My coauthors and I have been doing research on families in bankruptcy for more than twenty years. I never really wanted a role in politics, but like many things in life, when the bankruptcy bill came thundering down the tracks, there wasn’t really much choice. Supporters of the bankruptcy bill railed on about irresponsibility and fraud. Our research was one of the few pieces of hard data about what was going on. It offered a very different picture of families in desperate financial trouble.

In a remarkable piece of timing (the article had been submitted for publication more than a year earlier, but academic journals are very slow), our recent study on medical bankruptcies was published in Health Affairs, the premier health policy journal, just a week before the Senate took up the bankruptcy bill again. As a result, people committed on the political question took after the study. So here’s a quick Q&A with my students that might be useful:

1) What is the study you report on in Health Affairs?

The overall project involves five law professors, the dean of a law school, two medical school professors, two sociologists and a finance professor. Their areas of expertise include law, medicine, demography and housing. The universities represented are University of California at Los Angeles, Harvard University Medical School, Harvard University Law School, University of Iowa, University of Las Vegas at Nevada, Ohio University, University of Pennsylvania, and the University of Texas. The Ford Foundation and the Robert Wood Johnson Foundation did most of the funding. The study has gone through various forms of peer review and human subjects approval, and the medical study was blind review (the gold standard for academic research). The medical bankruptcy portion was the work of two Harvard doctors, an Ohio U. sociologist and me.

2) What did you say in the study?

There were many ways to measure medical bankruptcy, from the family that was crushed by massive medical bills (medical debt) to the person whose bills were picked up by insurance but who was flatted by eight weeks with no income (job loss) to the family that paid off huge medical bills by putting a second mortgage on the house and who now can’t manage the mortgage and all their other bills (migrating debt). We said that reasonable people could make the count different ways, but that the data suggested that about 44.2%-54.5% of the families filing bankruptcy could fairly be classified as medical bankrupts. We extrapolated those numbers, which would mean about 750,000 households filing for bankruptcy, or about 1 million people (counting husbands and wives who file together). Once the children, the elderly dependent parents, and the non-filing spouses are counted, the total rises to about 2 million.

These families were mostly middle class, with good educations and decent jobs. About three-quarters of them had health insurance at the onset of the illness or accident that eventually bankrupted them.

3) Is it true that you included drug addiction and gambling in the definition of medical bankruptcy?

Yes, we reported data on addition and gambling—but it made very little difference on the overall numbers. About 2.5% families described the costs of dealing with addiction and 1.2% reported uncontrolled gambling. Many of those families had other medical problems—children with serious illnesses, car accidents, a terminal illness in the family, etc. If all of these families were somehow disqualified from consideration as medical bankruptcies, then the top range of the estimate of medical bankruptcies would drop from 54.5% to 50.8%.

4) Why include these people at all? Isn’t this their own fault?

My physician coauthors felt strongly that a family driven to bankruptcy to pay for drug rehab treatments for a teen-aged son should be included in medical bankruptcies. They also thought that a family that lost everything when an out-of-control husband ran up hundreds of thousands of dollars in debts at casinos should be included. If a family described their reason for filing as addiction or uncontrolled gambling we reported it, but we also gave the exact percentages so that anyone who wanted to exclude these people could do so—and could see that it wouldn’t change the overall finding.

5) What about everyone who had more than $1000 in out-of-pocket medical costs?

We reported on those people, and we noted that the median out-of-pocket medical costs were $11,854.

6) Why include these people?

Most of them had much higher debts, and they were included because they also described medical problems had pushed them into bankruptcy. But even the lowest possible number—$1000 in out-of-pocket costs—was a real burden for these people. The average income when they filed for Chapter 7 bankruptcy was $19,188, which means that even the minimum out-of-pocket medical cost was more than 5% of their annual income.

7) What would change if you left them out?

Again, the difference would be modest. In the published report, we didn’t have the room to run every possible permutation, but if we exclude as a medical bankruptcy anyone who was classified only because they put a second mortgage on the house to pay medical bills AND anyone who lost more than two weeks of income because of an illness or accident AND anyone who had medical bills at the $1000 or higher level, we would still be left with 47.3% of the sample describing their medically-related bankruptcies. In other words, even if several criteria are taken out, there are still nearly 1 million people filing for bankruptcy in the aftermath of a medical problem.

8) Is yours the only study that finds medical bankruptcies?

