The Impact of the Massachusetts Health Care Reform on Unpaid Medical Bills

By Arrieta, Alejandro | Inquiry, August 2013 | Go to article overview

The Impact of the Massachusetts Health Care Reform on Unpaid Medical Bills


Arrieta, Alejandro, Inquiry


Abstract

The Massachusetts health care reform was expected to reduce the financial burden of medical care, but literature exploring this effect is limited. In this study, we use hospital financial information and a panel data difference-in-difference model to assess the impact of the Massachusetts health care reform on unpaid medical bills. We find that the reform reduced the financial burden for patients, reflected by a 26 percent decrease in hospital bad debt The effect was more pronounced among safety-net hospitals, indicating a larger benefit for the most vulnerable population.

Keywords

Health reform, medical bills, hospital bad debt safety-net hospitals

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Massachusetts enacted health care reform legislation in 2006 to move the state toward universal coverage. The reform made insurance coverage mandatory for adults, expanded public coverage through MassHealth and Commonwealth Care, created an insurance exchange for individuals and small businesses, and required larger employers to provide private insurance (McDonough et al. 2008). A growing body of literature has reported the reform's impact on different stakeholders (Cozad 2012; Gettens et al. 2011; Kenney, Long, and Luque 2010; Kolstad and Kowalski 2010; Ku et al. 2011; Long, Stockley, and Yemane 2009; Miller 2012a, 2012c; Pande et al. 2011). However, studies on the effects of the reform on patient's ability to pay for medical bills are limited.

The literature assessing the impact of Massachusetts health care reform on the financial burden of medical care has used information from either patient surveys or personal bankruptcy files. For example, Long (2008b) used the Massachusetts Health Reform Survey to show an initial reduction of 24 percent in the number of residents reporting problems paying medical bills. However, this reduction vanished and was not statistically significant in the following years (Long, Stockley, and Dahlen 2012). Rather than ineffectiveness of the reform, the result of this pre-post study could be explained by the negative effect of the economic recession of 2008-2009 on the financial burden of households nationwide. Without a control group, both effects cannot be disentangled. Using personal bankruptcy files, Miller estimated the effect of the reform on bankruptcy rates through a quasi-experimental design (Miller 2012b). (1) The author found that the reform reduced personal bankruptcy by about 12 percent, a high but plausible effect considering that insurance expansion concentrated in low-income households (the most vulnerable to financial distress). However, although personal bankruptcy could be triggered by medical debt, it only captures extreme cases of unpaid medical bills. According to Domowitz and Sartain, the probability of filing for bankruptcy is only 2 percent for households with medical debt below 2 percent of income, while the same probability is 58 percent for households with higher medical debt (Domowitz and Sartain 1999). Moreover, medical bills are one of many other factors that contribute to bankruptcy. Since any liability is equally likely to push households into bankruptcy (Dranove and Millenson 2006), using bankruptcy rates to assess the burden of medical bills could be limited, since it requires to control for multiple factors that are in many cases unobserved.

In this study, we take an indirect approach to assess unpaid medical bills. Rather than surveying patients about their financial condition or using an extreme event as personal bankruptcy, we use hospital financial statements to obtain information of patients' unpaid medical bills. Because hospitals record the medical bills that are expected to be uncollected as allowances for bad debt, this account reflects the financial burden of medical care for patients. We use a quasi-experimental design that tracks hospitals in Massachusetts and control states before and after the Massachusetts health care reform. …

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