[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
     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

                               ----------
                         U.S. GOVERNMENT PRINTING OFFICE 

51-346 PDF                       WASHINGTON : 2010 

For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
Washington, DC 20402-0001 































                       COMMITTEE ON THE JUDICIARY

                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            DANIEL E. LUNGREN, California
MAXINE WATERS, California            DARRELL E. ISSA, California
WILLIAM D. DELAHUNT, Massachusetts   J. RANDY FORBES, Virginia
ROBERT WEXLER, Florida               STEVE KING, Iowa
STEVE COHEN, Tennessee               TRENT FRANKS, Arizona
HENRY C. ``HANK'' JOHNSON, Jr.,      LOUIE GOHMERT, Texas
  Georgia                            JIM JORDAN, Ohio
PEDRO PIERLUISI, Puerto Rico         TED POE, Texas
MIKE QUIGLEY, Illinois               JASON CHAFFETZ, Utah
LUIS V. GUTIERREZ, Illinois          TOM ROONEY, Florida
BRAD SHERMAN, California             GREGG HARPER, Mississippi
TAMMY BALDWIN, Wisconsin
CHARLES A. GONZALEZ, Texas
ANTHONY D. WEINER, New York
ADAM B. SCHIFF, California
LINDA T. SANCHEZ, California
DEBBIE WASSERMAN SCHULTZ, Florida
DANIEL MAFFEI, New York

       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   TRENT FRANKS, Arizona
MELVIN L. WATT, North Carolina       JIM JORDAN, Ohio
BRAD SHERMAN, California             HOWARD COBLE, North Carolina
DANIEL MAFFEI, New York              DARRELL E. ISSA, California
ZOE LOFGREN, California              J. RANDY FORBES, Virginia
HENRY C. ``HANK'' JOHNSON, Jr.,      STEVE KING, Iowa
  Georgia
ROBERT C. ``BOBBY'' SCOTT, Virginia
JOHN CONYERS, Jr., Michigan

                     Michone Johnson, Chief Counsel

                    Daniel Flores, Minority Counsel






















                            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


     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.
    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.
    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 medical-debt-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 
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 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 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 
carve-out 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.
    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.
    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 permitting 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

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                               __________

    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 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.
    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 co-payments, 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.
    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

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                              ATTACHMENT 1

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                              ATTACHMENT 2

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                               __________

    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 has also been a consultant to the World Bank and taught 
economics at the University of Maryland.
    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 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.
    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:]
                  Prepared Statement of Aparna Mathur

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                               __________

    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 School, a school no longer known for football.
    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 whether people were shifty gamesmen trying to 
game the bankruptcy 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.
    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:]
                Prepared Statement of John A. E. Pottow

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                               __________

    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 for medical causes?
    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 compulsory pre-bankruptcy credit counseling and 
then in-bankruptcy 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.
    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 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 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?
    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?
    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 questions. 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.
    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.
    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 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.
    Dr. Woolhandler. Well, there is a tremendous amount of 
over-treatment 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 
over-treatment, 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 
single-payer 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----
    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 
non-reimbursable 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.
    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?
    Dr. Woolhandler. No, sir. Americans live two to 2\1/2\ 
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 
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 
when we are paying twice and we are not living as long? I am 
putting 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.
    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 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 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----
    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.
    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 can correct me--is from the 1990's and they analyzed 
medical filings 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 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 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 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 
non-recourse 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.
    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.
    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, 
across-the-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.
    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 cost-shifting 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 cost-shifting. 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----
    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 malpractice 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----
    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.
    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.]





























                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

      Response to Post-Hearing Questions from Elizabeth Edwards, 
        Senior Fellow, Center for American Progress Action Fund

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

  Response to Post-Hearing Questions from Steffie Woolhandler, M.D., 
         M.P.H., Professor of Medicine, Harvard Medical School

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

      Response to Post-Hearing Questions from John A. E. Pottow, 
          Professor of Law, University of Michigan Law School

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                                 
