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Does Medicare Reduce Medical Debt?

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  • Kyle J. Caswell
  • John H. Goddeeris

Abstract

We study the effect of Medicare on financial strain, measured by annual changes in medical debt in collections, using credit bureau data. We exploit the program’s eligibility age at 65 and compare the experiences of those just under and over age 65 using a regression discontinuity design. We find that during our baseline study period Medicare reduced the annual probability of large medical collections, above $1,000, by 0.31 percentage points, a 19 percent reduction relative to the probability for those aged 60–64, and reduced new medical collections by approximately $380 at the 99th percentile, a 23 percent decrease. We hypothesize that Medicare mainly decreases medical collections among those who transition from uninsured to Medicare. Under that hypothesis we estimate a “treatment on the treated” average reduction of about $250 in new medical collections. We find support for our hypothesis by comparing discontinuities for those in zip codes with different uninsured rates pre-age 65, and comparing discontinuities before and after implementation of the main health insurance provisions of the Affordable Care Act. Our findings complement recent work on the role of Medicare in reducing risk of out-of-pocket medical expenditures and of health insurance in reducing medical collections.

Suggested Citation

  • Kyle J. Caswell & John H. Goddeeris, 2020. "Does Medicare Reduce Medical Debt?," American Journal of Health Economics, University of Chicago Press, vol. 6(1), pages 72-103.
  • Handle: RePEc:ucp:amjhec:doi:10.1086/706623
    DOI: 10.1086/706623
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    References listed on IDEAS

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    1. David S. Lee & Thomas Lemieux, 2010. "Regression Discontinuity Designs in Economics," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 281-355, June.
    2. David Card & Carlos Dobkin & Nicole Maestas, 2008. "The Impact of Nearly Universal Insurance Coverage on Health Care Utilization: Evidence from Medicare," American Economic Review, American Economic Association, vol. 98(5), pages 2242-2258, December.
    3. Amy Finkelstein, 2007. "The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(1), pages 1-37.
    4. McCrary, Justin, 2008. "Manipulation of the running variable in the regression discontinuity design: A density test," Journal of Econometrics, Elsevier, vol. 142(2), pages 698-714, February.
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    6. repec:mpr:mprres:7986 is not listed on IDEAS
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    Cited by:

    1. Andre, Jennifer & Braga, Breno & Martinchek, Kassandra & McKernan, Signe-Mary, 2024. "The effects of state utility shutoff moratoria on credit delinquencies during the COVID-19 pandemic," Journal of Economics and Business, Elsevier, vol. 129(C).
    2. David J. G. Slusky & Donna K. Ginther, 2021. "Did Medicaid expansion reduce medical divorce?," Review of Economics of the Household, Springer, vol. 19(4), pages 1139-1174, December.
    3. Andre, Jennifer & Blavin, Fredric & Braga, Breno & Gangopadhyaya, Anuj, 2023. "The Impact of Hospital Closures on Medical Debt in Collections: Analysis Using Consumer Credit Bureau Data," IZA Discussion Papers 16448, Institute of Labor Economics (IZA).
    4. Yaa Akosa Antwi & Marion Aouad & Nathan Blascak, 2023. "I've Got 99 Problems But a Bill Ain't One: Hospital Billing Caps and Financial Distress in California," Working Papers 23-20, Federal Reserve Bank of Philadelphia.
    5. repec:aei:rpaper:1008569439 is not listed on IDEAS
    6. Michael Batty & Christa Gibbs & Benedic Ippolito, 2022. "Health insurance, medical debt, and financial well‐being," Health Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 689-728, May.
    7. Barış K. Yörük & Yiran Han, 2024. "Age-based health insurance coverage policies and mental health," Journal of Population Economics, Springer;European Society for Population Economics, vol. 37(2), pages 1-26, June.
    8. Braga, Breno & Elliott, Diana, 2023. "The Effects of Maria Migrants on the Financial Health of the Residents of Central Florida," IZA Discussion Papers 16482, Institute of Labor Economics (IZA).

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