Lower health spending contributed to downturn in GDP

The revision by the Commerce Department finds that health spending was substantially below expectations for the first quarter and subtracted 0.16 of a percentage point from the nation's growth rate.

The Wall Street Journal: U.S. Economy Shrinks By Most In Five Years
Gross domestic product, the broadest measure of goods and services produced across the economy, fell at a seasonally adjusted annual rate of 2.9% in the first quarter, the Commerce Department said in its third reading of the data Wednesday. ... One factor in the government's revision of first-quarter output was difficulty in estimating the impact of the Affordable Care Act on health-care expenditures. Actual health spending came in substantially lower than expected based on ACA enrollments and Medicaid data, declining at a 1.4% annualized pace in the period compared with an earlier estimate of a 9.1% increase (House, 6/25).

The Wall Street Journal: Difficult Obamacare Measures Lead To Swing In GDP Reading
The revision in the health-care category was the largest in recent memory, said Nicole Mayerhauser, an official that oversees GDP statistics at the Commerce Department's Bureau of Economic Analysis. "Trying to initially estimate health care this first quarter was a very unique circumstance because of the rollout of the Affordable Care Act," she said. "We made an adjustment from our normal methodology … (but) our assumptions ended up being too strong" (Morath and Radnofsky, 6/25).

The New York Times: Economy In First Quarter Was Worse Than Everybody Thought
The new report now finds that health care spending actually subtracted 0.16 of a percentage point from the growth rate. The health care spending data in G.D.P. is a measure of how much President Obama's health reform law is reshaping health care spending patterns, and it is now showing opposite results from those reported two months ago, when the first-quarter data was initially released (Irwin, 6/25).

The Fiscal Times: It Turns Out Obamacare Did Not Save The Economy In Q1
The dance between the Affordable Care Act and the nation's economic output is a delicate one: We spend more per capita on health care than any developed nation and want that number to go down. But health care spending is a major part of the U.S. economy, and when it goes down so does our Gross Domestic Product. Economists have known this was an issue since the passage of the ACA, but the general assumption was that any slowdown in health spending would be offset in the near term by the addition of millions of people receiving health insurance for the first time (Garver, 6/25).

The Washington Post: The Economy Just Had Its Worst Quarter Since The Great Recession. Here's Why You Shouldn't Worry.
It turns out that, at an annual rate, the economy shrank 2.9 percent in the first quarter of 2014, mostly due to weak exports, weak inventories, unexpectedly weak health-care spending and the harsh winter. ... the first couple GDP estimates looked at how many more people were getting health-care insurance from Obamacare, and assumed that health-care spending would go up quite a bit. It didn't (O'Brien, 6/25).

Politico Pro: Negative Health Care Spending Bucks Prediction
Reports of the demise of the health spending slowdown appear to have been greatly exaggerated. Government number crunchers, figuring a flood of newly insured would rush out and get long-nagging ailments treated, estimated in April that health care spending would spike at an annualized rate of 9.9 percent in the first quarter of 2014. It turns out that spending actually sank, by an annual rate of 1.4 percent, the Bureau of Economic Analysis said Wednesday. The GDP -; once thought to be treading water at 0.1 percent growth -; went negative, too, contracting at an annual rate of 2.9 percent (Wheaton, 6/25).