Imagine That: Healthcare Spending Dropped 1.4% in the first quarter of 2014
Not much time to post today, but remember all the fuss & bother about how the ACA was going to cause massive increases in healthcare spending? Yeah, about that...
Pretty much everyone was stunned to see Q1 GDP growth slashed to -2.9% from an earlier estimate of -1.0%.
The revision largely boils down to one thing: healthcare spending.
"Two thirds of the revision is in consumption, cut to +1.0% from +3.1%," said Pantheon Macroeconomics Ian Shepherdson. "Almost all of this huge hit is in the healthcare services component, cut to -1.4% from +9.1%."
According to the BEA, healthcare spending went from adding 1.01 percentage points to subtracting 0.16 from the headline GDP growth number.
"So much for the BEA's initial view that the start of Obamacare triggered a surge in spending on healthcare," said Shepherdon. "The press release offers no detail on what triggered this massive revision."
The slowdown in healthcare growth has been steady over several quarters now, so it's not just statistical noise at this point, but real cost cutting. Exactly why it's happening isn't clear. The recession played a part—people spent less on everything, including healthcare, but with the recession easing we should have seen more of a rebound there. Obamacare is probably playing a part, though it's too soon to say how much of one. The whiff of reform has hospitals and providers paying more attention to implementing programs to cut waste and make their operations more efficient. This is good. Today's [overall GDP] numbers look bleak, but there's reason for some cheer in them.