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MEDICAL DEBT: IS OUR HEALTHCARE SYSTEM 

BANKRUPTING AMERICANS? 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COMMERCIAL AND ADMINISTRATIVE LAW 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

JULY 28, 2009 

Serial No. 111–56 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

LUIS V. GUTIERREZ, Illinois 

BRAD SHERMAN, California 

TAMMY BALDWIN, Wisconsin 

CHARLES A. GONZALEZ, Texas 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California 

DEBBIE WASSERMAN SCHULTZ, Florida 

DANIEL MAFFEI, New York 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM ROONEY, Florida 

GREGG HARPER, Mississippi 

PERRY APELBAUM, Majority Staff Director and Chief Counsel 

SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel 

SUBCOMMITTEE ON COMMERCIAL AND ADMINISTRATIVE LAW

STEVE COHEN, Tennessee, Chairman 

WILLIAM D. DELAHUNT, Massachusetts 

MELVIN L. WATT, North Carolina 

BRAD SHERMAN, California 

DANIEL MAFFEI, New York 

ZOE LOFGREN, California 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

JOHN CONYERS, JR., Michigan 

TRENT FRANKS, Arizona 

JIM JORDAN, Ohio 

HOWARD COBLE, North Carolina 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

MICHONE JOHNSON, Chief Counsel 

DANIEL FLORES, Minority Counsel 

(III) 

C O N T E N T S 

JULY 28, 2009 

Page 

OPENING STATEMENTS 

The Honorable Steve Cohen, a Representative in Congress from the State 

of Tennessee, and Chairman, Subcommittee on Commercial and Administrative Law ........................................................................................................... 1 

The Honorable Trent Franks, a Representative in Congress from the State 

of Arizona, and Ranking Member, Subcommittee on Commercial and Administrative Law .................................................................................................. 2 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, Chairman, Committee on the Judiciary, and Member, 

Subcommittee on Commercial and Administrative Law .................................. 4 

The Honorable Howard Coble, a Representative in Congress from the State 

of North Carolina, Chairman, and Member, Subcommittee on Commercial 

and Administrative Law ...................................................................................... 5 

The Honorable Howard Melvin L. Watt, a Representative in Congress from 

the State of North Carolina, Chairman, and Member, Subcommittee on 

Commercial and Administrative Law ................................................................. 5 

WITNESSES 

Ms. Elizabeth Edwards, Senior Fellow, Center for American Progress Action 

Fund 

Oral Testimony ..................................................................................................... 7 

Prepared Statement ............................................................................................. 9 

Ms. Steffie Woolhandler, M.D., M.P.H., Professor of Medicine, Harvard Medical School 

Oral Testimony ..................................................................................................... 19 

Prepared Statement ............................................................................................. 21 

Ms. Aparna Mathur, Ph.D., Research Fellow, American Enterprise Institute 

for Public Policy Research 

Oral Testimony ..................................................................................................... 34 

Prepared Statement ............................................................................................. 37 

Mr. John A. E. Pottow, Professor of Law, University of Michigan Law School 

Oral Testimony ..................................................................................................... 50 

Prepared Statement ............................................................................................. 53 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Response to Post-Hearing Questions from Elizabeth Edwards, Senior Fellow, 

Center for American Progress Action Fund ....................................................... 96 

Response to Post-Hearing Questions from Steffie Woolhandler, M.D., M.P.H., 

Professor of Medicine, Harvard Medical School ................................................ 98 

Response to Post-Hearing Questions from John A. E. Pottow, Professor of 

Law, University of Michigan Law School .......................................................... 100 

(1) 

MEDICAL DEBT: IS OUR HEALTHCARE 

SYSTEM BANKRUPTING AMERICANS? 

TUESDAY, JULY 28, 2009 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON COMMERCIAL

AND ADMINISTRATIVE LAW, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 11:11 a.m., in 

room 2141, Rayburn House Office Building, the Honorable Steve 

Cohen (Chairman of the Subcommittee) presiding. 

Present: Representatives Cohen, Conyers, Delahunt, Watt, 

Maffei, Lofgren, Scott, Franks, Jordan, Coble, Issa, and King. 

Staff present: James Park, Majority Counsel; Adam Russell, Majority Professional Staff; and Daniel Flores, Minority Counsel. 

Mr. COHEN. This hearing of the Committee on the Judiciary, 

Subcommittee on Commercial and Administrative Law, will now 

come to order. 

Without objection, the Chair will be authorized to declare a recess of the hearing. And I will now recognize myself for a short 

statement. 

Two years ago, this Subcommittee held a hearing on a Harvard 

study which examined 2001 bankruptcy filing data in five select judicial districts around the country. That study concluded that illness or high medical bills contributed to almost half of all the 

bankruptcy filings that were studied. 

Today we revisit the issue of medical debt as a contributor to 

bankruptcy. The authors of the study have now released an updated version, published online last month in the American Journal 

of Medicine, based on 2007 data of bankruptcy filings nationwide. 

Disturbingly, this study concludes that 62 percent of bankruptcy 

debtors can trace at least part of the cause of their bankruptcies 

to medical debt. 

The 2007 data also indicate that there was a—nearly a 50 percent increase in medical bankruptcies as a proportion of bankruptcy filings between 2001 and 2007. 

The updated study further suggests that medical debt is driving 

middle-class families into bankruptcy. Of those classified in the 

study as medically bankrupt, more than 60 percent attended college. More than 66 percent at one point owned a home. And 78 percent had health insurance at the time they became sick or injured. 

2 

Accordingly, it is obvious that medical bankruptcies are not the 

fault of people keeping track of their assets and liabilities. They are 

the victims of life’s lottery. 

Ultimately, the problem lies with the runaway cost of health care 

in America—simply too expensive for millions of Americans to buy 

any health insurance at all. 

And even for those who have insurance, excessive premiums and 

deductibles, low coverage caps and uninsured medical conditions 

are just some of the reasons why Americans with health insurance 

are left one serious illness away from financial disaster. 

And when that financial disaster may hit, it hits hard. Studies 

show that many are skipping recommended treatments, not filling 

critical prescriptions, pharmacists—postponing doctor appointments, and cutting back on other essentials like food in order to 

stay financially aloft. Often, the debt becomes so burdensome that 

Americans are faced with no other choice but bankruptcy. 

Medical bankruptcies have a collateral effect on creditors, because when you have a medical bankruptcy, all creditors lose, 

which means small business loses, which is an important reason 

why small business and creditors in general benefit from a health 

care system that doesn’t drive American citizens into bankruptcy, 

where we lose the opportunity to collect on lawful debts. 

It is my sincere hope that today’s hearing will help us better understand the extremely serious consequences of medical debt and 

serve to galvanize us to work toward finding solutions. 

I welcome ideas for amending the bankruptcy code to help provided needed relief for the medically bankrupt. I am certainly open 

to revisiting some of the more onerous provisions of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, and particularly the means test and the credit counseling requirement. 

Credit counseling certainly can’t help a person who has gone into 

bankruptcy because they have a major medical problem. That is 

something that—maybe a checkup with a doctor could do more 

good, and the credit counseling becomes a waste of time. 

Perhaps this could achieve a better balance between creditors’ 

rights and the need for relief for honest medical debtors. 

In addition to exploring bankruptcy law changes, I believe the 

long-term solution to runaway health care costs is to enact meaningful health care reform. I would be remiss if I did not recognize 

the leadership of the distinguished Chairman of this Committee, 

the Honorable John Conyers. 

He has drawn attention to this important issue over the years, 

and I applaud him for his efforts to bring about legislative change 

in the medical field and for universal coverage. 

The updated Harvard study should be a useful reminder as to 

why Congress must consider refining the bankruptcy code and reforming our health care system to provide much-needed relief to 

those with overwhelming medical debt. Not to do so would be a 

crime. 

I thank the witnesses for appearing today, and I look forward to 

their testimony. 

I now recognize my colleague, Mr. Franks, the distinguished 

Ranking Member of the Subcommittee, for his opening remarks. 

Mr. FRANKS. Well, thank you, Mr. Chairman. 

3 

And thank all of you for being here. It is another wonderful day 

in the capital here. We are glad that we can go forward here. 

Thank you. 

Mr. COHEN. Mr. Rogers. 

Mr. FRANKS. Absolutely. It is a wonderful day in the neighborhood. It is a great day. 

The question this hearing title presents, ‘‘Is our Healthcare System Bankrupting Americans,’’ quote—it is relatively easy to answer, in my opinion, and that answer is no. 

The empirical evidence, aside from the one Harvard study, the 

university study the Chairman has mentioned, demonstrates there 

has been no increase in the number of bankruptcies caused by 

medical debt. 

Medical bills and medical problems, Mr. Chairman, to be sure, 

are, indeed, a source of deep concern for many American families, 

and unfortunately, in some cases, these problems lead families into 

bankruptcy. 

But this is why the bankruptcy code allows low-income debtors 

to discharge their medical debts completely and higher-income 

debtors to pay back only what they can afford. 

In short, the bankruptcy code already tries to strike an appropriate balance between debtors and creditors, including health care 

providers. And I believe it is unwise to change that mechanism. 

However, the government-run health care system that really is 

at the top of the majority’s agenda I think is the main reason we 

are here today, not really to talk about the reforms to the bankruptcy code. 

I suspect that we are here to discuss why a new Harvard study 

on medical debt and bankruptcy should lead us to conclude that 

this country needs a government-run health care system. 

There are at least two problems with that argument—since medical debt plays a significant role in bankruptcy filings, we need, 

therefore, government-run health care—in other words, we we 

make that leap. 

But first, the Harvard study that is the foundation for this argument, is fundamentally unsupportable. The study’s findings rest 

primarily on the way researchers define and count what constitutes 

a medical bankruptcy, instead of on an actual increase in medicaldebt-related bankruptcies. 

Indeed, even assuming the researchers’ methodology is correct, in 

absolute numbers, medical debt bankruptcies actually decreased 

between the years of 2001 and 2007. 

Yet by using percentages instead of actual numbers, the researchers claim that medical debt bankruptcies increased during 

that same time period. 

Moreover, Mr. Chairman, no other study of medical debt and 

bankruptcy has reported a correlation anywhere near as the 62 

percent correlation the Harvard study finds. 

Second and perhaps most important, in terms of decreasing the 

number of bankruptcies in America, there is little reason to believe 

that a government-run health care system will have much of an 

impact. One only needs to look at Canada to see why this is true. 

According to a study by the Fraser Institute, the consumer bankruptcy in Canada was higher than the bankruptcy rate in the 

4 

United States in 2006 and 2007, despite the fact that Canada has 

a universal, single-payer, government-run health care system. 

Somebody said a long time ago that a smart man learns from his 

experience and a wise man learns from other people’s experience. 

And I hope that we will look to other people’s experience with the 

government-run health care. 

If we had government-run health care like Canada has, Mr. 

Chairman, we are still looking at Canada having a higher bankruptcy than we do in the last couple of years. 

It is projected that the health care legislation the majority is trying to move through Congress will eliminate up to 5 million jobs. 

Certainly, the loss of 5 million jobs will have a far greater impact 

on the number of Americans filing for bankruptcy than medical 

debt, even using the Harvard study’s inflated numbers. 

Every American, regardless of health or financial status, should 

have access to affordable health care and the coverage, in my opinion, of their choice. But we should not be making decisions on how 

to improve America’s health care system based in any part on a 

flawed medical debt bankruptcy study. Nor should we use that 

study as a bankruptcy for modifying the bankruptcy code. 

Mr. Chairman, I heard that if you have a cold in Canada, you 

call a doctor. If you have something serious, you call a travel agent. 

So I just thought I would throw that in while we are walking by 

this way. 

I look forward to the witnesses’ testimony and yield back the balance of my time. 

Mr. COHEN. I thank the gentleman for his statement. And since 

he did reference the Chairman there, I would want him to know 

that we are not fashioning our health care program after Canada, 

and we have a much warmer and fuzzier system we have planned. 

And we do intend—Americans, we are sure, will continue to call 

their travel agent to go to Canada, which is a nice place to travel 

to. 

I now recognize our distinguished Judiciary Committee Chairman, a leader on all things that are good, Mr. John Conyers, for 

his opening statement. 

Mr. CONYERS. Thank you, Chairman—— [Applause.] 

Mr. COHEN. Here, here. Here, here. 

Normally applause is not allowed, but for the Chairman it is encouraged. [Laughter.] 

Mr. CONYERS. Well, this is a good way to start off a hearing, because I wanted my dear friend, the Ranking Member, Mr. Franks 

of Arizona, to get all of these supposed problems out of his system 

and get them on the table so we can examine them. 

This is almost like a medical diagnosis that we do in the legislature. We find out what is wrong, how you are feeling, and what you 

believe, and we lay it out on the table and then we start talking 

through it. 

And that is what brings us here today. I have rarely been in a 

room in a hearing to have Elizabeth Edwards, Stephanie 

Woolhandler, Professor Pottow, Dr. Patch Adams in the office, our 

movie starlet Donna Smith, and there are probably others here. 

And then to have all of my colleagues—the Chairman, Bill 

Delahunt, the gentleman from Virginia, Bobby Scott, Maffei, and of 

5 

course, Mel Watt himself—and what we want to try to do is examine these premises and we can’t do it with a better group than the 

ones that we have here. 

I am worried about this health bill, by the way. Like my friend 

from Arizona, I, too, am worried about H.R. 3200, maybe for different reasons, but look. We are not insuring everybody, and anybody using the term ‘‘universal’’ applied to this patchwork, well-intentioned patchwork, of legislative ideas is erroneous. 

And the other thing—there is a—what do you call it, the donut 

hole for the medically uninsured? What did you call it? There is a 

donut hole for the medically uninsured inside this bill. And we will 

be talking about it. 

Now, in addition, I do celebrate the fact that our colleague from 

Ohio, Dennis Kucinich, was able to get through an amendment 

that allows states to use single-payer, to experiment with it, which 

they cannot do now without this amendment. And I am fighting to 

keep that in the bill. 

And so I look forward to the proceedings. I want to tell my friend 

on the—from Ohio, Jim Jordan, that I sent my congratulations to 

him this morning and that—— 

Mr. JORDAN. I got that. 

Mr. CONYERS. I am glad you did, because, you see, we have to 

work together. The essence of democracy isn’t how much you can 

dis the other person or personalize attacks and misrepresent facts. 

The essence of democracy is that we can have honest views about 

conservatism, progressivism, and what a democracy really ought to 

stand for and still remain friends. 

And so I yield back the balance of my time. 

Mr. COHEN. Thank you, Mr. Chairman. 

We are going to ask that the other Members’ opening statements 

be concluded in—be included in the record, except for those people 

who are Tarheels, and we have a Tarheel exception, and I first will 

recognize our Republican Tarheel, Mr. Coble. 

Mr. COBLE. Well, thank you. Thank you, Mr. Chairman. I will 

be—— 

Mr. COHEN. I don’t know why I have trouble with that. Mr. 

Coble. 

Mr. COBLE. I will be very brief. I won’t take anywhere near the 

five. But, Mr. Chairman, thank you for calling this hearing. 

And I want to welcome all of our witnesses, and particularly Mr. 

Watt’s and my fellow North Carolinian, Mrs. Edwards. 

Good to have you, Mrs. Edwards. 

Good to have all of you with us. 

Thank you, Mr. Chairman. Yield back. 

Mr. COHEN. Thank you, sir. Thank you, sir. 

And now I recognize the distinguished gentleman from North 

Carolina—the other distinguished gentleman from North Carolina, 

Mr. Watt. 

Mr. WATT. Thank the gentleman for the recognition, and I want 

to join with my colleague Mr. Coble and my other colleagues in 

welcoming Elizabeth Edwards. 

I don’t really know of a more public and ardent and thoughtful 

advocate in the health care arena who is not herself a—or himself 

6 

a doctor or with medical training. She has just been a wonderful 

spokesperson for health care reform. 

And I am looking forward to her testimony as well as the other 

witnesses. I don’t mean to discount anybody’s testimony about this 

important subject. 

We actually have a number of different standards in the bankruptcy laws for a number of different things. We have got a whole 

section on agricultural bankruptcies, farms. 

