Myth 3. Americans are going bankrupt, and American companies are noncompetitive, because we don’t have “universal health care.”

For years, advocates of “single payer health care” have been warning that middle-class Americans are only “one serious illness away from bankruptcy”—even if they have insurance. Obama has claimed that medical costs cause a bankruptcy in America every 30 seconds. Divided We Fail claims that “millions” go bankrupt every year because of medical costs.

American companies are also going bankrupt and losing out to global competition, allegedly because they are having to bear workers’ high health costs.

Both problems would be solved, say proponents of a government takeover, if the U.S. adopted a universal tax-funded medical system, which would purportedly drive down expenditures, while imposing them on taxpayers instead of individuals and employers.

The facts are these:

  • The actual number of “medical bankruptcies”—by the single-payer advocates’ definition—fell by 220,000 between 2001 and 2007.  There were a total of 822,590 bankruptcies filed in 2007.
  • According to Ning Zhu of the University of California at Davis, author of a study of 2003 bankruptcies in Delaware, only about 5% were caused by medical problems. If this percentage holds, (.05) (822,590) or about 41,000 were caused by medical costs—far from Obama’s 30/sec or 1,051,200.
  • The mean net worth for “medically bankrupt” households was          –$44,622, while their average out-of-pocket medical costs came to $17,943. Single-payer advocates attribute bankruptcy to medical reasons if the debtor reported uncovered medical bills exceeding $1,000 in 2 years, or lost at least 2 weeks worth of income because of illness or injury. Bankruptcy is caused by debt, and a loss of the income needed to service it.
  • Many companies are in trouble, especially if they have acceded to union demands for unsustainable “gold-plated” benefits that encourage overconsumption of medical services. But American industry as a whole also faces an increasingly hostile business environment of taxation, regulation, and litigation, as well as high wages compared with the developing world.

Universal tax-funded medical care only compounds the bankruptcy problem. The existing single-payer systems in America—Medicare and Medicaid—are themselves unsustainable and on a course to bankrupt both federal and state treasuries. The price controls they impose on physicians and hospitals lead to cost shifting to private insurers and self-paying patients.

European social welfare systems are even more financially challenged than those in the U.S. Spending growth is about the same in the U.S. and other developed countries.

The entire world is in an economic crisis. “Universal health care” is much more likely to be a contributory cause than a solution.

Additional information:

14 thoughts on “Myth 3. Americans are going bankrupt, and American companies are noncompetitive, because we don’t have “universal health care.”

  1. How can we this information and message out to the pubic … And let them know the lies of the current administration?..

  2. I have serious doubts regarding your bash against the proposed O’Bama health care proposals. As a former practicing physician I can tell you your premise is ABSOLUTELY :Not true! Insurance companies have been gouging the public for countless years. I come from a blue collar family who worked and retired from the big three in the skilled trades.


  3. I, too, am a retired M.D., c 48yrs. practice, most of it before there was ANY medical insurance. The cost of med care to the pt. was “the cost of medical care” PERIOD!!!. Since medical insurance has taken over, it’s very existence has magnified the cost of care by astronomical proportions. Just think of the enormous extra cost imposed by involving a
    $multibillion business enterprise in the cost of every medical event. A government single payer system would still be an insurance operation with cost increased enormously simply because of gov’t operating inefficiency. What we really need is a return to the unimpeded doctor-patient relationship, free of all extraneous influences.

  4. Just fact-checking real quick I found the UC Davis survey you cited above mentions nothing about bankruptcies in 2007. The survey cites over 2,000,000 bankruptcies in 2005 on page 3 -far more than the ~800,000 figure you found. I’m afraid I don’t buy your arguments and have to agree with Dr. Graller that you have other motives for making scary pronouncements and dire warnings about any form of government-financed health insurance (you tend to conflate single-payer with the public option but they’re not the same thing). So what’s the real reason you put up this site and wrote the letter?

