Medical bills are skyrocketing, and about one quarter of Americans families are struggling under the weight of their health care costs. According to some estimates, medical costs are the biggest reason that Americans are driven to bankruptcy. How much will the health reform law be able to help address this? It’s still somewhat of an open question — but new research suggests it could nudge the country in the right direction.
A new working paper from the Federal Reserve Bank of Chicago finds that health care reform in Massachusetts — which relies on many of the same policies in the Affordable Care Act — significantly reduced “financial distress.” Researchers looked at financial outcomes for a broad sector of the state’s residents, not just the low-income people who gained access to insurance.
“We find that the reform reduced the total amount of debt that was past due, the fraction of all debt that was past due, improved credit scores and reduced personal bankruptcies,” the researchers conclude. “These results show that health care reform has implications that extend well beyond the health and health care utilization of those who gain insurance coverage.”
Similarly, previous studies have estimated that Obamacare could help boost the poorest Americans’ incomes by at least five percent, since the law will help them avoid big out-of-pocket expenses for their health care needs. Gaining insurance coverage, which protects against incurring huge costs for catastrophic events, is the first step in this equation. Then, Obamacare also attempts to limit the costs that private health insurers can shift onto consumers by capping annual out-of-pocket costs to about $6,300.
However, these type of gradual improvements certainly don’t mean the problem of medical bankruptcies will totally disappear. There are still some concerns that Obamacare doesn’t do enough to keep medical costs low — so economically disadvantaged Americans gaining insurance for the first time still may remain “underinsured,” devoting too much of their income to co-pays and deductibles. And although the majority of Massachusetts residents report they’re very happy with health reform in their state, they acknowledge that their personal medical costs have gone up.
Researchers who focus on medical bankruptcies point out that they’re ultimately a function of tying health insurance to market concerns, and the countries that have made the most progress in eliminating them have universal health care systems.