For years, some health reform advocates have lauded the potential benefits of insurance for an individual's financial security and well-being -- and now, a growing body of research is beginning to back up their claims.
Katherine Baicker, a health economics professor at the Harvard School of Public Health, in an email to American Health Line wrote, "One of the crucial, but often unheralded, benefits of health insurance is protection against the potentially dire financial consequences of an expensive illness," adding, "There is mounting evidence that Medicaid is an important contributor to the financial security of beneficiaries."
Past studies in Oregon and Massachusetts laid the scientific foundation by providing evidence health coverage reduces a person's medical debt. For example, the Oregon Health Insurance Study -- which Baicker co-authored -- found that low-income individuals who obtained Medicaid coverage were 44 percent less likely to borrow money or be unable to pay for medical care and were 23 percent less likely to have medical collection.
The latest study published as a working paper by the National Bureau of Economic Research builds on that research by looking at the financial effect of gaining Medicaid coverage on uninsured individuals ages 19 to 64. The researchers used credit report data from the Federal Reserve Bank of New York Consumer Credit Panel/Equifax to identify low-income areas where residents likely would qualify for Medicaid under the Affordable Care Act's expansion. The researchers focused on quarterly data from 2010 through 2015.
Robert Kaestner, a professor at the University of Illinois and study co-author, in an interview with American Health Line said, "The data [are] a real unique aspect" of the study. "We had two years subsequent to the expansion to measure the consequences."
Overall, the researchers estimated that on average an individual who went from being uninsured to enrolling in Medicaid under the coverage expansion could see a $600-$1,000 decline in the amount of debt collection they owed.
Experts weigh in
That dollar finding is "a definite contribution" to research on the effects of Medicaid on an individual's financial security, according to Carter Price, a mathematician at RAND Corp.
Further, the latest findings provide evidence at the national level that Medicaid is financially beneficial to enrollees. Until now, Caroline Pearson, senior vice president at Avalere Health, said, "[W]e haven't had a way to test it on a broad national scale."
Meanwhile, Matt Brodis, a research analyst at the Center for Budget and Policy Priorities, said, "What is powerful to me about the new study is the [Oregon Health Insurance Experiment] results were related to medical debt. This study looks broadly at medical debt" to determine whether it is contributing to a larger financial problem that can be relieved by Medicaid coverage. He said, "The finding that debts collected are reduced for Medicaid is a significant finding for the broad role Medicaid plays in" individuals' financial lives.
However, some experts say the study provides little value. Michael Cannon of the Cato Institute said, "This study doesn't tell us anything we didn't already know," adding, "It's not surprising that when you give people money or subsidies worth thousands and thousands of dollars that they will have fewer money problems."
While this is only the first national study to examine the issue, the findings could hold several implications for beneficiaries, policymakers and the overall health care system.
For the previously uninsured beneficiary who gained Medicaid coverage, Kaestner said the findings amount to a $600-$1,000 increase in income, which can have a significant effect on the individual's financial stability. He said, "This gives people extra money to either spend on other resources or pay down other means of debt."
According to Pearson, "It should bring more financial stability to low-income families by protecting them from these unpredictable and catastrophic health events" and provide an incentive for people to seek out preventive health care.
However, Cannon questioned "whether and to what extent expanding Medicaid to more people traps people in low-wage jobs, traps people in poverty because you are offering them a very valuable subsidy ... and threatening to take it away from them if their income rises." He said research is needed to measure those potential effects.
In the meantime, Price said that for policymakers the findings serve "as a mark in favor for expanding Medicaid" because it shows that the expansion has benefits. Brodis, similarly, said, "[T]his seems to be a good study to insert into" discussions surrounding Medicaid expansion.
Meanwhile, Pearson noted that hospitals also have seen a decrease in bad debt since the ACA was signed into law, particularly in states that have expanded their Medicaid programs. She said, "If hospitals are having less bad debt, then it is likely that low-income people also are experiencing less medical debt, so those two things should go hand in hand, so it is nice to see that they are."
Health insurance exchanges
While the new study focused solely on the Medicaid population, some experts say they expect to see similar trends among individuals with higher incomes shopping in the exchange market -- just to a lesser degree.
Study co-author and assistant professor of business economics at the University of Michigan Sarah Miller cites an analysis of the 2006 Massachusetts Health Reform, which primarily affected a higher-income population similar to those shopping on the exchanges. In an email to American Health Line, she wrote that the analysis "showed improvements across a large number of financial indicators including bankruptcy, amount past due and collections."
In addition, Brodis cited two Commonwealth Fund surveys that suggest individuals in the income range just above Medicaid eligibility who qualify for cost sharing and subsidies in the exchanges saw improvements in their ability to pay medical bills after the law's exchanges were implemented.
However, Pearson noted that the findings in the exchange market are likely to be less acute because individuals with higher incomes typically can absorb more health care costs without going into debt. She also noted that there are differences in the size of enrollment and previously uninsured status between the Medicaid population and those in the exchanges.
Price provided another reason the individuals in the exchanges could be seeing a lesser effect: the presence of high-deductible health plans. Such plans -- according to the IRS -- have a deductible greater than $1,300 for an individual or $2,600 for a family. A New York Times analysis last year found that in multiple states, more than half the health plans available through the federal exchange had annual deductibles of $3,000, and that insured consumers cited them as a reason for underusing their coverage.
Price said that while he expects the exchange population would see similar trends, "you hear a lot of anecdotes with high-deductible health plans on exchanges and that could be a reason the effect might not be as great."
by Heather Drost, contributing editor