National Bureau of Economic Research
NBER Working Paper No. 22170
The Effect of the Patient Protection and Affordable Care Act Medicaid Expansions on Financial Well-Being
By Luojia Hu, Robert Kaestner, Bhashkar Mazumder, Sarah Miller, and Ashley Wong
We examine the effect of the Medicaid expansions under the 2010 Patient Protection and Affordable Care Act (ACA) on financial outcomes using credit report data for a large sample of individuals. We employ the synthetic control method (Abadie et al., 2010) to compare individuals living in states that expanded Medicaid to those that did not. We find that the Medicaid expansions significantly reduced the number of unpaid bills and the amount of debt sent to third-party collection agencies among those residing in zip codes with the highest share of low income, uninsured individuals. Our estimates imply a reduction in collection balances of around $600 to $1,000 among those who gain Medicaid coverage due to the ACA. Our findings suggest that the ACA Medicaid expansions had important financial impacts beyond health care use.
From the Introduction
In 2010, President Barack Obama signed the Patient Protection and Affordable Care Act (ACA) into law, which included a provision to expand Medicaid eligibility to low-income adults, many of whom were previously ineligible. A major motivation for this expansion was to provide financial security to individuals if they experience a sudden deterioration in their health and cannot afford to pay for their medical expenses.
Indeed, the financial consequences of not having health insurance can be severe for individuals who become seriously ill or injured. Studies using survey data suggest that the uninsured often have difficulty paying medical expenses, become delinquent on their medical and non-medical bills, and are more likely to be contacted by collection agencies.
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. Our baseline intention-to-treat (ITT) estimates indicate that the Medicaid expansions are associated with a decrease in the amount of unpaid balances in collections of between $51 and $85. This effect is an average over the entire sample and includes many individuals who did not obtain Medicaid insurance coverage through the expansion. Rescaling this estimate based on the fraction of the target population who were likely to have obtained insurance coverage yields estimates of the effect of treatment on the treated (ToT) of between $600 and $1,000.
From the Conclusion
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. Indeed, a major justification for the Patient Protection and Affordable Care Act (ACA) of 2010 was to provide such financial protection.
While these results show that the ACA Medicaid expansions had important financial impacts outside of health care use, they are also consistent with recent work documenting that much of the incidence of these financial effects falls on third parties as much as the uninsured themselves. Given that the ACA Medicaid expansions decreased unpaid bills, the financial benefits of the ACA expansions appear to fall at least partially on third-party creditors. As a result, those individuals who gained coverage through the ACA Medicaid expansions may have better access to credit markets in the future.
Comment by Don McCanne
The results of this study are intuitive. Low-income individuals who obtain Medicaid insurance coverage not only are protected from medical bills when they must access health care, they also have a reduction in other unpaid bills and a lower incidence of account referral to collection agencies - a benefit to both the patients and their potential third-party creditors.
The authors state, "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."
Individuals who face large deductibles and other cost sharing in individual plans and employer-sponsored plans or who have inadequate subsidies for cost sharing in the ACA exchange plans are frequently exposed to financial hardship. It is the near absence of cost sharing (deductibles, copayments and coinsurance) in the Medicaid program that has made it so effective in protecting the personal finances of otherwise vulnerable individuals - in sharp contrast to the increasing financial burdens resulting from the inadequacies of the private plans.
Medicaid does have other problems. Too many physicians refuse to accept Medicaid patients because of the very low payment rates, especially specialists, thus access may be impaired. Also many states are shoving patients into Medicaid managed care plans to save even more money, and early experience suggests that there is a further deterioration in patient access and service. Thus merely expanding Medicaid is not a satisfactory solution to filling in our voids in health care today.
The lesson from this study is not that Medicaid should be expanded but rather that health insurance should provide complete financial protection from health care costs. That is proposed as one of the more important improvements in an Improved Medicare for All - a single payer national health program. Everyone could have health care without causing financial hardship for anyone. Costs would be controlled in a more patient-friendly manner by application of other important single payer policies.