We are putting in place resolution authority for systemically 

threatening financial institutions that wouldn’t be part of the regular bankruptcy code. 

There are all kinds of exceptions, and yet there is no real carveout or exception for medical conditions which apparently cause a 

lot more bankruptcies than we could ever imagine based on the research. 

So I look forward to it. I think it is an important hearing. And 

I particularly welcome my good friend and longtime friend Elizabeth Edwards and look forward to her testimony. 

And I won’t abuse the system any longer. Although he did say 

Tarheel, so I would remind him that we won the national championship this year, as opposed to Tennessee. That is why he is so 

deferential to us, I think, in addition to having an outstanding witness here to testify on that—on the subject of the day. 

I yield back. I am sure he will get the last word. 

Mr. COHEN. Thank you, Mr. Watt. No, but North Carolina’s trip 

to the championship did go through Memphis, and I was there, and 

I cheered for them. 

I am now pleased to introduce the witnesses and to hear the testimony for today’s hearing. 

First, I want to thank each of you participating in today’s hearing. Without objection, your written statements will be included in 

the record. I would ask you to limit your oral remarks to 5 minutes. 

There is a lighting system for time. Green light means you have 

started and you—within the first 4 minutes, and then at the 4- 

minute mark it turns yellow. And the yellow brick road leads to the 

red sign, which means your time is up. 

Most people don’t pay attention to that, but we would hope that 

we would start to pay attention to that a little bit and you would 

start to wind up your remarks, at a minimum, when it gets to be 

red. 

After you have completed your testimony, Subcommittee Members will have 5 minutes to ask you questions. 

Our first witness is Ms. Elizabeth Edwards. She is a senior fellow at the Center for American Progress Action Fund, where she 

works on health care issues. A passionate advocate for children and 

an accomplished attorney, she has been a tireless worker on behalf 

of important social causes for many years. 

She worked for the North Carolina Attorney General’s Office in 

the early 1980’s and worked at the Department of Natural Resources and Community Development and CETA. From 1984 to 

1996, she was in private practice, and she worked in bankruptcy 

courts—particularly relevant for us here. 

7 

She taught at the UNC Law School for 2 years, and she was a 

member of the first group of public fellows at the College of Arts 

and Sciences at the University of North Carolina, the NCAA basketball champion. 

Thank you, Mrs. Edwards. Will you please begin your testimony? 

TESTIMONY OF ELIZABETH EDWARDS, SENIOR FELLOW, 

CENTER FOR AMERICAN PROGRESS ACTION FUND 

Mrs. EDWARDS. There. All right. 

Chairman Cohen and Members of the Subcommittee, thank you 

for inviting me here today to discuss the problems individuals face 

when they cannot afford health insurance or health care. 

As a person who spent the majority of her legal career in bankruptcy court representing bankruptcy trustees, and as someone 

who has spent her post-legal career dealing with health care policy, 

I have to disagree, unfortunately, with Congressman Franks. The 

answer to the question posed by this hearing is yes, our health care 

system is bankrupting Americans. 

We are in the middle of a great national debate on health care. 

For the first time in 15 years, we are truly trying to fix a problem 

of a broken health care system and deal with the twin problems 

of the status quo, which are skyrocketing health care costs and millions of Americans living without adequate health care coverage. 

I know the Committee is particularly interested in the financial 

hardships that many Americans experience due to health care 

costs. 

People with poor health insurance coverage or no health insurance coverage and a significant health problem are particularly 

likely to accrue considerable medical debt and are thus particularly 

vulnerable to bankruptcy. 

Medical debt is a symptom of larger problems in our health care 

system. And although we can take some ameliorative steps, the 

real solution to medical debt and medical bankruptcy is real health 

care reform that results in affordable, reliable insurance coverage 

for all Americans. 

The problem can be pinpointed further. It is a problem of insurance coverage, which is unaffordable for 47 million Americans, and 

the—sadly, people who even have health insurance increasingly 

face problems paying for health care. 

Seventy-five percent of those filing for bankruptcy had—because 

of medical debt have health insurance—obviously, inadequate 

health insurance. Some of these are part of the 25 million adults 

in America who the Commonwealth Fund identified as under-insured. 

Even moderate levels of out-of-pocket spending relative to family 

income created medical bill problems, because many families have 

little wiggle room, particularly in this economy, within their family 

budget for large or unexpected out-of-pocket health care expenses. 

Still another study found that one in five, 20 percent of us, reported problems paying medical bills, and that was in 2007. I don’t 

expect it has gotten any better. 

Health care affordability is particularly elusive for individuals 

with chronic illnesses and other conditions that require ongoing, 

often costly medical care. 

8 

In particular, individuals who are older, have activity limitations, 

have chronic conditions such as diabetes, heart disease, arthritis, 

or have experienced a stroke are more likely to spend a higher proportion of their income on health expenses. So this problem of medical debt hits the most vulnerable people at the worst possible time. 

Of sicker uninsured adults, three-fifths reported being contacted 

by a collection agency. 

In a 2007 survey, respondents reported making difficult choices 

between using up a lifetime of savings; running up credit card debt, 

often to cover those medical costs; skipping the purchase of other 

necessities or adding a mortgage against their home in order to pay 

medical billions. 

So broader financial problems which are often masked in some 

statements are another hazard of uninsurance or under-insurance. 

Many medical debtors turn to borrowing to cover accrued medical 

expenses in order to continue treatment, which is why the study 

that was done by Harvard is so illuminating, and continuing treatment may be their highest priority—in fact, probably should be 

their highest priority. 

For example, a recent debtor in North Carolina—this was just 

last week—had incurred medical expenses for a child who needed 

cardiac surgery. A large part of the cost—so he was insured. A 

large part of the costs were not covered by the insurance policy. He 

borrowed money against his credit cards in order to pay for that 

first surgery, but that wasn’t his worst problem. 

Like many medical debtors, the surgery was the beginning, not 

the end, of the treatment. A second surgery was required. The 

medical providers would not do that surgery until the first bill was 

paid, so that required the charges against the credit card. After the second search, there were $30,000 of unreimbursed 

costs that had been borne by this particular debtor to pay for his 

child’s cardiac surgery, and the father was forced into bankruptcy. 

The need for continuing care from the health care provider slash 

creditor puts these particular kinds of costs in a unique category 

in our bankruptcies. In some cases, bankruptcies may be driven not 

by under-insurance or by bad—by insurance but, in fact, by bad insurance policies. 

Those who suffer from a wrongful rescission or denial of legitimate claims include not only the debtor, who is obviously disadvantaged, but also, as the Chairman mentioned, it disadvantages other 

creditors, particularly unsecured small business creditors whose 

debts are devalued by the inclusion of unreimbursed costs in the 

bankruptcy filing. 

The problems I have outlined in my testimony—families forced 

into bankruptcy, people with chronic conditions going into—going 

without necessary care, low-income families experiencing the 

squeeze of unexpected medical bills—are merely a symptom of our 

larger problem in our health care system. 

Today we leave too many Americans without health insurance 

and many more without adequate coverage. Congress can fix these 

problems. 

But in order to do so, we need to address the health care issue 

in addition to addressing some issues we can in bankruptcy—considering those rescinded contracts, for example, or perhaps permitVerDate Aug 31 2005 14:41 Feb 23, 2010 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6601 H:\WORK\COMM\072809\51346.000 HJUD1 PsN: 51346
9 

ting medical debtors to file again before the statutory limit on repeat filings, in order that they deal with those medical costs and 

continue—can continue to get the care that they need. 

Thank you for your attention. I look forward to working with you 

and the Nation as the Nation moves forward with these needed 

changes in our health care reforms. 

[The prepared statement of Mrs. Edwards follows:] 

PREPARED STATEMENT OF ELIZABETH EDWARDS


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Mr. COHEN. Thank you very much, Mrs. Edwards. 

Our second witness is Stephanie Woolhandler. On the Harvard 

faculty since 1987, Dr. Woolhandler has conducted research and 

published her results in dozens of articles, chapters and books. 

She still provides patient care as an attending physician at the 

Cambridge Hospital and serves as co-director of the school’s General Internal Medicine Fellowship Program. 

Numerous honors and awards have recognized her contributions 

to health care. She advocates guaranteed access to health care for 


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all members of society, including the 42 million Americans currently without medical insurance. 

In 1986, she helped found Physicians for the National Health 

Program, a not-for-profit organization for physicians, medical students and other health care professionals who advocate for a national health insurance program. 

Thank you, Dr. Woolhandler. Appreciate your work. And you 

could begin your testimony. 

TESTIMONY OF STEFFIE WOOLHANDLER, M.D., M.P.H., 

PROFESSOR OF MEDICINE, HARVARD MEDICAL SCHOOL 

Dr. WOOLHANDLER. Mr. Chairman, Members of the Committee, 

as Mr. Cohen said, I am Steffie Woolhandler. I am a primary care 

doctor in Cambridge, Massachusetts and a professor at Harvard. 

And I am the senior author of the two studies on medical causes 

of bankruptcy that we have been discussing. One appeared in 

Health Affairs in 2005 and the latest is in the August 2009 issue 

of American Journal of Medicine. 

They are actually quite large studies. The first one had about 

1,700 people in bankruptcy courts who we surveyed. The most recent one has 2,300 debtors in bankruptcy court. 

In that most recent study, medical bills and illness contributed 

to, as many people have said, 62 percent of our bankruptcies. And 

the proportion of bankruptcies attributed to medical problems rose 

by about 50 percent. 

The striking conclusion from the study is really that private insurance is a defective product. It is a defective product. It leaves 

millions of middle-class Americans vulnerable to financial ruin. 

And unfortunately, the health reforms now under consideration 

in the House would do little to address this grave problem—that 

is, reforms other than single-payer. They will not address the problem. 

We found that most of the medical bankrupt were middle class, 

at least when their financial crisis hit. Two-thirds were homeowners. Three-fifths had gone to college. High medical bills were 

part of a web of problems. Often they lost their job because they 

were ill and with it lost their insurance just as the bills started to 

roll in. 

As was mentioned before, the overwhelming majority of those in 

bankruptcy had health insurance. Seventy-eight percent were insured at the start of the bankrupting illness. 

And the majority of them actually had private coverage, and the 

majority of those actually held onto their coverage throughout the 

bankrupting illness but were bankrupted anyway by co-payments, 

deductibles and gaps in coverage, which will continue to be legal 

in the House bill. 

These families have done everything right. They have worked 

hard, paid their premiums and thought they were covered. Yet on 

average, they ran up bills—people with private insurance ran up 

bills of nearly $18,000, including folks who held onto the insurance 

throughout the illness. 

So this is not an issue of rescissions. It is an issue that private 

health insurance is fundamentally defective. 

20 

I think our study raises a warning flag that leaving most Americans to rely on private insurance is going to leave them unprotected. 

And unfortunately, a public plan option that mimics the rules 

and coverage of private plans won’t help. It will still have those copayments, deductibles and other gaps. 

Now, in Massachusetts we have 3 years of experience with the 

kind of plan the House is now debating, and it is actually pretty 

sad experience. Reform has not made health care affordable for our 

middle class and has decimated—decimated—the safety net on 

which poor people and mentally ill people, continue to rely. 

In 2007, only 5 percent of Massachusetts residents were uninsured. That was the lowest rate in the Nation. And yet medical 

problems in 2007 were still responsible—still underlaid three out 

of every five bankruptcies—essentially the same proportion as nationally. 

In our state, failure to buy insurance is illegal, punishable by a $1,000 fine, which is the same fine you get for beating your wife 

or making a terrorist threat. 

For a middle-income 56-year-old, the cheapest coverage available 

through the state’s Connector—and you can go on the state’s Web 

site to see—the state’s insurance exchange offers you a policy— 

$4,900 for a policy with a $2,000 deductible before it pays for care 

and 20 percent co-payment after that. 

That is going to be—what is being proposed in the House bill is 

identical to Massachusetts. A diabetic with such coverage would 

quickly run up bills of about $10,000 a year and in 2 years he 

would accumulate bills large enough to bankrupt him, if he was 

like the people in our study. 

This kind of insurance, sold with a stamp of approval of our 

state, in a reform similar to the one you are considering—the 

stamp of approval of the Connector is a cruel joke, and Congress 

should not repeat that. 

For everyone financially ruined by illness, many more are physically suffering because they can’t get the care they need. 

Access to an insurance policy is not the same thing as access to 

care. Eighteen percent of people in our state skipped health care 

last year because they couldn’t afford it. We are supposed to be the 

model. Eighteen percent skipped care because they couldn’t afford 

it. 

Moreover, if those people show up at safety-net hospitals and 

clinics, they are going to find them shuttered or cutting back on 

services. Our governor and legislature, desperate to keep the reform afloat as costs have escalated more rapidly than predicted, 

has drained funds from that safety net. 

Reform needs to replace the defective private insurance that 

most families have with insurance that is always there, that covers 

all medically necessary care, without gaps like co-payments and 

deductibles. 

That is the kind of coverage people in other wealthy nations get 

through single-payer national health insurance. Only single-payer 

national health insurance can make universal comprehensive care 

affordable by saving literally hundreds of billions of dollars every 

year that we now waste on insurance overhead and bureaucracy. 

21 

In nations like Canada that have single-payer health plans, medical bankruptcy is rare—about 12 percent of all bankruptcies. 

Unfortunately, overwhelming evidence indicates that the reform 

that the House now seems poised to pass will fail to protect Americans unless it gets rid of the defective product that is private 

health care—private health insurance, excuse me. We will have 

private health care, but just no private health insurance, with single-payer. Thank you. 

[The prepared statement of Dr. Woolhandler follows:] 

PREPARED STATEMENT OF STEFFIE WOOLHANDLER


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ATTACHMENT 2 


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Mr. COHEN. Thank you for your testimony. [Applause.] 

We will not have applause, except for the Chairman, please. 

Thank you for your testimony, Dr. Woolhandler. 

Our third witness is Aparna Mathur, Dr. Aparna Mathur. Dr. 

Mathur is an economist who writes about taxes and wages, and she 

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Her work ranges from research on carbon taxes and the impact 

of state health insurance mandates on small firms to labor market 

outcomes. Her research on corporate taxation includes the widely 

discussed co-authored 2006 ‘‘wages and taxes’’ paper, which explored the link between corporate taxes and manufacturing wages. 

Thank you, Dr. Mathur. Will you please proceed with your testimony? 

TESTIMONY OF APARNA MATHUR, Ph.D., RESEARCH FELLOW, 

AMERICAN ENTERPRISE INSTITUTE FOR PUBLIC POLICY 

RESEARCH 

Ms. MATHUR. Thank you. Chairman Conyers, Ranking Member 

Frank and distinguished Members, thank you for giving me the opportunity to testify today. 

In my testimony, I will explore the extent to which household 

medical debts can be held responsible for consumer bankruptcy filings. In recent times, the debate surrounding the topic has become 

particularly heated, with studies claiming that more than 60 percent of all bankruptcies are medical bankruptcies. 

While sympathetic to the plight of these families in tough economic times, I believe that to positively inform and steer the debate, we need to disentangle the rhetoric from the facts. 

My own analysis of microdata from nationally representative 

data sets covering thousands of American families over several 

years has led me to conclude that the extent of the problem is 

being overstated and therefore misdiagnosed. 

A rise in medical bankruptcies should show up in the data as a 

rise in medical debts. The most extensive nationally representative 

data on medical debts is available from the Survey of Consumer Finances. This data shows that medical indebtedness has actually declined between 1989 and 2004. 

The number of families reporting any medical debt has declined 

from about 5 percent in 1989 to about 3 percent in 2004. At the 

same time, medical debt as a fraction of all debts have declined 

from 0.6 percent in 1989 to 0.3 percent in 2004. 

Even if you focus on the latter half of this decade, the same data 

show that there has been no significant change in medical debts, 

though credit card debts have risen over this period. Therefore, 

while indebtedness in general may be a problem, medical indebtedness per se is not. 

