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

See all articles by Pengjie Gao

Pengjie Gao

University of Notre Dame - Mendoza College of Business

Chang Lee

Korea Advanced Institute of Science and Technology (KAIST) - College of Business

Dermot Murphy

University of Illinois at Chicago

Date Written: September 23, 2019

Abstract

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

Suggested Citation

Gao, Pengjie and Lee, Chang and Murphy, Dermot, Good for your Fiscal Health? The Effect of the Affordable Care Act on Healthcare Borrowing Costs (September 23, 2019). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3458657 or http://dx.doi.org/10.2139/ssrn.3458657

Pengjie Gao

University of Notre Dame - Mendoza College of Business ( email )

246 Mendoza College of Business
Notre Dame, IN 46556-5646
United States
(574) 631-8048 (Phone)

HOME PAGE: http://​sites.google.com/site/gpengjie/

Chang Lee

Korea Advanced Institute of Science and Technology (KAIST) - College of Business ( email )

85 Hoegiro Dongdaemun-Gu
Seoul 02455
Korea, Republic of (South Korea)

Dermot Murphy (Contact Author)

University of Illinois at Chicago ( email )

2114 University Hall (UH)
601 S. Morgan Street
Chicago, IL 60607-7124
United States
312-355-4372 (Phone)

HOME PAGE: http://sites.google.com/site/murphyderm

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