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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Let’s discuss the statistical discrepancy.
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Let’s discuss 2026 health care premiums and what they mean to the Fed’s preferred measure of inflation.
The treatment of Health Care within GDP is nearly the best example of how GDP is a junk measurement of economic health.
At the lowest level, a person takes a day off, which leads to a loss of productivity, but and if it’s no pay a reduction in GDP, otherwise no impact. They then pay to see a doctor which adds to GDP and maybe get a prescription, the purchase of which adds to GDP.
The nett effect for the bulk of the population is that being sick probably increases GDP.
Doubling the cost of a medicine would increase GDP. 50c on a cup of coffee improves GDP.
Even those examples are not quite as stupid as how demolishing a building adds to GDP. Or that cutting down a forest, exhausting an oil field or cleaning up a polluted river adds to GDP. It is really a measure of consumption, in many aspects the reduction of nations’ wealth, rather than production.
A question I have had for a long time is why healthcare is not considered in inflation indexes in some related proportion to its costs for patients. Forget insurance, use the total cost as eventually the insurance cost will always be more than the industry payout to cover administration and profit.
Clearly, having 80% of the country overweight or obese and 50% diabetic or pre-diabetic is “good for the economy”.
And more and more is under the “non-profit” umbrella. This is a death knell for state and local taxes to put that much economic activity out the range of taxation. In Virginia Bon Secours is on a rampage buying practices and building hospitals. In Indiana it is IUHealth. UCHealth in Colorado. Peace Health. Providence. The list goes on. They take those 340b dollars that could fund Obama care and medicaid and they GROW TAX FREE!!!
Upon returning from a trip to Europe, my wife came up with intestinal distress. A call to our insurance provider resulted in a possible cancer diagnosis and she was told to go immediately to the emergency room. Ten thousand dollars in tests resulted in no disease or cancer. When she mentioned she had been to Europe they tested for parasites and hit the jackpot-cryptosporidium! The first question should have been-have you been overseas? Fortunately, insurance covered all but 2k, but still it was wasted money and highlights how stupid the system is. Personally, I wouldn’t have visited a doctor at all.
If you eliminate the insurance companies interference, insane coding and inefficiency from the healthcare equation you save 40% immediately…
Why do you think their buildings are the among the tallest in every city? The hospitals lie squat and dwarfed by their financial overlords.
Healthcare should outcomes based and run by doctors, not for profitable insurance companies for the benefit of executive bonuses and shareholders.
Insurance coding should be uniform across companies. Much more efficient for insurance to conform to a uniform code than have health care companies deal with multiple codes.
– Medical Patient Care Experience (PCE).
> More touchy-feely, and extremely expensive, but very, very Lucrative to Non-Patients!
– refers to hands-on roles in healthcare where individuals directly interact with patients, such as medical assistants, EMTs, or phlebotomists.
> This used to be called “Speaking With Your Doctor” Now it’s a Cash Cow called PCE (Political Cash Entitlement) Program!
– This experience is crucial for those applying to physician assistant programs, as it demonstrates practical skills and understanding of patient care.
> PA’s want more money to speak to you, or they can’t be bothered? OR is it more money available for others to Siphon Off?
Real PCE Services in Billions of Dollars
Total: 10,942
Health Care: 2,963 (Should be 100%) Isn’t this the point after all?
Housing and Utilities: 2,704 > It’s called Where You Live. Are we supposed to put everyone up in Hotels? Must be nice! Should be $0.00.
Recreation: 632 (When did Taxpayers become responsible for this?) Should Be $0.00. Why don’t we send them ALL to Disney… Should be $0.00.
Transportation: 520 (When did Taxpayers become responsible for this?) It’s called Public Transportation for a reason. Should Be $0.00.
Financial and Services: 1,18. (It’s called a “Financial Advisor”) Go get one, and this Should be $0.00
Food and Accommodation: 1,090 (When did Taxpayers become responsible for this?) Should Be $0.00.
Other: 1,479 (WTF IS THIS?) Should be $0.00.
