- In recent years, the Affordable Care Act (ACA) paved the way for significant Medicaid expansion. A recent study from the National Bureau of Economic Research found that Medicaid expansion resulted in financial benefits for low-income patients as well as healthcare providers.
Expanded Medicaid coverage caused a reduction in the amount of non-medical debt sent to third-party collection agencies. Medicaid expansions caused a reduction in the amount of unpaid balances in collections that ranged between $51 and $85. The researchers’ estimates implied a decrease in collection balances of around $600 to $1,000 among those who gained Medicaid coverage due to ACA.
“Our findings suggest that the ACA Medicaid expansions had important financial impacts beyond healthcare use,” the researchers said.
Because individuals who obtained Medicaid coverage did not have to worry about paying for pricey medical bills, they also had an easier time paying for their other bills. Medicaid expansion led to a reduction in uncollected bills in general.
Additionally, because more people had insurance coverage through Medicaid, hospitals were not left with as many unpaid medical bills.
For this study, researchers looked at whether the recent expansion of Medicaid to individuals aged 19-64 would impact the financial well-being of individuals living in low-income zip codes. They determined that Medicaid expansions significantly lowered the number of unpaid non-medical bills in areas with the highest share of low income, uninsured individuals. These results mainly applied to individuals who were living in areas that were most likely impacted by Medicaid expansions.
Because Medicaid expansions caused a decrease in unpaid bills, third-party creditors were able to benefit financially. Additionally, those individuals who gained coverage through Medicaid expansions might get better access to credit markets in the future, the researchers said.
The researchers argued that Medicaid expansion could play an important role in providing low-income individuals with financial protection by improving their ability to pay their medical expenses.
“Access to health insurance has the potential to improve access to credit markets, increase savings, and facilitate consumption of other goods and services. These other channels can potentially have salutary effects on the well-being of low-income individuals,” the researchers said.
Originally, the researchers hypothesized that Medicaid’s financial protection for low-income individuals should eliminate a majority of their significant medical expenses. They also believed that Medicaid coverage could reduce delinquencies and other indicators of financial distress. They thought that Medicaid could decrease a patient’s total debt and borrowing.
“The financial protection afforded by Medicaid coverage should reduce the need for low-income individuals to borrow to smooth consumption when medical issues arise. Thus, Medicaid has the potential to decrease a person’s borrowing and total debt,” the researchers noted.
In 2012, the U.S. Supreme Court made the Medicaid expansions optional for states. At the end of 2015, 29 states and the District of Columbia had chosen to expand Medicaid coverage in some form, while 21 states had opted not to expand Medicaid coverage. Researchers of the study noted that according to CMS, total Medicaid enrollment in states that offered Medicaid increased by 12.3 million between 2013 and 2015.
States that choose to opt out of Medicaid expansion are losing money, a previous report observed. Hospitals that opt out of participating in Medicaid expansion efforts can potentially lose more than $400 billion in federal Medicaid funds.
According to the study, rates of health insurance coverage have improved significantly more in the states that expanded Medicaid coverage than in those that did not.
“The financial protection provided by health insurance is arguably its most important function. This is particularly true in the case of Medicaid because of the relatively high prevalence of disease among low-income individuals and the substantial financial burden that illness imposes on those who become seriously ill or injured,” the study said.