Health Services 30 Percent of GDP Growth

BEAThis morning’s second estimate of GDP for the first quarter was a little stronger than last month’s advanced estimate, although much of the adjustment was a smaller decrease in inventories than initially estimated.

Spending on health services continue to dominate weak GDP growth. Health services spending of $19.2 billion (annualized) comprised 30 percent of GDP growth. However, there was shrinkage in personal consumption expenditures on goods, private domestic investment, and exports. This meant personal expenditures on services grew much more than GDP overall. Growth in spending on health services amounted to a little less than one fifth of growth in services spending. Nevertheless, the quarterly growth in spending on health services indicates health services continues to consume a disproportionate share of (low) growth (Table I).

20160527 TI

The figures for 2015 Q1 to 2016 Q1 show growth in spending on health services accounted for only 15 percent of GDP growth. Nevertheless, this spending grew 4.3 percent versus only 3.2 percent for non-health GDP. Growth in health spending accounted for almost one quarter the growth in services spending (Table II).

20160527 TII

Although health services spending accounts for just 12 percent of GDP, these estimates continue to indicate it will grow faster than GDP. There is no slowdown in health services spending.

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.)

Comments (5)

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  1. Ron Greiner says:

    John, on 6/17/2016, last week, you wrote a story called: “CPI: Medical Inflation Finally Under Control”

    So which is it?

  2. Ron Greiner says:

    “Investor’s Business Daily-Blue Cross Blue Shield of Texas, facing massive losses for its Obamacare plans, has requested a 58% premium hike!”

    More news this Holiday weekend: United Health Care (UHC) terminates FLORIDA plans on the Obamacare Exchange for 2017.

    Obamacare News-Flash: Ohio’s Obamacare co-op will be shut down over the next 60 days despite efforts to keep it afloat.

    Nearly 22,000 customers will be forced to find alternatives for their health insurance. The meltdown marks the 13th out of 23 Obamacare co-ops to go under.

    Obamacare is the conclusion of Hillarycare!

    Vote TRUMP for Beefed-Up tax-free HSAs and make health insurance a Qualifying Medical Expense (QME).

  3. Wanda Jones says:

    John:

    I’m eager to learn what “consumer good” healthcare expenditures are of these gross numbers. Botox, its–the optional expenditures.

    Wanda Jones
    San Francisco

    • I doubt we can get that from BEA’s estimate of GDP. Maybe CMS’ National Health Expenditure Account woudl get closer. (See Hartman reference above.) However, I think we’d have to reconcile private market research output to really get that. It is a good question.