Health insurance serves many purposes, but perhaps the most important function is to protect families from financial devastation. The CDC released a new report examining the percent of families having problems paying medical bills between 2011 and the first half of 2016. Overall, the percent of individuals under age 65 in families that were having problems paying medical bills decreased by about 24%, from 21.3% in 2011 to 16.2% in 2016. It appears that much of this reduction is being driven by public health insurance, and we know that means the big driver is Medicaid because the study only included individuals under the age of 65. When the percent of individuals under age 65 in families having problems paying medical bills is broken out by the type of insurance, public insurance had a larger decline (24%) than private insurance (15%).
However, the largest reductions were for adults and children who were poor (living below 100% FPL) or near poor (between 100% and 200% FPL). Given the recent gains in children’s coverage and the Medicaid expansion for their parents up to 138% FPL, and that many of the largest drops occurred in 2014 and 2015, it seems likely that Medicaid is at least partially responsible for the increase in financial security. The percentage of poor children under 18 years old who were in families having problems paying medical bills in the last 12 months decreased 28% and for near-poor children it dropped 29%. Adults followed a similar trend: the percentage of poor adults who were in families having problems paying medical bills fell 29% and it fell 27% for near poor adults.
The fact that fewer families are having problems paying medical bills after the ACA expanded health insurance is not surprising. Research has found significant relationships between Medicaid coverage and financial security. In April 2016, a National Bureau of Economic Research working paper examined the relationship between Medicaid expansion and financial well-being. The authors found that Medicaid expansions beginning in 2014 significantly reduced the number of unpaid medical bills and the amount of non-medical debt sent to third-party collection agencies for individuals living in zip codes most likely to be impacted by the Medicaid expansion. The estimated effect was a reduction in unpaid collection balances between $600 and $1,000.
A 2013 study in the New England Journal of Medicine on The Oregon Health Insurance experiment found significant evidence of Medicaid reducing financial hardship, across a variety of measures. The table below shows that Medicaid coverage effectively eliminated catastrophic expenditures (when out-of-pocket costs exceed 30% of income). It also significantly decreased out-of-pocket spending, having medical debt, and whether you had to borrow money to pay bills or skip payments.
These findings are not new. An older study, from 2011, in the Journal of Public Economics examined Medicaid expansions from 1992 to 2004, which mostly impacted children. It found that medical costs can be a significant driver of bankruptcies, but Medicaid can help: a 10-percentage point increase in Medicaid eligibility would decrease bankruptcies by 8 percent. They also find that zip codes with the most children and the lowest income are most affected.
Any reduction in Medicaid coverage – which would come with the repeal of the ACA, a Medicaid block grant or a per capita cap – will increase the number of uninsured and reverse the progress that we’ve made in the last 5 years reducing the percent of families that are having problems paying medical bills. Families who lose Medicaid also lose the financial security of having health insurance.