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Closing the 'Medicaid gap' would save lives and $2 billion in medical debt, study finds

·Senior Editor
·6 min read

All U.S. states adopting Medicaid expansion would save an estimated 7,000 lives each year, shave off $2 billion of medical debt in collection, and lead to 48,640 fewer evictions on an annual basis, according to a new report from the Center for American Progress (CAP).

Health insurance is “about far more than just coverage,” Emily Gee, co-author of the report and senior economist for health policy at CAP, told Yahoo Finance. “It can improve so many facets of people’s well-being, whether that’s health-related or financial, or even just peace of mind. My goal was to quantify the benefits of closing the coverage gap. The number of lives saved, reductions in evictions, and the reductions in medical debt is staggering.”

Medicaid has been around since 1965 and was dramatically expanded under the Affordable Care Act (ACA), commonly known as Obamacare, to increase eligibility for low-income Americans. In 2012, the Supreme Court ruled that the ACA's expansion of Medicaid across the U.S. was “unduly coercive” and left it up to the states to decide if they wanted to adopt Medicaid.

There are currently 12 states that have not adopted Medicaid, which became a lifeline for millions of Americans after the coronavirus pandemic led to massive job losses in the U.S.

“Traditionally, states or governments have covered pregnant women, children, low-income seniors, people with disabilities, but generally didn’t cover childless adults,” Gee said. “This program was going to give people up to 138% [of the federal poverty level] coverage for Medicaid. And then people with higher incomes or lower-income and middle-class families would have access to subsidies to work at places. Those with incomes over 400% [of the federal poverty level] would not get subsidies, but could still buy marketplace coverage.”

Federal poverty levels are used to determine if someone is eligible for Medicaid or premium tax credits through the health care marketplace. To qualify for Medicaid, a person must make up to 138% of the federal poverty level — which is currently $17,774 for a single individual.

If someone’s income is between 100% and 400% of the federal poverty level, they qualify for premium tax credits that lower their monthly premium. If their income is below 138% of the federal poverty level and their state has adopted the Medicaid expansion, they qualify for Medicaid. And if their income is below 100% of the federal poverty level and their state has not adopted the Medicaid expansion, they likely won’t qualify for either income-based Medicaid or premium tax credits (also known as the Obamacare subsidies).

In the 12 states that have yet to expand Medicaid, according to the CAP report, there are roughly 2.2 million low-income adults that have fallen into the so-called Medicaid gap “with no options for affordable coverage.” Additionally, the report noted, “most live in states in the South, and about 60% are people of color.”

'The economics are strongly in favor of expanding' Medicaid

Expanding access to Medicaid generally means improving access to health care. 

According to the CAP report, states that expanded Medicaid have seen “lower rates of hospitalizations related to opioid use disorder as well as earlier detection of cancer” in addition to “reductions in cardiovascular mortality, maternal mortality, infant mortality, mortality of the near-elderly, and overall mortality,” along with a narrowing of racial disparities in health outcomes.

During the 2020 presidential campaign, President Biden touted a health care policy proposal that would automatically enroll individuals into Medicaid who would normally qualify for it if their state had adopted the expansion. 

“There are a bunch of gaps in coverage in the ACA, or Obamacare, in part because some states expanded and some states didn’t and the original law was written as if all states expanded,” Katherine Baicker, dean of the Harris School of Public Policy at the University of Chicago, told Yahoo Finance. “There are these income ranges where people aren’t eligible for subsidies on the private health insurance exchange because the original law envisioned them being covered by Medicaid, but then states that didn’t expand Medicaid, they’re not covered by Medicaid either.”

President-elect Joe Biden adjusts his face mask after delivering remarks about health care and the ACA in Wilmington, Delaware, November 10, 2020. REUTERS/Jonathan Ernst
President-elect Joe Biden adjusts his face mask after delivering remarks about health care and the ACA, which expanded Medicaid, in Wilmington, Delaware, November 10, 2020. REUTERS/Jonathan Ernst

And federal funding covers 90% of the costs for expansion enrollees, meaning the onus isn't placed on state taxpayers. 

“The state choice to expand Medicaid is largely about politics and preferences, not about economics in the sense that the vast majority of the cost of expanding falls on other states,” Baicker said. “If you choose to expand as a state, it’s funded by federal dollars, only a small share of which are paid by residents of your state. The economics are strongly in favor of expanding because Medicaid provides substantial benefits to residents of your state and very limited cost to people in your state. It has to be about something beyond those economic calculations and more about politics and philosophical choices.”

Baicker is skeptical that Medicaid will be federally reformed any time soon to address these glitches, with politics playing a key role.

“There are also some technical glitches in terms of how affordability is defined and how subsidies are defined for individuals versus families that I think in a different political climate would just be fixed as technical improvement in the law,” Baicker said. “For such a big change in policy, you would expect there to be legislative as well as administrative refinements over time. It just didn’t happen in the current political environment.”

A woman wearing a face mask with Medicare for All written on it,  seen near the Capitol as she takes part in the March for Medicare for All in Washington D.C. on 7/24/2021. (Photo by Probal Rashid/LightRocket via Getty Images)
A woman wearing a face mask with Medicare for All written on it, seen near the Capitol as she takes part in the March for Medicare for All in Washington D.C. on 7/24/2021. (Photo by Probal Rashid/LightRocket via Getty Images)

Medicaid gap: 'Just really sad and incredible'

Closing the Medicaid gap could also wipe off billions of dollars in medical debt. 

Many of these non-expansion states have some of the highest amounts of medical debt. Collection agencies held an estimated $140 billion in unpaid medical bills in 2020. These costs are led by emergency room visits, childbirth, and visits with doctors and specialists. 

About 28 million people (about 8.6% of Americans) were uninsured in 2020, meaning that at no point did they have any type of health insurance, according to new data from the U.S. Census Bureau.

“The most stark numbers out of the Census data, if you’re looking at it, is really this persistent gap in insurance rates between expansion and non-expansion states,” Gee said. “It’s just really sad and incredible. ... Filling that gap would go a long way to narrowing that disparity between these two types of states, but also narrow racial and ethnic disparities in insurance coverage.”

Relatively high health care costs in America are another factor.

“Even outside of the gap, people may have skimpy plans that don’t cover previous conditions or other catastrophic events or have an annual or lifetime limit,” Gee added. “I think this reduction in debt would be a boon to both households and providers since eventually, that debt that’s in collection gets written off by the hospitals and other providers.”

Adriana Belmonte is a reporter and editor covering politics and health care policy for Yahoo Finance. You can follow her on Twitter @adrianambells and reach her at adriana@yahoofinance.com.

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