No. A month before our study was published, the Salt Lake City Tribune (go here, here, here, here, here, and here) analyzed 1,053 randomly selected cases filed in 2003-04 in Utah. They found 60% of the cases involved medical debts, a point they discussed at length. Another academic study in which I participated [link] pointed in that same direction based on 1999 data. A new study in progress from the Commonwealth Fund is reported to find that 29 million Americans—14% of all adults—are in serious medical debt, which means they have put large medical bills on their credit cards, taken out second mortgages on their homes or are in a payment plan with their hospital or other provider.

9) So what’s the bottom line?

Over the past decade, millions of Americans families have turned to the bankruptcy system to deal with the financial fallout from serious health problem. Some of them have come forward to tell their stories. The bankruptcy bill speeding through Congress treats every one of them exactly the same way it treats a person who took expensive vacations or who went to the mall too many times.
Several amendments were introduced to the bankruptcy bill to cut a break for the families laid low by medical problems, but each one was voted down. According to this bill, they are all deadbeats who need to be squeezed harder.

Some conservatives would have people believe that only the far left is opposed to the current bankruptcy reform. That simply isn't true. Take a look here and here for well-articulated opposition to the bill from conservative law students.

Here's a great quote: "These credit card companies know about the information costs that consumers face and not only that, it is evident from the design of their websites and their billing strategies that they actively seek to increase information costs so as to extract supracompetitive profits from their customers. Needless to say, I have little sympathy for their pleas concerning consumer bankruptcy...I do not support the means test in the current bill, especially in light of opposition to credit card dislosure from the proponents of the bill, along with their refusal to end some of the mechanisms that those with more significant wealth facing bankruptcy can use to shield their assets."

Click here to watch Professor Warren discuss bankruptcy reform on CNN.

HYPOCRISY UPDATE: Both Republican Senators Snowe and Collins of Maine voted against an amendment from Consumer Champ Senator Russ Feingold that would have set a federal homestead floor of $75K for the elderly. This amendment would have allowed seniors to get homestead exemptions allowing them to hold onto their homes when they file for bankruptcy. Homestead exemptions are currently decided by the states, and some are as low as $5,000. That means that seniors who have worked a lifetime to pay off their homes and seen the value of those homes appreciate substantially in the past several years cannot shield them from their creditors in bankruptcy. This amendment would have softened the blow this bill will deal to millions of seniors by setting a federal homestead floor for every state. During the floor debate for this amendment, Senator Feingold said, "Seniors are the people who need the exemption most." I guess Senators Snowe and Collins disagree.

It turns out that these two not only disagree with Senator Feingold, but they also disagree with their own constituents. Today, seniors in Maine are offered a special homestead floor of $70K. The two Republican Maine Senators voted against giving seniors across the country the same protection that the Maine legislature has decided they deserve in Maine.

In today’s Sun Journal (Maine), Senators Olympia Snowe (R-ME) and Susan Collins (R-ME) write that “the bill provides additional protection for disabled veterans, service members called to active duty and debtors with severe health problems.”

If Maine’s senators were genuinely interested in these protections, they wouldn’t have voted against these amendments to protect debtors with severe health problems. And they wouldn’t have fought against Senator Durbin's effort to provide broad protection to active duty service members and their families. The truth is that Snowe and Collins voted for a weak amendment that provides rhetorical cover to senators instead of providing financial cover to distressed middle class families. These same families would be better off under current law; the bill, even as amended, just makes things worse.

Snowe and Collins are engaging in the politics of deception. Mainers: don’t fall for it. Write letters to the editor to the Sun Journal and let people know that Maine's senators are lying to their constituents.

Don’t forget: Maine has voted for a Democrat for president in every election since 1992 and Olympia Snowe is up for reelection. Her campaign coffers are filled with finance industry donations. To compete, the grass roots fight has to begin now.

The bloggers over at mainepolitics have been doing a nice job covering Snowe and Collins on bankruptcy.

You can watch a webcast of the S.256 markup here (RealPlayer required).

Here are some of the amendments rejected by the House Judiciary Committee at yesterday’s markup of S.256:

- An amendment by John Conyers (D-MI) protecting military personnel from predatory payday lenders;
- An amendment by Mel Watt (D-NC) exempting tuition costs from the expense calculation in the means test;
- An amendment by Adam Schiff (D-CA) protecting people whose bankruptcy is due to identity theft;
- An amendment by Howard Berman (D-CA) protecting bankruptcy filers who file due to medical crises;
- An amendment by Jerry Nadler (D-NY) which would make debts arising from civil rights violations non-dischargable in bankruptcy.

