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Good for your fiscal health? The effect of the affordable care act on healthcare borrowing costs

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  • Gao, Pengjie
  • Lee, Chang
  • Murphy, Dermot

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.

Suggested Citation

  • Gao, Pengjie & Lee, Chang & Murphy, Dermot, 2022. "Good for your fiscal health? The effect of the affordable care act on healthcare borrowing costs," Journal of Financial Economics, Elsevier, vol. 145(2), pages 464-488.
    • Handle: RePEc:eee:jfinec:v:145:y:2022:i:2:p:464-488
    DOI: 10.1016/j.jfineco.2021.09.003
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    2. Lu, Runjing & Ye, Zihan, 2023. "Roe v. Rates: Reproductive Healthcare and Public Financing Costs," SocArXiv 7t5jz, Center for Open Science.

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    More about this item

    Keywords

    Public finance; Health economics; Municipal bonds; Affordable care act; Medicaid;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • I10 - Health, Education, and Welfare - - Health - - - General

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