The impact of the Affordable Care Act: evidence from California's hospital sector

The Affordable Care Act (ACA) authorized the largest expansion of public health insurance coverage in the U.S. since the mid-1960s. Evidence on the effects of the ACA-induced increase in insurance coverage on patient health and health care providers is still emerging. We deploy administrative data from the universe of general acute care hospitals and emergency rooms in California over 2008-15 and present new empirical evidence on the effects on insurance coverage, health care utilization, and hospital finances. Our empirical approach utilizes regression discontinuity and differences-in-differences research designs, exploiting sharp changes in Medicaid coverage due to age-based eligibility restrictions and pre-ACA variation in un-insurance shares across hospitals and markets. We have three principal findings. First, we find that approximately half of the Medicaid expansion replaced existing county safety-net programs - implying a large transfer from federal taxpayers to those in California. Second, although we find substantial increases in utilization of hospital stays and ER visits as well as sorting toward better quality hospitals, we find no detectable effects on patient health. Third, we find heterogeneous effects on revenue - government owned - safety-net' hospitals experienced large gains in revenue, while gains are modest for private hospitals. Additional revenue does not manifest in improved quality metrics or capital investment.