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Elizabeth Warren “linked” to ruin of low cost catastrophic health insurance

Elizabeth Warren “linked” to ruin of low cost catastrophic health insurance

In early June 2009, long before Scott Brown would emerge as the 41st vote, and even longer before Brown would be challenged in the 2012 Senate race by Elizabeth Warren, Warren was the darling of the push for Obamacare.

Warren released  a study showing that over 60% of personal bankruptcy filings were linked to medical expenses.  The one-page “fact sheet” distributed with the study highlighted the following:

Illness and medical bills were linked to at least 62.1% of all personal bankruptcies in 2007. Based on the current bankruptcy filing rate, medical bankruptcies will total 866,000 and involve 2.346 million Americans this year – about one person every 15 seconds.

Such “fact sheets” distributed with longer, more dense reports amount to press releases, basically “talking points for dummy journalists.”

It did not take much for “linked” to become “caused.”  It became a health care reform talking point that medical bills caused over 60% of all bankruptcies and that such bankruptcies were rising.  Kathleen Sebelius used the study in television interviews.

From The NY Times, June 4, 2009:

Nearly two out of three bankruptcies stem from medical bills, and even people with health insurance face financial disaster if they experience a serious illness, a new study shows.

But the actual findings were not as strong as the fact sheet, the media and Democrats portrayed.  In fact, medical billed were deemed “linked” to the bankruptcy even if only 10% of pretax family income:

Using a conservative definition, 62.1% of all bankruptcies in 2007 were medical; 92% of these medical debtors had medical debts over $5000, or 10% of pretax family income. The rest met criteria for medical bankruptcy because they had lost significant income due to illness or mortgaged a home to pay medical bills.

Meghan McArdle pointed out the weakness of making the causal connection on such a wide scale of medical bills and bankruptcy, since bankruptcy filers themselves did not identify medical expenses as the cause of the bankruptcies (emphasis mine):

Elizabeth Warren has another study out showing that medical expenses contribute to more than half of all bankruptcies–indeed, this time, it’s 70%, up from the 50% she found in 2001.

Now, it is possible that this is true. The fact that it seems to disagree with every other study I’ve ever read that is not authored by Elizabeth Warren, and also, the self-reports of the people in her study (only about a third of whom attribute their bankruptcy to a health problem) could just be a fluke. It doesn’t necessarily mean that it’s wrong.

Yet upon closer examination, it turns out that it is not just wrong, but actively, aggressively wrong. Warren and her co-authors have obscured important and obvious facts that call the integrity of the work into serious question.

The text itself raises a huge red flags. It’s hard to believe that more than half of people who have been pushed into bankruptcy by a medical issue don’t understand this fact. Perhaps they are not the brightest bulbs on the Christmas tree, but could it really be true that most people catapaulted into a financial crisis by their medical bills don’t even notice that health care expenses are their main problem?

McArdle elaborated on other misleading aspects of the study, and then followed up with Why Elizabeth Warren’s New Bankruptcy Study is So Bad:

She’s a professor at Harvard, and the head of the Congressional TARP oversight panel.  This conveys a certain responsibility to present data in the most illuminating way, not in the way that will induce journalists to say things that aren’t true.

The post 2005 increase in bankruptcies isn’t being driven by medical bankruptcies.  It’s simply rebounding from what every single analyst at the time, including Elizabeth Warren, agreed was an unsustainable drop.

There is no doubt that many people are forced into financial difficulty and even bankruptcy (which of course wipes out the medical debt) by catastrophic illness.

A simple answer would be to create incentives for insurance companies to offer catastrophic health insurance policies at low rates.  High deductible policies would be one such device, which relatively cheaply would prevent catastrophic medical bills.

Much like umbrella liability policies, catastrophic health policies would be affordable because they only would kick in in a relatively small number of cases, yet would protect against medical bills causing financial ruin.

These catastrophic policies will not qualify as coverage under Obamacare, which emphasizes all encompassing policies with low or no deductibles (e.g., contraception).  Because the mandatory policies are loaded with the types of coverages which are not related to catastrophic costs, all policies rise in cost and fewer people can afford any coverage.

Elizabeth Warren’s June 2009 medical bankruptcy study did not “cause” Obamacare and the elimination of relatively low cost private catastrophic health  insurance, but Warren is “linked” to such ruin.


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Collectivists lie.

Warren is a Collectivist.


Among the civil law services I offer clients is bankruptcy. Of those I have helped my clients through, NONE were caused by medical costs alone, and only one was much impacted by medical costs at all. Even that one was really the result of my entrepreneurial client losing his business after trying (too long) to keep it afloat.

Many jobs provide basic (equal to one year salary) life insurance as part of the job, it’s so damned cheap they might as well. I wonder, if insurance hadn’t become a form of compensation (thanks unions!) if we’d have more companies offering catastrophic plans as part of employment for simply nothing. Something with a really really really high deductible (like 15-20k) only designed to kick in when the shit hits the fan.

