American Rescue Plan Reduces Medical Debt

Medical debt is at an all time high, made worse from the influx of surprise hospitalizations caused by the COVID-19 pandemic. 


Still, there are 14 states that have yet to expand Medicaid eligibility for low-income adults. These include: Alabama, Florida, Georgia, Kansas, Mississippi, Missouri, North Carolina, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Wisconsin, and Wyoming.


In these states, people below the federal poverty level have no access to Medicaid or marketplace coverage, resulting in exorbitant medical debt that undermines economic growth in these areas. Nearly half of the nation’s uninsured (14.6 million of 29.6 million total uninsured nationwide) lived in these 14 states. 


To help, the American Rescue Plan offers financial incentives for states to expand Medicaid eligibility for low-income adults, as all other states have already done. ARP offers “bonus” federal funding if they implement this expansion. They may earn an additional five-percentage-point federal match on their regular Medicaid expenditures for two years to help with state matching costs, and they will also gain the ACA’s 90 percent federal matching funds to pay for the costs of covering newly eligible adults.

This expansion would expand the number of Americans who qualify to include anyone whose income is at or below 138 percent of the federal poverty level ($30,305 for a family of three in 2021). 


Not only would this policy lighten the medical debt burden on individual families, expanding Medicaid would also increase federal revenue to the 14 states by $49 billion in 2022 and state matching costs would be $5 billion. More than 1 million jobs would be created nationwide, with largest gains in Texas (298,900), Florida (134,700), North Carolina (83,000), and Georgia (64,300). These jobs will not only occur in the health care sector but also in retail, construction, and other industries, benefiting employers, workers, and communities overall.

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Collectively, the 14 states would expand their economies by $350 billion from 2022 to 2025. While state governments would bear some additional costs, the American Rescue Plan’s bonus incentives plus additional tax revenues would exceed state matching costs.

With these incentives, many advocates are renewing their calls for Medicaid expansion. Notably, Stacey Abrams' organization, Fair Fight, just launched a medical debt awareness campaign doing so. As part of the effort—and to set an example, Fair Fight just bought $212 million in medical debt for families across the South. The gift forgave the medical debt of 108,000 families. 

Learn More About Medical Debt in the USA