A decade ago then-professor Elizabeth Warren and her co-authors released a study on the causes of bankruptcy--just a few weeks before the U.S. Senate was scheduled to take up bankruptcy reform legislation. The subject of an enormous publicity campaign, the study made headlines--like “Medical Bills Blamed in Half of Bankruptcies” and “Medical Bills Cause About Half of Bankruptcies, Study Finds”--all over the country. The article has been highly influential in policymaking circles. Who knows whether Obamacare would have been enacted without this meme to support it?
Your humble author pointed out at the time that, despite the authors’ statements to the press, the actual study purported to be about medically-caused bankruptcies not bankruptcies caused by medical bills. Illness sometimes causes people to lose their jobs and hence their income, which can lead to bankruptcy. Obamacare doesn’t change that.
But more important, as I also pointed out in that article, the Warren study grossly inflated the number of bankruptcies having a “medical cause.” It did so by including all cases of “uncontrolled gambling,” “alcohol or drug addiction,” and “birth/addition of a new family member” and by including cases where relatively modest medical bills acted in combination with other debts.
Now comes the Washington Post’s concession in Study: Medical Bankruptcies May Not Be As Common As Thought that the Warren study may have been inaccurate. A new study cited in the article finds that hospitalizations cause “about 4%“ of bankruptcies among the non-elderly adults. That’s hugely different.