Expanding economy got little help from healthcare in last quarter

The national economy grew more robustly than was believed a month ago, but the expansion owed little to health spending—at least according to the latest estimates of the evolving picture of U.S. economic growth and demand for healthcare as millions gained insurance.

But economists caution that another estimate, scheduled for late September, is likely to show a different picture. Survey data on second-quarter health spending will be used for the first time in September estimates. The survey results that help inform the estimate aren't available until mid-September.

The economy grew 6.4% last quarter compared with the first three months of the year, before adjusting for inflation, according to the latest seasonally adjusted, annualized federal estimates. That's stronger than the 6% estimate released by the Bureau of Economic Analysis in late July. (The economy grew 4.2% after adjusting for inflation, the latest estimate said.)

Meanwhile, spending on healthcare services such as hospital and clinic visits grew 2.3% during the second quarter, or marginally slower than 2.5% estimated in July.

Year over year, the latest estimate shows, healthcare spending was 2.9% higher in the second quarter (compared with 3% reported in July).

Overall, healthcare’s contribution to last quarter’s economic growth was marginal—0.05 percentage point—and declined from July’s estimate. “I think the technical term is ‘dinky,’ ” said Paul Hughes-Cromwick, a senior health economist with the Altarum Institute’s Center for Sustainable Health Spending.

Recent reports by publicly traded hospital companies of rising revenue and patient demand also suggest health spending may be accelerating faster than believed, said Charles Roehrig, director of the Altarum center. Hospital giant HCA reported admissions increased 2.2% in the second quarter.

But another growth indicator—healthcare hiring—does not appear to suggest rising healthcare demand, though jobs data may not reflect rising productivity, Roehrig said.

Healthcare hiring has lagged hiring in other industries for the past year, Altarum’s August analysis of labor markets shows. That’s a trend, said Hughes-Cromwick, not seen since the last half of the 1990s.

Follow Melanie Evans on Twitter: @MHmevans