GDP: Health Services Growing Faster Than Personal Consumption Expenditures

BEAReleased on December 22, the third estimate of Gross Domestic Product for the third quarter indicates growth in health services spending is maintaining a disproportionate share of still slow GDP growth.

Spending on health services grew faster (4.8 percent, annualized, in current dollars) than spending on non-health services (3.9 percent) or non-health personal consumption expenditure (4.2 percent) from the second quarter (Table I). The growth in health services spending ($24.8 billion, annualized) accounted for 17 percent of all GDP growth ($146.5 billion), just under one fifth of personal consumption expenditure ($130.6 billion), and 29 percent of all services spending ($84.7 billion).

20151222 TI

Looking at the change over one year from 2014 Q3 to 2015 Q3, health services spending grew 5.3 percent (Table II). GDP less health services grew at only 3.1 percent. Over the four quarters, growth in health services spending accounted for one fifth of GDP growth. This means that health services spending continues to devour more of our budgets. The evidence continues to indicate Obamacare is not bending the cost curve.

20151222 TII

Technical note: When I discuss health services in these quarterly GDP releases, I mean only health services. I do not include purchases of medical equipment, or facilities construction. While I include Medicare and Medicaid, I do not include Veterans Health Administration or other government benefits. So, these dollar figures undercount the amount of our economy consumed by the government-health complex.

(See: Measuring the Economy: A Primer on the GDP and the National Income and Product Accounts, Bureau of Economic Analysis, October 2014, pages 5-2 and 5-3; Micah B. Hartman, et al., “A Reconciliation of Health Care Expenditures in the National Health Expenditures Accounts and in Gross Domestic Product,” Research Spotlight, Survey of Current Business, September 2010, pages 42-52.)

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