One of the questions raised since Congress passed the Affordable Care Act (ACA) six years ago is whether decreasing uninsured rates would also reduce medical bankruptcy. One mechanism the ACA enacted was a requirement that states expand Medicaid, but the U.S. Supreme struck that down, leaving state governments with the choice of expanding the program for themselves. Some states did and others didn’t. As a result, it’s possible to compare medical-debt outcomes for those who have a stronger safety net than those who don’t.
The Federal Reserve Bank of New York rose to the task in a recent blog post using its Consumer Credit Panel, which is based on data provided by Equifax. Primarily, the New York Fed considered whether debt collections fell in counties with high uninsured rates in states that expanded Medicaid as opposed to those in states that didn’t. The hypothesis is that expanding Medicaid would increase insured rates and thus reduce debt and subsequent collection efforts.
The New York Fed’s results were striking. In counties with low uninsured rates, the Medicaid expansion had little effect. Because most people in these counties were insured, they were already less likely to borrow money for medical expenses. However, in counties with high uninsured rates, the effect of the Medicaid expansion was quite clear: Counties in states that expanded Medicaid saw a $100 per capita decline in collections compared to counties in states that didn’t expand Medicaid. The authors noted that the mean collection balance throughout the country was $280, so the savings are quite high.
The blog post didn’t stop there. It then examined the differences in credit-card balances between states that did and did not expand Medicaid, and again it found a $200 per capita decline in balances. Finally, the authors discovered in a similar comparison of people’s credit risk scores that the ACA has lifted consumers’ creditworthiness by a few points.
Although the New York Fed writers were cautious about their results, they do tend to confirm what we already know about how health insurance affects people’s finances. Even though most people are healthy most of their lives, when a crisis hits, they may not have the savings available to cover the costs, which is where health insurance steps in. Without it, people go into debt to pay their medical bills, and if they can’t repay their debts, they may need to file bankruptcy.
The New York Fed post can be found here.
It’s wonderful that the ACA is likely reducing medical debt, but medical bankruptcy still occurs. If despite medical insurance or Medicaid, you are finding difficulties paying your medical bills, then you should talk to an experienced New York bankruptcy lawyer.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy law changes Bruce Weiner for a free initial consultation.