    Ragspierre in reply to tsrblke. | March 31, 2012 at 11:07 am

    Insurance as a perk came into play…as with a lot of other perks…in a market response to the distortion of the FDR wage and price freeze. Employers were prohibited from bidding for services by offering employees competitive wages, so they had to find other ways, and they did. As they always do.

    The rest is history, as they say.

      tsrblke in reply to Ragspierre. | March 31, 2012 at 3:12 pm

      True enough, but it’s more fun to blame things on the unions. And I was simplifying, the FDR stuff certainly started the trend, but the unions solidified it in the American consciousness, so I hold them in greater blame.

Why wouldn’t medical expenses show up in bankruptcies? When people are finacially challenged, they are going to prioritize cash as follows: Mortgage (secured by the home, potential to lose home & equity if payments not made.)/Rent (eviction if rent not paid and/or possible move to a less desireable location); Car loan (car gets taken away if payments not made); and Credit Cards (not secured debt, but loss of credit means inability to buy anything without cash.) Same would apply to check/payday advances – don’t keep up and that avenue is closed.

So, the last remaining type of debt would be medical expenses – that is about the only transaction where you receive the service without making an advance payment. Even dentists require payment at time of service, and if they don’t & you fall behind, they aren’t going to feel obligated to treat you.

Warren. What a piece of work…not surprising she added to the mess. Atleast she’s consistant when she asserts our infrastructure use by companies mean they collectively “owe” society and government a portion of their profits.
Sort of a twist on the “original sin” concept.
The fault in her logic is she fails to recognize nearly everything we see is the result of money earned and spent by companies of one sort or another. Only someone working for Government would damn “business” as irresponsible.
Nevermind about the slave labor that built a portion of DC.

    Ragspierre in reply to jimzinsocal. | March 31, 2012 at 11:34 am

    “…she fails to recognize nearly everything we see is the result of money earned and spent by companies of one sort or another.”

    Golly. It’s almost like there was an “invisible hand” at work… Or something…

“could just be a fluke….” – “fluke” – you know, I’ve seen that word before… And it also was associated with twisted logic…

Ms. McArdle spells her first name Megan.

But medical expense are caused by everybody.
The heart pacemaker is made by a company that used the roads
… that lead to the house that Jack built.

Golly. It’s almost like there was an “invisible hand” at work…Or something…

Or…ominous music…a Vast Right Wing Conspiracy…

Protect us, St. Elizabeth!

    gs in reply to gs. | March 31, 2012 at 12:27 pm

    The above was meant as a reply to Ragspierre | March 31, 2012 at 11:34 am and to jimzinsocal | March 31, 2012 at 11:23 am. The site seemed to load irregularly but the mistake could have been mine.

With the left…if you tell a lie often enough, it becomes fact.

Heaven help us if Elizabeth Warren wins Massachusetts, but Teddy Kennedy would be proud.

Cassandra Lite | March 31, 2012 at 12:12 pm

Alas, this is the truth that dare not speak its name during the campaign. No one will want to hear Brown say that it’s wrong, just as the left doesn’t want to hear that blacks are more likely to kill whites than whites are to kill blacks. When the legend becomes fact…

StrangernFiction | March 31, 2012 at 12:18 pm


A petition to rebuke the GOPE for force feeding us a liberal candidate:

The sad part is, you could replace “Warren” with “Romney” in the Prof’s post and not change much otherwise. He used the same arguments to justify Romneycare.

Anyways, the post highlights the main problem–we have gotten away from the idea of “insurance” against statistically rare medical calamity and replaced it with the idea that someone else should pay for our routine “health maintenance,” the kinds of things we used to…and still could…budget for and pay for all by our lonesome.

The solutions are out there. Founder and CEO of Whole Foods, John Mackey, took a lot of hear from the arugula-munching crowd (whatever happened to that boycott??) when he challenged ObamaCare. Mr.Mackey:

“ Remove the legal obstacles that slow the creation of high-deductible health insurance plans and health savings accounts (HSAs). The combination of high-deductible health insurance and HSAs is one solution that could solve many of our health-care problems. For example, Whole Foods Market pays 100% of the premiums for all our team members who work 30 hours or more per week (about 89% of all team members) for our high-deductible health-insurance plan. We also provide up to $1,800 per year in additional health-care dollars through deposits into employees’ Personal Wellness Accounts to spend as they choose on their own health and wellness.

Money not spent in one year rolls over to the next and grows over time. Our team members therefore spend their own health-care dollars until the annual deductible is covered (about $2,500) and the insurance plan kicks in. This creates incentives to spend the first $2,500 more carefully. Our plan’s costs are much lower than typical health insurance, while providing a very high degree of worker satisfaction.”

