New study shows medical debt cut nearly in half in states that expanded Medicaid

MONTGOMERY, Ala. – Medicaid expansion reduces medical debt, a new study in the Journal of the American Medical Association (JAMA) has found. According to the report, “the mean medical debt decreased by 44% between 2013 and 2020 in states that immediately expanded Medicaid,” improving their populations’ overall financial health. But Alabama and other states that failed to expand Medicaid have seen only a 10% decline in medical debt during the same period.

“Alabama’s failure to expand Medicaid has forced Alabama families to file bankruptcy and take on additional debt,” said Jane Adams, campaign director of Alabama Arise and director of the Cover Alabama Coalition. “The tangible benefits of Medicaid expansion go far beyond providing people with health insurance. This study shows that Medicaid expansion leads to less individual debt and a more thriving state and local economy.”

Medicaid expansion would provide health insurance to adults with low incomes who make too much to qualify for Alabama Medicaid but not enough to afford a private plan. More than 220,000 Alabamians are in this coverage gap. An additional 120,000 are struggling to pay for coverage they cannot afford.

The JAMA study, published July 20, also found that Medicaid expansion “significantly reduced the number of unpaid non-medical bills and the amount of non-medical debt sent to third-party collection agencies.” Scholars from various universities and the National Bureau of Economic Research used national credit report data from 2010 to 2020. According to the study, “between 2013 and 2020, the states that expanded Medicaid in 2014 experienced a decline in the mean flow of medical debt that was 34% greater than the states that did not expand Medicaid.” 

Most Southern states have failed to expand Medicaid, and their residents have faced worse financial outcomes, specifically when it comes to medical debt in collections. The South accounts for nearly 24% of all medical debt in collections across the country. 

Medical debt is a key driver of poverty. A 2019 study published in the American Journal of Public Health found that 66.5% of all bankruptcies in the United States were tied to medical issues, either because of the high cost of care or time off work. In 2019, medical expenses alone moved 7.7 million Americans into poverty, according to the Census Bureau’s Supplemental Poverty Measure. 

A majority of Alabamians support expanding Medicaid, including 54% of Republicans. But Alabama’s elected leaders are still leaving many Alabamians uninsured by refusing to expand health coverage. Medicaid expansion would benefit working families by ensuring coverage for adults between ages 19 and 64 whose incomes are at or below 138% of the federal poverty level. In 2021, that amounted to $17,774 for an individual and $36,570 for a household of four.

“The best way for Governor Ivey to help families facing debt is to expand Medicaid coverage, as 38 other states have done,” Adams said. “It’s time to open a pathway for all Alabama families to get affordable and consistent health care.”

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About Cover Alabama: The Cover Alabama Coalition is a nonpartisan alliance of more than 110 advocacy groups, businesses, community organizations, consumer groups, health care providers and religious congregations advocating for Alabama to provide quality, affordable health coverage to its residents and implement a sustainable health care system.