Good News on Health-Care Spending Is Making U.S. GDP Look Bad

http://www.businessweek.com/articles/2014-06-25/good-news-on-health-care-spending-is-making-u-dot-s-dot-gdp-look-bad#r=rss

***SNIP

The big surprise in the first quarter was the dip in health-care spending. The U.S. spent $6.4 billion less on health care in the first quarter than in the last quarter of 2013. Government statisticians initially forecast a 9.9 percent increase in health-care spending—and what we got was a 1.4 percent decline. Considering all the millions of previously uninsured people who are gaining access to health insurance under the Affordable Care Act, how can they be shrinking so dramatically?

Health-care costs overall have been increasing more slowly in recent years compared with the pace before the 2007-09 recession. Slow growth in the price of health-care services combined with a decline in utilization—the amount of health care people consumed—in the first quarter. So lower costs and greater access translated into lower consumption. That’s a head-scratcher.

Some people saw this big revision coming, based on the method the Bureau of Economic Analysis uses to make its estimates, as Austin Frakt pointed out on the Incidental Economist blog last month. To estimate the effect of Obamacare in the first quarter, the BEA initially relied on trends in Medicaid spending, because it could not directly capture spending by people newly enrolled in private insurance.