Healthcare Business News

Healthcare spending growth lags overall economy

By Melanie Evans
Posted: July 30, 2014 - 1:30 pm ET

Consumer health spending growth remained largely flat in the second quarter, preliminary federal estimates show.

Annualized spending by consumers for hospital care, clinic visits and other medical services increased 3% in the second quarter compared with the same quarter a year ago, in line with the 3.2% growth for first quarter compared with the first three months of 2013. The figures are not adjusted for inflation.

Health spending contributed 0.08 percentage point to the economy's welcome 4% annual rate growth in the second quarter.

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The figures are preliminary and economists stressed that the estimates can be significantly revised, as was the case with first-quarter figures. Initial spending estimates for January through March put growth at 10% for the year. A final revision released in June estimated a decline in health spending of 1.4% for the year.

Health insurance expansion under Obamacare that began in January has made estimates more difficult. Enrollment in subsidized health plans continued through March, and many consumers bought insurance close to the deadline. Public health plans have no deadline for enrollment.

The figures, released by the Bureau of Economic Analysis, reflect spending by consumers for health services, but exclude other contributors to the nation's overall healthcare costs, such as pharmaceuticals, medical equipment, hospital capital investments, public health and research.

After adjusting for inflation, annualized health spending increased by slightly more than 0.7% between the first two quarters of the year. Second-quarter annualized spending compared with the same three months in 2013 increased 1.5%.

Figures also included an annual revision to economic estimates, which included a slight but significant adjustment to health spending for 2013, said Paul Hughes-Cromwick, an economist with the Altarum Institute. The 2013 revision shows the economy grew slightly faster (3.7%) than consumer spending on healthcare (3.5%). Prior to the revision, consumer health spending growth of 3.8% outpaced economic growth of 3.4% for 2013.

Follow Melanie Evans on Twitter: @MHmevans

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