This morning’s third estimate of GDP for the first quarter significantly increased the estimate of health spending, such that it comprised one half of GDP growth in the first quarter.
Spending on health services continue to dominate weak GDP growth. Growth in health services spending of $33.3 billion (annualized) comprised 50 percent of GDP growth. However, there was shrinkage in personal consumption expenditures on goods and private domestic investment. This meant personal expenditures on services grew much more than GDP overall. Growth in spending on health services amounted to 62 percent of growth in personal consumption expenditures and 35 percent of spending on services. Spending on health services grew by 6.4 percent, almost twice as much as growth in spending on non-health services (Table I).
The figures for 2015 Q1 to 2016 Q1 show growth in spending on health services accounted for only 18 percent of GDP growth. Nevertheless, this spending grew 5.0 percent versus only 4.4 percent for non-health GDP. Growth in health spending accounted for over one quarter the growth in services spending (Table II).
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.)