Health Care Costs and Corporate Investment.

The article investigates how rising health care costs for U.S. employers affect corporate investment decisions, specifically capital expenditures and research and development (R&D) spending. Using firm-level data and two identification strategies—state-level medical malpractice tort reforms that reduce health care costs and health insurer mergers that increase costs—the study finds that higher health care expenses lead firms to reduce investment, with stronger effects for financially constrained firms, those employing more high-skilled workers, and firms with less bargaining power relative to insurers. Additionally, uncertainty in health care policy, measured by the Health Care Policy Uncertainty (HCPU) index, negatively impacts capital investment, particularly for firms facing higher labor adjustment costs. The findings highlight the interconnectedness of health care costs, labor market dynamics, and corporate investment, suggesting that controlling health care expenses and reducing policy uncertainty could promote firm growth and innovation.