Where’s the Obamacare Health Spending Boom?

A version of this post appeared at Forbes.

The Bureau of Economic Analysis has released the second estimate of second quarter Gross Domestic Product (GDP). There is good news — especially for those of us concerned with health policy.

First, the BEA seems to have figured out how to measure health spending under Obamacare, no longer giving huge updates to initial estimates, like it did in the first quarter. The second estimate is little revised from the advanced estimate: Real GDP increased by 4.2 percent (annualized) versus an advanced estimate of 4.0 percent; and health spending accounted for just 0.05 percent of the increase, versus an advanced estimate of 0.08 percent.

So, the question of the day seems to be: Where is the Obamacare spending boom? We’ve seen some contradictory evidence. On the one hand, for-profit hospital chains have reported significant increases in top-line revenues, attributable to Obamacare’s newly insured patients. This is coherent with evidence that Obamacare enrollees are sicker than the general population.

On the other hand, there is evidence that much of Obamacare’s insurance coverage is Medicaid crowd-out of private coverage.

Today’s release tells us that annualized health spending measured at the end of the second quarter is lower than it was in 2013. The Obamacare health spending boom may yet come. However, according to the latest data, Obamacare is looking like a bust for the healthcare sector which championed it.

Comments (4)

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  1. Uwe Reinhardt says:

    There is always the counterfactual baseline of what health spending would be in the absence of Obamacare.

    The CBO produced some really interesting news: Medicare and Medicaid spending grwth is less than had been projected earlier. Upshot had a good post on that.

    • John R. Graham says:

      Thank you. My own speculation is that it would have been higher, because businesses would have been more confident to hire people.

  2. Big Truck Joe says:

    With the latest CBO forecasts concluding “certain aspects of the Affordable Care Act will tend to reduce labor force participation” maybe the drain on the economy negates any positive effects Obamacare might impose. With a woefully anemic employment economy forcing much of Obamacare’s growth to come from Medicaid patients, maybe the hospitals are simply not making any money on these poorly paying plans?
    How many private hospitals or physicians see a cash cow in the Mediciad population? I would think not many. So while the administration sings the praises of bringing 8 million insureds to the table, how many of those are costlier, sickly patient groups whose reimbursement doesn’t positively effect the healthcare providers profit margins.

    • John R. Graham says:

      Thank you. Hospitals constantly advocate for Medicaid expansion. I’m not sure why, but we have addressed it in the blog. Politicians would not be nearly so eager to expand Medicaid dependency if the hospitals were indifferent or hostile to it.

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