Hacks

Megan McArdle reads a study that determines the percentage of bankruptcies caused by medical problems. She plainly states that Elizabeth Warren (and the other authors of the study) are acting in bad faith, hiding and obscuring the results of their study for ideological purposes.

[...U]pon 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.

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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.

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Had their paper done the basic arithmetic, readers would easily have seen that their own numbers imply a decrease in medical bankruptcies, from about 750,000 to slightly over 500,000. Yet their paper does not merely ignore this fact; it uses language that seems deliberately designed to conceal it.

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A huge change in the composition of your sample needs to be noted. It certainly should not be artfully disguised.

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Elementary googling reveals that the two doctors who co-authored this study are prominent spokespeople for Physicians for a National Health Program, and thus have an obvious agenda, one that Elizabeth Warren has not been shy about sharing. The American Journal of Medicine, which published this study, seems to have flunked Peer Review 101--I sure hope they're more careful about controlling for background conditions when they're talking about cures for cancer Also wearing duncecaps are the journalists who are already uncritically parroting it.

There is, of course, a large amount of terrible advocacy masquerading of social science out there, and too many journals and journalists abet it. But this is particularly troubling because Elizabeth Warren is now in charge of overseeing the TARP program for Congress. What other inconvenient facts is she shielding us from?

These are very serious charges to fling around in the national media. McArdle has spoken ill of Warren before. She is a "somewhat" "hyperbolic" "advocate," "another voice shouting slogans at Congress" and "has massively extended her mandate, using the office as a sort of forum for broad-ranging commentary on the financial crisis" to "to push her own ideas about what should be done with the banks." Why does Megan McArdle believe Warren is dishonest?

I find little evidence for Elizabeth Warren's claims about why Americans have
all this debt--which is to say that they're being forced into it by heartless
capitalism, a lzay government, and rising inequality.

Critics of capitalism and the rich are not friends of Megan McArdle. They are fools trying to thwart the wisdom of the free market, which is self-correcting according to McArdle. Since Warren did dare to criticize the financial system, she must be dishonest and ideological and a hack. McArdle finds plenty to criticize.

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 doesn't quote the section of the study that claims people don't know that health care expenses drove their bankruptcies. The study does state that some people gave other reasons when their main reason was medical, but that was about semantics, not stupidity.

The present study and our 2001 analysis provide the only data on large
cohorts of bankruptcy filers derived from in-depth surveys. As with any
survey, we depend on respondents’ candor. However, we also had independent
checks— from court records filed under penalty of perjury—on many responses. Because questionnaires and court records were available for our entire sample, we used them for most calculations. The lowest plausible estimate of the medical bankruptcy rate from these sources is 44.4%—the proportion who directly said that either illness or medical bills were a reason for bankruptcy. But many others gave reasons such as “aggressive collection efforts” or “lost income due to illness” and had large medical debts. Indeed, detailed telephone interview data available for 1032 debtors revealed an even higher rate of medical bankruptcy than our 62.1 estimate—at least 68.8% of all filers.

This point is irrelevant. But there are more.

My radar is further engaged by the fact that they're implying a really astonishing surge in medical-bill-driven bankruptcies, in a healthcare environment that just didn't change all that massively.

This is the main thrust of her post and the crux of her problem. McArdle either did not read the study, read it and did not understand it, or grossly misinterpreted it due to ideological bias. In comments she said that she was referring to an increase in the number of bankruptcies. The commenters clarified that the study was about an increase in the percentage, not number, of medical-driven bankruptcies. McArdle doubled down.

McArdle, from the comments:

The number of medical bankruptcies *fell*. Their paper implies, while never quite saying, that it *rose*.

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When you compare your results to an earlier sample, and there's been an enormous, dramatic change in the sample composition, you have to mention it. The fact that you can read this paper without realizing that bankruptcies were higher is a problem.

