Does the new GDP report pass the smell test?

from health-policy-blog at on June 26, 2014 at 02:06PM

After sleeping on it, I have to wonder whether the third revision of the 1st Quarter GDP report actually passes the smell test any more than the first one did.  When the first one came out — and it said that health utilization grew by 9.9% at an annual rate (even when GDP was growing just 0.1%) many of us did not believe this passed the smell test.  We subsequently learned that the Commerce department did not have real use numbers to back this up, but it was based on projections.  And even in the first quarter, as the ACA was being implemented, many health economists did not believe the moral hazard effect would be as large as 5%.

Now we hear that the Commerce department has some survey results and they show a DECLINE in health utilization in the first quarter — some of it dramatic (for example drops in physician office use of -6% and outpatient us of -6%).  This seems almost impossible to believe given the ACA was being implemented in the 1st quarter of 2014.  Yes, only about half of the newly insured actually got enrolled by January, and many newly-insured by Medicaid have been having trouble getting on the rolls.  There have been downward trends in health utilization in 2013, but it reversed in the last couple quarters of 2013.  Also, there have been other surveys showing a significant uptick in utilization, at least in states that expanded Medicaid.  Also a WSJ story presented evidence that a higher proportion of the newly insured may have chronic disease, so one would think they would seek care right away.

So now I am in the place where I am having trouble saying the third revision of the GDP numbers for the first quarter pass the smell test, any more than the first release did.  And this does matter, because this is a big part of why the economy showed a big drop of -2.9% in the quarter.