  5. As an associate member of AAS, I am not a physician (my first career was a registered nurse in a variety of settings) and I am technically retired having left my last employment – a mechanical engineer for Motorola – in 2000. My health is excellent with no significant dysfunctions nor any chronic problems, I (and my 71 year old husband, a Canadian citizen, also in similar excellent health) take a considerable number of preventative measures, and I have no medical care insurance. I would like to have a catastrophic insurance plan that would cover an unforeseen untoward event with a large deductible of say $25,000. However to date I have not found one that is of reasonable cost. Last November I was quoted at an insurance agency website for a $25k deductible, $131.88 per month as a 63 year old non smoker, this last being the *only* item that reduced the premium (however no increase would occur if obese but still a non-smoker!?!). The retort from the Vice President of sales for that company, when I questioned the quote, was that “a plan for a 43 year old would be much less”. $132 per month is not a small amount at all – $1584/year – and now at age 64 it would be even more, though my health has not deteriorated at all. This individual’s remarks (there were more) were such that it was clear that the insurance industry, of which he is a part, obviously takes the view that once smoking is eliminated, all other illnesses are, in essence, randomly caused and/or cannot be prevented/inhibited by “layman” actions. This was evident from his additional statement to me that based on my input, the online quote “given [was] the best possible rate we offer- Preferred Risk which with your current health status” from which any additional information he might get from/about me could only raise the monthly premium.

    Unfortunately there are a great number of physicians and other health care providers who hold the same view as this representative above from an insurance agency – and they say this specifically, or at least infer it, to their patients. Consequently a very great number of people (likely most in the US and elsewhere) think that there is nothing they can do to positively affect their “genetic destiny”, an increasingly popular phrase in the mass media in the past 10 years (but older in the sciences). Couple this view with the greatly diminished practice of direct payment for medical services since employer-paid health benefits began during WWII, plus Medicare and Medicaid, and it is not at all surprising that so much of the US population is obese with the numerous health problems that accompany that state. I am convinced that if individuals had to pay for their health care services, they would take far more interest in and actions toward regaining and/or maintaining a high level of health in body, brain and mind, throughout their lives.

    As I noted at the top of the many forwarded emails I sent recently of the AAPS Action Alert regarding fighting government takeover of medicine, I do not want government telling me what doctors I can consult and what treatments I can obtain with my own money – they already do large amounts of the latter via the FDA, which I also want eliminated. And I definitely do not want to be dictated to that I must purchase medical “insurance” or be fined *and* to be taxed higher than I already am.

    I do and will continue to consult physicians when I think it will benefit me – which is very rarely. I will continue to take all the health promoting measures that I and my husband, Paul Wakfer, consider to likely benefit us. (He is highly knowledgeable in human biochemistry and nutrition and regularly monitors all related research). It is highly unlikely that any untoward health event will bankrupt us as the group Physicians for a National Health Program claim. This is not because either of us is a Warren Buffett – ” ‘Unless you’re Warren Buffett, your family is just one serious illness away from bankruptcy,’ said David Himmelstein, an associate professor of medicine at Harvard.” – but because we have no debts, have a moderate amount of savings/investments/assets and because of our health degeneration preventative practices. I heartily encourage others to do similarly.

  6. Health care is not a right despite what the politicians tell us! It is a priviledge like obtaining a driver’s license. All pols sell their votes! we have the best Congress money can buy. The pander and prostitute themselves for personal aggrandizment and enrichment. You do not have the right to expect your neighbour to pay for your illness because you demonstrate high risk behaviour such as unprotected sex, not wearing a helmet while riding a motorcycle, eating junk food, being overweight and in general self inflicted diseases. Keeping in mind that 40% of Americans are freeloaders and do not pay any Federal Income taxes but have the power of the vote which they sell to the pols how can you expect any progress in stopping national health care whcih is a vote and power getter for the pols? I am not optimistic that we will prevail. Only the insanity and economic restrictions will stop them for no one wants to pay more taxes for the free loaders to have healthcare and bankrupcy of the US like California would result fron a single payer option. I have practiced for 34 years and am the last ofthe free physicians. I stopped my son from going into medicine and interupted a family tradition (my father was a general surgeon) because I did not want him sacrificed on the altar of corporate or government medicine. I have never joined an HMO and treated PA patients for free! There are only two reasons to chose medicine as an occupation, one to make money (an income commesurate with the cost and time spent to acquire the skill set and reflected in a higher standard of living), by the way the lifetime earnings of Canadian truckdrivers is higher than physicians because they have a better union and two, to make a difference and make this a better world to effect cures and save lives….with cookbook medicine, rationing and controls with national drug formularies omitting the more effective expensive pharmaca and limiting MRIs etc. this will not be possible and professional satisfaction will evaporate. We can take a pay cut but not professional satisfaction that we made a difference in the lives of our fellowman. In London, private practice is alive and well! England the mother of NHS, imagine that. I have a friend Nadey Hakim, M.D., a Harley street physician who performs organ transplants and does very very well! In the final analysis, despite all this insanity yours and my healthcare will be determined by our ability to pay not by the government. There will always be two classes of people the haves and the havenots! It is better to be in the former than the later as your live expectancy may very well depend on your economic status. I fear we will not be heard, but we must still try before we are silenced forever to get the word out. I do not regret stopping my children from entering medicine with today’s events it reinforces my convictions that it was the right thing to do.

