Real Health Spending Continues Moderate Growth

The Bureau of Economic Analysis released its second estimate of 3rd quarter GDP and it confirms what was observed in the advanced estimate: Real growth in health spending is moderate.

Indeed, real GDP growth was revised upwards from 3.5 percent to 3.9 percent, but health spending was not really changed from the advanced estimate. In chained (2009) dollars, GDP grew by $153.7 billion in the 3rd quarter, but health care comprised only 8.6 billion of that growth (Table 3). If we go back before Obamacare kicked into high gear, the increase from the 3rd to 4th quarters in 2013 was $18.7 billion — more than twice as much, and both figures are seasonally adjusted.

Also, health spending increases with economic growth. That is slow, but it is picking up. That makes the slow growth of health spending even more curious. This blog has noted that Obamacare has caused sick people to become insured and demand health services. However, this does not appear to be causing a shock to health spending in the national accounts.

Comments (4)

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  1. Devon Herrick says:

    The old notion that patients can do little to affect a change in health expenditures is at odds with evidence that reference pricing, high-deductibles and cost-sharing all have an effect on patient behavior.

    • John R. Graham says:

      That may be it. Deductibles and out-of-pocket payments are the highest they have ever been, as a percentage of people’s disposable income. That is surely suppressing demand.

  2. LVHHC says:

    Hopefully home health care prices do not continue to rise over the years. MIddle-class people are having enought trouble as it is


  3. wanda jones says:

    John and All…

    When healthcare prices are compared with GDP growth, and pundits take it as a measure of how steady or infla-tionary the use of healthcare services appear to be, I wonder if it would be possible to segregate out the part of healthcare expenditures that are purely a “consumer good,” as is cosmetic surgery, to show the more necessary services more clearly. Too, I wonder if the analysis picks up expenditures in government agencies, such as the IRS and HHS.

    I agree with you that high deductibles are a powerful tool for reducing use of health services. I do not draw comfort from that, as it could mean that some problems are delayed to the point that they are more expensive to treat.

    Also, high expenditures in the health sector translate to jobs, taxes and purchases in the tech sector that benefit those companies. Our view of healthcare is way, way too narrow.

    Wanda Jones
    San Francisco