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

Listed author(s):
  • Mohamad Al-Ississ
  • Nolan H. Miller
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    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.

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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16193.

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    Date of creation: Jul 2010
    Publication status: published as Al-Ississ, Mohamad M., and Nolan H. Miller. 2013. "What Does Health Reform Mean for the Health Care Industry? Evidence from the Massachusetts Special Senate Election." American Economic Journal: Economic Policy, 5(3): 1-29.
    Handle: RePEc:nbr:nberwo:16193
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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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