The economic news this week may have people wondering whether they have gone through the Looking Glass into Wonderland. The Bureau of Economic Analysis issued its advance estimate of first-quarter growth in 2014, which barely made it into the black with an annualized GDP growth rate of 0.1 percent. Even that terrible result – the worst quarter since 2012, and tied for second-worst since the start of the technical recovery in June 2009 – would have been worse without an explosion of health-care spending as Obamacare enters its first year of implementation.
Not since 1980 has the American economy seen such a rapid expansion of health-care spending. It rose at an annualized rate of 9.9 percent, far outstripping inflation and standing in stark contrast to other components of the BEA report. Exports fell 7.6 percent, and demand for imports declined by 1.4 percent. Consumer consumption rose 3.0 percent, but that came in part from the high rate of health-care spending.
The US had seen a drift downward in health-care spending, but the trend began to reverse as Obamacare first officially launched in October. In the fourth quarter of 2013, health-care spending rose 5.6 percent, far above the 2.6 percent growth rate of the economy, to which it significantly contributed. Without the spending on health care in 2014 Q1, annualized GDP would have dropped to a recessionary -1.0 percent, according to economist Ian Shepherdson.
It didn’t take long for supporters of the Affordable Care Act to change their tune on the benefits of increased health-care spending. Think Progress’ Igor Volsky wrote, “All of this was fully expected,” and that the spending just reflected the fact that more Americans “are finally getting insurance and are using their care.”
Oddly, the same publication lamented less than four months ago that Obamacare didn’t get enough credit for keeping spending increases down in 2012. “According to CMS, the spending growth between 2009 and 2012 is the lowest ever recorded in the past five decades,” wrote Tara Culp-Ressler in early January, “and 2012 is the first time in more than a decade that health spending grew more slowly than the U.S. economy.” She complained, “The CMS’ report isn’t giving the Affordable Care Act much credit” for keeping increases limited, as CMS attributed the slowdown to the economic malaise of the so-called recovery.
The White House jumped on the same bandwagon. “The sharp increase in estimated utilization appears to have been driven by greater use of health care services by people who gained insurance coverage during the first quarter because of the Affordable Care Act,” wrote Jason Furman on the White House blog on Wednesday. “Ensuring access to care is a key goal of the Affordable Care Act’s coverage expansion, so this increase in utilization is neither a surprise, nor a cause for concern.”
This, however, ignores one of the key stated purposes of pushing for the top-down, command-economy overhaul of the American health-care system: bending the cost curve downward. As Congress prepared to pass the ACA four years ago, Obama told the House Democratic Congress, “[E]very single good idea to bend the cost curve and start actually reducing health care costs are in this bill.” The need to reduce spending on health care drove the debate, both in terms of government and private spending.
The scope of the new spending doesn’t suggest that it’s limited to just the uninsured. Nor does it come as a function of economic growth. The annual rate of GDP growth for 2013 was just 1.9 percent, less than a third of the spending increase in 2014, and less than a fifth of the increase in 2014 Q1. If growth in health care spending was linked to economic growth, as CMS concluded in regard to the 2012 data, then something has caused a major disruption and delinking of that relationship – and the obvious change has been Obamacare.
Is this new health-care spending really just an expression of joy over new coverage, as Obamacare supporters argue now? Fortunately, we have some metrics to judge this claim after two full quarters of rapid increases in spending. Since the White House declared victory on Obamacare as open enrollment ended, and insisted that “the debate is over,” a number of national polls have been published on the new law and support for its provisions. Not a single one of them demonstrates a rise in support anywhere near the rise in spending – or much of an improvement at all in popular perception of Obamacare.
The Washington Post/ABC poll results show the opposite, in fact. Support for the law dropped five points to 44/48, down from 49/48 in the previous poll from March. Among Latino voters – a key demographic for President Obama and his Democrats in the midterm elections – support for Obamacare dropped seven points. The news was only slightly better in the NBC/Wall Street Journal survey, where support for the ACA rose from 35 percent in March all the way to … 36 percent. Those who think Obamacare to be a bad idea did decline from 49 percent to 46 percent, but all of these changes fall within the polling margin of error.
Kaiser Family Foundation similarly sees no burst of enthusiasm from consumers happy about the massive increase in health-care costs. In September, before the sharp increases occurred, opinion split on the law 39/43, numbers that remained largely stable throughout last year until the Obamacare launch. During the rollout, when spending increases began, disapproval pushed those figures to 33/49 in November 2013 and 34/50 in January. In March and April, approval remained constant at 38/46. A majority of 57 percent told Kaiser that the law clearly is not working as intended, including 61 percent of independents.
So no, the rapid increase in spending does not indicate that the system is working to lower costs, an absurd if not Orwellian construct. Nor is the debate “over,” no matter how many times Obama claims otherwise. Too bad the White House chose not to take advice from National Journal’s Ron Fournier.
“The president risks insulting a vast majority of Americans by dismissing their concerns with a consultant's talking point,” Fournier wrote before the economic figures were released, “and Obama can't afford any more blows to his credibility.”
Perhaps it’s better to say that the only curve being bent downward now on Obamacare is the honesty curve, and that we can only expect more of that as Obamacare costs force higher spending and lower growth in the future.
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