Other surveys linking medical debts and bankruptcies reach 

similar conclusions. The Department of Justice’s Executive Office of 

the United States Trustee examined the records of approximately 

5,000 bankruptcy cases filed between 2000 and 2002. More than 50 

percent of the cases listed no medical debt. In only 10 percent of 

the cases was medical debt higher than $5,000. 

So there are very few cases in which medical debts can be held 

responsible for the bankruptcy filing. 

The Panel Study of Income Dynamics, another household survey, 

similarly shows that medical debts account for 9 to 16 percent of 

all bankruptcies. 

Survey data, however, need to be interpreted with caution. In 

order to draw the right inferences, we need to apply the correct 

methodology to the survey data. Using more rigorous multivariate 

35 

regression analysis in an AEI paper that I wrote, I still do not find 

support for the view that medical debts are the leading cause of 

bankruptcy filings. 

In fact, households who are most likely to file are those with primarily other forms of debt who also incur medical debts. This was 

also the conclusion of a 1999 study by Domowitz and Robert 

Sartain in the Journal of Finance. 

Accounting for prevalence of various sources of debt, they found 

that the largest single contribution to bankruptcy at the margin is 

credit card debt, and they distinguish between medical and credit 

card debt. 

In general, the economics literature reviewed in my longer testimony using standard regression analysis to account for household 

and macroeconomic conditions that could influence the filing has 

typically found that medical debts are not the most important 

cause of bankruptcy filings. 

So why do the Himmelstein and colleague surveys conclude that 

nearly 62 percent of filings are medically-related? There are several 

reasons listed in my longer written testimony. I will talk about a 

couple of those here. 

First, Table 2 of the study clearly states that only 29 percent of 

the respondents believe that their bankruptcy was actually caused 

by medical bills. However, the authors chose to add to this number 

the percent of people who lost weeks of work due to illness, the percent of people with more than $5,000 in medical bills and the percent of people reporting any medical problems. 

This is clearly an overstatement of the problem. Since the respondents themselves do not believe that these other factors caused 

the bankruptcy filing, it is wrong to ascribe the additional bankruptcy filings to medical costs. 

Second, if the authors are trying to establish whether medical 

debts cause bankruptcy filings, at the very least the appropriate 

sample should have included households with and without medical 

debt and households who filed or did not file for bankruptcy. 

Having defined the appropriate sample, then the correct methodology, which is widely used in the economics literature, is multivariate regression analysis. 

With regression analysis, it is possible to study the effect that 

each factor has on the probability of filing for bankruptcy while 

holding the effect of all other variables constant. This is the only 

way that one can establish causation. What the authors have established is some correlation of medical debts and bankruptcies but 

not causation. 

Having said that, however, I do not wish to underestimate the 

serious effects of medical problems on particular families. Rising 

health care costs are clearly an area of growing concern, and there 

is an urgent need to tackle the issue. 

At the same time, we should recognize that families are being 

pushed to the brink of bankruptcy for a multitude of reasons. 

While some recent reports based on different methods would 

have us believe that rising health care costs are, in fact, the main 

factor responsible for household bankruptcies, I hope my testimony 

has provided a more substantial basis for concluding that this is 

not the case. 

36 

The most effective solution to the problem of rising bankruptcies 

in these tough economic times is to help families keep their jobs, 

retain their earning power, stay in their homes and live within 

their means. 

If economic problems nevertheless become unmanageable, the 

bankruptcy system is designed precisely to give families a fresh 

start by discharging some of their debt. 

If you mistakenly focus too narrowly and simply on medical indebtedness, believing it to be a bigger problem than it is, we will 

be even further away from the solution we need. Thank you. 

[The prepared statement of Ms. Mathur follows:] 

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Mr. COHEN. Thank you, Dr. Mathur. 

Our final witness is John Pottow. Professor Pottow is an internationally recognized expert in the field of bankruptcy and commercial law and a professor at the University of Michigan Law 

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His scholarship concentrates on the issues involved in the regulation of cross-border insolvencies, and he has published in prominent legal journals in the United States and Canada. 

Professor Pottow joined the Michigan law faculty in 2003. Prior 

to coming there, he worked at several law firms doing predominantly bankruptcy work. His practice focused on debtor representation and Chapter 11 restructuring. 

He is licensed as a barrister and solicitor in Ontario, and he— 

but he is an attorney in Massachusetts. 

Thank you, Professor Pottow. Will you proceed with your testimony? 

TESTIMONY OF JOHN A. E. POTTOW, PROFESSOR OF LAW, 

UNIVERSITY OF MICHIGAN LAW SCHOOL 

Mr. POTTOW. And thank you. It is my pleasure. Thank you, Mr. 

Chairman, distinguished Members and honored guests. This is 

really an honor and a pleasure to participate in this hearing. 

What I thought I might do is quickly speak about some of the 

academic studies you are going to be hearing about when you work 

through these difficult health care issues to see if I can provide 

some guidance at cutting through the morass of numbers. 

And then if I have time, which is unlikely, I would like to share 

some of my own data on the rising problem of elderly Americans, 

elder Americans, who are filing for bankruptcy at an alarmingly increasing rate. 

The first thing I would like to do is talk about some of the methodological issues of bankruptcy filing and medical bankruptcies. 

And I think the single most important thing I would like Members of this Committee to think about is that an academic study 

that distinguishes between something called a ‘‘medical debt’’ and 

a ‘‘medical bankruptcy’’ and then takes something like a credit card 

and calls that an ‘‘other bankruptcy’’ is entirely missing the point. 

There is no artificial distinction in the real world—and I can say 

this from academic research; I can say this from doing consumer 

pro bono cases which I still keep my license for—there is no distinction between a medical debt and a credit card debt. You are allowed to charge co-payments and hospital bills on your credit card. 

So if you base an academic study on looking at court records, and 

you read the list of the creditors, and it says St. Jude’s Hospital, 

you say, ‘‘Oh, that is a medical debtor, okay,’’ then it says Visa, 

‘‘Well, that is not a medical debt, no, that is credit card,’’ that is 

just wrong. And you are getting limited nuance on the insight. 

So I urge very strong caution at trying to gauge the amount of 

medical bankruptcy by studies that cannot look at the actual identity of those debts and simply use crude categorizations of credit 

cards. 

Secondly, and relatedly, I think that there is a mis-emphasis in 

some studies on the idea of medical debts alone as the only way 

of gauging what a medical bankruptcy is. 

And this just may be reflective of academic disciplines of economists versus law, but what legal scholars are interested in looking 

at is are people going bankrupt through no fault of their own, because there was much discussion in the bankruptcy debates about 

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ruptcy system, or they were just playing by the rules and went 

bankrupt through no fault of their own. 

And so from that perspective, we don’t really care whether someone went bankrupt because they had a heart attack and then had 

to reduce their work hours or had a heart attack and then had very 

expensive bills to pay for that heart attack. Both of those people 

went bankrupt for reasons for which they should not be blamed 

and should receive protection. 

Now, even if I were to grant the distinction and say, ‘‘Well, the 

first guy who went bankrupt because of a heart attack—that is just 

his tough luck and his bad health, but that is not a problem with 

the health care system, that is just a problem with his healthiness 

level,’’ I am not even sure I would grant that concession. 

I am not sure that makes logical sense to me, because the reason 

one might have a medically caused bankruptcy like a heart attack 

could simply be because you haven’t had your blood pressure 

checked for 10 years or 20 years, and you never went to see a doctor, because you had insufficient medical insurance in the first 

place. 

Had you had proper health insurance, you might have had preventative medical care that could have prevented that medically 

caused bankruptcy in the first place. 

So again, I caution against these artificial distinctions that I 

think really miss the forest for the trees. 

The next thing I want to talk about briefly is what I call an epistemological conundrum of people really fighting over is it 29 percent, or is it 39 percent, or is it 60 percent. I think it is important. 

I think it is important at an academic level, but at the broader 

level of congressional policy, I—my testimony is it is too high, 

whatever you use as the most conservative metric. 

If you even take the most—you know, the conservative, conservative—just people who said on questionnaires, ‘‘Why did you go 

bankrupt,’’ ‘‘Health reason,’’ you are still looking at numbers that 

are over 30 percent. And that is a lower bound which is simply too 

high. 

Now, in my own data, which I have just run; I haven’t error 

checked yet—lawyer’s caveat—if I look at just elder Americans, 

people who are over 65, and I use Dr. Woolhandler’s thresholds of 

defining medical bankruptcy—so I don’t want to get into the fight 

of whether that is the right one; I want you to be able to compare 

apples to apples—we are seeing people—on my questionnaire, 46 

percent of elderly bankruptcy filers said they filed bankruptcy for 

medical reasons. 

Thirty-two percent said they filed bankruptcy because they had 

medical bills. Someone selecting either of those two choices—they 

either ticked ‘‘my medical bills are too high’’ or ‘‘I had a medical 

problem’’—that is 49 percent of elderly bankruptcy filers. 

That is particularly disturbing for two reasons. Number one, the 

elder Americans are the fastest-growing rate of bankruptcy filers. 

In 1991, they were 2 percent. In 2001, they were 7 percent. In 2007 

they are now—sorry, now 7 percent. If I take that as 55 and older, 

in 2007 they are 22 percent. So concern number one—they are the 

fastest-growing group. 

52 

Concern number two, we are supposed to have Medicare. Right? 

If you are over 65, you should have—I mean, there are some people 

who don’t qualify, but the lion’s share of people over 65 in this 

country are supposed to have a government-funded health insurance program. 

Last thing I want to say is please be careful of academic studies. 

I am not faulting you, sir, for throwing that Fraser Institute study, 

but that has already been discredited. You can go to a blog called 

‘‘Credit Slips’’ and read the post by Professor Lawless. 

But that Fraser Institute said, ‘‘Look, the bankruptcy filing rate 

in Canada is higher. Look at these 2 years, 2006 and 2007.’’ And 

then they said, ‘‘Yeah, but why are you looking at those 2 years? 

Why don’t you look at all the years?’’ 

And then you take out the telescope and you look at 2001, 2002, 

2003—and by the way, 2008, after 2007, and guess what? Every 

other year the filing rate is lower. 

And so you ask the authors, ‘‘Well, why did you pick those 2 

years to say that the filing rate is higher in Canada and just those 

2 years? Was there something special? Was there a new bill that 

was passed in Canada?’’ And you don’t get a very satisfying answer. 

So please be careful with your reliance on academic studies. 

[The prepared statement of Mr. Pottow follows:] 

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Mr. COHEN. Thank you, Professor Pottow. I appreciate your 

statement. 

And now we will start the questioning, and I will recognize myself for 5 minutes. 

Mrs. Edwards, you talked about repeat filings. Would you talk to 

us about your thoughts there and changing the bankruptcy code 

when there is an identification of a person that had a bankruptcy 

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Mrs. EDWARDS. It is very often the case that a debtor filing for 

medical reasons may file actually too early. 

If they are not charging their medical bills on their Visa card, if 

they are simply dealing with the medical collection agency, medical 

providers are not in the business of collecting debts, and you will— 

the practice is—you know, is it 32 days old? It goes to a collector. 

And the collector is in the business of trying to collect what they 

can, moving to judgment, and basically forcing the debtor into 

bankruptcy. 

Other kinds of creditors—Visa, for example—they are happy to 

add on the additional charges every month. You make the minimum payment and part of their business actually discourage people from paying off entirely because they want to get the high interest rates on the recurring debt. 

So medical debtors are very often forced into bankruptcy early. 

They are forced in, and forced in while they still have chronic conditions. And since a large number of people who have excessive 

bills are the people with chronic conditions. 

I know my particular condition, metastatic breast cancer—extremely expensive to deal with, and though I have coverage, insurance coverage, that seems to be covering it, I certainly sit in rooms 

with people who do not. 

They file bankruptcy and then they have to wait—depending on 

the kind of bankruptcy they have filed or what chapter they filed 

under, and other criteria, they have to wait 5 years or 8 years. 

What if they have one of those medical providers who says, ‘‘I am 

not going to give you continuing care until you pay off this previous 

bill?’’ They may be in a condition where they are simply not going 

to get care if they are not permitted to utilize the bankruptcy system. 

I don’t think you want them—you know, you don’t want repeat 

filers—we want to discourage repeat filers. We want to address the 

underlying problem. 

But where you have this situation, you may want people, if they 

meet certain criteria, at—a particularly high percentage of their 

debt that is medically related—you may want them—in order to 

encourage their continued health and also to encourage their continued productivity, you may want to allow them to file more frequently than permitted. 

You would want stringent requirements to make certain that 

that is the category they fall in, but you may want to reduce that 

period of time. 

Mr. COHEN. Thank you. Thank you, Mrs. Edwards. 

And, Professor Pottow, are there other situations, maybe like 

with the counseling, that might be unique to medical bankruptcies? 

Mr. POTTOW. Yes. I think so. I know there is some legislation 

proposed—I think it is H.R. 901—that says, ‘‘Why don’t we try to 

carve out a definition of medically bankrupt and see if we can reduce some of the more onerous bankruptcy law provisions for these 

medically bankrupt?’’ 

It seems one area that would be—for example, the means test is 

one example. Other areas that the new bankruptcy—I guess it is 

not new anymore—that the current bankruptcy bill requires is 

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ruptcy financial education or financial rehabilitation courses, and 

those are compulsory. No one gets out of those. 

And so one can question if you are assuming you are able to 

come up with a good definition of medical bankruptcy and it is 

workable—if you have someone who has got—‘‘I went bankrupt because I had metastatic breast cancer and I didn’t have generous 

health insurance,’’ I don’t know what use it is making them sit 

through—it is like traffic school—you know, sitting through, like, 

compulsory—‘‘Well, you know, here is your education. Don’t get 

breast cancer next time.’’ It just seems to me like a waste of time 

for everyone. 

So there could be little ways of tinkering on the edges—not as 

grand as redesigning the health care system, but just little things 

with the bankruptcy code that might help. 

Mr. COHEN. Thank you. I think we might get bipartisan support 

for that. That is good. Thank you. 

Dr. Woolhandler, Dr.—and is it Mathur? Thank you—basically 

said that her study and your study come to different conclusions 

and in essence doesn’t believe that bankruptcy filings have probably been caused by medical debt, and it is a small matter. She 

cites the Executive Office—the U.S. Trustee study from 2000 to 

2002. 

Would you comment on Dr. Mathur’s belief that medical debts 

are not—are not a major cause or concern for us here? 

Dr. WOOLHANDLER. Well, we could spend a lot of time dissecting 

these different studies. I am actually—I train researchers in the 

medical school at Harvard, and I spend most of my days sitting in 

seminars and going through research technique and telling you 

why different research projects yield different conclusions. 

What I can say is that this paper was peer-reviewed at the 

American Journal of Medicine. Of the 3,000 medical journals in the 

world, this is ranked either number 11th or number ninth in terms 

of overall impact. It was reviewed by other scientists. It has gone 

under very rigorous critique and review. 

The thing that really differs in our study from other studies is 

we ask the debtors what happened. And we didn’t just ask them 

one question. We asked them dozens, even hundreds, of questions 

to get a full picture of what happened. 

And what we found is that many people said they were bankrupted because of medical debt. Others said, ‘‘I was—I filed for 

bankruptcy to pay a mortgage.’’ ‘‘Well, why did you take on the 

mortgage?’’ ‘‘To pay my medical debt.’’ Other people said ‘‘Too many 

collection calls.’’ ‘‘Well, you know, why did you have so many bills?’’ 

‘‘Because I missed work because I was ill.’’ 

‘‘Too high a credit card balance.’’ You ask them, ‘‘Well, why is the 

credit card balance so high?’’ It turns out if you can’t pay for drugs 

at a drugstore, your only option is to put it on your credit card. 

Your only option is to put it on your credit card, because drugstores 

don’t offer credit. 

So 19 percent of people in our study said their highest medical 

cost was actually the pharmaceuticals. So the only way to get this 

kind of data is to ask people why they filed for bankruptcy, and ask 

them in enough detail to figure out what really happened. 

63 

And you know, that is what we did, and that is the studies we 

have done. They passed peer review. There are other studies looking at other data, but they can’t actually get at this question of the 

real reason behind the bankruptcy. 

