Archived: Obamacare's Big Save

By Chris Hoenig


Photo by Shutterstock

A disappointing report on the economic activity in the U.S. during the first quarter could have been a lot worse if not for one thing: Obamacare.

The Commerce Department analysis released on April 30 showed that the economy had little growth in the first quarter of this year, climbing just 0.1 percent. Business investment fell 2.1 percent, hurt by a 5.5 percent drop in spending on equipment. The housing market was also weak, with residential construction down 5.7 percent. Experts blamed the low numbers—the 0.1 percent overall growth was well below the 1.1 percent forecast—on a particularly harsh winter.

With all the doom and gloom in the report, there was one particular bright spot in the effects of the Affordable Care Act. Healthcare spending, counted as part of consumer spending, jumped almost 10 percent—adding $43.3 billion to the U.S. economy. The increase helped buoy a 3 percent overall gain in consumer spending, despite the smallest rise in spending on consumer goods in nearly three years.

“If healthcare spending had been unchanged, the headline GDP growth number would have been -1.0 percent,” Ian Shepherdson, Chief Economist at Pantheon Macroeconomics, wrote in a research note. “Spending on both doctors and hospital services [is] now running at more than twice their pre-Obamacare trend, indicating that pent-up/hidden demand for healthcare was huge.”

More than 8 million Americans have signed up for health insurance through state and federal healthcare exchanges established under the Affordable Care Act. Another 4.8 million were added to the Medicaid and Children’s Health Insurance Program rolls as part of the expansions of the programs that were included in the law, giving a total of nearly 13 million Americans affordable access to healthcare services and goods.

Consumer spending also increased when it came to utilities, in large part due to the polar vortex gripping large swaths of the country over the winter.

An increase in overall spending across many of the measured sectors in March is keeping economists optimistic about future reports. Shepherdson predicts a 3 percent growth in the GDP in the second quarter of the year, a rate that falls in line with many other forecasts.

“While quarter one was weak, many measures of sentiment and output improved in March and April, suggesting that the quarter ended better than it began,” said Dan Greenhaus, Chief Investment Strategist at global financial-services firm BTIG.

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