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Research Project

The Effect of the Affordable Care Act on Healthcare Borrowing Costs, by Dermot Murphy, Pengjie Gao, and Chang Lee

Research Area(s)
Debt and Long-Term Obligations
Government Finance Research


In the research report, Good for your Fiscal Health? The Effect of the Affordable Care Act on Healthcare Borrowing Costs, UIC associate professor of finance Dermot Murphy studies the impact of the Affordable Care Act (ACA) on municipal healthcare borrowing costs. The ACA expanded the insured customer base for hospitals, although exposed them to greater regulatory risk. Following a favorable 2012 ACA Supreme Court ruling, healthcare yields decreased by 39 basis points, for per-issue and economy-wide interest savings of $3.0 million and $1.74 billion. The effect was larger for urban and private hospitals. Yields decreased by another 17 basis points in states that voted to expand Medicaid. However, the ACA effect on long-term yields was weak, suggesting that repeal risk remains an obstacle to long-term financing and growth in the healthcare sector. Pengjie Gao, professor of finance at the University of Notre Dame, and Chang Lee, assistant professor of finance at the Korea Advanced Institute of Science and Technology, are also co-authors on the study. The study was supported by a research grant from UIC’s Government Finance Research Center. This working paper was originally published in 2019, is has been revised and the final version was published in the Journal of Financial Economics in 2021. Published: September 30, 2019 Publisher: The Journal of Financial Economics View the report here