Mr. COHEN. Thank you. I would like to give Dr. Mathur an opportunity to respond. 

In your statement, you said that the Survey of Consumer Finances showed medical indebtedness has not changed significantly. 

Apparently, I believe both Dr. Woolhandler and Professor Pottow 

feel that that is not necessarily the case, and that this—that the 

Survey of Consumer Finances didn’t go into what the response was, 

and that medical debt was not distinguished from goods and services. 

Did you go beyond what they said in that survey to see if there 

were credit card and/or mortgages caused by medical debt to go beyond the initial response? 

Ms. MATHUR. So the Survey of Consumer Finances is actually— 

it samples like 4,500 families. It tracks them. It has been tracking 

them, I think, since 1968. 

And basically, what they do is they ask every family what their 

financial situation is. They ask them their debt and asset levels. 

They ask them how much of it is medical debt, how much of it is 

credit card debt, how much of it is—you know, ‘‘Did you file for 

bankruptcy? When did you file for bankruptcy?’’ 

And the—and that is the clearest picture that you can get of 

what is actually happening with the average American family over 

this entire period. And if you look at the average debt levels that 

the—that that survey shows, they haven’t changed much since 

1989, between 1989 to 2004, and even between 2004 to 2007. 

The other survey that I mentioned, the Panel Study of Income 

Dynamics, actually asked exactly the question that you asked. It 

said, ‘‘Why do you think you filed for bankruptcy?’’ And instead of 

doing, you know—your survey was sort of limited because—don’t 

report what the other reasons were. All of your reasons were entirely related to medical reasons. 

That survey actually asked people, ‘‘Did you file’’—you know, 

‘‘What was the primary reason for filing? And you can rank the different reasons.’’ And if you actually look at the data, that survey 

shows that only 9 percent of people claim that medical debts were 

responsible for the bankruptcy filing. 

So when you give them a choice between is it a medical debt reason or is it a credit card debt reason, I assume that people will 

make that distinction. And that survey clearly shows that the largest reason was non-medical debt, was credit card debt. 

So I think there are numerous other surveys, you know, surveying a much larger sample of people asking, you know, more detailed questions than were asked in the study and that come up 

with a much lower number than you did. 

Mr. COHEN. Yeah, I think that—the Chairman is asking me, in 

the spirit of Saturday Night Live, to give you an opportunity to respond, Doctor. 

Dr. WOOLHANDLER. Sure. I guess we are going to go into the details of this. The Survey of Consumer Finance study has a problem 

64 

that is well stated by the author, Buck, where he says that the 

question was actually, ‘‘Did you take out any loans?’’ 

So many people will not think of a—paying off a hospital bill 

over time as taking out a loan. So if you can’t pay your hospital 

bill, they say, ‘‘You know, pay $100 a month for the rest of your 

life.’’ People won’t list that as a loan. 

The other thing is he had no data about credit cards. And yet we 

are hearing that a lot of people these days, when they can’t pay 

medical care and they are panicked, the first thing they do is pull 

out a credit card. 

So the Survey of Consumer Finance is not adequate to the task. 

Nor, frankly, is the PSID, which is a good study, but it had a grand 

total of 74 bankruptcies in the entire study. They identified half 

the rate of bankruptcies that would be expected in the population 

from which the sample was drawn—can’t possibly be an adequate 

sample or an adequate representation of bankruptcies in this country. 

Nonetheless, PSID does show some substantial rates of medical 

bankruptcy, unlike the Survey of Consumer Finance. 

Mr. COHEN. Thank you. 

And in the interest of time, we are going to move to questioning 

from our Ranking Member, Mr. Franks. 

Mr. FRANKS. Well, thank you, Mr. Chairman. 

You know, Mr. Chairman, I guess it is important for me just to 

say something by way over overview. I recognize, I think, as everyone in this room does, that people encountering medical challenges 

and sudden disasters in their life affect them in every way, including financially. 

I mean, I hesitate, but I will tell you that I had 11 surgeries before I was 9 years old due to some situations from birth defects. 

And it was a profound burden on my family. And so I understand 

that those things are real. 

And I know that there are some disagreements here among the 

academics as to some of the causation of bankruptcy. 

Professor Pottow, I would suggest to you that the overarching 

perspective of the Fraser study was that nationalized health care 

doesn’t demonstrably reduce bankruptcy. And I think that is a— 

one that is—strong evidence here. 

But I guess here is my big concern. And that is that somehow 

that the answer to medical bankruptcy is nationalized health care. 

The professor—Woolhandler said that private insurance is fundamentally defective. Now, those are her words, not mine. 

She said that, you know, a single-payer system would save hundreds of millions of dollars—again, her own words and not mine. 

And I would just suggest two things. First of all, if it saves hundreds of millions of—it will be a first in history where government 

doing something of this complexity actually saved money. 

And if, indeed, private insurance is fundamentally defective, it 

leaves only the government option. And here is my concern. With 

all of the crises that people face with health care, if you put it in 

government’s hands, even to a partial extent, you will do a couple 

of things. 

You will diminish the dignity of the patients. The pressure will 

be on giving less health care—that would be the only outlet of the 

65 

system, because there is tremendous pressure in the system no 

matter what we do. 

And I am convinced that health care will become more expensive, 

and the ultimate result will be those people in crises, like my family was, will simply not be able to navigate the bureaucracy, and 

instead of having financial bankruptcy, we will have health bankruptcy. 

And I am very, very concerned about that, because, you know, 

the highway of history is littered with the wreckage of governments 

who thought that the socialistic perspective or tendency would 

somehow create more productivity and create products or services 

that would be better and cheaper. 

The only thing that has really proven in our history to do that 

is a private market that instigated responsible activity on the part 

of everyday people. And I believe that this country has tremendous 

capability. 

And I want to mention one other example here. There was a time 

when government was a kind of quasi—because, you know, I know 

that my friends on—I should say my left, but I can’t—my friends 

on the other side of the aisle believe that I am mischaracterizing 

a nationalized or government takeover of health care. And I understand that. 

But let’s then, for the sake of argument, or I hope the sake of 

enlightenment, look at what happened when government had a 

quasi-involvement in the telephone company. There was a private—Ma Bell was a private company but government was all in 

the middle of it and controlled it and regulated it. 

And again, telephone service was enormously expensive. And we 

had almost no—and if we want to do that to health care, that is 

exactly the wrong direction. 

But what happened when we encouraged the private sector to be 

really involved? All of a sudden there was an explosion in technology that made telephone services and all kinds of the related 

services much cheaper and much better for everyone. 

And my concern is that we are going, again, in exactly the wrong 

direction with the idea of moving in a government direction of 

health care. 

If we want to help those who are—and this is important—those 

who are under-insured, that can’t be—find insurance because they 

can’t afford it, why doesn’t the majority offer something where we 

would give them a draft to go out and buy the private health care 

insurance of their own choice? 

That is empowering those who don’t have what they need. That 

would change the entire dynamic, and it would incent a private 

competitive market system which would help everyone. 

Let me ask a question right quick before I am out of time. 

Dr. Mathur, the recent Harvard study that you have talked 

about today—I want to give you a chance—concluded that medical 

debt significantly contributed to 62 percent of consumer bankruptcies. 

I want to give you another chance. Do you believe the study accurately reflects the impact of medical debts on consumer bankruptcies in America? 

66 

And are you aware of other studies that represent this high of— 

similar results? 

And what accounts, in your judgment, for the high correlation of 

medical debt and bankruptcy that is found in the Harvard study? 

Ms. MATHUR. I think the number is definitely overstated. I think 

the survey response of the—you know, even if you take the respondents and their own—when they asked them the question of 

what actually caused the bankruptcy, that number in their own 

survey, by their own estimates, is 29 percent. 

Whether the survey is a random sample, whether it, you know, 

would sort of pass—I think sampling 1,000 people, you know, and 

asking them only questions related to whether there were any medical reasons for the bankruptcy filing, whether, you know, you had 

any bills, whether you, you know, lost sort of weeks of work a year 

prior to the filing, I think that is, you know, sort of overstating the 

case. 

I think at the most, what you can take from the study is that 

maybe 29 percent of the respondents believe that medical bills had 

something to do with their bankruptcy filing. Whether it was the 

actual cause, whether it was the—you know, the proximate cause, 

whether it was the immediate cause of the filing is also not certain 

in the survey that they did. 

I have now, you know, surveyed the entire economics literature. 

There are now—there are no other surveys, you know, again, peer 

reviewed, published in the Journal of Finance and other places, 

that would suggest that, you know, that number is even close to 

being accurate. 

I think it is an—statement. Every study that I have come across 

actually finds a much higher role for credit card debt where you 

can distinguish between the two, where, you know, any academic 

study will—you know, would not pass muster if it simply said, ‘‘Oh, 

we are including credit card debt but we are not sure whether medical debt is a part of it.’’ 

So to the extent that, you know, you rely on the peer review 

process, no study has actually concluded that medical debts are the 

single most factor—you know, most important factor causing bankruptcies today. Thank you. 

Mr. COHEN. Thank you, Mr. Franks. 

And now we would like to recognize for 5 minutes the Chairman 

of the full Committee, Mr. Conyers, of Michigan. 

Mr. CONYERS. I am setting aside my questions because Trent 

Franks and I and Steve King and Howard Coble and Jim Jordan— 

we are working this thing out. 

Dr. Mathur, we maybe will or will not see you again, but we take 

your statements at their face value, that they are intended to convey a point of view. 

And so let me ask Dr. Woolhandler and Professor Pottow and 

Elizabeth Edwards—let’s just go through this again. Sometimes it 

may be repetitive, but we want to try to straighten this out. 

Steffie, what do you say? 

Dr. WOOLHANDLER [continuing]. Asking specifically about the 

numbers of people in—— 

Mr. CONYERS. Well, the—— 

Dr. WOOLHANDLER [continuing]. In medical bankruptcy? 

67 

Mr. CONYERS [continuing]. The discussion—see, here is what I 

do. Here is the only way I improve in this system we are in. We 

are going to take your statement and we are going to go through 

it sentence by sentence for accuracy. That is the only way we get 

better. 

But what are your impressions? What are you up here today— 

want to add to this review? 

Dr. WOOLHANDLER. Okay. Well, I think the question of whether 

national health insurance would actually save money is an empirical question that you can answer by looking at places that have 

tried national health insurance, which is not socialized medicine. It 

is socialized insurance, like Medicare for all. 

But you can look and say, ‘‘Where they have national health insurance, does it cost more or less,’’ and the reality is the United 

States is paying twice as much as the average for other industrialized nations. We are the only industrialized nation that does not 

use nonprofit national health insurance. 

So the scientific empirical answer about what is the most affordable, if we accept international evidence, is going to be that national health insurance is more affordable. The reason for that is 

the tremendous administrative savings that you get with national 

health insurance. 

So when you have one payer like a Medicare-for-all type program, not only do you get the administrative savings at the insurance center, but it also means doctors and hospitals don’t have to 

have their complex billing apparatus, their complex staff of clerks 

who argue with the insurance company, doctors like me don’t have 

to spend my time on documentation that is just there to argue 

about who gets paid. 

And Canada has administrative overhead in their system of only 

about 16.7 percent. In the U.S., it is about 31 percent of total 

health spending. And again, that is a peer-reviewed study—we 

have been talking a lot about peer review—New England Journal 

of Medicine, 2003. 

So if we were able to reduce our administrative costs to Canadian levels, we would save about $400 billion a year, which is the 

money we need to cover all of the 47 million uninsured, with 

money left over to plug the gap in coverage that people now have, 

to eliminate co-payments, deductibles and uncovered services. 

And in fact, in Canada, there are not co-payments and 

deductibles. There is not lifetime limits. There is not rescission, albeit rescission is a small problem in the United States, affecting a 

tiny fraction of people, and actually was not an issue in our study. 

Most people did not experience that. 

But they don’t have any of that in Canada because they have 

Medicare for all, everybody in, nobody out. So we can grandstand 

and—and talk about what might be—try to project the future. We 

don’t have to do that. We can really look at the evidence and see 

what has happened in countries with national health insurance. 

Mr. CONYERS. Thank you. 

Professor Pottow, what—— 

Mr. POTTOW. I would like to respond quickly, if I could. First, I 

would like to briefly wade in again on these methodological quesVerDate Aug 31 2005 14:41 Feb 23, 2010 Jkt 000000 PO 00000 Frm 00071 Fmt 6633 Sfmt 6601 H:\WORK\COMM\072809\51346.000 HJUD1 PsN: 51346
68 

tions. And I feel somehow Dr. Woolhandler has been put in this almost defensive posture, and I think that is wrong. 

In fact, if anything, I think her study is one of the most rigorous 

methodologically. And again, I cannot emphasize enough that when 

you talk to people who are filing for bankruptcy, first and foremost 

on their mind is not the accurate classification of their debts for 

academic studies of people who are questioning them. 

And so they do answer things like, ‘‘Why did you go bankrupt,’’ 

‘‘Because of the mortgage,’’ and it is only if you do that second level 

of in-depth survey analysis to say, ‘‘Why did you put a mortgage 

on your house,’’ they say, ‘‘Because of the wife’s surgery.’’ 

And so I don’t see anything incongruous about that, the 

Woolhandler, et al., study having higher estimates, because I think 

as you get through more gradations of understanding you are going 

to see those numbers go up. 

Secondly, if I may just speak anecdotally as someone raised in 

the Canadian system, I mean, I don’t know how much of this—and 

how much changed since I have been down in the States, but like 

I certainly didn’t feel any lack of dignity and I think was raised 

pretty healthily. 

The one thing that I was struck by coming to the American system was that you didn’t have to get a referral. Everything—I think 

they try to channel much more through the primary care medical 

system in Canada, so if you want to go see like an orthopedic surgeon, you have got to wait till your primary care doctor does a referral. 

And that may be like anathema to the libertarian culture of free 

medical choice here, or it might be a way of reducing cost, to have 

some doctor gatekeep that. But I don’t have strong feelings—— 

The final thing I want to say was I really do want to get to the 

point that—I believe it was the—that Mr. Chairman who brought 

up about losing life’s lottery. 

From a bankruptcy perspective, I—if you lose life’s lottery and 

you are now bankrupt, that is just like a terrible situation to be 

in, sort of like you have got two strikes at the same time. 

And I am not making a claim of causation. I am simply looking 

at bankruptcy as like doing like post-mortem in the entrails of the 

people who are in the worst financial circumstances in this country. 

And if you find yourself there because you have lost life’s lottery, 

that should be, to the extent we can design legislation, as minimally painful a respite as possible. 

You should go in and out quickly. And if we can differentiate you 

from sort of charge card junkies, then we should try to do that with 

bankruptcy legislation. I am sorry I am not speaking to grander 

health care redesigns, but it is something I know a little bit more 

about. 

Mr. CONYERS. Mr. Chairman, could I get enough time to let Attorney Edwards make any comments she chooses? 

Mr. COHEN. Granted. 

Mrs. EDWARDS. If I can sort of take this out of the context that 

we are arguing about medical bankruptcies, the problem with the 

extensive medical costs that people are suffering doesn’t just reflect 

itself in medical bankruptcy. 

69 

It also reflects itself in a different area as well. It reflects itself 

in the number of foreclosures we have. 

Christopher Robertson has done a study published in Health Matrix magazine—indicates 50 percent of foreclosures have as one of 

the causes one of the substantial—significant causes medical costs, 

both medical costs because they have lost their job—I mean, they 

have had to quit their job in order to take care of somebody who 

needed long-term care, and that wasn’t covered by any insurance, 

and they needed—that was the cheaper thing for them to do. Or 

whatever the—but all related to medical costs and the inability of 

that family to meet its medical expenses. 

You think of the larger economic problems we are having right 

now—you know, if the truth is we never had subprime mortgages, 

maybe half the houses on your street wouldn’t be for sale because 

of foreclosures, because of subprime mortgages. 

But half would still be being foreclosed because of mortgages that 

had to do with health care costs. And that continues to be an enormous problem. 

When you think about the consequences of that, the consequences of that are the collapse of the real estate market, which 

means that our creditors, our banks, become under-collateralized, 

and that is part of the problem that has caused the—has the ripple 

effect. 

