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

52 Pages Posted: 30 Sep 2019 Last revised: 20 Nov 2019

See all articles by Pengjie Gao

Pengjie Gao

University of Notre Dame - Mendoza College of Business

Chang Lee

University of Illinois at Chicago - Department of Finance

Dermot Murphy

University of Illinois at Chicago - Department of Finance

Date Written: September 23, 2019

Abstract

We use the Affordable Care Act (ACA) to study the medical infrastructure premium in healthcare municipal bond markets. Hospitals were exposed to greater regulatory risk after the ACA was passed. Following a favorable 2012 ACA Supreme Court ruling, healthcare yields decreased by 39 basis points, for per-issue and economy-wide interest savings of $3.0 million and $1.74 billion. The effect was larger for urban hospitals and private non-profits. Yields decreased by another 17 basis points in states that voted to expand Medicaid. However, the ACA effect on long-term yields was weak, suggesting that repeal risk remains an obstacle to long-run financing.

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). 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

University of Illinois at Chicago - Department of Finance ( email )

2431 University Hall (UH)
601 S. Morgan Street
Chicago, IL 60607-7124
United States

Dermot Murphy (Contact Author)

University of Illinois at Chicago - Department of Finance ( email )

2431 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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