| WASHINGTON, April 30
WASHINGTON, April 30 As the U.S. economy
teetered on the brink of contraction in the first quarter, one
thing stood out. Healthcare spending increased at its fastest
pace in more than three decades.
That surge is attributed to the implementation of President
Barack Obama's signature healthcare law, the Affordable Care
Act, also known as Obamacare. Because of Obamacare, the nation
narrowly avoided its first decline in output in three years.
"GDP growth would have ... been negative were it not for
healthcare spending," said Harm Bandholz, chief economist at
UniCredit Research in New York.
Healthcare spending increased at a 9.9 percent annual rate,
the quickest since the third quarter of 1980, and it contributed
1.1 percentage points to GDP growth.
The economy expanded at only a 0.1 percent rate in the first
quarter, held back by a drop in exports and business investment,
which economists attributed to a harsh winter. A sharp slowdown
in the pace of inventory accumulation was also a drag.
The gauge of healthcare spending published on Wednesday is
simply an estimate based on Medicaid benefits, ACA insurance
exchange enrollments, and other related information. Firm data
will not be available until June, and the government could well
revise its figures for both healthcare and overall GDP.
About eight million people have so far signed up for
healthcare insurance under the law, and the jump in healthcare
spending had already been flagged in the government's monthly
income and consumer spending data.
White House economic adviser Jason Furman said the increase
should not be a cause for alarm.
"Any upward pressure on healthcare spending growth from
expanding insurance coverage will cease once coverage stabilizes
at its new, higher level, so it does not affect the longer-term
outlook for spending growth," he said in a statement.
Obamacare provides coverage for residents who previously did
not have health insurance, as well as subsidies to those who
cannot afford monthly premiums. These transfers are helping to
free-up income and more people are making visits to hospitals.
Economists said both the subsidies and hospital visits were
contributing to the surge in healthcare spending.
"You have those two separate things that are working; the
challenge is we don't know the split between newly insured and
previously insured," said Alec Phillips, an economist at Goldman
Sachs in Washington.
Healthcare spending could rise again in the second quarter,
but probably not at the first-quarter's rapid pace.
Through February, estimated personal income from Medicaid
and other social benefits - the category where the tax subsidies
through the health exchanges show up - was running ahead of the
actual increase in healthcare consumption.
"That kind of implies that there may be at least a little
bit more in terms of growth in health consumption from
essentially those new benefits that have been provided," said
Phillips. "With that said it also implies that we have probably
seen a decent amount of it already."
Government transfers, including health insurance premium
subsidies, boosted personal income in the first-quarter.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)