Council of Economic Advisers Blog

Historically Slow Growth in Health Spending Continued in 2013, and Data Show Underlying Slow Cost Growth Is Continuing

New data out today from the Office of the Actuary at the Centers for Medicare and Medicaid Services confirmed that 2013 was another year of historically slow growth in health care spending and that 2011, 2012, and 2013 saw the slowest growth in real per capita health care spending on record. Today’s data make it increasingly clear that the recent slow growth in the cost of health care reflects more than just the 2007-2009 recession and its aftermath, but also structural changes in our health care system, including reforms made in the Affordable Care Act. As we have noted previously, if even a portion of the recent slowdown continues, the benefits for Federal and State budgets, families’ budgets, and the economy as a whole will be dramatic.

The remainder of this blog post takes a closer look at today’s report and what it can tell us about the drivers of recent trends. We also take a look ahead at 2014 using other data that are already available. Available data suggest that aggregate spending may be growing more quickly as millions of people gain health insurance coverage and access needed care. But the available data also show that health care prices, premiums, and per-enrollee costs—the factors that determine the costs families face—have continued to grow very slowly during 2014.    

Advance Estimate of GDP for the Third Quarter of 2014

Economic growth in the third quarter was strong, consistent with a broad range of other indicators showing improvement in the labor market, rising consumer sentiment, increasing domestic energy security, and continued low health cost growth. Since the financial crisis, the U.S. economy has bounced back more strongly than most others around the world, and the recent data highlight that the United States is continuing to lead the global recovery. Nevertheless, more must still be done to boost growth both in the United States and around the world by investing in infrastructure, manufacturing, and innovation; and to ensure that workers are feeling the benefits of that growth, by pushing to raise the minimum wage and supporting equal pay.

FIVE KEY POINTS IN TODAY’S REPORT FROM THE BUREAU OF ECONOMIC ANALYSIS

1. Real gross domestic product (GDP) grew 3.5 percent at an annual rate in the third quarter of 2014, according to the advance estimate from the Bureau of Economic Analysis. The strong growth recorded in each of the last two quarters suggests that the economy has bounced back strongly from the first-quarter decline in GDP, which largely reflected transitory factors like unusually severe winter weather and a sharp slowdown in inventory investment. In the third quarter, net exports made a large positive contribution to growth, while consumer spending and business investment grew at a somewhat slower pace than the previous quarter.