Is health care the top reason for bankruptcies, as a Florida GOP leader said?

Health care is a top reason that Americans are saddled with debt, said Florida House Speaker José Oliva, R-Miami Lakes.

"The two issues that Floridians and Americans are most controlled by nowadays financially are their health care, No. 1 reason for bankruptcy, and student loans, No. 1 debt for young people," Oliva told reporters during the Associated Press’s legislative day Jan. 30.  

Oliva stated that the only way to curb rising health care costs is to allow more competition in the free market. The Republican-led Legislature has rejected Medicaid expansion, which is a part of the Affordable Care Act.

We found that it isn’t so simple to determine if health care is the top reason for Americans to declare bankruptcy.

It’s tough to tease out the single-most factor in bankruptcies, because people can find themselves in debt for multiple reasons at once. But medical bills and illnesses can play a role in bankruptcy, including when people can’t work as a result of their health.

There are a few key studies about the extent to which medical bills and illnesses factor into bankruptcy. Oliva’s spokesman also cited studies about the financial burden of medical debt, but we will focus on the research specifically about bankruptcies.

Medical bankruptcy was a frequent Democratic talking point around the discussion of the Affordable Care Act.

In 2009, President Barack Obama said, "The cost of health care now causes a bankruptcy in America every 30 seconds." Democrats in the Senate, including Hillary Clinton and Chris Dodd, made statements about the percentage of bankruptcies attributed to medical issues.

The research has drawn a lot of attention because key research was co-written by Elizabeth Warren, then of Harvard Law School and now a U.S. senator running for president.

In a 2005 paper, Warren, along with David Himmelstein, then at Harvard Medical School, found that that 28.3 percent of bankruptcies were attributed to illness or injury alone based on 2001 data. But that number grew to 46.2 percent when researchers asked about additional factors such as unpaid medical bills, lost income due to illness, or the mortgage of a home to pay medical bills. The researchers interviewed about 900 people who had filed for bankruptcy and examined bankruptcy records.

They updated their research in a paper in 2009 and found for 62 percent of people, illness or medical bills contributed to their bankruptcy. Researchers designated bankruptcies as medical based on debtors’ stated reasons for filing, income loss due to illness, and the magnitude of their medical debts. (Oliva’s spokesman, Fred Piccolo, included this study among several he sent to PolitiFact but said the 62 percent figure was probably too high.)

The Harvard research has led to years of disagreement between the authors and other academics. Critics of the research have said it relied too much on people saying their medical bills led to their own bankruptcies, rather than independent confirmation. David Dranove and Michael Millenson at the Kellogg School of Management at Northwestern analyzed the data and concluded that there was a causal link in only 17 percent of personal bankruptcies.

"It is insufficient to show that medical problems are associated with bankruptcy; one must also determine whether, and to what extent, medical spending causes bankruptcies," they wrote in 2006.

Himmelstein and Warren pushed back, noting that an industry group supported the research by Dranove and Millenson.

More recent research on the topic renewed the debate.

A group of economists from the University of Southern California, MIT and the Kellogg School wrote an article published in 2018 in the New England Journal of Medicine, "Myth and Measurement: The case of medical bankruptcies."

Using data on California adults from 2003 to 2007, they found that hospitalizations caused only 4 percent of personal bankruptcies among adults. The researchers acknowledged this didn’t cover all potential bankruptcies from illnesses or injuries that did not lead to hospitalization, or from hospitalizations of children or senior citizens.

In an interview with PolitiFact, Himmelstein zeroed in on those caveats, saying that it led to a big underestimate in bankruptcies.

"Families can drown in medical debts without a hospitalization — they may spend hours in an emergency department after an accident, followed by months of physical therapy, or have chronic conditions requiring drugs costing tens of thousands of dollars," Himmelstein and his co-authors wrote in a response to the 2018 study.

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Neale Mahoney, a University of Chicago economics professor, said that the research by Warren and her co-authors overstates the share of bankruptcies caused by health shocks. One problem is that those who file for bankruptcy may attribute it to health problems, while downplaying other factors such as financial mismanagement.

On the other hand, the California study understates the impact of health shocks on personal bankruptcy because it only looks at hospital admissions.

"More broadly, I think determining exactly what causes bankruptcy is difficult, because bankruptcy typically has multiple causes — overborrowing, job loss, health shocks, and so on," he said. "That being said, I think Jose Oliva's statement is not outside of the range supported by the research literature."

We interviewed two other professors who said that the 62 percent figure is too high and that the 4 percent figure is probably closer to the truth: Craig Garthwaite, a professor at the Kellogg School of Management at Northwestern and Martin Gaynor, a professor of economics and health policy at Carnegie Mellon University.

"That doesn’t mean that health care expenses don’t cause people financial hardship — they do," Gaynor said. "It just means that (medical issues are) not responsible for nearly as large a percentage of bankruptcies as some people have been claiming."

Oliva said that health care is the "No. 1 reason for bankruptcy."

Research in 2009 found that in 62 percent of cases, medical illnesses or bills contributed to bankruptcy, based on surveys of the people who declared bankruptcy.

But other academics have disagreed with that conclusion, particularly those who are wary that people tend to blame financial problems on illness when there are other reasons as well.

A paper published in 2018 concluded that adult hospitalizations caused 4 percent of personal bankruptcies, but that data also has limitations.

It is difficult to pinpoint a top reason for bankruptcies because multiple factors could collide, causing someone’s debt to mount and leading to bankruptcy. Researchers are still debating how different issues contribute.

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