Is it the only reason? It is not the only reason. But to ignore the 

fact that medical costs are part of the underlying problem with the 

financial meltdown that we have experienced would be to completely turn a blind eye to a significant problem that we can solve. 

It is not just this is a problem out there that seems insolvable. 

We can solve this problem. I believe that Congressman Franks is 

probably being hyperbolic and didn’t actually mean that the Federal Government should be making a contribution to pay for the 47 

million people who are uninsured, and I suppose an additional for 

people who are under-insured, the 25 million who are under-insured. 

But we are talking about—you know, the enormous amounts of 

money you end up talking about—we are talking about $6 trillion 

over 10 years—is what we would be talking about in order to—in 

order for—that is the reason we are not talking about it. We are 

not talking about doing that. It is entirely too much money. 

We have to solve the problem in a way not only that deals with 

the problem of medical expenses and the moral and financial need 

for medical care, because it has so many repercussions, not just in 

the financial market but in businesses. 

It creates $2 billion—uninsured loss of productivity—$2 billion a 

year. I mean, this is a substantial amount of money. And we can 

address all of those issues, but we have to do it in a way that 

makes economic sense. 

This suggestion simply, you know, for whatever theatrical reason 

it was presented—it is simply not the kind of solution we need to 

be looking for. 

Mr. COHEN. Thank you, Mr. Conyers. 

I now recognize the gentleman from Ohio. 

Mr. JORDAN. Thank you, Mr. Chairman. 

70 

Mr. COHEN. And would you let us know why you got that nice 

note? 

Mr. JORDAN. I believe it was the Chairman saw the Ranking 

Member this morning heading over to an event. The Ranking Member was headed to an event I was having, and they happened to 

exchange greetings, and Mr. Smith said he was coming to my 

event, and Mr. Conyers was kind enough to say something nice 

about me. 

So I appreciate that, the gentleman from Michigan and the 

Chairman. 

In your research have you all seen that when a family or a patient is experiencing difficulty paying their medical bills, debt—has 

it been your experience that hospitals and physicians are willing to 

do what they can to work with that family, to see if there is a way 

they can pay it off over time? 

What has your research shown in that area, trying to help families avoid what we are—you know, the bankruptcy we are talking 

about here today? And I counsel—you can start wherever. We will 

start with the physicians. 

Dr. WOOLHANDLER. Yeah. Well, actually, at the end of the surveys in 2002 and 2007 we asked people to give a narrative report 

of what happened, like a longer story. And I actually read all of the 

reports from the 2001 study. 

And the fairly typical study would be like a—I mean, this is a 

real person, a schoolteacher, who gets a heart attack, can’t teach 

school, loses her health insurance, gets a $20,000 hospital bill. 

A savvy consumer goes to the hospital and negotiates and gets 

the hospital to write off the entire bill. But then she is bankrupted 

anyway because of the doctors’ bills and the bills for medication she 

has put on her credit card, okay? 

So savvy consumers go and try to negotiate these things, and occasionally they do get a deal, but that doesn’t save people from 

bankruptcy because they can’t get a deal that covers all of their 

bills. They can’t cover the hospital bills and the doctors’ bills and 

the drug bills all at the same time. 

Mr. JORDAN. Dr. Mathur, that the—— 

Ms. MATHUR. I don’t think I can speak to that. 

Mr. JORDAN. Okay. Okay. 

Ms. MATHUR. I don’t have—— 

Mr. JORDAN. That is okay. 

Mr. POTTOW. There is some anecdotal stuff about hospital collection procedures. There was a case out in Connecticut where they 

were attaching liens, but that is not a systematic academic study. 

One thing we do have from the sociological, psychological literature that I have seen is that respondents who are trying to juggle financial stuff always want to pay their health care provider 

first, and I think that maybe speaks to what Mrs. Edwards was 

saying about having to go into that doctor’s office. 

And that, quite frankly, may be one of the reasons why you see 

the incidence of credit card debt rising, because it is a little bit 

more anonymous to put it on the credit cards than—so that is another piece of academic data I have. 

As for hospitals themselves, I know that there is an emerging 

product of like a health credit card, where you put—it is supposed 

71 

to put structured payments on an amortized payment schedule, but 

you can actually use it as a general purpose charge card. But 

again, I am not familiar with the academic studies. 

I will say my general research with credit cards makes me extremely nervous about that sort of product, if you are getting into 

that, but that is a—that is a separate hearing, I believe. 

Mr. JORDAN. And you mentioned that people are more inclined 

to deal with the health debt first, and why is that, just the relationship they have with their physician, the trust they have there? 

Is that part of it? 

Mr. POTTOW. I think that is right. I think the worry is that you 

would go up to your doctor’s office, and if you haven’t paid your bill 

last month, then you kind of get—it is awkward talking to the 

nurse, and you—maybe you are not going to get the full level of 

trust. 

I think perhaps Mrs. Edwards would be able to speak—— 

Mrs. EDWARDS. The truth is if you are having a problem with 

Sears, you can, you know, get your washer-dryer someplace else. If 

you are having a problem with your doctor—you know, you have 

a continuing relationship, and you need that continuing relationship because health care is so important. 

One of the things that we are—that you see sometimes is if you 

have an insurance policy, you will get one kind of bill. You might 

get a larger bill if you are uninsured. 

And part of the reason for the larger bill is that we have a lot 

of charities that try to help out people who don’t have—who can’t 

work things out, or they—but they can only pay 20 percent of the 

bill. 

So 20 percent represents a—closer to the insurance number, so 

that is why you see an inflated—you often see an inflated number 

for the health care provider, usually a hospital as opposed to a doctor—an inflated number for that. 

So that skews a little bit of what you are talking about. 

Mr. JORDAN. Let me change, because I want to go to something 

that happened last week and just get your thoughts, since we are 

talking—we have sort of talked about health care in general. 

Last week, the President of the United States made a statement 

during his press conference that I found troubling, and I would like 

to get your thoughts. And again, we will start with the physician 

in the witness panel. 

But if you remember during that press event, he made the statement that doctors will, in some cases, take the tonsils out of a child 

not because it is in the best care of that child, that patient, but because they will make more money. 

And I found, frankly, that statement incredible, that—I mean, 

you go—I said this in a speech yesterday back home. You go pick 

a random sample of 100 people, 1,000 people—pick any number 

you want—of Americans and ask them the simple question, ‘‘Who 

do you trust more, a politician or a doctor,’’ and my guess is 100 

percent of them will say the doctor. 

And yet the President of the United States, in the midst of this 

health care debate, made that kind of statement. And so I would 

like your thoughts on the President’s comments last week to the 

American people. We will start with the doctor. 

72 

Dr. WOOLHANDLER. Well, there is a tremendous amount of overtreatment in the United States. There is a tremendous amount of 

overuse of expensive technologies, most of which is useless but 

some of which is actually harmful to patients. 

Mr. JORDAN. Driven by what? Are you saying your colleagues, 

Doctor, are making decisions—financial interest? Many of us would 

argue that if we would maybe look at some reforms in the tort system, there may be less of what you just described. 

Dr. WOOLHANDLER. Well, I think there is a bias toward intervention. It is there in the medical literature. It is there in the finances, 

so that the doctor and the hospital—— 

Mr. JORDAN. Remember, the President’s statement was—the 

President’s statement was not about—the President’s statement 

was flat-out they do it for more money. They put the patient’s care 

secondary to more money, an attack on physicians across this country. 

I want to know what your thoughts are as a physician about that 

statement. 

Dr. WOOLHANDLER. Okay. There are a few scoundrels in my profession who only do surgeries to make more money. But for the 

vast majority of them, it is not that they are scoundrels. 

It is that the entire educational system, the entire payment system, is biasing us toward being overly invasive and overly intensive, so that all the new medical students, all the new residents, 

are being trained to order a C.T. scan every time someone has a 

bellyache or a cough. 

That is tremendously expensive. It is invasive. It exposes patients to radiation they don’t need. They are not being bad people. 

They are just working in a system that biases us toward overtreatment, and we—in other countries, some of the other countries 

that spend less do it, you know, by having all these C.T. scans and 

tests, or whatever, but using them more sparingly. 

And that is one of the things we would want to do with a singlepayer system, is do better health planning to—— 

Mr. JORDAN. Okay. Okay. 

Dr. WOOLHANDLER [continuing]. Shift away from excessive treatment and toward the patient—— 

Mr. JORDAN. Can I get a response from the others? 

Dr. WOOLHANDLER [continuing]. And primary care. 

Mr. JORDAN. And I won’t ask any more. Can I get a response 

from the others, Mr. Chairman? 

Mr. COHEN. Sure, Mr. Jordan. 

Mr. JORDAN. All right. Thank you. 

Let’s go with Mrs. Edwards and the professor. 

Mrs. EDWARDS. To follow up on this, there is an emphasis on 

coded treatment. We have all seen the—you know, as the doctor or 

the nurse fills out the form and checks particular codes on the— 

that will translate into reimbursable treatments that the insurance 

companies decided are reimbursable. 

There are some treatments that are not reimbursable—the kind 

of continuing care, a lot of the preventive care that we would like 

to see, the—you know, basically they wave goodbye to you at the 

door of the cancer center, even though you would like to be able 

to follow up—— 

73 

Mr. JORDAN. Maybe—my question was do you think it was helpful for the President to make that kind of allegation, that kind 

of—— 

Mrs. EDWARDS. I—— 

Mr. JORDAN [continuing]. In the midst of this debate, in the 

midst—— 

Mrs. EDWARDS. I think—— 

Mr. JORDAN [continuing]. Of a question of whether the government is going to end up actually getting between you and your doctor, do you think it was helpful for the President to make that kind 

of statement? 

Mrs. EDWARDS. First of all, I do not think it is an accurate statement that any of the policies we are talking about put the government between a patient and the doctor. 

I think that that right now we have the insurance company between the two, but I don’t think that any of the policies would put 

the doctor there. 

I do think that doctors are being encouraged not by their guts 

or by their wallet, but by their administrations to make certain 

that the treatments they give have some code that is reimbursable, 

so to the extent to which—and I don’t know what was behind the 

example that was given. 

But the extent to which, you know, choosing between an uncoded 

treatment and a coded treatment, I think there is probably administrative pressure that the doctor could respond to more accurately 

to provide the coded treatment, not the uncoded treatment. 

Mr. JORDAN. The context of his comments—if I could, Mr. Chairman, the context of the President’s comments were real simple. 

You are going to give the kid amoxicillin, or whatever, you know, 

to deal with the sore throat, or you are going to take his tonsils 

out. 

That was the context of his statement. He said doctors are going 

to take the tonsils out, even though it may not be the right thing, 

even though it is not the right thing to do, because they make more 

money. 

Mrs. EDWARDS. I—— 

Mr. JORDAN. That was the context of the statement. 

Mrs. EDWARDS. And I would like—I—— 

Mr. JORDAN. And I am asking—— 

Mrs. EDWARDS.—I am hopeful what it means is reimbursable—— 

Mr. JORDAN [continuing]. People who are experts in health 

care—— 

Mrs. EDWARDS [continuing]. As opposed to non-reimbursable 

treatments. I hope that what it means is reimbursable as—to nonreimbursable treatments. 

And yes, there is an emphasis on making certain that the treatments provided are reimbursable, which means that we need to expand that—expand the reimbursement to include a lot of preventative care. 

Mr. JORDAN. I am reclaiming my time, so I can go to the last two 

witnesses—or—— 

Ms. MATHUR. I am not a physician, but I think it does a big disservice to the doctors in this country, you know, to make a statement like that. 

74 

Mr. JORDAN. Thank you. 

Mr. POTTOW. I don’t want to speculate whether the President is 

trying to declare war on doctors, or whatever, but it seems to me 

that if there is—if there is—and my wife is a physician, too, so I 

am speaking from anecdotal evidence here, too—— 

If there is a treatment and procedure bias, so if you say, ‘‘Listen, 

this is the way the compensation system works. If you spend an 

hour talking to a patient with counseling, you get paid this dollar 

amount from your—for insurance reimbursement. But if you do the 

procedure, you get paid this higher level,’’ then I can understand 

the gravitations toward doing the procedure thing. 

So maybe what the President is saying is the way the current 

payment structure is right now is that it is—not only is it easier 

for defensive—because that is the inculcation of risk aversity that 

we train our doctors in—it is like, ‘‘Oh, God, I better err on the side 

of caution in doing more stuff,’’ but also hey, guess what? You get 

paid at a fatter compensation level to do it, so there is sort of a 

double incentive. 

And whether that is like, you know, inculcating a culture of malevolence or not of physicians, I don’t know, and I don’t know if the 

President is going to go there with the doctors or not. But that is 

just my response. 

Mr. COHEN. Thank you, Mr. Jordan. 

Now I will recognize the representative from the Bay State, the 

Cape, the Island, knowledgeable—— 

Mr. DELAHUNT. That is enough. 

Mr. COHEN. That is enough. [Laughter.] 

You are on. 

Mr. DELAHUNT. Thank you, Mr. Chairman. 

I would like to get back to the statistics in terms of the cost of 

health care. And there has been a lot of discussion during the debate on health care, comparisons versus Canada or versus Germany, versus, you know, other democracies. 

And I think it was you, Doctor, that said that the cost of health 

care in Canada is half of what it is in the United States. Am I correct in—— 

Dr. WOOLHANDLER. The cost of health care in Canada is about 

half of what it is in the state—my home state of Massachusetts. 

However, Massachusetts is—— 

Mr. DELAHUNT. I am very familiar. 

Dr. WOOLHANDLER. Yeah, higher than—— 

Mr. DELAHUNT. The Bay State. 

Dr. WOOLHANDLER. Yeah. 

Mr. DELAHUNT. Yeah. 

Dr. WOOLHANDLER. Yeah. Right, and we are about 15 to 30 percent higher in terms of cost than the rest of the country. So if we 

just want to talk nationally—— 

Mr. DELAHUNT. Yeah, nationally. 

Dr. WOOLHANDLER [continuing]. We would say Canada is just 

over half the cost of health care nationally on a per capita basis. 

Mr. DELAHUNT. I guess the question that I have is what are we 

getting for our dollar in medical terms. Let’s pick out longevity. Are 

we living longer than the Canadians? 

75 

Dr. WOOLHANDLER. No, sir. Americans live two to 21⁄2 years 

shorter life than Canadians. 

Mr. DELAHUNT. Give me some more comparisons. How do we do 

compared to the Germans? 

Dr. WOOLHANDLER. Okay. People in the United States have a 

slightly lower life expectancy than Germans. Okay? 

Mr. DELAHUNT. I find that very disconcerting, since I am paying 

twice but I am not living longer. 

Dr. WOOLHANDLER. Well, most of western Europe people live 

longer, so French people, Scandinavians, people in Holland—they 

have complete free access to health care. They pay less per capita 

for health care. And yes, they do, indeed, live longer. 

Mr. DELAHUNT. Right. I mean, I think we tend to be particularly 

proud of the quality of our health care, and yet it doesn’t seem to 

be distributed in a way that for the average American, as opposed 

to the more affluent American, helps as far as longevity is concerned. Is that an accurate statement? 

Dr. WOOLHANDLER. Yes, sir, it is. 

Mr. DELAHUNT. And yet we are paying so much and getting so 

little in comparison. I mean, I think that is important to talk 

about. 

I mean, I have to agree with you, Professor Pottow, and I respect 

both of your versions in terms of the methodology, but can we 

agree—can the panel agree—and I guess I am looking to you, Dr. 

Mathur and Dr. Woolhandler—that however you define it, medical 

costs are at least a significant factor in terms of bankruptcy. 

Is that a fair statement? 

Dr. WOOLHANDLER. Well, I obviously think the—— 

Mr. DELAHUNT. You—— 

Dr. WOOLHANDLER [continuing]. Answer is yes based on data we 

collected from people filing for bankruptcy. 

Mr. DELAHUNT. Right. But you know, I mean, there is no one on 

this panel, believe me, that is a statistician—oh, maybe there is 

one, but it—you know, I mean, we are not particularly erudite in 

terms of math and probabilities and what have you, and I am sure 

that academicians can disagree and have a good, fascinating debate 

that would bore most of us in terms of the methodology. 

