Medicaid Expansion Associated with Less Medical Debt Collections

July 27, 2021 - States that expanded Medicaid in 2014 saw a 45 percent decline in the mean flow of medical debt collections compared to states that chose not to expand Medicaid or those that expanded after 2014, according to a study published in JAMA Network. Medical debt has become the largest source of debt in collections in the US over the past decade.

States that expanded Medicaid in 2014 experienced the most significant reductions in medical debt, with low-income individuals experiencing the largest reductions. Meanwhile, states that did not expand Medicaid saw an uptick in medical debt. The lowest income decile also experienced the largest medical debt increases, widening the gap between low and high-income communities.

In addition, Southern and low-income communities experienced the highest rates of medical debt in collections, while the Northeast experienced the lowest. Over 17 percent of individuals had medical debt in collections in 2020. In the South, 23.8 percent of people had medical debt in 2020, compared to 10.8 percent in the Northeast.

Medicaid expansion in 2014 was largely adopted by Northeastern states. Southern states accounted for 8 out of the 12 states that chose not to expand Medicaid. Nonexpansion states saw only a 10 percent reduction in medical debt in collections.

Researchers obtained data on unpaid medical debt in collections from a nationally representative 10 percent panel of consumer credit reports spanning from January 2009 to June 2020. Data from the 2014-2018 American Community Survey allowed researchers to analyze income and estimate medical debt by geographic location.

Next, they evaluated the association between statewide Medicaid expansion and medical debt, stratified by geographic location and zip code income decile.

“Medical debt is associated with reduced health care use. Personal debt, broadly defined, is associated with worse mental health and a deterioration of personal finances,” the study explained.

“Despite widespread concern, there is only limited evidence on recent trends in medical debt, its distribution across individuals, and how health policy has affected the distribution of medical debt.”

The mean stock of medical debt increased from $750 to $827 between 2009 and 2010, at a time when medical debt surpassed nonmedical debt as the main source of debt in collections. Mean medical debt was $119 less than nonmedical debt in 2009, but 2020 saw mean medical debt exceed nonmedical debt by $39.

It is important to note that the study was conducted based on data prior to the onset of COVID-19, and further research will determine the impact of the pandemic on US medical debt in collections.

However, since adverse health outcomes and financial hardship are both conduits to higher medical debt, it is likely that COVID-19 had a significant financial impact on individuals across the country.

“This study provides an important estimate of the total burden of medical debt in the US population and its variation across aggregate socioeconomic and geographic contexts. The observed patterning of these contexts follows similar patterns of well-established health inequities that contribute to unpaid medical bills and debt,” an accompanying editorial article observed.

“For example, people with fewer economic resources and those living in southern states tend to have higher morbidity across a spectrum of illness conditions. People who lack adequate health insurance are also at greater risk of incurring medical debt.”

A recent survey from The Commonwealth Fund found that Black and Latinx adults were more likely to incur medical debt and suffer income loss during the pandemic. Almost half of Black and Latinx adults reported income loss during the pandemic, compared to a third of all US adults. People who lost income, uninsured individuals, and those who got sick from COVID-19 also faced the most medical debt.

Recent analysis from Johns Hopkins University also revealed that many of the top US hospitals use predatory patient billing practices to sue patients over unpaid medical bills. Over a quarter of the top 100 hospitals in the country in terms of revenue sued patients between January 2018 and July 2020 for unpaid medical bills.

Ten of those top hospitals accounted for 97 percent of court actions against patients between 2018 and 2020.