered medical bills over $1,000, a two-week loss of work-related income due to illness, or simply citing illness or injury as one reason for bankruptcy. Further, the study was based upon an unscientific and arguably skewed sample.

  • The Department of Justice has produced data that validates the criticism of the medical bankruptcy study. Its U.S. Trustees Program, which oversees bankruptcy cases in 21 regional offices nationwide, said medical bills were in fact not a significant cause of bankruptcies in the 1998-2000 period they studied:

    “Overall, medical debt did not seem to be a major factor in the vast majority of cases. The average medical debt listed per debtor was $2,582, or about 5.6 percent of the total general unsecured debt. More than one half (53.6 percent) of the debtors reported no medical debt at all ? Only 11.1 percent of debtors reported $5,000 or more in medical debts, and in only 4.4 percent of cases did medical debt comprise one-half or more of total unsecured debt.”


No one argues that the high cost of medical care is a not serious problem, as the White House Council of Economic Advisers reported in its latest paper this week. Health care costs are “certainly a major drag on the economy, on family budgets,” said CEA Chair Ben Bernanke. “Higher costs of medical care and health insurance, though paid in part by employers, are in the longer term borne mostly by workers.” The CEA adds that for some workers, “the increase in benefits has caused wage growth to lag total compensation, reducing gains in take-home pay.”

On Tuesday, President Bush asked Congress to pass his health care proposals, including enhancements to HSAs, refundable tax credits to help low-income individuals purchase health insurance, association health plans, support for new technology to reduce medical errors, and limits on medical malpractice lawsuits.

These policies move away from the victim mentality toward offering new incentives that empower people to take more control over their health and health care and to demand better value and more affordable coverage options.

Grace-Marie Turner

Health Policy Matters is a weekly newsletter containing summaries of timely and informative studies and articles on free-market health reform. It features research and writings by participants in the Health Policy Consensus Group, articles of interest from the health policy world, and announcements of coming events. Health Policy Matters is published by the Galen Institute, a not-for-profit public policy organization specializing in information and education on health policy. For more information about the newsletter and our organization, please visit our website at

If you wish to subscribe to this free weekly newsletter, update your address, or be removed from our list, please send an e-mail message to

The views expressed in this newsletter are the opinions of the authors and do not necessarily reflect the views of the Galen Institute or its directors.