Health care was nearly half of PCE services in Q3. Here’s a breakdown of services.
Real PCE Services in Billions of Dollars
- Total: 10,942
- Health Care: 2,963
- Housing and Utilities: 2,704
- Recreation: 632
- Transportation: 520
- Financial and Services: 1,181
- Food and Accommodation: 1,090
- Other: 1,479
Health care is now the single largest PCE component. It passed Housing and Utilities in January of 2023.
For contribution to GDP, we need to look at the change in real spending.
Real PCE Services Change in Billions of Dollars
Health care is no consistently the fastest growing segment of PCE services.
2025 Q3 Change in Services from 2025 Q2
- Total: 100
- Health Care: 48
- Housing and Utilities: 2
- Recreation: 10
- Transportation: 4
- Financial and Services:7
- Food and Accommodation: 3
- Other: 25
Health care was nearly half of the increase in PCE spending in the third quarter. That means it was nearly half of the services contribution to GDP.
Real PCE Services Health Care Percentage Point Contribution
In 2025 Q3 Heath Care was 48.2 percent of PCE Services spending. It provided 0.84 percentage points to GDP.
These numbers will soar in 2026. I expect the nominal cost of health care to surge by 10 percent or more next year.
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How Much Does Health Care Contribute to GDP?
The very question evokes how squirrelly the relationship is between the statistical construct ‘GDP’ and economic well-being. The more Americans spend on medical care, the sicker they get. The stark increase in health care spending since the Fauci jab roll out at the beginning of 2021 suggests that subsequently Americans are sicker.
With this kind of GDP contribution, we’d be better off with less.
Any time there are increases in employment, “health care” tends to be the big factor. But are any of those “health care” jobs actually treating patients, such as doctors or nurses? No. Who knows what those new jobs are for. But they keep appearing out of nothing and adding to the overall expense of medical care in this country.
What will be the social costs as healthcare and related insurance premiums become beyond the ability to pay for an increasing number of US citizens?
“If something cannot go on forever, it will stop.”
— Herb Stein, Senior Fellow at the American Enterprise Institute
And be replaced by something else…
Nobody truly knows, but we’re determined to learn those answers ASAP
Increases in healthcare costs should hold back other sectors of the economy. The US does a poor job in controlling healthcare costs. There needs to be strict anti-trust enforcement along with more outcome based treatment initiatives. The incentives in healthcare are totally backwards. The less healthy people are the more money that providers make. For major expenses it is cheaper to go to another country for care. Perhaps insurers and MediCare should allow for this in the United States to put a little competition in the system.
A competitive market requires the buyer and seller to have a similar level of knowledge about the product on offer. That allows for competent negotiating. Modern medicine does not have this characteristic, therefore competition isn’t an effective price control. This is why we have seen above trend price increases for decades. Markets don’t solve all problems.
“Health care was nearly half of the increase in PCE spending in the third quarter. That means it was nearly half of the services contribution to GDP.”
It should state “Health care was nearly half of the increase in PCE spending in the third quarter. That means it was nearly half of the services contribution to increase in GDP.”