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  5. From Health to Wealth: Healthcare Policy and Household Finance
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From Health to Wealth: Healthcare Policy and Household Finance

Paper Session

Sunday, Jan. 3, 2021 12:15 PM - 2:15 PM (EST)

Hosted By: American Economic Association
  • Chair: Gideon Bornstein, University of Pennsylvania

The Impact of Social Insurance on Household Debt

Gideon Bornstein
,
University of Pennsylvania
Sasha Indarte
,
University of Pennsylvania

Abstract

This paper studies how health insurance affects household debt, with a focus on credit card borrowing. While reducing potential medical debt, health insurance can also incentivize households to take on more debt through two channels. First, it reduces households’ precautionary savings motive. Second, it reduces delinquency, improving the debt pricing schedule insured households face. We exploit the staggered expansion of Medicaid across US states under the Affordable Care Act to show Medicaid expansions led to an increase in credit card debt at the state level. We then construct and estimate a heterogeneous-agent model with credit card debt and delinquency. The model captures key features of the distribution of credit card debt across households. We use the model to study a counterfactual policy where all households receive health insurance ("Medicare for All").

The Burden of Medical Debt and the Impact of Debt Forgiveness

Ray Kluender
,
Harvard Business School
Neale Mahoney
,
Stanford University
Francis Wong
,
University of California-Berkeley
Wesley Yin
,
University of California-Los Angeles

Abstract

Medical debt is potentially a large burden for many Americans—with 44 million individuals holding an aggregate $75 billion in medical debt. While these nominal amounts are staggering, it is unclear to what extent medical debt threatens well-being. Recovery rates for medical debt in collections are low, suggesting that the pure “balance sheet” cost of medical debt is modest for most individuals. Yet medical debt may harm individuals financially through lower credit scores, higher interest rates, and reduced access to credit. Medical debt may also have non-pecuniary costs through negative impacts on mental and physical health, or by deterring individuals from seeking valuable health care. We implement a large-scale randomized control trial of medical debt forgiveness. The experimental treatment group is comprised of around 60,000 individuals who have received approximately $122 million in medical debt forgiveness. We measure financial outcomes using credit bureau data and health and healthcare utilization outcomes using surveys.

Health Insurance as an Income Stabilizer

Emily Gallagher
,
University of Colorado Boulder
Nathan Blascak
,
Federal Reserve Bank of Philadelphia
Michal Grinstein-Weiss
,
Washington University in St. Louis
Stephen Roll
,
Washington University in St. Louis

Abstract

We evaluate the effect of health insurance on the incidence of negative income shocks using the tax data and survey responses of nearly 14,000 low income households. Using a regression discontinuity (RD) design and variation in the cost of non-group private health insurance under the Affordable Care Act, we find that eligibility for subsidized Marketplace insurance is associated with a 16% and 9% decline in the rates of unexpected job loss and income loss, respectively. Effects are concentrated among households with past health costs and exist only for “unexpected” forms of earnings variation, suggesting a health-productivity link. Calculations based on our fuzzy RD estimate imply a $256 to $476 per year welfare benefit of health insurance in terms of reduced exposure to job loss.
Discussant(s)
Paul Goldsmith-Pinkham
,
Yale University
Ha Diep-Ngyuen
,
Indiana University
Sarah Miller
,
University of Michigan
JEL Classifications
  • G5 - Household Finance
  • I1 - Health