The ACA is making medical debt a little less red

Medical debt is falling thanks to higher insurance rates under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), according to a study by the National Bureau of Economic Research (NBER). The study estimates that the medical debt held by people with new Medicaid coverage fell between $600 and $1000 each year since 2014. Additionally, the study determined that the ACA’s Medicaid expansions resulted in beneficial financial impacts that extend beyond the use of and access to health care.


The financial impacts of not having health insurance can be severe. According to data from the Medical Expenditure Panel Survey (MEPS), the annual cost of inpatient care for a person aged 18 to 64 who was hospitalized in 2012 was approximately $15,000 and the annual cost of all types of care for that person for the year was $25,000. Thus, it is hardly surprising that those without insurance are more likely to have difficulty paying, become delinquent on, and be contacted by a collection agency regarding their medical bills. The study cited data suggesting that when an uninsured individual is hospitalized, that individual doubles their likelihood of bankruptcy and experiences other hardships like reduced access to credit.


Using credit-reporting data for a large sample of individuals, the NBER compared individuals living in Medicaid expansion states with individuals that live in states that have not expanded Medicaid. The study relied on Federal Reserve Bank of New York Consumer Credit Panel/Equifax (CCP) data to measure financial outcomes of individuals in the population between the ages of 19-64. The study used data from 2010 through 2015—four years of pre-Medicaid-expansion data and two years of post-expansion data. Demographic information was acquired based upon zip code data.


The study found that Medicaid expansion significantly reduced the amount of debt in third-party collections among those individuals that live in zip codes containing the most poor and uninsured individuals. The study primarily looked at individuals earning less than $16,000 a year. The NBER estimated that reductions in collection amounts in 2014 were between $51 and $85. The overall impact of debt reduction fell between $600 and $1000. Although the impact is positive, it is not complete in terms of health care related debt or hardship elimination. A Kaiser Family Foundation survey identified that, even with the passage of the ACA, one in five Americans still struggle to pay their medical bills.

Other impacts

Medical debt and its impact on financial security is an important measure of success for the ACA. The significance stems in part from the fact that the impacts of Medical debt go beyond health. Medical debt can force people to rely on savings, cut back on other necessities (including other health care expenditures), and fall behind on other payments (car, rent, etc.), any and all of which can put employment at jeopardy. Medical debt is often both a symptom of and a factor leading towards other financial hardships.  The ACA’s positive impact at reducing those hardships is, at least for those with medical debt, a good sign. Additionally, the reduction of medical debt is yet another reason for non-expansion states to consider expansion of their Medicaid programs.