As federal lawmakers continue to debate whether to repeal, and perhaps eventually replace, the Affordable Care Act (ACA), it is clear that Republican health care proposals would significantly scale back a key feature of the ACA: allowing states to expand Medicaid for adults up to 138 percent of the federal poverty line. This policy decision should be informed by a thorough accounting of the ACA’s Medicaid expansion’s effects.

In this post, we present new evidence that the ACA’s Medicaid expansion reduced the share of low-income Americans with unpaid medical debt and improved their satisfaction with their own financial situation. This evidence is important not only for federal lawmakers debating whether to repeal the ACA, but also for state policymakers in non-expansion states who, if the ACA is retained, will have to decide whether to change course and expand Medicaid.

What Is Known About The ACA Medicaid Expansion’s Effects

To date, several studies compare the experiences of low-income adults in states that chose to expand Medicaid under the ACA with their counterparts in states that declined to expand Medicaid. These studies find that the Medicaid expansion reduced uninsurance for adults with low incomes. The expansion led to increased access to care, and there is some evidence that it improved measures of self-assessed health. These studies indicate that the ACA’s Medicaid expansions have delivered significant benefits to the low-income Americans who live in states that chose to expand Medicaid. However, they do not address a key question about the effects of the Medicaid expansion: how it affects families’ finances.

Medicaid And Financial Protection

Insurance is most fundamentally about giving people financial protection from the risk of needing costly health care that could otherwise overwhelm their personal finances. The landmark Oregon Medicaid experiment that took place before the ACA was enacted found that gaining Medicaid led to large reductions in catastrophic out-of-pocket medical expenditures and improvements in other financial outcomes. However, we know little about the effect of the ACA’s Medicaid expansions on financial outcomes, in part because data on financial outcomes are less accessible for researchers than publicly available data on health insurance and access to care.

A suggestive bit of evidence is that the national rate of personal bankruptcies, which can be driven by medical debt, have fallen since the passage of the ACA. On the other hand, current FDA Commissioner Scott Gottlieb (formerly of the American Enterprise Institute) and others argue, based on observations about health care firms’ write-offs of unpaid debt, that the ACA may be increasing unpaid medical debt. Two recent studies of the ACA Medicaid expansion’s effect on financial wellbeing use credit report data and find that low-income areas in Medicaid expansion states had significant reductions in unpaid non-medical bills and in the amount of non-medical debt sent to third-party collection agencies, compared to low-income areas in states that did not expand Medicaid. One other study finds that low-income adults in Medicaid expansion states had reductions in problems with, and worries about, paying medical bills.

Measuring the Effects of the Medicaid Expansion on Financial Outcomes

To generate new insight into how the ACA’s Medicaid expansion affected financial outcomes, we examined data from an untapped source, the National Financial Capability Study (NFCS). The NFCS was designed to measure different dimensions of financial capabilities among Americans and track these changes over time. The study was developed collaboratively between the U.S. Department of Treasury and the FINRA Investor Education Foundation. Over 25,000 people completed the survey online in each wave, and participants come from all 50 states and Washington, D.C. Details about NFCS’s survey methodology are here.

We use data from 2012 and 2015, which correspond to the periods before and after the ACA’s Medicaid expansion. Similar to the other recent studies described above, we compare changes in outcomes between 2012 and 2015 across states that expanded Medicaid under the ACA against changes in states that did not expand Medicaid over the same time span.

We focus the analysis on the type of people most likely to be affected by the expansion. We include only non-elderly adults (age 18-64), who are not active military, and for whom the lower boundary of their reported income category is below 138 percent of the federal poverty level (FPL) based on their family size and state of residence. The sample includes over 4,500 observations across the two survey years. We weight the data to be nationally representative. Details on our methods, categorization of expansion and non-expansion states, the study sample, and a link to our analysis code are here.

Findings

We focus primarily on outcomes that would be closely-linked to the Medicaid expansion or that relate broadly to financial wellbeing. Financial problems are quite prevalent among low-income, non-elderly adults.

Uninsurance Rates

In 2012, before the Medicaid expansion, almost half of the low-income adults in both sets of states were uninsured. In states that would go on to use the ACA to expand Medicaid before 2015, 43 percent of low-income adults lacked health insurance (Figure 1). In states that did not go on to expand Medicaid, 47 percent were uninsured. Before the ACA Medicaid expansion, uninsurance rates were similar in the two sets of states.

