Working Paper Revision

Up in Smoke: The Impact of Wildfire Pollution on Healthcare Municipal Finance

Abstract: Climate risk pricing is not necessarily tied to physical damages from local climate events. Large-scale wildfires generate hazardous smoke plumes that impose costs on distant hospitals by increasing relative demand from underinsured patients. We show that wildfire smoke increases credit risk in the healthcare municipal bond market, especially in areas with high underinsurance. A natural experiment using the staggered expansion of Medicaid provides additional evidence consistent with the underinsurance channel. Hospital-level tests indicate that wildfire smoke reduces profitability and investment growth. Out-of-state wildfire smoke similarly increases healthcare credit risk, indicating that unchecked wildfires impose negative externalities on other states.

JEL Classification: R31; O18; H74; I11; Q54;

https://doi.org/10.24149/wp2503r1

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Working Papers

Publication Date: 2026-10

Number: 2503

Related Works

• Working Paper Revision (2026-10) : You are here.
• Working Paper Original (2025-01-09) : Up in Smoke: The Impact of Wildfire Pollution on Healthcare Municipal Finance