The Impact of the Affordable Care Act: Evidence from California’s Hospital Sector

Abstract

We exploit changes in the discontinuity in health insurance coverage at age 65 induced by the implementation of the Affordable Care Act to examine effects on coverage, hospital use, and patient health. We then link these changes to effects on hospital finances. We show that a substantial share of the federally funded Medicaid expansion substituted for existing locally funded safety net programs. Despite this offset, the expansion produced a substantial increase in hospital revenue, reflected in an equivalent increase in operating surplus. We do not detect improvements in patient mortality, although the expansion led to substantially greater hospital and emergency room use. (JEL H51, H75, I12, I13, I18, I38)