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Impact of the Medicaid expansion on U.S. health services firms: Evidence from the 2010 Affordable Care Act

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  • Lee, Daeyong
  • (Alicia) Zhang, Fan

Abstract

This article examines how the Medicaid expansion of the 2010 Affordable Care Act (ACA) affected firm performance in the health services industry. The U.S. federal government expanded Medicaid coverage up to 138% of the federal poverty level for low-income households, and the expansion increased demand for health care services after the ACA. Using quarterly Compustat data from the first quarter of 2009 to the first quarter of 2016, we find that the Medicaid expansion significantly increased firm performance (the return on assets by 0.01, Tobin's q by 0.21, and the return on equity by 0.17) in the health services industry.

Suggested Citation

  • Lee, Daeyong & (Alicia) Zhang, Fan, 2017. "Impact of the Medicaid expansion on U.S. health services firms: Evidence from the 2010 Affordable Care Act," Finance Research Letters, Elsevier, vol. 21(C), pages 172-177.
    • Handle: RePEc:eee:finlet:v:21:y:2017:i:c:p:172-177
    DOI: 10.1016/j.frl.2016.12.006
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    References listed on IDEAS

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    1. Gruber, Jonathan & Rodriguez, David, 2007. "How much uncompensated care do doctors provide?," Journal of Health Economics, Elsevier, vol. 26(6), pages 1151-1169, December.
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    3. Jonathan Gruber & David Rodriguez, 2007. "How Much Uncompensated Care do Doctors Provide?," NBER Working Papers 13585, National Bureau of Economic Research, Inc.
    4. Rountree, Brian & Weston, James P. & Allayannis, George, 2008. "Do investors value smooth performance?," Journal of Financial Economics, Elsevier, vol. 90(3), pages 237-251, December.
    5. Cheng, Shijun, 2008. "Board size and the variability of corporate performance," Journal of Financial Economics, Elsevier, vol. 87(1), pages 157-176, January.
    6. Saiying (Esther) Deng & Elyas Elyasiani, 2008. "Geographic Diversification, Bank Holding Company Value, and Risk," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(6), pages 1217-1238, September.
    7. Brighi, Paola & Venturelli, Valeria, 2016. "How functional and geographic diversification affect bank profitability during the crisis," Finance Research Letters, Elsevier, vol. 16(C), pages 1-10.
    8. Wagner, Kathryn L., 2015. "Medicaid expansions for the working age disabled: Revisiting the crowd-out of private health insurance," Journal of Health Economics, Elsevier, vol. 40(C), pages 69-82.
    9. Ling, Leng & Zhou, Xiaorong & Liang, Quanxi & Song, Pingping & Zeng, Haijian, 2016. "Political connections, overinvestments and firm performance: Evidence from Chinese listed real estate firms," Finance Research Letters, Elsevier, vol. 18(C), pages 328-333.
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    Cited by:

    1. Lee, Daeyong, 2019. "Effects of the Medicaid expansion on low-income, childless household savings: Evidence from the Affordable Care Act," Economics Letters, Elsevier, vol. 181(C), pages 164-168.
    2. Zhao, Guangchuan & Cao, Xinbang & Ma, Chao, 2020. "Accounting for horizontal inequity in the delivery of health care: A framework for measurement and decomposition," International Review of Economics & Finance, Elsevier, vol. 66(C), pages 13-24.
    3. Lee, Daeyong, 2018. "Impact of the excise tax on firm R&D and performance in the medical device industry: Evidence from the Affordable Care Act," Research Policy, Elsevier, vol. 47(5), pages 854-871.

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    More about this item

    Keywords

    Medicaid expansion; Affordable Care Act; Return on assets; Tobin's q; Return on equity; Health services industry;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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