Money Culture

Medicaid Expansion: Winners vs Losers

Low-income residents are in better financial shape in the 31 states that have expanded their Medicaid health coverage under the Affordable Care Act (ACA).

Medicaid expansionThat’s the bottom line in a new study finding that they have fewer unpaid bills being sent to collection agencies and their collection balances are $600 to $1,000 lower than their counterparts in non-expansion states. This contrasts with the years prior to the 2014 Medicaid reform, when residents of would-be expansion and non-expansion states had very similar financial profiles.

State decisions about whether or not to expand their Medicaid rolls are having “unambiguous” and “important financial impacts,” concluded researchers at the University of Michigan, the University of Illinois, and the Federal Reserve Bank of Chicago.

Medical crises are expensive for most workers but are virtually insurmountable for low-income Americans. The annual cost of care for someone hospitalized at some time during 2012, for example, was $25,000 – more than many low-wage workers earn in a year.

To address this risk, the ACA expanded Medicaid health coverage to more people and established a new income threshold to qualify at 138 percent of the federal poverty level – or about $16,000 for an individual. A U.S. Supreme Court decision later gave states the option of expanding their Medicaid programs.

The researchers’ findings were based on credit reporting data on 1.8 million individuals between 19 and 64 years old who are living below 138 percent of the federal poverty.  They analyzed the impact of Medicaid availability on non-medical debt, such as credit cards, in zip codes with the highest percentage of people under the threshold during 2014 and 2015.  [Mortgage debt was excluded.]

The purpose of health insurance is to provide a financial cushion by limiting the spike in out-of-pocket expenditures when a medical crisis strikes. For low-wage workers, this cushion takes the form of Medicaid.

To stay current on our Squared Away blog, we invite you to join our free email list. You’ll receive just one email each week – with links to the two new posts for that week – when you sign up here.

6 Responses to Medicaid Expansion: Winners vs Losers

  1. Ken Pidcock says:

    “Low-income residents are in better financial shape in the 31 states that have expanded their Medicaid health coverage…”
    And that makes your community a better place to live. For you.

  2. Dave G. says:

    While many in need have benefited with the expansion, I understand the reluctance of other states to follow. The govt. can be a fickle business partner, providing support in good times under some administrations, then threatening to take it away. We all now operate in increasing uncertainty.

  3. Kermit Housh says:

    What would the financial results be for those 31 states if the federal subsidy was not in place?

  4. Jack R. says:

    Unfortunately, this is no panacea because as costs go up, taxes must go up, or coverage must be adjusted downward. The main point of ACA was to destroy private insurance so that eventually everyone would be pushed toward Obamacaid, which is the main objective of ACA. Obamacaid, not Obamacare.

  5. teo says:

    Of course people can skew statistics as they see fit.

    But to make the overall point: low-income residents in Medicaid expansion states have less debt than low-income earners living in states without the Medicaid expansion. Yes, the federal subsidy is in place. That is exactly what Medicaid is — a federal subsidy for states to insure low-income residents. But the notion that the states can/will do it themselves is shown to be false by this study. States won’t do it themselves because (shockingly) health care is very expensive. The federal tax base offers the best opportunity for a subsidy.

  6. Very interesting to read about these positive developments in the US. Do you think the remaining states will follow? The results are promising.