[UPDATED 630 am Central, 5/1; updated May 2, 3 pm to include link to new Altarum report]

The first quarter 2014, gross domestic product (GDP) numbers were released Wednesday April 30, and other than the report gaining headlines for being so dismal (largely attributed to the terrible winter weather), the other big headlines were for the large increase in medical care utilization (9.9% annual rate, even when medical inflation rose only 0.1%).

Certainly it WAS EXPECTED that the total health spending in the country would rise as the Affordable Care Act (ACA) was implemented in January 2014, and many millions started to get health insurance coverage.  However, here are a few observations:
So, given all this what to make of the first quarter GDP results?  Two major, important points:
  • it should always be said that the first release of GDP data is often "messy", requiring revisions later, and it would not be at all surprising if these numbers were revised (down or up); also, given the weather problems the problems obtaining data may have been even worse this time around.
This all said, a few more things must be said about this 9.9% annual increase in health utilization figure:

  • if it holds up, then it shows that in fact there are many people who obtained health insurance right away in 2014, which contradicts all the nay-sayers who have been saying that the ACA has not led to an increase in coverage;
  • this of course implies that advocates for the ACA, who have been predicting (and hoping) that many of the uninsured gained coverage must also accept or even embrace results like this;
  • either one side is right or the other! (there was no net increase in coverage, but if so, then these numbers will be revised downward; or there was a big increase in coverage (with the resulting increase in demand/use of medical care).
  • my guess?  I expect the number will eventually be revised downward, to perhaps 5-7% annually once Commerce has some private plan data.  And that is just a hunch, probably informed as much based on prior estimates from CMS, and recent work by Altarum and others, and the fact that ACA enrollment has been fairly robust.
Finally, if these results indicate that many of the newly-insured ran out right away and obtained medical care (a pent-up demand effect), then it could also be explained not just by a moral hazard effect (price of medical care falls, use rises), but of evidence of adverse selection among the previously uninsured and those first to obtain coverage (which is of course possible, because evidence exists that they were the first to sign up for the Marketplaces and Medicaid).  (Thanks much to my friends and colleagues, James Burgess and Dennis Shea for reminding me of how these two effects interact.)

[Last edited, 5/1, 12:15 pm]