Working Paper: NBER ID: w24002
Authors: Kenneth Brevoort; Daniel Grodzicki; Martin B. Hackmann
Abstract: This paper investigates the effects of the Medicaid expansion provision of the Affordable Care Act (ACA) on households' financial health. Our findings indicate that, in addition to reducing the incidence of unpaid medical bills, the reform provided substantial indirect financial benefits to households. Using a nationally representative panel of 5 million credit records, we find that the expansion reduced unpaid medical bills sent to collection by $3.4 billion in its first two years, prevented new delinquencies, and improved credit scores. Using data on credit offers and pricing, we document that improvements in households' financial health led to better terms for available credit valued at $520 million per year. We calculate that the financial benefits of Medicaid double when considering these indirect benefits in addition to the direct reduction in out-of-pocket expenditures.
Keywords: Medicaid; Financial Health; Affordable Care Act
JEL Codes: D14; H51; I13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Medicaid expansion (I18) | reduced unpaid medical bills sent to collection (I13) |
| Medicaid expansion (I18) | newly accrued medical debt (H63) |
| Medicaid expansion (I18) | average annual decline in accrued medical debt (G52) |
| Medicaid expansion (I18) | likelihood of becoming newly delinquent on debt obligations (G33) |
| Medicaid expansion (I18) | improvements in credit scores (G51) |
| Medicaid expansion (I18) | fewer bankruptcies among subprime borrowers (K35) |
| Medicaid expansion (I18) | better credit terms (G21) |
| financial benefits of Medicaid expansion (I18) | direct reductions in out-of-pocket expenditures (H51) |