Three years later in 2015, after the ACA, the uninsurance rate among low-income adults had fallen by 16 percentage points, to 31 percent, in states that did not expand Medicaid. This may reflect changes in the economy and other areas of health care policy such as the introduction of ACA’s Insurance Exchanges.

However, the states that expanded Medicaid experienced far larger drops in uninsurance — the uninsurance rate went down by 27 percentage points, to 16 percent, in these states. By comparing the change in the expansion states to the change in non-expansion states, we approximate the effect of the ACA’s Medicaid expansion as reducing uninsurance by 11 percentage points. This is consistent with, though somewhat stronger than, effects reported in prior studies.

Figure 1

Past-Due Medical Bills

Turning to the heart of the question, we examine how the expansion affected the share of individuals with any bills from a health care or medical service provider that are past due. Again, the expansion and non-expansion states start out in similar positions in 2012, with 47 percent of low-income adults reporting unpaid medical debt in non-expansion states compared with 43 percent in soon-to-expand states (Figure 2). In 2015, the share with medical debt fell 7 percentage points in non-expansion states, again perhaps reflecting an improving economy and falling uninsurance due to other mechanisms. In contrast, medical debt fell by almost twice as much, 13 percentage points, in expansion states.

Figure 2

Self-Assessment Of Finances

Next, we estimate the Medicaid expansion’s effect on a self-assessment of household finances, measured through a question which asks, “Overall, thinking of your assets, debt, and saving, how satisfied are you with your current personal financial condition?” Possible responses range on a 10-point scale from, “Not at all satisfied,” (1) to “Extremely satisfied” (10).

Here, the two sets of states do not start off in the same place but again, the expansion states experience greater improvement, evidence that the ACA Medicaid expansion increased financial satisfaction (Figure 3). The Medicaid expansion led to improved satisfaction with one’s current financial situation of 0.38 points on the 10-point scale. For comparison, non-elderly adults outside the military with household incomes near the U.S. median level reported average financial satisfaction at 1.39 points higher than low-income families. So, the effect of the Medicaid expansion closes about a quarter of the gap in financial satisfaction between low-income and median-income individuals.

Figure 3

For all three of these outcomes, more-sophisticated econometric techniques to adjust for other changes between states over time yield similar results. Those statistical techniques conclude that there is less than a 5 percent likelihood of seeing differences in changes as large as we observe just by chance. Details on these analyses are available here. For the other financial-wellbeing outcomes that we examined—difficulty paying bills, too much debt, overdrawing checking, and credit card problems—we do not find evidence that the Medicaid expansion had significant effects at conventional levels of statistical significance, meaning that the observed differences had a greater than 5 percent chance of being due only to chance. The direction of estimated effects varied.

What Does This Mean for Current Medicaid Debates?

This new evidence that the ACA’s Medicaid expansion led to improvements in some financial outcomes for low-income Americans adds to the existing evidence that the Medicaid expansion increased levels of insurance and improved access to health care. Our findings also complement other recent work on credit card debt data and survey data about difficulty paying medical bills.

Our data are somewhat different from what has been used in other recent research, but overall a clear story emerges: The ACA’s Medicaid expansion benefits not just health care, but also financial health. This is not surprising, as financial protection is exactly what health insurance is supposed to provide. But evidence on the extent to which the ACA Medicaid expansion delivered that benefit has been limited.

We do not find significant effects on all of our outcomes. We take our results to mean that even though Medicaid provides important financial protection to low-income individuals, it is not a panacea to all financial difficulties. We also do not mean to imply that the benefits of the ACA’s Medicaid expansion are costless. The expansions are funded by the federal government and to a much lesser extent by state governments. But we do want to highlight that our results add to the evidence on the benefits of this policy.

What does this mean for the debate over the Republican efforts to repeal and replace the ACA? The Congressional Budget Office estimates that the Senate Republican’s Better Care Reconciliation Act (BCRA) would reduce the number of people covered through Medicaid by 15 million by 2026. Repealing the ACA through reconciliation and without a replacement plan would reduce Medicaid coverage by 19 million people by 2026. Many of these people would end up uninsured, and others would end up in private market insurance plans that are much less generous than plans provided under the ACA’s Medicaid expansion.

Our results suggest that Republican proposals would threaten the improvements to financial wellbeing that low-income Americans experienced under the ACA’s Medicaid expansion. If the ACA’s Medicaid expansion survives, Governors and legislators in non-expansion states will need to revisit their decisions around whether the benefits of expanding Medicaid exceed the costs to their states. Lawmakers would be wise to consider consequences for financial wellbeing as they weigh the tradeoffs involved with making major health care policy changes.