But is it a fair statement to say that you can’t discount medical— 

the cost of medical care in this country as it relates to bankruptcy? 

Ms. MATHUR. I think, as Dr. Woolhandler’s study had stated, 

that let’s say 10 to 15 percent of bankruptcies—— 

Mr. DELAHUNT. I am not asking for—I am just saying—if you 

could give me—and if you can—— 

Ms. MATHUR. I would say that they would account for 10 to 15 

percent of bankruptcies, and it—and leave it up to the audience to 

judge whether it is significant. 

Mr. DELAHUNT. Significant. Okay. That is fair enough. 

Mrs. Edwards, do you have any—— 

Mrs. EDWARDS [continuing]. Whether we are getting what we pay 

for? 

Mr. DELAHUNT. Yeah, are we getting what we paid for? 

Mrs. EDWARDS. We are clearly not getting what we paid for. I 

mean, in addition to—we are now—we have been always talking 

76 

about 17—16 or 17 percent of GDP. We now may be talking about 

upward of 20 percent of GDP donated—that goes to health care. 

We use it in a tremendously inefficient way. And one of the reasons we do so is that we don’t have the kind of competition for— 

in—— 

Mr. DELAHUNT. I guess the reason that we don’t give the check 

to the private insurance company is that we don’t want to pay for 

their profit, is that—— 

Mrs. EDWARDS. Well, the—— 

Mr. DELAHUNT [continuing]. Really what it is about? 

Mrs. EDWARDS. Under the law, insurance companies—insurance 

is not like another—any other product, really. You know, basically, 

I mentioned Sears before. If Sears sends you—sells you a washer 

and a dryer, they make more profit. The more product they give 

you, the more profit they make. 

Insurance companies operate exactly the opposite way. The less 

product they give you for what you—the more profit they make. 

They have a fiduciary obligation under the law—and I concede 

that they—that they comply with this—insurance companies have 

a fiduciary obligation to their stockholders to maximize their profit. 

They have no fiduciary obligation to their insureds. And that creates an enormous problem. 

It means that they—that when you have WellPoint’s experience 

in California, where they were find a million dollars—they operate 

Anthem Blue Cross. It is the largest health insurance company in 

the country. They operate Anthem Blue Cross. 

They were fined a million dollars for systematically denying coverage to pregnant women. And that is a system that we—that perhaps could be corrected in the way that Dr. Woolhandler is suggesting, but also—but can be corrected also by less dramatic 

changes that are really calculated to solve those kinds of abuses. 

When we solve those kinds of abuses, perhaps we will get, in 

fact, the coverage that we deserve. The problem isn’t that we don’t 

have the best health care in the world. People come from around 

the world—we hear stories of it all the time—to get health care 

here. 

The problem is that those clinic doors are closed—— 

Mr. DELAHUNT. But that is just it. They come—— 

Mrs. EDWARDS [continuing]. To many Americans. 

Mr. DELAHUNT. They come from all over the world. 

Mrs. EDWARDS. Right. 

Mr. DELAHUNT. You know, in the Bay State, in my home city of 

Boston, Massachusetts, we get a lot of very wealthy people, and we 

welcome them, from the Middle East, from Russia, from Japan—— 

Mrs. EDWARDS. Right. 

Mr. DELAHUNT [continuing]. From everywhere, to come to get the 

best. But there are many in the Bay State, up until recently, who 

can’t access that health care. 

Mrs. EDWARDS. Exactly the point. 

Mr. DELAHUNT. That is the difference. 

Mrs. EDWARDS. Exactly the point. 

Mr. DELAHUNT. What are we doing for the average American 

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ting it, obviously, in very simplistic terms. But to me, that is what 

it is about. 

Mrs. EDWARDS. And the problem is exactly—— 

Mr. DELAHUNT. I am not here, to be honest with you, to help deliver quality health care to sheiks from the Middle East. 

Mrs. EDWARDS. Right. 

Mr. DELAHUNT. I want to do it for the folks from South Boston. 

Mrs. EDWARDS. And the problem is exacerbated in rural areas, 

where your care is so dispersed. 

We have the capacity to make these corrections, and what we are 

doing is we are considering substantial health reform, which I 

should say the country appreciates your doing. 

Mr. COHEN. Thank you. 

And thank you, Mr. Delahunt. 

In fact, I kind of surveyed my district, and hardly anybody in my 

district knew what M.D. Anderson was. 

Mrs. EDWARDS. Yeah. 

Mr. COHEN. Mr. Coble, are you—the gentleman from North Carolina is recognized. 

Mr. COBLE. Thank you, Mr. Chairman. 

Dr. Woolhandler, we have a few scoundrels in our profession, too. 

But I think the good news is most of the people in your profession 

and most of the people in our profession are pretty good folks. I 

think that is the bottom line of the good news. 

Good to have all of you with us. 

Mrs. Edwards, I think we all agree that there are a number of 

challenges facing people around the country generally, and in yours 

and my North Carolina specifically. 

While health care is one of them, there are many others which 

seem to be linked to one common thing, and that is the economy. 

You touched on it earlier regarding the mortgages. 

When the climate is favorable, problems appear to be less complex. Well, the climate is not all that favorable now. And I have 

no doubt but that the economy has impacted these bankruptcies 

and has furthermore impacted health care. 

I am thinking cumulatively now. Automobile payment late. Home 

mortgage payment late. Credit card payment late. Health care payment late. Do you concur with that, Mrs. Edwards? 

Mrs. EDWARDS. I concur that the situation is getting worse, not 

better, which just encourages—means we have more need to address the problem. 

But the study that was done out of Harvard that Dr. 

Woolhandler participated in, is one of the senior authors of, was a 

study that was done, I believe, in 2007. So that preceded the current crisis. 

Now, you can imagine how much worse it is, and I have spoken 

with my former colleagues practicing bankruptcy law, both from— 

people who stand in front of the judge and the judges, and the situation is considerably worse. 

At the time of the 2007 study, a bankruptcy that followed an illness happened every 90 seconds. I hate to think how often it is 

now. 

Mr. COBLE. I thank you. 

78 

Dr. Mathur, how do we define and quantify what is referred to 

as medical bankruptcy, A? And is there any empirical data with 

which you are familiar on which you would depend to analyze 

whether it is creating a significant impact on bankruptcy filings 

generally? 

Ms. MATHUR. I think the only way we can classify a bankruptcy 

as being—and the way it is widely—you know, the study is being 

cited—is that medical bills are causing the bankruptcy filings. I 

think the authors need to clarify that we are not just talking about 

medical bills but, you know, anything—any medical reason, and 

they say that, you know, that is part of the bankruptcy. 

By their own estimates, about 29 percent of respondents say that 

their—that medical bills were—you know, were like another cause 

of the bankruptcy filing. 

I think to improve the study you would need to, as you said, you 

know, account for—and which standard economics literature does— 

is to account for, you know, tens of other factors that could have 

influenced the filing. 

So you account for, you know, what is happening to average incomes in the state, what is happening to the average unemployment rate in the state, what is happening to our own income level, 

you know, are you facing, you know, job loss or any other factor 

that may be not linked to the—to any medical reason, and then say 

that okay, this part of it is purely due to the medical bankruptcy. 

I have tons of papers cited in my longer testimony and also some 

that I mentioned here, and a lot of those papers say that yes, medical debts, you know, could account for some fraction of bankruptcy 

filings, but we believe that the other reasons are much more predominant. 

You know, if you can distinguish between credit card debt and 

you can distinguish between, you know, medical debt, or you can 

distinguish between card debt or, you know, mortgages, then accounting for all of these different factors that could affect the bankruptcy, all of these other factors are—you know, might actually be 

more significant in explaining the bankruptcy filing than medical 

debts per se. 

Mr. COBLE. I thank you for that. 

Dr. Pottow, will you concur that there should be some sufficient 

safeguard—you mentioned elderly in your testimony—safeguards 

to ensure that the elderly can afford health care? And what programs, government or otherwise, are essential to meet that goal? 

Mr. POTTOW. I think that is a good question. I think that there— 

some states, I believe, have experimented with having different levels of seizure protection laws or different levels of tax rates for residential properties for elderly people. 

So those certain fixed expenses that they are going to be stuck 

with—like if you live in your home, and when the property taxes 

start going up, you may have a differential tax rate for an elder 

primary residence owner. Some people put different homestead exemptions by state. 

In terms of the bankruptcy laws, maybe you could consider something like H.R. 901 for someone over 65, that—— 

I would like to respond, before I forget, sir, about the data that 

we have from the consumer bankruptcy project from this 2007 data 

79 

of seeing people filing for bankruptcy for all bankruptcies, not just 

the medical ones. 

And one of the things that we did see when—in answering our 

questions and looking at their struggling with their bills is that we 

are seeing a trend where people are waiting longer to file for bankruptcy, so people are stretching themselves on their credit cards or 

with home equity loans a little bit longer before they fall off the 

cliff into bankruptcy. 

What that leads me to believe is as we have a lagging unemployment effect with this economic recession is that you are going to 

see a—an even larger uptick in the number of people who are filing 

for bankruptcy now, because they are still in the stretch period 

now as the jobs are going. 

They will still flounder around and tread water with their credit 

cards, but eventually—I am crossing that, of course—but eventually, those chickens are going to come home to roost, and you are 

going to see even more financial distress of even more people filing. 

Mr. COBLE. Thank you, Professor. 

Mr. Chairman, you compiled a very fine panel of witnesses. I 

think it has been a very good hearing, and I yield back. 

Mr. COHEN. Thank you, sir. 

Mr. Scott, do you have—gentleman from Virginia—— 

Mr. SCOTT. Thank you—— 

Mr. COHEN [continuing]. Is recognized. 

Mr. SCOTT.—Mr. Chairman. 

Dr. Edwards, you alluded to the fact that we pay a higher percentage of GDP, higher amount per capita more as a Nation for 

health care and get very little of it. We have heard of life expectancy where we don’t compare very favorably. Infant mortality is 

another indicator. 

What are the other indicators that show that we are not getting—— 

Dr. WOOLHANDLER. Well, certainly, relative to Canada, we fail in 

almost every indicator. That is, when you look at deaths from cardiovascular disease, they are higher in the United States. Deaths 

from preventable and treatable cancers are higher in the United 

States. 

When we did a review where we looked at people who were insured in both countries and compared the quality of treatment for 

people with insurance in the two countries, the outcomes were virtually identical. 

If anything, death rates were a little bit lower, by about 5 percent, in Canada, just comparing apples to apples—that is, insured 

people getting health care in the two countries. 

Canadians are healthier than Americans by almost all indicators, 

with a single exception, which is they are more likely to smoke. So 

there is a pretty substantial body of information saying that we are 

getting a very poor value for money in this country, very poor bang 

for your buck. 

Other countries have—in addition to having universal health 

care, nonprofit national health insurance, and all other developed 

nations do, many of them have saved a lot of money by centering 

the health care system on the patients and on primary care, so that 

80 

you start with what the patient needs in their first contact with 

the primary care doctor. You strengthen primary care. 

And then you call in these resources, the C.T. scans, the fancy 

surgeries, only when they are needed, and you pay for them in 

such a way that there is no reward for overuse. 

Mr. SCOTT. Well, let me ask a blindly different question, because 

I think you are the only one that kind of alluded to a different between health insurance and health delivery systems. 

In some systems, particularly a rural system, you are not going 

to have the critical mass for a high-tech operation, and I understand a couple of years ago, I think, the standard was if you didn’t 

have at least 900 deliveries, you couldn’t have a well-staffed obstetrical unit. 

So the babies would probably be delivered by a family practitioner rather than an obstetrician. You would not have the neonatal pediatricians. You are not going to have the neural surgeons 

around if you don’t have the critical mass. 

Now, the fact that everybody—that is the system. Now, the fact 

that everybody has or doesn’t have insurance doesn’t change the 

system. You have got counties in Virginia that don’t have any physicians, none, from time to time. 

The fact that everybody has got a Blue Cross/Blue Shield card 

isn’t going to create—it certainly isn’t going to make it any less 

likely that there is going to be a doctor. It might even make it more 

likely. 

And so can you say a little bit of the difference between the 

health delivery system and what we are trying to do in giving everybody access to the system we have? 

And how it is a misrepresentation to suggest that if everybody 

has insurance, therefore you are going to have what is essentially 

in Canada a rural health delivery system, and therefore the quality 

would be worse? Would quality go up or down if everybody had insurance? 

Dr. WOOLHANDLER. Yeah. Well, certainly, everybody—I believe 

everyone should have insurance, and my own experience in Massachusetts, where people tend to be very close to a doctor in Massachusetts—we are a small state—the problem is people have insurance but there is gaps in their coverage, like co-payments, 

deductibles, uncovered services, so they can’t afford the care. 

In a rural situation, it is obviously very different. Canada has a 

big rural situation. If you look at the map, you know, most of the 

Canadian population—90 percent of the Canadian population lives 

within 100 miles of the U.S., but they have huge, hundreds and 

hundreds and thousands of miles going north which are very 

sparsely populated. 

And what they have done is developed a network of rural clinics 

staffed by these very gung-ho, smart nurse practitioners who can 

get on the telephone and get backup from doctors in the cities. 

Not only that, but if a patient needs to be airlifted out, they get 

airlifted to the—to a tertiary center on the dime of the national 

health insurance. 

So it is not a question of do you have insurance that will pay for 

you to be airlifted to Toronto. It is you need to go if that nurse 

practitioner there says you need to go. They airlift you out, so—— 

81 

Mr. SCOTT. But the quality—— 

Dr. WOOLHANDLER [continuing]. They have come up with some 

novel solutions that—— 

Mr. SCOTT. The quality of care—— 

Dr. WOOLHANDLER [continuing]. Can address that. 

Mr. SCOTT [continuing]. Is not diminished by virtue of the fact 

that everybody has an insurance card. 

Dr. WOOLHANDLER. Oh, absolutely not. I think it increases the 

quality of care because then things are more likely to be distributed where they are needed. The services are there for people who 

need them and not where they are going to make more money because a person has a different type of insurance. 

Mr. SCOTT. Thank you. 

Can I ask one other question? 

Dr. Mathur, you cited—in the studies you cited, would—do those 

studies count credit card debt and other credit caused by medical 

bills as a medical debt or as a credit card debt? 

And also, if someone is in debt with a lot of credit cards because 

they paid for their hospital bill with cash but didn’t have any 

money left over for groceries, gasoline, cash advance for the mortgage, would you—would those count as medical debt or mortgage, 

gasoline, grocery debt? 

Ms. MATHUR. The study that I cited, the survey that I cited, basically gives respondents the choice of selecting the—between different types of debt that they have. And so you have to rely on the 

fact that people know best about what is actually driving them to 

bankruptcy. 

Mr. SCOTT. So if someone is squeezed—— 

Ms. MATHUR. And so it doesn’t matter whether—— 

Mr. SCOTT. So if somebody is squeezed financially because of financial debt—— 

Ms. MATHUR. If they think that—sir, my understanding is that 

if they believe that medical debts are the biggest—you know, even 

on their credit card, the medical debts are the biggest fraction of 

their debt, then I believe that they would respond to it as medical 

debts causing the bankruptcy rather than credit card debts. That 

is my—— 

Dr. WOOLHANDLER. I am familiar with most of the peer-reviewed 

literature. Things that have not been peer-reviewed, or that are not 

in the public domain, I really can’t comment on. 

But most of the peer-reviewed economics literature does not let 

you figure out if it is really a medical debt, for the reasons we have 

talked about. They don’t actually know why you have got a credit 

card bill. They ask you about taking a loan, and people may not 

know they are supposed to say, ‘‘Oh, I pay off the hospital over 

time.’’ It doesn’t sound like a loan to most people. 

The PSID, which Dr. Mathur did—a non-peer-reviewed study, 

but it is available on the Net, is in the public domain—used this 

data set with a grand total of 74 bankruptcies in it, half the expected number. 

So the data that—you know, many of these studies are decent. 

