corporate and think-tank researcher

Donald Gutstein

16 Jul '09

Fraser Institute Bankruptcy Mini Study Spins 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, 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.”

It mattered, and the Fraser Institute measured it.

First published in The Georgia Straight. It was reprinted on

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