What do we know so far about what Obamacare means for consumers? A report released yesterday by the government on personal income and spending in January provides some new data. The information is preliminary, but it does offer some early and interesting hints about life after the first full month's implementation of the new health-care law.
1) The Affordable Care Act represents a major income boost for many Americans.
The law entails a massive expansion in government social benefits, and the numbers from January bear this out. The Medicaid expansion was the biggest factor in driving up personal income in January, which rose 0.3 percent from the month before. By comparison, overall income was flat in December. The Commerce Department estimates that the Medicaid expansion alone added $19.2 billion to income in January.
On top of the Medicaid expansion, refundable tax credits for families buying insurance through the health exchanges accounted for the bulk of another $14.7 billion in added government social benefits, according to the data.
All of this helped offset the drop in income from the expiration of long-term unemployment benefits, which cut income by $17 billion, according to government estimates.
2) The law also drives up overall spending.
On the spending side, the effect of Obamacare was also significant in January. It was the biggest reason behind a 0.4 percent jump in consumer spending, more than many economists had expected. You can see both the jump in income and health services consumption in the chart produced by Goldman Sachs below in a new report:
The author of the report, Alec Phillips, notes that there had been concern that households paying insurance premiums would push out other consumer spending, but this did not seem to be the case in January. Excluding health-related spending, personal consumption still rose by 0.2 percent.
3. Health-care costs appear to be going down.
Phillips says that data inflation in the price index for personal consumption expenditures was "slowed by what was likely an ACA-related drop in health services prices."
As Phillips explains, the law requires a smaller annual increase in the prices Medicare pays for services. These cuts were used to finance some of the law's new benefits, he writes, and the effect can be seen on the health-related parts of the PCE price index.