Health Spending and First Quarter GDP: What Happened?
A couple of months ago, I noted that the only thing growing in the stagnant economy in the first quarter was health spending. Further, another source suggested that most of that spending was from Medicaid, a welfare program. Such “growth” is not really good for the economy.
The final estimate of real first quarter Gross Domestic Product (GDP) has thrown everyone for a loop, reporting an annualized decline of 2.9 percent. It was a huge revision: The previous estimate was that first quarter GDP had declined by only one percent.
The huge error in the earlier figure was almost entirely driven by a poor estimate of the effect of ObamaCare by the Bureau of Economic Analysis (BEA):
The downward revision to consumer spending was mostly to services, especially to health care services. The revision to health care services reflected the incorporation of newly available Census Bureau quarterly services survey (QSS) data for the first quarter. The QSS data reflect the revenues of for-profit and nonprofit hospitals, physician offices, nursing homes, and other health care providers and the expenses of nonprofit hospitals and other nonprofit health care providers. Prior to receiving the Census QSS data, BEA used information on Medicaid benefits and on Affordable Care Act insurance exchange enrollments to prepare the previously published estimates of health services.
