essays in public finance and industrial organization a dissertation ...

CHAPTER 1. BANKRUPTCY 38
education loans. While the PSID and MEPS distinguish remaining housing and vehi-
cle principle from other debts, these other debts are not further decomposed. 45 The
leading potential concern is that these other debts include a substantial amount of
education debt—particularly for households with recent college graduates who may
also be on the margin of insurance coverage. To overcome this issue, I estimate the
share of education debt in total unsecured debt in the 2004 Survey of Consumer
Finances (SCF) and use this estimate to project education debt in the PSID and
MEPS. In particular, I use parameter estimates from a probit regression of the share
of education debt in total unsecured debt on income, family structure, age of the
household head, and unsecured debt level fully interacted with a categorical variable
for educational attainment of the head to project education debt values.
1.10.3 Micro-Simulation Details
Medical Cost Distributions
I construct the household-level medical cost distributions using individual-level med-
ical cost data from the 2005 MEPS for age-by-sex-by-insurance status cells. 46 For
insured individuals, costs are defined as total payments. For uninsured individu-
als, my measure of costs in construct in the following way: I start with medical
charges as this variable accounts for medical services written off as charity care or
bad debt. I then scale down charges by the cost-charge ratio (CCR) for the privately
insured population to account for the discount typically extended to the uninsured. 47
45 The debt variable in the PSID is based on the question “Aside from the debts that we have
already talked about, like any mortgage on your main or vehicle loans – do [you/you or anyone in
your family] currently have any other debts such as credit card charges, student loans, medical or
legal bills, or loans from relatives?” In the MEPS it is based on the question “Does anyone in the
family have any debts that we haven’t asked about, such as credit card balances, medical debts,
life insurance policy loans, loans from relatives, and so forth?” While both these variables may
include additional non-dischargeable debt (e.g., department store loans collateralized by durable
goods, unpaid taxes), the bias introduced by this is likely to be small.
46 The age-by-sex groups are no more than 18 years old, male age 19 to 34, female age 19 to 34,
male age 35 to 64, and female age 35 to 64.
47 Recall from Figure 1.2 that privately insured and uninsured households make similar payments
for low charges.