Since the Affordable Care Act and Medicaid expansion took effect, researchers have been tracking the effects of expanded coverage on Americans’ financial well-being. Recent findings suggest that gaining Medicaid coverage is associated with declining medical debt, fewer personal bankruptcies, improved credit scores, and reduced reliance on predatory lending practices.

Here are three recent studies that discuss the evidence in detail.

“Using a nationally representative panel of five 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.” The study also found “approximately 50,000 fewer bankruptcies over the first two post-reform years.”

Credit scores can determine whether someone is approved for an apartment, mortgage, car loan, cell phone plan, or credit card — and what interest rate or security deposit they must pay. The scores are also often used to determine how much someone pays for home or auto insurance. Read the National Bureau of Economic Research’s paper, “Medicaid and Financial Health.”

After certain California counties moved quickly to expand Medicaid, the number of payday loans in those counties each month declined 11% compared to counties, both in California and across the country, that had not expanded Medicaid eligibility during the study period. The number of unique borrowers and the amount of payday loan debt also declined in early expansion counties, particularly among Californians under 65, the group eligible for coverage. The authors note that the decline in payday borrowing “did not appear to be due to a preexisting trend” and “was more pronounced in areas that had a higher share of uninsured people before the expansion.” Read the full Health Affairs article, “Early Medicaid Expansion Associated with Reduced Payday Borrowing in California.“

Payday loans are a form of short-term, high-interest borrowing primarily used by low- and middle-income Americans. Payday loans are considered a major financial hazard because they trap borrowers in a cycle of debt. “In 2012, about 12 million Americans took out at least one payday loan; the average borrower took out eight loans of $375 each, and for each spent $520 in interest.”

There is evidence that the Medicaid expansion helped families make ends meet by freeing up resources that would otherwise be spent on medical bills. In a recent survey of individuals covered by Ohio’s Medicaid expansion, 59% of enrollees reported that it was easier to pay for groceries after enrollment, according to the state Department of Medicaid. Forty-eight percent said it was easier to pay their rent or mortgage, and 44% said it was easier to pay off debts. The study also found that the percentage of enrollees with medical debt declined by nearly half after enrolling in Medicaid. Read the Ohio Department of Medicaid’s full report, “Ohio Medicaid Group VIII Assessment” (PDF).

Anne Sunderland

Anne Sunderland is the senior communications officer for CHCF’s Improving Access team, which works to improve access to coverage and care for Californians with low incomes. Read More

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