The House voted today to narrowly pass a bill that would move to dismantle the Affordable Care Act (ACA), better known as Obamacare. After some tweaks to certain provisions, President Trump managed to gain a consensus even as twenty Republican and all Democrat Representatives voted against the bill. This victory for President Trump comes just as a new report by Consumer Reports finds that not only did Obamacare allow more people to get health insurance, but it also seems to have helped cut America's personal bankruptcies almost in half.

On the face of it, that seems like a big win for Obamacare. The report cautions, however, that courts do not mandate people to reveal the reason for filing bankruptcies, and medical debt is not the sole reason it happens. 

Other reasons bankruptcy might have dropped include difficulty in filing for bankruptcy because of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, the high legal costs of filing for bankruptcy and a general economic slowdown.

However, a 2014 study by bankruptcy attorney Daniel Austin, then a professor at the Northeastern University School of Law, found that medical debt is the single largest factor in consumer bankruptcy. Nearly 26% of people who were part of that study – and had filed for bankruptcy – reported that their medical bills drove them to it. (Portions of the study were  published in the Maine Law Review.)

So while medical costs may have been just one of the factors that led to fewer Americans declaring bankruptcy, the correlation between Obamacare's roll-out in 2011 and the dramatic drop in bankruptcy is uncanny and simply cannot be ignored. The chart below tells the tale.

Personal Bankruptcies in America Drop

Between 2009 and 2016, personal bankruptcy filings in America peaked in 2010 at a little over 1.53 million. That was also the year that the ACA was signed and since then, there has been a steady decline in the number of filings, according to data compiled by Consumer Reports.

Personal bankruptcies for 2016 were recorded at 770,846, down nearly 50% since the year the ACA was signed – and almost 43% since it was brought into effect a year later.

“We’re not getting people with big medical bills, chronically sick people who would hit those lifetime caps or be denied because of pre-existing conditions. They seemed to disappear almost overnight once ACA kicked in,” bankruptcy attorney Jim Molleur told Consumer Reports.

Medical Debt Declines

The National Center for Health Statistics conducts an annual survey that collects data about Americans under age 65 who come from families who have problems paying their medical bills. In its most recent report, the agency found that there has been a 22% decline in the number of such people between 2011 till June last year.

Austin's 2014 study also compared the medical debt and personal bankruptcy rates in Massachusetts (which had enacted an ACA-like healthcare system in 2006) to the national average. Despite having higher unsecured debt, people of Massachusetts had lower medical debt than the national average and were less likely to file for bankruptcy due to unpaid medical costs. 

The Number of Uninsured Americans Plummets

Over the past few years, there has there been a significant expansion of health insurance coverage under the ACA. The result: The number of uninsured people in the country dropped by nearly 40% in the period between 2011 and the first nine months of last year.

No insurance means that any bills come straight out of the consumer’s pocket, which could leave a big hole in it.

“If you’re uninsured or underinsured, you can run up a huge debt in a short period of time,” Lois Lupica, a bankruptcy expert and Maine Law Foundation Professor of Law at the University of Maine School of Law, told Consumer Reports.

The Bottom Line

This was not the Trump administration’s first attempt to get rid of the ACA. The previous attempt, the American Health Care Act, colloquially known as Trumpcare, would have led to some moderation of premiums but at the cost of 14 million uninsured Americans by 2018 and 24 million without health insurance by 2026, according to the Congressional Budget Office (CBO). (See also: CBO: 14M to Lose Healthcare by 2018 Under GOP Plan)

While there have been changes to that to come up with the latest version of the bill that was voted on today, there are no estimates to determine what impact it would have on the number of insured or its burden on the exchequer. While the bill now faces its next test in the Senate, the evidence above makes it clear what is at stake as lawmakers consider this new legislation and the repeal of the Affordable Care Act.

 

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