Health Spending as a Share of Personal Consumption Keeps Rising

Where is your money going? Increasingly, the answer is health care. This morning’s third estimate of first quarter Gross Domestic Product (GDP) was not as awful as previously estimated – a real decline of 0.2 percent, not 0.7 percent.

The overall drop of $7 billion was driven by a decline in exports and nonresidential structures. Personal consumption expenditures increased by $58.3 billion. However, $48.1 billion of that was services, of which $24.2 billion was health care. Almost half the quarterly increase in personal consumption was health care.

As I have noted consistently for over a year, a distressingly large share of our national prosperity is being consumed by the government-medical complex.

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.)