Moreover, it's totally specious to say "this is about what drove the post 2005 bankruptcies, because the post-2005 bankruptcy increase was trivial compared to the earlier fall. What drove the increase is that a huge number of people filed bankruptcies right before the law took effect; there was a slow natural rebound. But there is no evidence that there were fresh medical bankruptcies being filed. Not only is there no evidence that there were fresh medical bankruptcies being filed; *there were fewer medical bankruptcies being filed*. At the very least, it is very likely that their proportion change picked up a change in the sample composition, rather than any cost factors driving medical bankruptcies, a possibility they don't even mention.

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So it's okay to write totally misleading studies as long as we cure a
moral tragedy?

Do you know that there are 300 million people in this country who will die of something we can't cure? Now, to me, that's also a big tragedy. And I think that if the government strips all the profit out of inventing new drugs and medical equipment, medical innovation will grind to a shrieking halt, and we will lose billions, trillions, of life years from current and future Americans--not to mention people in other countries.

But that's not my point in writing about this study. My point in writing about this
study is that it's egregiously misleading, and I don't think that respected
academics should write things that are egregiously misleading. Great truths do
not need to be sold with second-rate lies.


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Okay, do you read this paper and think, "Hey, medical bankruptcies fell 33% between 2001 and 2007, which kind of implies either that many of the 'medical bankruptcies' in 2001, or that medical bills have gotten easier to pay"?

No you do not.

You read this paper and think "Oh, my god, rising medical bills are pushing ever more people into bankruptcy!"

The proportion of a smaller, different population is not a relevant comparison unless you explain the fall, how the sample has changed, and why you don't think this matters.

I'm sure Warren, and you, understand this about companies: if your revenues fall by
half, you haven't "grown" your medical sales business because it now accounts
for 70%, rather than 50% of your revenue. And any attempt to explain this in
terms of the growth in the market for medical goods is ridiculous. Your medical
sales have fallen.

And indeed, previous studies have shown that income loss is a bigger force driving medical bankruptcy than medical bills. I'm not arguing that medical events don't drive bankruptcy; I think they do. I'm arguing that medical bills aren't driving some huge spike in either medical or non-medical bankruptcies.

Stop here for a second. I read all McArdle's old posts that mention Elizabeth Warren and I know that McArdle knows those previous studies might not be correct.

I was going to cite job loss as a major cause of bankruptcy in the previous post, which is the conventional wisdom. But this paper argues it isn't true:

This paper utilizes the population of personal bankruptcy filings in
the state of Delaware during 2003 and finds that household expenditures on durable consumptions, such as houses and automobiles, contribute significantly to personal bankruptcy. Adverse medical conditions also lead to personal bankruptcy filings, but other adverse events such as divorce and unemployment have marginal effects. Over-consumption makes households financially over-stretched and more susceptible to adverse events, which reconcile the strategic filing and adverse event explanations.

According to Zhu, having a serious medical condition makes you 50% more likely to file for bankruptcy, but not because of medical bills; medical bills are only a very small percentage of the overall debt of bankrupts, and are not significantly correlated with higher credit card debt, which one would expect if people were keeping down their medical bills by charging them to Visa. Presumably it's the income effect of disability or caretaking responsibilities.

Job loss may precipitate bankruptcy, but bankrupts don't report being laid off at a significantly higher rate than the control group. The difference is, the control group had savings to cover its financial emergency.

The paper seems to have covered most of the ways I initially suspected it had gone wrong; for example, I thought they might have missed people who had had an adverse income event like being forced into a lower-paying job, but length of job tenure was actually higher for bankrupts. I still have the lingering suspicion that it overstates its case, but it seems pretty robust--unlike the more widely quoted Warren study, which had to use a tenuous definition of causation to make its sensational claim that 50% of bankruptcies were due to a medical event--which turned into the even more sensational claim that 50% of bankruptcies were due to high medical bills in the hands of innumerate activists and journalists.

She either totally forgot everything she had stated previously or she is lying. Either she is simply not able to understand the study, she carelessly misinterpreted it and tried to cover up her carelessness, or she is lying.

There is a second post, and further attempt to double down. (Triple down?) She continues in the same pattern but that will have to wait until later; I am out of time.