What Today’s Startling GDP Report Says About Obamacare’s Impact

President Barack Obama , accompanied by Vice President Joe Biden speaks about the Affordable Care Act, Tuesday, April 1, 2014, in the Rose Garden of the White House in Washington. (AP Photo/Manuel Balce Ceneta)
Start your day with TPM.
Sign up for the Morning Memo newsletter

The federal estimates on health care spending in the first quarter of 2014 have been all over the place. First, the Bureau of Economic Analysis estimated that health care spending boomed 9.9 percent, one of the biggest quarterly jumps in decades.

But on Wednesday, the BEA revised its estimate to a 1.4 percent decrease in health care spending, contributing heavily to the overall estimate that economic growth dropped 2.9 percent in the first quarter of the year.

Observers had attempted to reconcile the originally projected boom with the beginning of Obamacare coverage in January. Federal analysts even pointed to the law in an interview with Business Insider after the first estimate came out.

So what does the revised estimate, which shows health care spending on the decline, say about Obamacare? Maybe not much, Larry Levitt, vice president at the Kaiser Family Foundation, told TPM.

There are a few things to consider, Levitt said in an email. First, health care spending increased at an abnormally high rate in the fourth quarter of 2013: 5.6 percent. Second, the original estimate for the first quarter of 2014 was missing a key piece of information: the Commerce Department’s quarterly service survey. The downward revision was always expected once that data came in, Levitt said.

As Business Insider noted, that survey found revenue for hospitals, medical laboratories and outpatient care dropping.

Finally, in terms of Obamacare’s direct impact, roughly half of the 8 million people who enrolled in private coverage through the law signed up in March or later. For many of those people, their coverage didn’t kick in until April or May, meaning the effect of that coverage expansion probably will not be felt until the second quarter of 2014.

“It’s good that health spending isn’t surging as feared right now, but it’s way too soon to get complacent,” Levitt concluded. “The effects of the ACA’s insurance expansion are more likely to show up in the second quarter. And the improving economy will likely continue to put pressure on health costs.”

The White House’s Council of Economic Advisers drew some of the same conclusions. They pointed to the lack of the quarterly services survey in the initial estimate and said that they expect spending to increase once people who obtained coverage under Obamacare start to utilize their coverage.

Latest DC
Masthead Masthead
Founder & Editor-in-Chief:
Executive Editor:
Managing Editor:
Associate Editor:
Editor at Large:
General Counsel:
Head of Product:
Director of Technology:
Associate Publisher:
Front End Developer:
Senior Designer: