Expanding Health Coverage Provides Financial Protection Too, Study Shows

The comprehensive health reform that Massachusetts enacted in 2006 improved residents’ financial well-being, likely by protecting them from high out-of-pocket medical costs (among other things), according to recent research from the Federal Reserve Bank of Chicago.  Combined with previous research, these findings suggest that the federal Affordable Care Act (ACA) will not only give people better access to quality health care but also help them avoid financial hardship.

As the share of Massachusetts residents with health coverage rose by about 7 percentage points, residents’ credit scores improved, personal debt fell 22 percent on average, and the likelihood of bankruptcy fell 18 percent, after controlling for other personal and macroeconomic factors.  The positive financial effects of health coverage were especially pronounced among residents who had lower credit scores prior to health reform, though residents across the income spectrum benefited.

Using a rich database of credit report information, the Federal Reserve analysts evaluated a wider array of direct financial outcomes than has previous research.  They evaluated the impact on financial outcomes of each percentage-point increase in the share of the population with health coverage.  Since Massachusetts had one of the country’s highest rates of health coverage before enacting health reform, the Federal Reserve analysis suggests that the ACA’s major coverage expansions would have even greater financial benefits in states with lower health coverage rates.

The Massachusetts results reinforce findings from the landmark Oregon health insurance experiment, which found that uninsured adults who gained Medicaid coverage not only had better access to health care than adults who remained on a waiting list for Medicaid but also were less likely to borrow money or leave other bills unpaid to cover medical expenses.