Good for your Fiscal Health? The Effect of the Affordable Care Act on Healthcare Borrowing Costs

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: 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, (2022) vol. 145, no. 2, 464-488, Available at SSRN: https://ssrn.com/abstract=3458657 or http://dx.doi.org/10.2139/ssrn.3458657