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As more states expand their Medicaid programs, it looks like the positive effects are reaching beyond health – but also to consumer bankruptcy.

Medicaid Benefits

For the past few decades, economists have looked into the how Medicaid expansion can affect a state’s population. Obviously long term health care is impacted. But recently two economists, Matt Notowidigdo and Tal Gross, decided to take a look at how Medicaid impacted consumer bankruptcy.

Consumer Bankruptcy

Families turn to bankruptcy when they have exhausted all means and are overwhelmed with debt. Consumer bankruptcy allows a family to discharge their debt. And while bankruptcy used to be rare, it’s fairly common in our current economy. In fact, nearly 10% of American households have declared bankruptcy. Notowidigdo and Gross wondered – would Medicaid coverage allow families to avoid consumer bankruptcy?

The Study

Since one of the main benefits of health insurance is not needing to pay for care when you really need it – thus relieving families of paying for large hospital bills. As a result – maybe this would also help them avoid bankruptcy. The two, being economists, stuck to the quantitative data on Medicaid expansions of the 1990s and early 2000s. During the years following states’ expansions of medicaid, fewer families had declared bankruptcy. In fact, every time Medicaid eligibility increased by 10 percentage points – bankruptcy rates reduced by eight percent.

What they can conclude from these findings is that for states missing out on the direct benefits of Medicaid – such as improved health, they might also be missing out on indirect benefits such as lower bankruptcy rates.

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