The House Republicans – just like their Senate counterparts – have no interest in protecting service members, families with children, the infirm or victims of crime. Who do they want to protect? Credit card companies and civil rights violators.

This is all on the record, folks. When these people run for reelection in your district in 2006, make sure your neighbors know about it. Write letters to the editor of the local paper. Post about it on your blog. Get the word out and make the Republicans publicly defend their votes. They won’t be able to. And hopefully they won’t win.

THE FIX IS IN

Yesterday, the House Judiciary Committee rejected several Democratic amendments and voted along party lines to send the bankruptcy bill to the House for a vote.

Committee Democrats said the bill would turn the federal government into a collection agency for credit card issuers, retailers and other creditors.

...

"The fix is in," said Rep. Sheila Jackson Lee, D-Texas. "This is a prime example of class warfare."

I will be on Lou Dobbs Tonight on CNN at 6pm ET to discuss the bankruptcy bill. Be sure to tune in!

WEDNESDAY ACTION ITEM

Politology, another blog opposing the bill, has posted its Wednesday action item: targeting the House. If you're wondering which Representatives deserve an earful, see the lists of co-sponsors, the Judiciary Committee, and the devious Democrats who wrote to Bush and promised to support the bill.

Robert Scheer calls the bankruptcy bill a tutorial in greed...courtesy of the "family values" bunch.

Thanks MT.

On the lighter side. This week's "What do you think?" feature in The Onion is about the bankruptcy bill.

My favorite: "If this doesn't teach Americans not to have medical emergencies or get laid off, I don't know what will."

Thanks Dave.

Great article from the Center for Responsive Politics on how the credit card industry bought the bankruptcy bill--one Senator at a time.

An analysis of the contributions shows that senators who voted to pass the bill raised an average of nearly twice as much between 1999 and 2004 from the finance and credit industry as those who voted against the bill.

Money talks. Loudly.

Conservative financial guru and radio show host Dave Ramsey absolutely trashes the bankruptcy bill in this video.

Money quote: "I think this bankruptcy legislation is absolutely horrible...I generally vote Republican and I'm ashamed of the Republicans on this."

Thanks to reader TJ.

An interesting comparison. The Republican platform contains only one passing reference to the middle class. I'm not surprised...

Blogging about the bankruptcy bill has led me to think about party platforms. I’ve never believed that an officeholder should be bound by the letter of her party’s platform, but the documents do convey the core values of the respective parties – and should, at least, provide guidance to party members.

Consider this remarkable passage from the Democratic platform:

“The heart of the American promise has always been the middle class, the greatest engine of economic growth the world has ever known. When the middle class grows in size and security, our country gets stronger. And when more American families save and invest in their children's future, America grows stronger still…Today, the average American family is earning $1,500 less than in 2000. At the same time, health care costs are up by nearly one-half, college tuition has increased by more than one-third, gas and oil prices have gone through the roof, and housing costs have soared. Life literally costs more than ever before – and our families have less money to pay for it. Three million more Americans have fallen into poverty since 2000. Average family debt is higher than ever. And as they lose the struggle to make ends meet, one out of every seven middle class families may be bankrupt by the end of the decade.”

I find it unthinkable that anyone can reconcile those words with a vote for the bankruptcy bill. It simply doesn’t work. Maybe the Senate Democrats who voted for the bill (and those in the House who plan to) just don’t believe in the American middle class. Maybe they’re triangulating in order to secure campaign contributions. In the wake of the November election, Democrats have openly criticized the party for failing to develop a coherent message. When I read that portion of the platform, the message is loud and clear – and it’s right. What’s wrong is that elected Democrats are so willing to violate the spirit of the platform in the name of corporate welfare and selfish campaign finance.

In the coming weeks before the bankruptcy bill becomes law, this site will sharpen its focus on several issues that the fight helped bring to the fore. First, we will examine aspects of the bill that need to be highlighted, like section 414 (see here, here, and here). Also, we will look at office holders defeated in elections for their support for past versions of this bill. Finally, we will spotlight abuses by the credit and lending industry. The bankruptcy bill fight was part of a larger struggle over the health and security of the middle class, and its a struggle that we will continue.

Please offer feedback and suggestions on this new direction.