Counterpoint: Drug price controls would cost plenty
With the deck stacked against people who need new drugs, let's not dismiss them because their interests happen to align with the drug industry.
Last night, as I watched the Republican National Convention on MSNBC, I about fell out of my chair when I saw an ad by AARP that claimed that “1.85 million Americans go bankrupt due to medical bills in one year.” The extreme exaggeration — nothing even approaching 1.85 million Americans go bankrupt due to medical bills — came as quite a shock. (Yes, I know, any AARP ad, no matter how exaggerated, really isn’t “fall out of chair” material. Disturbing as it may be, that was in fact my reaction.)
Of course, AARP intends to use their extreme exaggeration to stir up public sympathies to radically revamp a health care system that apparently plunges people into financial ruin.
In the past year I’ve written a couple blog posts that discuss the flawed methodology behind studies and reports that seem to overestimate the number of medical bankruptcies and the number of “underinsured” Americans.
Even compared to these studies, 1.85 million is a stratospherically high estimate. The study most often cited as proof of a widespread medical bankruptcy problem estimates that about half of the 1,452,030 bankruptcies filed in 2001 were caused by medical debt. For anyone needing help dividing by two, that’s 726,015 medical bankruptcies. According to the American Bankruptcy Institute, bankruptcies peaked at 2,039,214 in 2005. And so, if we buy into the half of all bankruptcies estimate, medical bankruptcies peaked at 1,019,607. That’s nothing close to 1.85 million.
Now consider that bankruptcy reforms implemented in 2006 cut the number of bankruptcy filings by over half. Despite a jump in bankruptcy filings between 2006 and 2007, there were still only 822,590 filings in 2007. How on earth can there be over one million more medical bankruptcies than actual bankruptcies?
There’s obviously something very wrong with AARP’s claims.
How much does medical debt really impact bankruptcies?
A more recent study by Professor Ning Zhu does confirm that medical debt has an impact, but that it’s a relatively small one. (You can download the actual study here.) According to Prof. Zhu, most bankruptcies are caused by”over consumption”– e.g., buying a house or a car you really can’t afford — not a sudden economic upheaval like losing a job or being diagnosed with an expensive illness. Prof. Zhu found that only 5 percent of bankruptcies are caused by medical expenses. In the peak year of 2005, that would amount to 101,961 medical bankruptcies. That’s right. Not 1.85 million. Not even 1 million. Just 101,961.
— Peter J. Nelson is a Policy Fellow with Center of the American Experiment in Minneapolis.
This commentary originally appeared on StateHouseCall.org on September 5, 2008.
Permission to reprint in whole or in part is hereby granted.
A new player has entered the game of the Democratic Party’s search for an alternative to President Biden for 2024’s presidential election: none other than our own Governor, Tim Walz:…
In December, I noted that: New Census Bureau data show that…From mid-2021 to mid-2022, 19,400 Minnesota residents left for other states, by far the highest number in at least three decades. …until…
Fargo car repair shop owner John Bultman didn’t appear to stand a chance against the city government’s threats to fine him up to $1,000 a day unless he shut down…
Mary Moriarty didn’t hide the fact that she would be a progressive prosecutor if elected as the Hennepin County Attorney. Despite examples of similarly minded progressive prosecutors across the country…
A bill to establish a “basic income” program was introduced today at the Minnesota state legislature. HF 2666/SF 2559 were introduced into their respective bodies and would provide $100 million…