A lot of them are old. But the data available from these public 

sources is not up to the task of figuring out what the root cause 

was. 

82 

You have to do the kind of study that we have done to really get 

at that. 

Ms. MATHUR. I think the study that I am citing is the Domowitz 

and Sartain study, which was peer-reviewed and published in the 

Journal of Finance. 

Dr. WOOLHANDLER. Yes, but that is an old study. 

Mr. POTTOW. That is from 1980? 

Dr. WOOLHANDLER. The number of medical bankruptcies were 

all—were lower in the past—is not particularly helpful, and that 

particular study, again, didn’t ask people, ‘‘Why did you take the 

mortgage? What is going on with’’—— 

Ms. MATHUR. And that is precisely why you do regression analysis so that you can put in the—factors on the right-hand side and 

show what is causing it. 

Dr. WOOLHANDLER. I teach regression analysis. It is part of what 

I teach at Harvard. It is not magic, okay? Regression analysis lets 

you look at multiple correlations at once, but it can’t determine 

causality in some magic way that is not there in the data. 

And if the data is not collected about why did you take that 

mortgage? What happened to you? Were you sick? If the data is not 

collected, there is no mathematical, statistical method in the world 

that will let you figure out causality. 

Mrs. EDWARDS. One of the things that—this is such an excellent 

question that you have asked, because a debtor comes to your office, comes to the office of a bankruptcy attorney, and they—I need 

to file bankruptcy. 

If they have paid off their doctor but their second mortgagor is 

on their case, and their credit card company is on their case, and 

you say, ‘‘Why do you need to file?’’ exactly the question that apparently was asked in this study, they are not going to mention the 

paid-off debts. 

They are going to mention the second mortgagor who is on their 

case, and they are going to mention the credit card company, which 

is why it is so important to look behind those numbers and find— 

ask exactly the kinds of questions that were asked in this—in the 

Harvard study, whether or not you actually suffered a kind of illness, and whether or not you had these kinds of expenses over a 

certain number, because the debtor may not be in the very best position to analyze it in the way that is helpful to this Committee. 

Mr. POTTOW. By the way, this is the best congressional hearing 

on multiple linear regression I have ever been to. [Laughter.] 

Mr. COHEN. We are real good on that. 

Mr. POTTOW. I did want to say the PSID actually—eventually 

just scrapped the idea of even asking bankruptcy questions. I think 

they only did it in that 1990—they brought it back in 2002. 

And do they still do the primary/tertiary thing, or—— 

Ms. MATHUR. No. 

Mr. POTTOW. Yeah, I think they gave up trying to gradate what 

is the first cause of your bankruptcy versus the second cause of 

bankruptcy, the third cause of bankruptcy, I think—realized in the 

research that it is just too hard to do it at that fine grain a level. 

And the Domowitz study I think—if I am recalling it—maybe you 

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83 

ings from the 1980’s, bankruptcy records from the 1980’s? Or is it 

1990’s? Oh, sorry. Use the microphone. 

And—— 

Ms. MATHUR. They used the 1999—— 

Mr. POTTOW. They published 1999—— 

Ms. MATHUR. They published in 1999. 

Mr. POTTOW [continuing]. And they used—they used filings from 

what year? 

Ms. MATHUR. From the entire—what they had up till then. 

Mr. POTTOW. Oh, up through 1999, okay. So it is staling, but it 

is still okay. But it still uses—— 

Ms. MATHUR. Yes. 

Mr. POTTOW [continuing]. The category—it still faces the categorization issue that Mr. Scott raised about medical or credit card, 

you have got to make your decision. 

Mr. COHEN. All right. Have you all finished? Thank you. 

Dr. WOOLHANDLER. Sorry about that. 

Mr. COHEN. No, that kind of discussion we will let you all go. I 

appreciate Mr. Scott encouraging that. 

Now—the gentleman from California, Mr. Issa, to be recognized—— 

Mr. ISSA. Thank you, Mr. Chairman. 

You know, I will note that I get to watch Suze Orman’s show, 

and one of her pet peeves is that people always say, when they 

take a look at their expenses, they start labeling how much they 

pay for their credit cards, and she has to say, ‘‘No, no, no, it is you 

are spending, not your debt.’’ 

And this is the challenge that—hopefully, this hearing brings up 

the question of are we asking the right questions in order to, if you 

will, do something about our growing tendency for bankruptcy. 

But on that note, recognizing that the Chairman has cleverly 

found a way to get into the health care debate, which we have virtually no jurisdiction over, I am going to play into this just quickly 

and say any of you disagree that if we revise the bankruptcy statute so that we had, like we have in housing, limited recourse—you 

know, in almost every state, if you don’t pay your mortgage, the 

only thing they get to take is your house. 

You don’t actually go into bankruptcy over your house in California, because you just walk away from your house. Now, if you 

pay your mortgage and run your credit bills up—credit card bills 

up, you could say that the mortgage was the reason, but assuming 

people are educated, in California there is no reason to go bankrupt 

over your house because you walk away from your house. 

Any of you disagree that within the jurisdiction of this Committee we could solve this problem by limiting the recourse for 

medical debts? 

Mrs. EDWARDS. I think that would continue to be—it would continue to be a problem, for this reason. 

Mr. ISSA. No, no, I am not saying there may not be side effects 

into health care. I just want to understand, from the limited jurisdiction of this Committee—— 

Mrs. EDWARDS. People will still be inclined to pay their medical 

debts and incur obligations in other places which will force them 

into bankruptcy, because they have an incentive to pay off their 

84 

health care provider, with whom they—most of these people have 

continuing chronic conditions, which is why their bills are so high, 

and they need that relationship. 

Because they need that relationship, they pay that bill over paying their power bill or paying their grocery—— 

Mr. ISSA. Okay. That is very true. I—— 

Mrs. EDWARDS [continuing]. Bill, so—— 

Mr. ISSA. I appreciate—— 

Mrs. EDWARDS [continuing]. It creates the same—— 

Mr. ISSA [continuing]. That, Mrs. Edwards. 

Mrs. EDWARDS. The same result occurs. 

Mr. ISSA. I appreciate that, but I would like to get to several 

questions in 5 minutes, so—— 

Mrs. EDWARDS. Yes, that is—— 

Mr. ISSA.—I will come back—I will come back to you, though, on 

it, I promise. 

For the rest of you, do you agree on the basic bankruptcy question? We limit it, we can, in fact, reduce the cause, the prime 

cause, not the behavioral causes Mrs. Edwards talks about, but the 

prime cause? 

So this Committee has that authority. Is that fair to say? 

Mr. POTTOW. Since most of the—most medical debt is not secured 

the way mortgage debt is secured, so the issue with the California 

non-recourse anti-deficiency laws is that you can walk away and 

just leave the creditor to recover the secured portion of the debt. 

The problem with medical stuff is most of those medical bills 

aren’t secured, so there is no—— 

Mr. ISSA. They are unsecured, but they are, in fact, recourse. 

They can go after every asset—— 

Mr. POTTOW. Yes, so—— 

Mr. ISSA [continuing]. Thing is I can take your house if I am 

wiling to, for a medical debt, but for a debt on your home, I can 

only take your home. And the same is true for—in many states 

with cars. 

The reason I ask that is there is a two-step process. One, the 

bankruptcy law says it becomes non-recourse. The second one is if, 

instead of comprehensive health care—— 

Mr. POTTOW. Yes. 

Mr. ISSA [continuing]. Reform and single-payer, we deal with, in 

fact, people who reach a point in which their chronic, ongoing or 

other health care requirements, in fact, are able to be taken to a 

court or any other ombudsman to say, ‘‘I can no longer afford my 

health care,’’ for whatever reason, and the government in some capacity become the backup. 

Now, we do this when you declare yourself indigent. We do this 

after your bankruptcy if you are unemployed. We do this for Social 

Security. Is there any reason this Committee should not consider 

the fact that we could do this in addition to any other consideration 

in health care? 

And I realize some of you are here to talk about single-payer and 

comprehensive health care. Is there any reason that the government could not do that rather than only the single-payer solution? 

Mrs. EDWARDS. A non-recourse, unsecured debt is no debt at all. 

If I lend you money and I have no recourse, I—basically, you don’t 

85 

owe me. You have no obligation to pay me, which means I 

shouldn’t lend you money, which means I shouldn’t provide you 

services. And so a non-recourse, unsecured debt isn’t a debt. 

Mr. ISSA. Okay. Well, let’s go through this for just a second. First 

of all, the European Union does reduce—and so does Canada— 

their health care costs by having plaintiffs’ trial lawyers not be 

able to get the kind of settlements that you get here in the United 

States. That is not debatable. 

Second of all, this Committee is—has been trying to—and it has 

held hearings on eliminating the not-for-profit exemption for public 

health facilities from being sued, literally going the other direction. 

Third of all, it is within the purview of the Federal Government 

to demand that nobody charge more for prescription drugs or other 

benefits to a cash customer than they charge to anyone else. 

We could make the cash payer the lowest payment, period, and 

we could mandate it under the law, and nobody could question the 

fact that nothing is more entitled to the lowest possible price than 

somebody walking in with U.S. currency that says ‘‘In God We 

Trust. 

So all of those are ways that we can reduce the cost. And I guess 

I am getting some head-nodding, but I would like us to understand 

there should be alternatives, even to this Committee, that would, 

in fact, change the dynamics of people who live in fear that they 

are going to lose their house, their lifestyle, and end up living in 

a car over a health care cost. 

Isn’t it true that we could, in fact, do that? 

And, Mrs. Edwards, I appreciate the fact that you were, rightfully so, saying, ‘‘Well, you know, what if we create a situation in 

which hospitals say they won’t pay?’’ It is very clear that if we are 

going to limit recourse somewhat that we do have to have a backstop so that our hospitals not fall away. 

But isn’t it true that, in fact, when the indigent go into our hospitals and they all receive care, ultimately the hospital either gets 

or doesn’t get reimbursement from the government? But they don’t 

make that determination when they walk in the front door. They 

make the determination after the care is given. 

Mrs. EDWARDS [continuing]. Some uncompensated care that— 

provided by health care providers is in fact, paid for by the government under various programs, some paid by charities under their 

things, a large part paid by every single American. 

Every insurance policy that we—that people have right now— $1,100 extra is tacked onto that because we have cost-shifting. 

Mr. ISSA. Oh, yes. We have even more of it with Medicare. That 

is very clear. 

Mrs. EDWARDS. The cost-shifting that takes place—so the idea 

that we are not paying—that we are not paying anything because 

there are uninsured people in this country is wrong. 

If you are insured in this country, you are paying $1,100 a year. 

You multiply that by the number of policies across the country and 

you are going to have a really large number. And that kind of— 

a number like that could fix our health care program—our health 

care program entirely. 

Mr. ISSA. Just for the record, I did see, I think, every head shaking yes, that if you walk in with green dollar bills you should get 

86 

the lowest price and not be, in fact, paying the highest price, while 

the government and every insurance company gets a lower price 

than the person that walks in with cash. 

Mrs. EDWARDS. There are two things about this. One is we want 

to make certain that we are not disadvantaging someone who 

needs a medication but simply doesn’t happen to—you know, they 

get paid on—they get paid on the—at the end of the month, and 

they happen to need the medication in the middle of the month. We 

want to make certain we are not disadvantaging them too much. 

But if what we are saying is that competition and the influence 

of the dollar—that capitalism ought to work in—with respect to 

pharmaceuticals, you are going to get complete agreement here, 

which means that the largest customer of pharmaceuticals in the 

entire world, which is the United States government, ought not to 

be negotiating away or agreeing away, as Congress did with the 

prescription drug benefit for seniors, the ability to negotiate the 

lowest possible price. 

Mr. ISSA. Look, I was just saying that if I walk in with hard, green $20 bills, I ought to get the same price the government did 

get in that negotiation, which was done by every individual insurance company. 

Is there anyone that would like to comment on the actual cash 

or cash equivalent statement? 

Dr. WOOLHANDLER. Well, it seems like everyone ought to get the 

same price. Of course, that is what happens in a single-payer system, as everyone has the same insurance, and so the compensation 

for taking care of you is the same as taking care of me or Mrs. Edwards. 

Mr. ISSA. When I walk up to United Airlines at the last minute 

and want a flight, I would like to get the lower price, too, but I 

don’t. 

Dr. WOOLHANDLER. Yes, but you have a choice about getting on 

the airplane. People don’t have a choice about being sick. 

Mr. ISSA. Okay. I am hoping I am down to two. Anyone like to 

answer the basic question of—— 

Mr. POTTOW. I am with you, Congressman. I think Dr., is that 

there is—the current pricing structure exploits the insurance coverage by charging—right, by charging more the other way, and so 

there is an arbitrage there. 

Hardcore economists would say that is rational price discrimination. They can make more money that way. But I don’t think that 

is necessarily in the best interest of minimizing the costs for everyone. 

I don’t want you to lose hope about your proposal with the nonrecourse thing. You do need to somewhat iron out the works because it could devolve into simply voluntary debt, and that is not 

going to go over well with the hospitals. 

But you could tweak it. You could try something like this H.R. 

91 that say if you fall into certain categories—and we have to define the categories properly—if you fall into X, then there is a limit 

on what can be collected from you. 

So maybe there is a different homestead exemption for someone 

who is, you know, going to lose the home for medical reasons. It 

is possible. It is conceivable. So there is something you could do. 

87 

Mr. ISSA. And that is, Mr. Chairman, what I was leading to, is 

the question of somewhere between no recourse except the house 

and absolute recourse in which they take everything, including the 

house would lie the question of whether or not the bankruptcy statute and, in fact, the whole debt process could proactively say that 

you cannot—that at some point the government becomes a backstop against rising medical costs for our citizens. 

Ms. MATHUR. Yeah, I think that—I mean, so that way you would 

be targeting exactly the people who actually need that system to 

work for them. I think that would tremendously contain costs. 

Mr. POTTOW. I want to rain on your parade just one little bit, 

which is—and I think it is—an idea very worthy of following—— 

Mr. ISSA. Raining on my parade is how I get better ideas. 

Mr. POTTOW. Okay. Well, so the way to do it would be maybe 

through the bankruptcy code through exemptions. You could create 

certain exemptions for medical people. 

The raining is I understand—and you guys argue about this 

more than I do—that similar proposals were made as fixing mortgages through the bankruptcy system as well, and so that is a good 

way to do it. We can do it through the bankruptcy system. 

And then I think that ran into resistance when people said, ‘‘No, 

no, no, we don’t want the bankruptcy judges getting involved in 

redoing the mortgages. That is a terrible idea.’’ So I just want to 

warn you that you may face some headwinds if you try to do that. 

But you have my support as a professor. 

Mr. ISSA. I would mention that right now the cram-down provisions we are talking about are, in fact, not allowing someone to 

take their secured asset away. In this case, bankruptcy presently 

eliminates all the debt, 100 percent of the debt, to that category of 

creditor. 

So anything we do that is in between actually doesn’t disenfranchise them. It simply keeps people from going into bankruptcy 

Chapter 7 when, in fact, we can more appropriately allow for a reorganization that does not wipe out the individual and yet, in an 

orderly fashion, would make those excess funds you could afford 

available but not have the—the house and the—and the lifestyle 

lost over—what Mrs. Edwards, rightfully so, said—this group of 

people who have chronic illnesses and find themselves beyond their 

original expectations they could have planned for. 

Mr. COHEN. Mr. Issa, could you, for the Chair’s edification, summarize your proposed bill? 

Mr. ISSA. Well, first of all, I think we do have the ability to deal 

with the fact that there are more different schedules for what 

somebody pays—if they walk into the hospital to get a CAT scan, 

they will pay four or five times as much for cash as the insurance 

companies pay or Medicare reimburses. 

They will pay two, three, four, five times as much as what—for 

a prescription drug. And the truth is that the uninsured or those 

who are operating with medical savings accounts, what we might 

call self-insured, find themselves paying this huge premium. It unfairly drives people to insurance plans and, in fact, those insurance 

plans disconnect people. 

88 

So you know, my feeling is that I would like to embrace what Europe and Canada does, which is they limit the liability to the 

health care provider, which reduces the defensive medicine. 

