Study says Medicaid expansion in Michigan improved beneficiaries' financial health

Medicaid expansion seems to have helped many Michiganders get out of debt, according to a new study. (Getty/Valeriya)(Getty/designer491)

A new study suggests that Michigan’s Medicaid expansion significantly improved beneficiaries’ health—their financial health, that is.

The paper, which was published as part of the National Bureau of Economic Research Working Paper series, found that past-due debts, bills in collections and bankruptcies all decreased among the expansion population between April 2014 and March 2015.

Third-party collections decreased exponentially from month to month over that period, eventually falling between $538 and $676, or 29% to 37%. Medical bills in collection specifically decreased between $384 and $515—between 42% and 57%.

Moreover, the number of newly covered individuals with subprime credit decreased by 3%, and the number with deep subprime credit decreased by 18%. Although past-due credit dropped by about $230, credit card and auto debt increased, suggesting better access to credit markets and lower interest rates.

Bankruptcies decreased about 10%.

RELATED: Louisiana uninsured rate cut in half due to Medicaid expansion

Although most studies examining Medicaid coverage and financial outcomes face certain sampling limitations, this study matched Medicaid administrative data and credit report data, allowing the researchers to measure these trends directly.

The benefits of Medicaid expansion “spill over into the community,” according to the University of Michigan’s Sarah Miller, Ph.D., lead author of the study.

When hospitals can’t remain financially solvent—“something that we’ve felt repercussions of in Michigan,” especially the Detroit area—they close, Miller said.

When hospitals close, communities lose a place to get medical care, and many people in that community lose their jobs, she explained. But when more people have coverage, it’s easier for hospitals to stay afloat, as they spend less on uncompensated care.

RELATED: Medicaid work requirements could remove at least 2.1M people if applied nationally, with limited savings

Michigan’s Medicaid program made the news last week, when the state submitted a waiver to the Centers for Medicare & Medicaid Services asking to implement work requirements for its expansion population. If the waiver gets approved, some Michiganders could lose coverage, such as was recently reported by officials in Arkansas.

“If people are disenrolled because of the work requirements, or for any reason—say they got rid of the expansion—I definitely think you would see these benefits start to evaporate,” Miller said.

However, this study and others have real political implications.

“We’re seeing more and more red states adopt the Medicaid expansion, [partially] because there have been so many documented benefits to people living in the state,” Miller said.