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

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. (C) 2021 Elsevier B.V. All rights reserved.

Automated summary

This study examines the impact of the US Affordable Care Act (ACA) on healthcare borrowing costs. The findings reveal that the ACA significantly reduces healthcare yields and stimulates increased hospital investment spending. Moreover, the results indicate that the yield effect is more pronounced in states that expanded Medicaid, while it is not significant in rural areas of non-expansion states. These findings contribute to the evaluation of public policy and inform targeted policy approaches.