Since their introduction, the Affordable Care Act’s Medicaid expansions have been a point of controversy. In part because a number of states (led by Republican governors) opted not to expand their Medicaid programs, an estimated three million Americans remain uninsured. A working paper released last week by the National Bureau of Economic Research sheds light on some of the financial consequences of those expansions, or a lack thereof: Public health insurance, it turns out, improves the financial well-being of not only the insured but the various people and institutions that the insured do business with.
The researchers compared the credit reports of individuals in states that expanded Medicaid to similar individuals in states that opted out of the expansion, focusing on people in the zip codes likely most affected by the expansion. They looked at six key indicators of general financial well-being and indebtedness: total debt, total debt past due, credit card debt, credit card debt past due, the number of non-medical bills sent to collections, and the total non-medical balance outstanding in collections.
“Our main finding is that Medicaid expansions that began in 2014 significantly reduced the number of unpaid non-medical bills and the amount of non-medical debt sent to third-party collection agencies among people living in zip codes that are most likely affected by the expansions,” the authors concluded. The researchers estimate that the Medicaid expansions decreased the amount of non-medical debt in collections by between $600 and $1,000 for low-income families who obtained insurance due to the expansions.
Medical debt has ripple effects on other aspects of a family’s finances.
Economists have established that, not surprisingly, health insurance reduces medical debts, but this paper is a reminder of another important truth: Medical debt has ripple effects on other aspects of a family’s finances. “A hit in terms of medical debt can affect more than just medical debt — it affects your whole financial portfolio,” says Sarah Miller, an economics professor at the University of Michigan and one of the co-authors of the new paper.
When people are faced with unmanageable medical bills, they often don’t pay other things, including rent, credit card bills, utility bills. A report published earlier this year by the New York Times and the Kaiser Family Foundation explored the financial sacrifices families make to pay high medical bills — 70 percent of people who had problems paying their medical bills reported that they cut back spending on food, clothing, or basic household items; 59 percent exhausted their savings; and 34 percent increased their credit card debt. In all, 61 percent of people in the survey reported problems paying their other bills, and 35 percent reported that they’d been unable to pay for basic necessities.
Of course, not all health insurance affects financial well-being equally. On balance, the ACA seems to have improved the financial well-being of Americans. A survey published last year by the Commonwealth Fund found a decline in the number of Americans reporting medical-related financial difficulties. But one of the major revelations of the joint New York Times/Kaiser survey was that people with private health insurance are still struggling to pay their medical bills, due to a shift toward higher deductibles and co-pays that predate the ACA but that some argue has worsened since the bill’s passage. Medicaid, by contrast, isn’t generally characterized by high cost-sharing requirements. “One thing we know about Medicaid is that it’s very generous in terms of cost sharing,” Miller says. “You tend to have very, very low co-pays, or no co-pays, whereas, with private insurance, there tends to be different effects.”
This latest research also sheds light on another important truth about health insurance, which is often overlooked in the ongoing debate over the costs of reform: Unmanageable medical debt affects not just the patients, but also all the other individuals and businesses that those patients and their families financially interact with. “This is a really big financial gain for the community as well,” Miller says. “The benefits are spread throughout the community — because it’s not just the households, it’s the people who are doing business with them, who can now collect on their debt.”
As I’ve written before, the United States does indeed have a big problem with health-care spending, and it’s a problem that’s gotten far too little attention during this election cycle. But denying insurance to people doesn’t mean that they won’t eventually need health care. The uninsured may forgo preventive care or ignore a nasty cough, but eventually that cough will turn into pneumonia, or they’ll slip and fall on a patch of ice and break an arm.
Denying insurance to people just means that when those unavoidable hospital visits do occur, uninsured patients, the safety-net hospitals that care for them, and the communities these patients live in will all suffer financially.