Deaths and bankruptcies: What awaits states that don’t expand Medicaid?

Pennsylvania just became the 27th state in the country to agree to implement the Affordable Care Act’s Medicaid expansion. The state will expand Medicaid to a half-million of its low-income residents. The federal government will cover most of the costs of that Medicaid expansion.
  
But what of the other 23 states?  Some states, like Utah and Indiana are still debating an expansion. Others, like Florida and Texas, seem determined not to expand Medicaid. They’re missing out. Over the past few decades, economists like myself have studied all of the ways that a Medicaid expansion can affect a population. We now know a good deal about what broader Medicaid coverage can do to a state.
  
{mosads}Take, for instance, recent research on Oregon’s Medicaid program. A team of researchers found that people given access to Medicaid were more likely to be diagnosed and treated for diabetes and depression. Or consider a recent study of the 2007 Massachusetts health care reform. Researchers found that being covered by Medicaid can lower the risk of dying.

But an expansion of Medicaid might do more than just improve health.  Medicaid coverage can have some surprising, positive side-effects. Along with another researcher, Matt Notowidigdo, I studied the effect of Medicaid on consumer bankruptcy. Families declare bankruptcy when they are overwhelmed with debt. In exchange for their assets, a bankruptcy judge can relieve a family of all of its debts. Bankruptcy used to be rare, but it’s now common: nearly ten percent of American households have declared bankruptcy.
  
We hypothesized that Medicaid coverage might allow some families to avoid bankruptcy. After all, one of the chief benefits of health insurance is that—when you really need health care—you don’t have to pay for it. Perhaps, we thought, families given Medicaid coverage are less likely to get stuck with a big hospital bill, and so are less likely to end up in bankruptcy.
  
To test that hypothesis, we dug up data on the Medicaid expansions of the 1990s and early 2000s. We found that, in the years after states expanded Medicaid, fewer families declared bankruptcy. Every ten-percentage-point increase in Medicaid eligibility—typical of 1990s-era Medicaid expansions—led to an eight-percent reduction in bankruptcy rates.
 

As economists, our research was quantitative: we analyzed bankruptcy records, but we didn’t talk to the bankruptcy filers themselves. Still, there exists plenty of anecdotal evidence to suggest that the pattern we observe in the data represents the experience of many Americans. For example, in reporting his book, The Great Unwinding, George Packer interviewed a Florida foreclosure attorney who described clients coming in to his office straight from chemotherapy: “I find that a lot of my clients are sick,” the attorney said.

And our findings have also been validated by other quantitative research.  For instance, the 2007 Massachusetts health reform was associated with a drop in bankruptcy rates. Once nearly every citizen in Massachusetts had access to affordable health insurance, bankruptcy rates went down.

Of course, past research on Medicaid expansions are an imperfect guide of what to expect from the Affordable Care Act. Only time—and future research—will demonstrate the effects of the ACA’s Medicaid expansion. But the evidence we have from past Medicaid expansions tells us what we should expect from the ACA.

All of this is to say that 23 states are missing out on more than just billions of dollars in federal funding. They are missing out on the direct benefits of Medicaid: fewer uninsured people and better access to health care. And they are also missing out on indirect benefits, like a reduction in bankruptcies.

Gross is assistant professor of Health Policy,  Department of Health Policy and Management at Columbia University, and a 
Public Voices fellow with the OpEd Project.