ACA may cut down on patient bankruptcies, bump credit scores

Could the Affordable Care Act (ACA) help to reduce personal bankruptcies? That's the gist of research performed by economists at the Federal Reserve of Chicago and the University of Notre Dame.

The economists used healthcare reform in Massachusetts--which is structurally similar to the ACA–to determine its impact on personal bankruptcy filings.

"The context of our study is a major state-level reform that closely resembles the Affordable Care Act, making this analysis highly relevant for the ongoing debate surrounding the current federal program," wrote economists Bhashkar Mazumder and Sarah Miller.

Their findings: personal bankruptcies dropped by 20 percent, and credit scores improved. The report also suggests that hospitals--many of which will take legal action against patients to collect on medical debts--are more likely to receive payment for the care they provide.

"Ideally, full implementation of federal healthcare reform will lower the out-of-pocket costs of healthcare enough to cause a similar decline in medical debt, one of the leading causes, along with layoffs and divorce, of bankruptcy filings," Ed Mierzwinski, consumer program director for the Public Interest Research Group, told MarketWatch.

Healthcare expenses are the biggest driver of personal bankruptcies in the United States, with pricey treatments such as cancer care more likely to lead to a filing than other kinds of healthcare delivery.

However, there were some caveats to the study. Those with lower credit scores tended to experience a more positive impact from healthcare reform than those with better scores. And some scholars believe that in the two dozen states that have declined to expand Medicaid, many of those most likely to avoid bankruptcy won't be able to do so.

"For the non-Medicaid-eligible population, the effect of Obamacare on medical bankruptcies is likely to be minimal," Stephanie Woolhandler, a professor of public health at Hunter College, told MarketWatch.

To learn more:
- read the MarketWatch article
- check out the study (.pdf)