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What Does Health Reform Mean for the Healthcare Industry? Evidence from the Massachusetts Special Senate Election

Author

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  • Mohamad Al-Ississ
  • Nolan H. Miller

Abstract

The recent reform of the U.S. health care system has been described both as a boon and a death blow for the healthcare industry and for private insurers in particular. We exploit the surprise election of Republican Scott Brown to the U.S. Senate, which dealt a serious blow to the prospects for reform by depriving Democrats of their 60-vote "filibuster-proof" majority, to evaluate the market's assessment of Health Reform's impact on the health care industry. We find that Scott Brown's election was associated with an abnormal return of 2.2 percent for a typical dollar invested in health care stocks and an abnormal return of 6.3 percent for a typical dollar invested in managed care firms. A typical dollar invested in the pharmaceutical sector experienced abnormal returns of 2.9 percent, while investments in healthcare facilities (including hospitals) experienced abnormal losses of 3.4 percent. Analysis of firms participating in government programs show that firms involved with Medicare Advantage experienced gains while those involved with Medicaid Managed Care experienced losses due to the election.

Suggested Citation

  • Mohamad Al-Ississ & Nolan H. Miller, 2010. "What Does Health Reform Mean for the Healthcare Industry? Evidence from the Massachusetts Special Senate Election," NBER Working Papers 16193, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:16193
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    File URL: http://www.nber.org/papers/w16193.pdf
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    References listed on IDEAS

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    1. Knight*, Brian, 2007. "Are policy platforms capitalized into equity prices? Evidence from the Bush/Gore 2000 Presidential Election," Journal of Public Economics, Elsevier, vol. 91(1-2), pages 389-409, February.
    2. Jayachandran, Seema, 2006. "The Jeffords Effect," Journal of Law and Economics, University of Chicago Press, vol. 49(2), pages 397-425, October.
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    Cited by:

    1. Jonathan Hartley, 2011. "Stock Prices and the Doctor Supply: Effect of Medicare Residency Policy on Healthcare Industry Firms," Working Papers 2011-011, Becker Friedman Institute for Research In Economics.
    2. Mayer-Foulkes David A. & Pescetto-Villouta Claudia, 2012. "Economic Development and Non-Communicable Chronic Diseases," Global Economy Journal, De Gruyter, vol. 12(4), pages 1-44, December.
    3. repec:sip:wpaper:12-028 is not listed on IDEAS
    4. Patricia Foo & Wichsinee Wibulpolprasert, 2013. "Who bears the burden of the U.S. health reform? An Event Study Incidence Analysis," Discussion Papers 12-035, Stanford Institute for Economic Policy Research.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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