Good for your Fiscal Health? The Effect of the Affordable Care Act on Healthcare Borrowing Costs
70 Pages Posted: 30 Sep 2019 Last revised: 3 Sep 2021
Date Written: September 23, 2019
We study the effect of the US Affordable Care Act (ACA) on healthcare borrowing costs. The ACA provides insurance subsidies to low-income enrollees. States could accept funding to expand Medicaid, although many declined, citing the cost burden. The ACA significantly reduced healthcare yields after a favorable 2012 Supreme Court ruling. Furthermore, hospital investment spending increased, and investment-cash flow sensitivities decreased. The yield effect was double in Medicaid expansion states, and insignificant in rural areas of non-expansion states. Our results highlight how the municipal market can be used to evaluate the heterogeneous effects of public policy and guide a targeted policy approach.
Keywords: public finance, health economics, municipal bonds, Affordable Care Act, Medicaid
JEL Classification: G12, G18, H74, I10
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