Today the third revision of the first quarter GDP report was released and it shows a rather remarkable downward slide in the health care sector's share of GDP, according to the Commerce Department that counts this up.  As I discussed in my previous blog report and is shown here in a good post on the Council of Economic Advisors web site, the revision has overall health utilization down -1.4% (on an annual rate), prices up only a very slow 0.5% (on an annual rate), so overall health care fell by -0.16% at an annual rate, contributing to the very bad -2.9% overall GDP economic growth rate.

A report by the Census Bureau, released a couple weeks ago gives some sense of what is behind these numbers.  I pull the relevant numbers from that report and put them into a table I insert below (also available here).  Note that this report on "quarterly revenues" from "selected service industries" shows several if not most of the areas in the health care sector showing significant negative growth: physician offices (-6.3%), medical labs (-6.4%), outpatient care centers (-3.6%), specialty hospitals (-2.1%), and general medical hospitals (-0.7%, which I list because they are such a large share of medical spending).

It is still difficult to figure out exactly why health care use was reported to drop so much in 1Q 2014, especially when use rose in 4Q 2013, and given that the Affordable Care Act was being implemented then.  However, perhaps there are some explanations for the early trends in 2014:

  • spending and use was slowing through much of 2013, at least until the latter part of the year (perhaps because of a general trends in the health care sector such as changes in the delivery systems or cutbacks in government payment streams);
  • related to this, it is worth recalling that the ACA itself put in place payment cuts that were designed to pay for the expansions in coverage to go into effect in 2014, so some of these payment cuts are going into effect already (e.g., slowing the growth of Medicare reimbursements to hospitals);
  • it is worth remembering that many -- as many as half of the newly enrolled under the ACA -- did not gain coverage until late in the open enrollment period (the last few weeks of March), and thus late in 1Q 2014;
  • the patterns that slowed the growth in GDP overall (bad weather) perhaps could have slowed health spending (dampening demand for health care use that was not an emergency)--if people had difficulty gettting around they may have chosen to delay elective health care too; 
  • Finally, and perhaps most important, the data on the ACA implementation likely will be "messy" and take a while to sort out, so caution in drawing definitive conclusions on any of this is prudent.  For an excellent article on how "tricky" this is see an article on the Wall Street Journal's website where the Commerce official responsible for leading this effort is quoted as saying: â€œTrying to initially estimate health care this first quarter was a very unique circumstance because of the rollout of the Affordable Care Act."