Study Reveals That Giving Poor People Health Insurance Reduces Their Medical Debt

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Florida Residents Sign Up For Affordable Care Act On Deadline Day
Working.Photo: Joe Raedle/2015 Getty Images

One problem with our private health-care system is that Americans don’t like seeing poor people die in the streets. So long as ambulance drivers don’t demand proof of employment before bringing the severely injured to the ER, the costs of individuals’ health care will be, partially, collectivized. If an impoverished gunshot victim can’t pay her medical bill, the hospital will make up the difference by increasing charges on those who can pay.

But there are a lot of different ways those costs can be socialized. The GOP’s preferred method is to load up poor uninsured people with medical debt, trapping many in spirals of bankruptcy and financial distress. This rarely results in low-income households paying off what they owe, but it does ruin a lot of lives and/or keep America a beacon of freedom.

Obamacare pursued a different strategy. By expanding government-funded health insurance to low-income households, the Affordable Care Act socializes the costs of ER visits for the poor up front. What’s more, it attempts to reduce the frequency of such visits, by giving the economically disadvantaged access to subsidized preventive health care.

A new working paper from the National Bureau of Economic Research finds that this approach, shockingly, reduces the debt burden of poor people. The study estimates that medical debt held by people newly covered by Medicaid since 2014 has fallen by about $600 to $1,000 each year. Comparing states that opted into the Medicaid expansion against those that did not, NBER found that the former saw a reduction in bills sent to collections as well as the amount of debt listed on such bills.

These reductions don’t just benefit the most vulnerable in our society, the authors contend; they also increase the likelihood that outstanding bills to hospitals, doctors, banks, utility companies, and landlords actually get paid.

Obamacare has its shortcomings. A study released by the New York Times and the Kaiser Foundation in January found that one in five Americans still struggled to pay their medical bills last year. On Tuesday, the biggest health insurer in the United States announced that it plans to exit most of the ACA’s state exchanges by 2017. But Medicaid expansion — the one part of the law that’s straight-up government-funded, socialized medicine — appears to be working quite well.