They do eliminate through single-payer—I don’t actually buy into 

single-payer, but they do eliminate all cost-shifting, which is something that we have an obligation to do, to make sure that the costs 

are fairly attributed and not simply one group paying for another 

group without even knowing it. 

And so you know, I do believe there is a lot of common, acrossthe-board—Chairman Conyers and I spent quite a bit of time one 

day here with Mr. Moore saying that we might disagree on the solutions, but we don’t disagree on the problem. 

Mr. COHEN. What I am asking—if there is anything particular in 

bankruptcy—are you suggesting that maybe medical debt should 

have—the government should be the—take those away from folks 

if they go to bankruptcy, or that the doctors or the health folks 

should not get as much opportunity to collect in bankruptcy as— 

if that is where you are going? 

Mr. ISSA. I do, and because we have limited jurisdiction, what 

the backstop would be from the government would go to other 

Committees, but what we could do here is we could recognize that, 

if you will, a medical reorganization should be a short-form bankruptcy. 

It should be a pleading to the court that here is my situation, I 

have a chronic illness, I am going to continue to have expenses 

which I cannot meet, my estate is now at a point where further— 

or I believe further taking from my lifetime savings, from my 

spouse’s earnings and so on is inappropriate, and rather than simply throwing it all away and going on Social Security—or you see 

people divorcing sometimes to protect assets and to put the disabled person into a separate pool. 

You see all kinds of tricks. I think we could work together to look 

at, if you will, a medical reorganization as a special class. And that 

falls within the jurisdiction and it presumes for a moment that we 

are not solving all the medical problems, but as a backstop against 

us not getting it all done in the next 2 weeks. 

I certainly think that this Committee does have jurisdiction to 

look at that and to try to deal with the fact that it—that current 

bankruptcy does not always rightfully deal with what Mrs. Edwards said, which is you have these people with ongoing chronic 

illnesses, depleted savings, and why should we end up having them 

plead a bankruptcy after they have lost their house, after they are 

living in their car? 

I think we can work together on that. And I think Mr. Conyers— 

it is something that this Committee has a real opportunity to do, 

which I think is different than the cram-down provision we were 

dealing with a few weeks ago. 

I think this is something where you would get across the board 

wanting to make reorganizational bankruptcy short, simple and 

done at the most administrative level, so that we make sure we 

don’t get conned, but at the same time we don’t have people losing 

everything over a health care event. 

Mr. COHEN. Thank you, Mr. Issa, for your surgically acute work 

here on this bankruptcy bill. 

89 

The gentleman from Iowa, Mr. King, is recognized. 

Mr. KING. Thank you, Mr. Chairman. 

I would suggest that the place to go to look for that model, picking up where Mr. Issa left off, would be Chapter 12, which was 

shaped here back during the farm crisis of the 1980’s. And that is 

that same type of reorganization as to a specific class. 

So I inject that into the record for consideration, which—I am 

just starting to think this through, listening to Mr. Issa. 

But I have a series of questions that have emerged as I—since 

I began listening to the witnesses. And one of those is the discussion that was brought up by, I believe, Dr.—or Mrs. Edwards on 

cost-shifting, the $1,100. It was you that testified—that $1,100 cost 

on that. 

And also, I think it was mentioned, perhaps by Dr. Woolhandler, 

but I am—I pose this question. Let’s back up and pick a year— 

1970, for example. 

If in that year this Congress had passed a Federal statute that 

prohibited cost-shifting, that everyone would get the same price for 

a service, just like today the rich and the poor pay the same price 

for gas, and without passing any national health care act but just 

simply changing that in 1970, and we would have had, then, these 

39 years for that to evolve through the system, how do you think 

this system would look today if it hadn’t been distorted by the costshifting that has emerged because of the limitations that came on 

the part of a number of—well, public providers, for example? 

Mrs. EDWARDS. I have got to sort of preface this by an exception. 

Representative Issa was correct. If you are not insured, a great 

number of providers will charge you a higher price. 

Perhaps if you came actually with the cash in hand they 

wouldn’t, but if you were uninsured, they would charge you a higher price, assuming that they are not going to get 100 percent. Taking that—— 

Mr. KING. And I agree with—— 

Mrs. EDWARDS. Taking that—— 

Mr. KING [continuing]. Your assumption on $1,100. That would 

the number I would offer as well. 

Mrs. EDWARDS. Yes, but I want to take that group out for a second and just assume that they are not going to collect anything 

from these people. It doesn’t matter what they charged them. They 

are going to collect zero from this group of people who are uninsured. 

That is not actually accurate. They will collect some, but assume 

that they are not. If you go back to 1970, you would still have costshifting. Even if everybody got exactly the same price, some people 

aren’t going to pay, and therefore the provider, the hospital or the 

physician or the pharmacy or the—— 

Mr. KING. But, Mrs. Edwards, rather than respond with a new 

hypothetical, I would appreciate if you could just build this thing 

out if the one that I have offered were the only hypothetical we had 

to consider. 

And I recognize some people won’t pay, but of those that do pay, 

if they were billed the same price per service in all cases? 

Mrs. EDWARDS. If they are billed—— 

Mr. KING. I am just saying—— 

90 

Mrs. EDWARDS. If they are billed the same price for services, you 

would still have—you would still have cost-shifting, because right 

now there is a certain amount of money—— 

Mr. KING. Okay, thank you. I am—— 

Mrs. EDWARDS [continuing]. There is a certain amount of money 

that is coming in. 

Mr. KING. That is not what I really am—the insight that I am 

looking for that I think you must have—perhaps Dr. Woolhandler 

will have an answer to that. 

Dr. WOOLHANDLER. Okay. Well, using the term cost-shifting narrowly to talk about a price when you go to the hospital, that everybody has got the same price—— 

Mr. KING. Unit price identity. 

Dr. WOOLHANDLER. There is this other concept of cost-shifting 

that is actually quite a bit more important, which is that when private insurers go out and try to get—recruit the healthiest people 

and cherry-pick, and then the sickest people get pushed off to other 

insurers or maybe to Medicare, or maybe they can’t get insurance 

at all, and then the private insurance that did all the cherry-picking can go and shadow price the cost of insurance at Medicare or 

the other private insurance. 

And that kind of cost-shifting that is sort of a patient shifting, 

if you will, cost shifts by getting rid of those expensive patients, 

and I might add you cost shift by getting rid of the doctors who 

take care of expensive patients. That is ubiquitous in the private 

health insurance system. 

And just saying every C.T. scan costs 500 bucks doesn’t fix that 

problem. 

Mr. KING. Dr. Woolhandler, this is a very deep question that I 

have asked here, and I don’t think we are going to be able to get 

to the bottom of it, so if you don’t mind, I have a few more specific 

ones that I would like to ask instead. 

And I would ask you, in the study that you participated in at 

Harvard, did you evaluate Chapter 11s as well as Chapter 7 bankruptcies? 

Dr. WOOLHANDLER. No, we did Chapter 7s and Chapter 13s only. 

Mr. KING. Okay. Thank you. 

And are you aware or did you do a study on—have you seen data 

of doctors that have declared bankruptcy? Has there been any look 

at doctors that have declared bankruptcy? 

Dr. WOOLHANDLER. My understanding is doctors declaring bankruptcy is very unusual. I have heard a few anecdotes of doctors 

who call me to tell me about it. 

Generally it is because they became seriously and chronically ill 

themselves and even though they started with good health insurance ended up—— 

Mr. KING. Thank you. Does anyone—— 

Dr. WOOLHANDLER [continuing]. Losing—— 

Mr. KING. Does anyone on the panel have any knowledge of doctors that have declared bankruptcy? 

Mr. POTTOW. Do you mean a business bankruptcy or a personal 

bankruptcy? Like a doctor inc? 

Mr. KING. Either. Either. I am suggesting this, that if there was 

a doctor that for some reason wasn’t covered by medical malVerDate Aug 31 2005 14:41 Feb 23, 2010 Jkt 000000 PO 00000 Frm 00094 Fmt 6633 Sfmt 6601 H:\WORK\COMM\072809\51346.000 HJUD1 PsN: 51346
91 

practice and there was a lawsuit, they might declare bankruptcy. 

So that surely has got to be a component of American society. 

Mrs. EDWARDS. Usually that would be a business bankruptcy. 

But I mentioned earlier that I, in preparation for this hearing, 

talked to my former colleagues and—who practiced bankruptcy law 

and bankruptcy judges hearing cases and was told—and this is secondhand anecdotal—that certainly in the Eastern District of Virginia—Eastern District of North Carolina, we are seeing increased 

filings not just by individuals for a variety of reasons, but we are 

also seeing them by law firms, by medical practices as well. 

So whatever the cause is, and we have had very few medical 

malpractice judgments in the last years in eastern North Carolina, 

so assume that these are caused by other reasons, but in any 

event, you are seeing some filings by bankruptcy attorneys. 

Mr. KING. Well, thank you. 

Mrs. EDWARDS. I mean by—— 

Mr. POTTOW. I am aware of one study, sir—— 

Mrs. EDWARDS [continuing]. By physicians. 

Mr. POTTOW [continuing]. Which is that—which would probably 

explain why you won’t see a lot of bankruptcies, which is that a 

lot of the malpractice actions against physicians themselves settle 

at the carriage—at the carrier coverage amount. 

So it is picked up by their malpractice carrier. 

Mr. KING. Well, and this is intriguing to me, in—let me see—Dr. 

Woolhandler’s testimony, that 16.7 percent of the Canadian is 

spent on administrative fees. U.S.—I think you said 31 percent. 

I know I have seen numbers that show 32 percent. So we are 

right in that same category there, and the data that has come out 

has been consistent with what I have seen. 

But I would like to know what percent—first, you know, why the 

difference. What is that money being spent on, on administrative 

costs? I don’t think I heard the answer to that. 

And what percentage of our GDP is being consumed by malpractice insurance and litigation associated with that? 

And could we then provide the medical equivalent of the sovereign immunity that government sometimes carries, and then just 

set up a fund to take care of the patients that might be victims of 

medical malpractice? 

How much could we take out of the industry if we would just do 

those things that I have suggested? 

And I think Dr. Woolhandler—— 

Dr. WOOLHANDLER. Sure. Well, I pay a big malpractice premium. 

I have luckily never been sued. But I am not very happy when I 

do get that bill. 

But Canadian doctors do pay less for malpractice. Part of it is 

that no one ever has to sue for future medical expenses. So if you 

are a parent and your baby is born, you know, brain-damaged, you 

are looking at a million dollars in medical expenses when you are 

looking at that baby, and one—— 

Mr. KING. What part of the whole—— 

Dr. WOOLHANDLER [continuing]. Option if you have no way of 

paying is to sue the doctor. It is not right. It is not fair. But that 

is what happens in the U.S., and it never happens in Canada because medical expenses—— 

92 

Mr. KING. Do you have an idea, though, on what part of the 

whole—what part of the 17.5 percent of the GDP is going off for 

medical malpractice premiums and the litigation opposing—Mrs. 

Edwards? 

Mrs. EDWARDS. One-and-a-half percent of our medical costs are 

associated with medical malpractice premiums. Or the cost of medical—— 

Mr. KING. That is fine. 

Mrs. EDWARDS [continuing]. Malpractice—1.5 percent—— 

Mr. KING. Okay. 

Mrs. EDWARDS [continuing]. Of that 17 percent. So—— 

Mr. KING. Be about—— 

Mrs. EDWARDS [continuing]. We are talking about a—— 

Mr. KING.—8 percent? 

Mrs. EDWARDS [continuing]. A fair—— 

Mr. KING. Oh. Well—— 

Mrs. EDWARDS. Oh, no, no. No, no. we are talking about point— 

probably .0—.0 something, .03. 

Mr. KING. One-and-a-half percent of 17.5 percent. 

Mrs. EDWARDS. Seventeen-and-a-half percent of GDP, and that is 

our—that is where we are starting. One-and-a-half percent of that 

17.5 percent—— 

Mr. KING. Okay. 

Mrs. EDWARDS [continuing]. So we are talking about something 

like point—these are the mathematicians down at the other end, 

but—— 

Mr. KING. Well—— 

Mrs. EDWARDS [continuing]. Something like .03. 

Mr. KING. In that case, and that being an enlightening number, 

then, we will go back to the administrative question. Where is the 

money going in administration? Because that number does sound 

high to me. 

Dr. WOOLHANDLER. Oh, administration is huge in the United 

States. The three biggest part of that—I mean, 31 percent is a lot 

of money. We are paying more than $2 billion—$2 trillion on 

health care, so we are talking $700 billion annually in administration. 

The three biggest components are the insurance overhead, so 

buying—selling the insurance; collecting all the premiums; underwriting, which is figuring out what patients or which groups of patients you are going to make money off of; fighting with the doctors 

and hospital about who pays the bills; trying to shift costs onto 

other insurance companies. That is the insurance over administration—insurance administration. That is the biggest—a big chunk. 

Mr. KING. Do we have any—— 

Dr. WOOLHANDLER. The second largest—— 

Mr. KING [continuing]. Data on that? Is there any data? 

Dr. WOOLHANDLER. Oh, yes. Yes. The New England Journal of 

Medicine, 2003. I am the first author, if you want to search for it. 

Mr. KING. We need to visit that, and I just—if the Chair would 

indulge—just an opportunity for Dr. Mathur to provide a response 

to the discussion that we have had. 

Mr. COHEN. Despite the fact that you were a terrible critic of my 

joke yesterday, you are indulged. 

93 

Ms. MATHUR. About the costs of—— 

Mr. KING. (Off mic.) 

Ms. MATHUR. What was the exact question, what to do? 

Dr. WOOLHANDLER. If you would like, just the other two components are the doctors’ office administration, which is sky high, because we have to bill with literally hundreds, sometimes thousands, of different insurers, and collect all the co-payments. 

Hospitals as well have huge administrative costs in the U.S. And 

all three areas—insurance administration, doctors and hospitals— 

are much lower in Canada, and be happy to supply you with that 

paper if you have trouble finding—— 

Ms. MATHUR. I—— 

Mr. KING. Dr. Mathur? 

Ms. MATHUR. I just feel like the administrative—if the administrative costs are so huge under the current system, if we try to 

change the system to have basically more administration, I don’t 

see how the costs are going to go down. 

Mr. KING. If I could follow up with a question on that, too—and 

we didn’t hear it addressed in any depth—that has to do with defensive medicine. 

But I would think that 1.5 percent of 17.5 wouldn’t—would be 

the premiums, but it wouldn’t calculate the extra medical costs for 

defensive medicine, additional tests. 

Dr. Mathur, could you address that? 

Ms. MATHUR. I am not aware of data on that, but, you know, I— 

we could find, I guess—— 

Dr. WOOLHANDLER. There is literature on this if you—you can go 

and ask doctors, ‘‘How much of the medical care that you give are 

you doing for defensive reasons?’’ And those generate higher estimates than 1.5 percent, but not a whole lot higher, okay? It is a 

few percent—— 

Mr. KING. Thank you. 

Dr. WOOLHANDLER [continuing]. Of total medical care costs. 

Mr. KING. I appreciate all the witnesses. This has been an engaging—actually, a debate and a dialogue going in three directions 

here, and I get a lot out of that. I thank you. 

And I yield back the balance of my time. Thanks, Mr. Chairman. 

Mr. COHEN. Thank you, sir. 

Mr. KING. And that was a bad—a lame joke. [Laughter.] 

Mr. COHEN. I set the bar low for the—all the rest of comedy 

which you might be presented with for the week. 

I would like to thank all the witnesses for their testimony today. 

Without objection, Members will have 5 legislative days to submit any additional written questions which we will forward to the 

witnesses and ask that you answer as promptly as you can. They 

will be made part of the record. 

Without objection, the record will remain open for the 5 legislative days for the submission of any other additional materials. 

Again, I thank everyone for their time and patience and appreciate each of the witnesses. This has been a very lively and interesting debate. And the externalities were discussed as well. 

This hearing of the Subcommittee on Commercial and Administrative Law is adjourned. 

[Whereupon, at 1:27 p.m., the Subcommittee was adjourned.] 

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