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Obamacare Helps Some People Be a Little Less Poor

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There are some eternal debates that may never be settled. If there is a God, why does God allow evil in the world? Great taste, or less filling? And of course, does Medicaid make people healthier?

I’m not going to rehash that last debate here, which I have covered many times. Suffice it to say that while liberals insist that the evidence is clear that health insurance expansions improve physical health, at least modestly, I do not see that the evidence warrants the confidence they exude. The intuitive sense that this ought to be correct seems to me to be doing a lot of heavy lifting in these evaluations. In health care, our intuitions are often wrong.

(Related: How Has the ACA Affected People’s Health?)

We’ll probably find it easier to settle a related debate, which is often mistaken for the same debate: Does Medicaid make people better off?

After all, it’s possible that Medicaid does nothing for your objective physical health, but makes you better off simply because you are under the impression that you are now at less risk of disease or dying. Peace of mind is valuable. (Just ask an insurance company how much we’re willing to pay for it.) And as you can readily see from any pharmaceutical clinical trial, the placebo effect is quite real, and often quite significant; the people who experience it are still better off, even if the abatement of their symptoms begins in their minds.

And of course, Medicaid may also make people financially better off. It is possible that most people manage to get medical care somehow, when they really need it (and are willing to comply with often onerous regimens). But those people will be left with debts, or have to cheat other priorities in order to ensure that the doctor gets paid. For the poor and near-poor, especially, this is a heavy burden: They have fewer resources to pay the bills, and for a variety of reasons, are more likely to be sick in the first place.

And here, we have considerably better evidence for a benefit. A randomized controlled study of Medicaid access in Oregon, which ultimately failed to find any statistically significant improvement in objective health markers, unequivocally found that the people who got Medicaid experienced less financial distress than those who didn’t. Over at Mother Jones, Kevin Drum points to another recent study showing the same result, from the Consumer Financial Protection Bureau. It suggests that in the states that accepted Obamacare’s Medicaid expansion, medical debt dropped dramatically compared to the states that declined the expansion. “So: Does Medicaid work?” writes Drum. “Yes indeed. It has moderate but positive effects on health, and very large effects on medical debt.”

It is customary at this juncture for me to offer the caveat that this is only one study, and no one study is definitive. I therefore offer it. Nonetheless. I would be very surprised if we later discover that no one got a financial benefit from the Medicaid expansion.

Measuring tape (Image: Thinkstock)

(Image: Thinkstock)

And yet, there is something surprising in this study: how modest the effect is. While the CFPB does show that states that expanded Medicaid saw significant declines in the overall level of medical debt, it also shows that there’s basically no decline in bankruptcies. One would have expected at least a small noticeable effect on the rate of bankruptcy.

What’s going on here? A few explanations spring readily to mind. First of all, the period of the study is short. It covers only two years of the Medicaid expansion. It can take quite a while before insolvent people finally admit that there’s no help for it, and actually file for bankruptcy, so the study may simply not have been long enough to detect an effect (though the fact that it was included in the CFPB’s presentation suggests that the agency expected to find one).

It is also possible, of course, that the “classic medical bankruptcy” is more often found in the imagination than in reality. That’s not to say that sickness doesn’t drive people into bankruptcy, because it’s quite clear that it does. But it’s less clear how often medical bills play the driving role in those bankruptcies. Many people pay doctors with credit cards, so researchers can’t even reliably determine what percentage of consumer debt is medical. And families with catastrophic illnesses often also experience significant income loss, making all their other debts impossible to pay: even in Canada, which has a single-payer system, a significant number of people cite illness as the primary reason for their bankruptcy.

It may be that over time, as we have more years of data to look at, it will become clear that the Medicaid expansion has prevented many bankruptcies, fulfilling the implicit promise made by Obamacare’s architects and supporters. But it may be that the difference between expansion and non-expansion states will stay stubbornly minimal, which brings us to Drum’s rhetorical question about whether Obamacare “worked.”

When Obamacare was passing, its supporters were pretty clear about what the program was supposed to do: save thousands of lives every year, reduce health care costs, lower premiums, and save thousands of families from the trauma, and stigma, of bankruptcy.

Have mortality rates dropped? No, they rose. Are premiums lower? No. Have bankruptcies dropped? Yes, but only dubiously related to Obamacare. The only outcome for which we have really strong evidence is a modest reduction in the financial stress of illness. According to the CFPB, we have reduced medical debt by about $5.5 billion, or roughly $10 per consumer.

Now, that debt is not equally distributed, so some people got a substantial benefit and are breathing easier without having to worry about their medical bills. That’s a definite good, and we should all be glad to know that fewer people are waking up in the middle of the night, wondering where they’re going to be able to pay for their medical care.

But we’re spending more than $100 billion a year on Obamacare. That is a lousy way to save people $5.5 billion in medical debt. It will be troubling if we continue to find good evidence of small effects like these, and less compelling evidence of the substantial benefits we were promised in return for all that money.

— Read U.S. States That Embraced the ACA Are Seeing Less Debt Sent to Collection Agencies on ThinkAdvisor.