Reducing the cost of healthcare, and bringing insurance into the reach of more people, was the point of Obamacare. After all, while it’s popularly known as Obamacare, the law is technically named the Affordable Care Act.
Medical debt is one of the major causes of bankruptcy, with one-quarter of bankruptcies citing it as the primary factor in filing. Many people, while not filing for bankruptcy, will still accumulate medical debt they are unable to pay off. Obamacare should, if it is serving its intended purpose, reduce that number.
Comparing numbers is a little difficult because different studies have produced different percentages. However, we can look at a general progression and get a good idea of the effect ObamaCare has had on bankruptcy filings.
Prior to ObamaCare going into effect in 2013, medical debt linked bankruptcies were significantly higher than they are currently. As many as three in five bankruptcies before ObamaCare could be attributed in whole or in part to medical debt.
1.8 million people in 2013 lived in households that filed for bankruptcy where medical debt played a role. A much larger number of people were struggling with medical debt or had debt that they could not pay. This was caused by a high number of people without health insurance or with insufficient health insurance.
While there was a great deal of discussion, most people agreed that the health insurance system in the United States needed some overhaul.
Massachusetts and Mandatory Health Insurance
A few years before ObamaCare went into effect, Massachusetts put into effect some healthcare reforms. These reforms would late serve as a model for what would become ObamaCare. The Massachusetts plan was thought to be a good indicator of how ObamaCare would affect the marketplace.
After Massachusetts made health insurance mandatory, people who filed for bankruptcy had less medical debt. While medical debt was still a factor, Massachusetts was the only state in which it was not a major cause of bankruptcy.
ObamaCare and the Massachusetts plan were not quite the same, however. The lower end health insurance plans (bronze plans) were calculated to cover 40 to 50 percent of medical costs. Obamacare, as it was implemented, covered as much as 60 percent of medical care.
Many people assumed this would have an even greater effect, lowering medical costs and reducing the number of medical debt bankruptcies.
ObamaCare in Action
The Affordable Care Act obviously has had some positive effect. Medical debt went from being a primary cause in 60 percent of bankruptcies prior to 2013 to being a primary cause in between 18 and 25 percent of cases in 2014. That is a big reduction.
The fact that medical debt still plays a large role in bankruptcy shows that, while ObamaCare has improved things, it has not completely solved the problem. While many people who did not have health insurance now do, reducing the cost of health care, health insurance is still expensive.
While the number of insured people has risen dramatically, many of those people are underinsured. Many low and middle-income families are underinsured. These are people that, while they have purchased health insurance, are unable or unwilling to buy plans that have the coverage they need. The number of uninsured has dropped from 15% to just under 10%.
However, when uninsured people do incur medical costs, they usually end up with more medical debt than they can afford. This has contributed to the continuingly large impact medical debt has on bankruptcies.
While ObamaCare has improved the situation, medical debt continues to be a large burden in the United States. The implementation of the Affordable Care Act has been problematic, and there have been many calls to reform, both politically motivated and as a result of the complexity of the healthcare system. However, it is an improvement.