Monday, April 13, 2020

Odds Ratios for Impact of Medical Debt on Home Equity

Odds Ratios for Impact of Medical
Debt on Home Equity

Question:   Information on people with and without medical debt and people with and without home equity is presented in the contingency table below.   Use this data to calculate the odds ratio for the existence of medical debt on negative home equity.

Follow up to Calculation of Odds Ratio Calculation:   The respondent level data obtainable from the 2018 Financial Capability Survey can be used to estimate a logistical regression model of the impact of medical debt on negative house equity.  What is the odds ratio obtained from this logistical regression model where the dependent variable is a dummy variable set to 1 if the respondent has negative home equity and the explanatory variable is a dummy variable set to 1 if the respondent has medical debt?

Follow up discussion of impact of medical debt on negative house equity:  What do the results presented here indicate about the impact of medical debt on negative house equity?

 Contingency Table for Medical Debt  and Home Equity Positive House Equity Negative House Equity Total No Medical Debt 13,175 456 13,631 Medical Debt 2,105 772 2,877 Total 15,280 1,228 16,508
Sample of all homeowners in 2018 track of the national capability study.

The odds ratio calculation from the contingency table:

Step One:  Calculate the probability of having medical conditional on negative house equity and the probability of have medical debt conditional on positive house equity.

P(medical debt/negative house equity) = 772/1228 = 0.629.

P(medical debt/positive house equity) = 2105/15280 = 0.138.

Step Two:  Calculated the odd for the two conditional ratios above.

O1= 0.629/(1-0.629) = 1.6929

O2= 0.138/(1-0.13) = 0.1597.

Step Three:  Calculate the odds ratio by taking the ratio of the two odds, which is 1.6929/0.1597 or 10.6.

Follow up to Calculation of Odds Ratio Calculation:

I used survey questions to generate dummy variables for existence of negative house equity and existence of medical debt.  The analysis is limited to homeowners on the 2018 survey.

The code used to estimate the logistical regression model is presented below.

logistic underwater medical_debt if track==2018 & home_owner==1

The results are presented below.

 underwater Odds Ratio Std. Err. z P>z [95% Conf. Interval] medical_debt 10.59622 .6734463 37.14 0.000 9.35519 12.00188 _cons .034611 .0016486 -70.61 0.000 .031526 .0379979

Note the odds ratio from the logistical regression model is 10.6 same as from the contingency table.

What is the impact of medical debt on negative equity?

Medical debt has a huge impact on negative equity.  It is likely that people with medical bills are taking out home equity lines or refinancing their mortgages.  Very large implications for retirement security.

I have a larger paper on medical debt and financial distress under review.  Also, please look at my policy primer Defying Magnets: Centrist Policies in a Polarized World.