The Impact of Health Care Reform on Personal Financial Outcomes: Evidence from Massachusetts

Abstract

The Massachusetts health care reform of April 2006 was a landmark piece of legislation that formed the basis of the 2010 Affordable Care Act. The reform aimed to achieve near-universal health insurance coverage in the state by expanding Medicaid, creating health insurance subsidies, and mandating the purchase of insurance for state residents. In this study, we use health insurance estimates linked to data from credit bureau records from 2002-2010 and a triple differences approach to estimate the effect of the Massachusetts reform on a range of financial outcomes. We find that the reform significantly reduced delinquent debts and debts sent to collections among affected groups. Using a constructed index of financial strain including events such as delinquencies, liens, and repossessions, we estimate that the reform reduced financial strain by 0.048 standard deviations for every one percentage point increase in a group’s exposure to the reform. We also find that the reform indirectly affected housing outcomes, leading to increases in mortgage inquiries, decreases in foreclosure, and increases in homeownership among the newly insured. These results are economically substantial and suggest that comprehensive health care reform may have broad effects on the financial health of individuals.