| Enrollment in Medicaid expansion reduced out-of-pocket costs of medical care and improved financial stability, leading to improvements in health and financial well-being of enrollees.

| Shalini Kathuria Narang

| Key Takeaways

• Medical debt is a pervasive and growing burden in Michigan and throughout the U.S., affecting millions of individuals and families.
• Using credit report data, researchers found that enrollment in Michigan’s Medicaid expansion program significantly reduced medical debt sent to collection agencies, and improved credit scores in the years following enrollment.
• These findings show that Medicaid expansion can reduce medical-related financial stress and strengthen the economic stability of low-income individuals, families, and communities.

Medicaid expanded its coverage for low-income Michigan residents in April 2014. Currently, more than 650,000 are enrolled in the Healthy Michigan Plan, which provides healthcare coverage to individuals with low incomes. Several studies have shown that the program has brought better physical and mental health to the enrollees and enhanced their ability to seek a job and work.

A new University of Michigan study is the first to examine the longer-term financial outcomes for Medicaid expansion enrollees, and it shows that enrollment has also had a positive and long-lasting impact on financial health. Those who enrolled in the first four years of the program saw large drops in their medical debt amounts in collections. That is, enrollees had fewer medical bills that were left unpaid for so long that they were turned over to a collection agency.

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Medical debt kept declining for at least seven years after enrollment and the credit scores of Medicaid expansion enrollees improved.

These findings are important for other states as they implement new Medicaid requirements and funding limits, signed into federal law last year. The findings can also inform policymakers and voters in the 10 states that have yet to expand Medicaid, and several states that expanded it in the past few years. (See Status of State Medicaid Expansion Decisions.)

“As Medicaid changes and enrollees face new requirements for new or continued access to coverage, these findings can help give a fuller picture of the financial benefits of these programs,” says Nora Becker, the University of Michigan primary care physician and health economist who led the study. “We know that financial stress from medical debt is closely intertwined with physical and mental health, including decisions to go without healthcare to avoid more potential costs. People with more financial security also earn higher incomes and pay more taxes in the future, so Medicaid expansion may also have benefits for state and local government budgets. This is why it’s important to look at personal financial factors over time to get a full picture of Medicaid expansion’s impacts.”

U-M Institute for Healthcare Policy and Innovation (IHPI) conducted the official evaluation of the Healthy Michigan Plan through a partnership with the Michigan Department of Health and Human Services. The evaluation was required under the state’s waiver with the Centers for Medicare and Medicaid Services that spanned the period 2019-2023, and data from the evaluation were used in the new study. 

Other Financial Impacts

The study looks at four kinds of financial outcomes, using anonymous data from Healthy Michigan Plan enrollees and from a major credit agency.  It focused on adults between the ages of 26 (when a parent or guardian’s insurance no longer provides coverage) to 62 (when Social Security retirement benefits and Medicare kick in).

To get the long-term view, the team concentrated on those who enrolled in the Healthy Michigan Plan in its first four calendar years of operation, from 2014 to 2017, and were still alive for at least three years after enrolling. In all, data on 575,283 individuals was analyzed, nearly half of whom enrolled in the program’s first year.

The researchers looked at anonymous financial information for each person, starting several years before their enrollment and for up to seven years after enrollment.

The drop in medical debt in collections began to be seen in the third year after enrollment, and accelerated after that. Subprime credit score rates began to drop after the first year of enrollment.

Half of enrollees are employed but have incomes that are low enough to qualify for Medicaid coverage. Bankruptcy rates and rates of nonmedical debt in collections also did not change after enrollment. 

Shalini Kathuria Narang is a Bay Area-based independent writer and software professional. She writes about health, wellness, education and technology.