Gross Domestic Product: Is Health Spending Figured Out?

Relying on a government agency to tell us the value of goods and services produced in our nation may not be the best way to estimate Gross Domestic Product. Nevertheless, it is widely accepted.

Health spending was a non-issue in the Department of Commerce’s release of the advanced estimate of second-quarter GDP, which came in at four percent (annualized). Much of the second quarter’s improvement was business spending and consumer spending on durable goods. Health spending increased by a muted 0.08 percent. The final estimate for first-quarter GDP was improved to minus 2.1 percent, up from minus 2.9 percent.

What is a relief is that the final estimate for health spending in the first quarter, minus 0.16 percent, was unchanged from the previous estimate. Previous estimates of first-quarter GDP were whipsawed by huge changes in the health estimate, and many were concerned that the Department of Commerce had no idea how to measure health spending under Obamacare. Yet more changes in the estimate were feared.

Advanced estimates of GDP are always subject to significant revision, but the previous uncertainty about health spending was unprecedented. If the Department of Commerce has figured out how to measure health spending in the new regime, at least that’s one Obamacare uncertainty that we can stop worrying about.

John R. Graham is a former Senior Fellow at the Independent Institute.
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