Midwest Rhino | March 31, 2012 at 12:35 pm

These catastrophic policies will not qualify as coverage under Obamacare

A lot of small business types (like me) use the catastrophic plans. Not only does it cover me for catastrophe, but my insurance company acts as my advocate for all medical bill. So when I get my biopsy bill for $400, I wait till it goes through my insurer, where it gets reduced to the real price of $200. (close to the real case numbers)

Obama promised me I could keep my insurance if I liked it … but I can’t apparently. The fact that Obama eliminates the cheapest and best policy for me, in favor of one that covers Fluke’s contraception and gawd knows what else … gives lie to the whole scheme.

If I could barely afford the $250/month plan, how does increasing my rate to $1000/month help? If I pay the penalty, will I be able to keep my catastrophic plan, or will it be illegal for the insurer to even sell it? Thanks a lot Obama (and Elizabeth).

“Much like umbrella liability policies, catastrophic health policies would be affordable because they only would kick in in a relatively small number of cases, yet would protect against medical bills causing financial ruin.”

So many people fail to understand that this is precisely the point of insurance. It’s a misnomer, it should be called “wallet insurance” because it is intended to transfer the risk of catastrophe to your wallet from your wallet to a third party for a fee.

“Dental insurance” doesn’t fit the definition of insurance at all. It’s merely an fancy (and expensive) savings plan.

When people complain about high deductibles and copays, this is a dead giveaway that they are pontificating on subjects they know little about.

    Ragspierre in reply to quiznilo. | March 31, 2012 at 12:47 pm

    Very good points, quiz. A lot of what people think of as employer-provided “insurance” is more correctly called a “benefit”.

    For instance, many of us know we need glasses and a new prescription every so often. A lot of plans have vision care provisions, but those benefits are not “insurance” in any true sense. And, of course, we pay for them whether we understand the costs or not, since such perks are part of the cost to an employer of hiring and keeping us.

Fringes and perks get included in employer compensation schemes because dollar for dollar, the tax code has made them cheaper to offer than cash compensation. This needs to change.

And this would be the result, and go a long way toward solving multiple problems, including accountability, waste in the system, and individuals’ financial devastation from serious medical problems:

A simple answer would be to create incentives for insurance companies to offer catastrophic health insurance policies at low rates. High deductible policies would be one such device, which relatively cheaply would prevent catastrophic medical bills.

Much like umbrella liability policies, catastrophic health policies would be affordable because they only would kick in in a relatively small number of cases, yet would protect against medical bills causing financial ruin.

Is anyone really shocked that the group “Physicians for a National Health Plan” comes out with a “study” that shows the critical need for a National Health Plan? It would be like Exxon coming out with a study saying we need to drill more oil wells.

I’ll bet a dollar any reputable study done on bankruptcy will show more credit card debt and auto debt than medical debt being discharged. Correlation does not imply causation or they would be pushing for National Auto Insurance too.

    (make that “debts” instead of “debt”, i.e. a greater number of bills discharged, not a greater value of debt.)

    janitor in reply to georgfelis. | March 31, 2012 at 2:20 pm

    It’s important to note, though, that whether or not you agree or disagree with this group’s proposed solution (universal single payer), they detest Obamacare, worst of all worlds.

    Ragspierre in reply to georgfelis. | March 31, 2012 at 2:26 pm

    Just a minor point…

    you don’t discharge “auto debt” or “real estate debt”. Both are secured debts, and the debt-holder gets their security.

    In a reorganization, you may reduce your indebtedness under a plan, but you do not discharge secured debt.

    Well, unless you are a U.S. automaker with UAW interests to protect….

The biggest driver of overall medical costs is the entire “wellness” and “preventative healthcare” philosophy. That’s what got HMO’s accepted back when people did not run to the doctor unless they actually needed a doctor. But HMO’s worked like a charm and people loved the “free” screenings for everything from high blood pressure to diabetes. Hell, we had HMO’s giving free chair massages in the lobby of my building. People loved it.

Now we’re stuck with it. I have a co-worker who is in the tank for Obama and he loves the pre-existing condition rule because his son is 35 years old and has cerebral palsy. He said “My son can’t go to a doctor when he has a cold because of his medical history”. I replied that nobody should go to a doctor when they have a cold. He thought I was nuts.

    Ragspierre in reply to Jaynie59. | March 31, 2012 at 2:29 pm

    Remember who the author of HMOs was…?

    (Hint: “Er-ahhh…pass that waitress, Chris… And the Scotch…”)

Elizabeth Warren was not the only source of bull hockey related to bankruptcy, death and medical insurance. Harvard Medical School Professor Dr. David Himmelstein and Cambridge physician Steffie Woolhandler co-founded “Physicians for a National Health Program” and then proceeded to publish two studies that literally said we will all die or go bankrupt without national health insurance.

Meghan McArdle and Diana Furchtgott-Roth of the Manhattan Institute took the studies apart. See my write-up here.

    Ragspierre in reply to gad-fly. | March 31, 2012 at 5:25 pm

    “…two studies that literally said we will all die…”

    Well, that…at least…was a true fact…!!!


How did she amass her net worth of 14million?