  7. There seems to be something wrong with your numbers. If there were 220,000 less medical bankruptcies over that 6 year period, that would average to about 39,000 less per year. Yet in 2007 you cite a figure of 41,000 for the year–are you suggesting that medical bankruptcies have decreased by close to 50% during that 6 year period? This seems unlikely.

  8. In regard to the message from Hamish, I too see no reference to any 2007 data in the linked paper by Ning Zhu at the University of California. However, his data for the 2005 total of 2,039,214 personal bankruptcies that he does note in his introduction comes from the American Bankruptcy Institute. Checking their website for personal bankruptcies quarterly filing – – I found a graph from 1992 (1st quarter) to 2007 (4th quarter). Simply by estimating the total for 2007, the number quoted in this AAPS News Item of 822,590 does not appear to be incorrect. The only thing that is incorrect is that this data was contained in the paper referenced. I suggest that a correcting statement is highly warranted by the author(s) of this news item – exactly which site and what tables/graphs were used for any data stated.

    It is reasonable for anyone on the opposite side of an argument to seek out errors and often accuse the writer of bad intent. It is important, particularly for those in the minority position, to avoid any such possibilities by scrupulously identifying the sources and extraction methods of their presented data and avoiding errors. Rushing to print is a recipe for disaster when readership includes those who are strongly opposed.

    Hamish, mistakes are far more common than intentional falsehood – exception for politicians ;>) Therefore I suggest that you look further before before claiming the leadership and members of AAPS have “other motives”. It does not appear that you have read very much about and by members of AAPS; I suggest that you do some reading beyond this one item.

  9. Note from the editor:
    Hamish is correct. The UC Davis study reported by Ning Zhu concerned bankruptcies in 2003. The number of bankruptcies in 2007 (822,590) was from a different source, which has now been added to the posting, along with a link to Zhu’s 2008 statement that medical problems caused just 5% of bankruptcies.

  10. There is a confusion of numbers in the various sources quoted for the number of total bankruptcies in 2007: one source gives 822,590 (AHN News). Megan McArdle used 727,167 for total bankruptcies in 2007 in calculating the 220,000 drop in medical bankruptcies between 2001 and 2007. She used the percentages for medical bankruptcies asserted by Himmelstein, Thorne, Warren, and Woolhandler in the article cited as the foundation for the latest alarmist figures (46% in 2001 and 62% in 2007, or 50% and 70%, depending on whether you read Am J Med or reports about it), and total bankruptcies of 1.45 million in 2001. Obviously, Himmelstein et al. and Zhu have very different definitions of “medical bankruptcy.”

    My number of 41,000 medical bankruptcies was calculated by Zhu’s definition. It is obviously very different from the “one medical bankruptcy every 30 seconds” used by Obama, which would give a number of medical bankruptcies far exceeding the total number of bankruptcies from all causes.

    You can read Himmelstein et al. from the Am J Med article posted on the PNHP website, and the highly critical analysis by McArdle in The Atlantic, and draw your own conclusions.

    Himmelstein et al. were funded by the Robert Wood Johnson Foundation and claim to have no conflict of interest. They are among the most prominent advocates of a government takeover of medicine, and have a fervid ideological dedication to demonstrating that medical costs are the most important reason for bankruptcy.

  11. Dr. Graller wrote, “ALL YOU ARE IS A LOBBY FOR THE AMA!”
    This gave me a big chuckle.
    I don’t belong to the AMA specifically because they do not represent the best interests of American physicians, in my opinion. Otherwise the AMA would oppose managed care participation and electronic health records. They would have come out soundly against Medicare some 20+ years ago when the government abandoned their promise that it would be INSURANCE and began to tell us what we could charge for our services. (Note: Medicare is NOT insurance. It is managed care. There is a big difference.)

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