Fraser Institute spins bankruptcy facts

The Fraser Institute’s motto is: “If it matters, measure it.” Mark Twain had a different take: “Lies, damn lies, and statistics.”

It’s easy for statistics to become lies. A recent Fraser Institute mini study demonstrates how this can happen. This study was produced to contribute to the heated debate in the United States over Barack Obama’s proposal to bring in a publicly funded health-insurance option.

One argument used to support a public option is that it would reduce the large number of bankruptcies experienced by Americans who have inadequate insurance to pay for expensive medical procedures.

A 2007 national study by legal, medical, and sociological researchers found that medical expenses contributed to nearly two-thirds of all personal bankruptcies in the U.S. Most medical debtors were well educated, owned homes, and had middle-class occupations, the study noted. Three quarters had medical insurance but had accumulated large medical debts, lost significant income due to illness, or mortgaged their homes to pay medical bills. Some lost coverage when they changed jobs.

An earlier study by the same authors noted that Canada’s universal health insurance resulted in lower bankruptcy rates.

Not so, claims Brett Skinner, the Fraser Institute’s director of bio-pharma and health-policy research, and senior policy analyst Mark Rovere. If the 2007 national study is correct, they argue, because of Canada’s single-payer system, “we should expect to observe a lower rate of bankruptcy in Canada compared to the United States, all else being equal. Yet the most recent data shows that the non-business bankruptcy rate in Canada is statistically the same as it is in the United States.”

But Skinner and Rovere don’t use the most recent data, which would undermine their case. They use data from 2006 and 2007 that shows bankruptcy rates being higher in Canada than in the U.S. In both years, the Canadian bankruptcy rate was 3.0 per thousand population. In the U.S., the rate was 2.0 per thousand in 2006 and 2.7 in 2007. Skinner and Rovere conclude that a publicly funded health-care system doesn’t lead to lower bankruptcy rates.

Why, though, didn’t the Fraser authors use 2008 data? It’s not that it wasn’t available. The Fraser study is dated July 7, 2009, and the footnotes indicate they were checking Web sites up to June 17.

The United States Bankruptcy Courts released its 2008 bankruptcy statistics on March 5, 2009, and the office of the superintendent of Bankruptcy Canada’s annual insolvency-rates Web page was last modified on March 10, 2009. Skinner and Rovere could easily have used the 2008 data.

But this new data shows that in contrast to 2006 and 2007, the U.S. bankruptcy rate was higher than Canada’s.

Nor is 2008 the only year American bankruptcies surpassed those in Canada. The Fraser study claims “we should expect to observe a lower rate of bankruptcy in Canada compared to the United States, all else being equal.” But all else is not equal. The U.S. revamped its bankruptcy law in 2005—the Bankruptcy Abuse Prevention and Consumer Protection Act—making it more difficult for consumers to declare bankruptcy. In 2006, the first year used in the Fraser study, American bankruptcy rates plummeted.

In the six years before the law came into effect, the Canadian rate averaged 3.8 per thousand population, while the average American rate was 6.7 bankruptcies per thousand—nearly 75 percent higher.

In fact, 2006 and 2007 are the only two years in the past decade in which Canadian bankruptcy rates exceeded the American ones. And they are the only two used in the Fraser analysis.

Bob Lawless is a professor at the University of Illinois School of Law and a nationally acclaimed expert in bankruptcy and corporate law. In a post on Creditslips.org, a blog for law professors and other experts in credit and bankruptcy, Lawless chastises the Fraser study for using bankruptcy rates for the total population rather than for the adult population (over 18). Despite the housing and financial collapses, not many 11-year-olds are declaring bankruptcy these days. Lawless allowed that the results would likely not be much different if Skinner and Rovere had used the more relevant adult population.

Lawless accuses the Fraser authors of being “extremely selective” in their use of bankruptcy data. “By limiting the data to 2006 and 2007,” he concludes, “the report is able to support the anti–health-care-reform agenda that the Fraser Institute seems to further.”

Donald Gutstein is a senior lecturer in the School of Communication at Simon Fraser University and a co-director of NewsWatch Canada, a media-monitoring project. His book, Not a Conspiracy Theory: How Business Propaganda Jeopardizes Democracy, will be published in October by Key Porter.

This article was originally published in The Georgia Straight [1] and is republished here with permission.

Comments

Submitted by Brian Eng on August 24, 2009 - 4:24pm.

Once again we have the problem of statisticians assuming that statistics can show cause and effect relationships. The notion that you can make all other things equal is absurd. The original study simply showed that health costs were a contributing factor in two thirds of American bankruptcies. Whether a universal health care system would have reduced the absolute number of bankruptcies is endlessly debatable. If Americans were not in debt in order to obtain health care, they might accrue unsustainable debt for other reasons.

What is not debatable is the fact that many Americans have to go into debt to obtain basic health services and a universal health care system would greatly reduce that particular debt burden.

Submitted by Fraser Institute on August 25, 2009 - 12:25pm.

Donald Gutstein makes several incorrect assertions about the data used in the Fraser Institute's recent study of medical bankruptcies. Contrary to what Mr. Gutstein claims, the two most recent comparable years for bankruptcy statistics between the US and Canada are 2006 and 2007. In fact, those are the only comparable years currently available because the US reformed its bankruptcy laws in 2005. US bankruptcy law since 2005 now closely matches Canadian legal standards. As most bankruptcy experts know, before 2005 it was much easier to declare bankruptcy in the US and that largely explains the divergence between Canada and US rates before the American reforms. Most people are also aware that in 2008 the US was uniquely impacted by massive systemic home mortgage defaults which did not occur in Canada because of differences in mortgage lending practices. US mortgage defaults would have been correlated with increased bankruptcy statistics. Therefore Canada-US comparisons in 2008 would not have been "apples to apples." We cite several other reasons in the paper why all else is roughly equal between the two countries during the 2006 and 2007 period. Our research presents a seriously inconvenient fact for advocates of government-run health insurance in the US, which is that during the only comparable years on record, personal bankruptcy rates were higher in Canada than in the United States.

Brett J Skinner
Director Bio-Pharma, Health and Insurance Policy
Fraser Institute
Toronto, ON

Submitted by deliciouspk on December 19, 2009 - 1:54pm.

Mr. Skinner, your assertions that 2006 and 2007 are the only years during which the US and Canadian bankruptcy rates can be compared is ludicrous. There are always methods of comparing relative statistics between countries. I feel that any statistician using a two year sample to prove his theory about comparative rates of bankruptcies between countries should have been ejected from the room before he even finished his presentation. A two year sample of comparative tooth decay between my brother and I would be pretty useless as well. Small samples can be cherrypicked pretty effortlessly however, and skewed to support almost any theory depending on which factors are included and which aren't even mentioned.

I agree with the author of this article for the most part, and I feel that the study that this article critiqued does a disservice to the scientific community.

Submitted by alan smithee on January 8, 2010 - 12:11am.

Think tanks are not but propaganda machines brainwashing the small-minded.I never pay attention to them.The Fraser Institute is just a training ground to future tyrants with fascist cravings.If a study comes out that was originated from that Institute,any free thinking person with an IQ higher than a turnip knows it's just right-wing spin.

Moulding a selfish generation into defending the interests of global conglomerates and in turn giving up their own self-interests and,yes,their civil liberties as well,is like shooting fish in a barrel.The 'me' generation seems to be taking over our institutions and the country's intellectuals are being turfed.In 10 years Canada will be the 51st state,complete with Republican ideologues and the green back currency.Cynical?...bleak?...but realistic.