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
Date Written: September 23, 2019
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: Suggested Citation