2025 Q3 Change in Services from 2025 Q2 ( So They Grabbed Much More of the Taxpayers Money I see (See Above) Should be $0.00…
Take “private health insurance” out of the picture. Replace it with “Medicare For All.” Negotiate better prices from providers.
My single largest expenditure is INSURANCE (Medical, Housing, Auto, Travel, Dental, Pet). It is not listed?
Exactly!
Bingo! We have a winner!
Health Care is ridiculously expensive. MAHA could help but we are hopelessly sick people.
It’s not healthcare. It’s sickcare, which is waaaaaaayyy more lucrative.
A simple cold used to be gargle with warm salty water, stay in bed, and drink plenty of liquids. Keep an eye on your temperature. You would feel better in 3-5 days at $0.00.
Now it’s multiple doctor visits, multiple forms of pills and liquid medicine, and if your lucky, with your immune system down, you won’t get COVID or The Flu while waiting around in rooms full of other sick people…
Good system we got going for us now… NOT!
The truth is health care, finance, real estate, insurance and education are wholly unproductive on their own. You need productivity gains in other segments of the economy in order for those sectors to actually thrive. The US economy is clinging to its legacy rather than embracing the future. The real the problem the world has is the future involves not needing as many people. How will the lives of billions be made productive and worthy ? This is the biggest question facing humans imo.
– The truth is health care > is More About $$, than Your Health. No Money in Healthy People.
– The truth is finance > is More About Their $$, than Your finances.
– The truth is real estate > Is more about Capital Gains, and Taxes, than Your Home.
– The truth is insurance > Is more about Sick People than looking out for you (see above)
– The truth is education > Is more about Indoctrination than Learning.
Prices simply go up, when they Desire, or Need more money. We have no say in pricing, and no understanding of it. We do know Medicine is much cheaper in some other Countries than in America. We do know that cost for Medical Educations is enormous, and thus demands High Salaries to be able to afford the cost. Hmm… That last one got me thinking why?
It is what it is as they say…
=How much does healthcare contribute to GDP?
in this logic best thing GOV would do for finances is to =kill= all those people who get pension after 65 /70 years !
IMO the Government shouldn’t be allowed to have Pensions. It’s a huge conflict of interest, and it’s Taxpayers Money, and should not to be used to pay for everyday people to collect from. That’s what S/S is for, and Medicaid, another cash cow that needs to be discussed, as well.
I don’t believe the federal government has pensions, at least for the bureaucracy anymore. Everyone contributes to an annuity instead.
=How much does healthcare contribute to GDP?
lets say all 350 mil people in USA got sick and US GOV would BE FORCED print 100.000$ per person per year as long as sickness is on!!
would that be good for country? of of course not!
but GDP would skyrocket!!
======
so you know GDP is calculation of spending !! it is all BS to make all those PHDS to look important!
alx
“How much does healthcare contribute to GDP?” I would ask “how much does healthcare consume of GDP?”
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.
We know the product produced by the FIRE sector: DEBT
But what exactly is the product produced by the Medical/Pharma complex ???
[FIRE=Finance Insurance Real Estate]
All-cause mortality in the US was highest in 2021 (the year of the vaccine and the lesser Omicron variant) rather than in 2020 (the Covid year), and remained well above the 2018-2019 level in 2022 and 2023 and 2024.
Hospitals were half empty during covid, no one wanted to go to the ER for something minor in case they got covid which was perhaps not unreasonable. However, for example, the number of cancer interventions in the EU was down by half. That was probably the case in the US. Alot of people who should have seen their doctor and gotten chemo etc. probably died in the years after covid. Ditto heart disease. I don’t think anyone has really looked into this but it certainly does sound reasonable.
MI6, that is a good reasonable point. But it isn’t controversial at this point that a non-trivial number of Americans died directly after getting the jab or in a way verified to be from the jab. And myocarditis, blood clots, and autoimmune problems have been clearly shown to be jab sequelae. And then there is the emergence of “Turbo cancers”, especially in younger people in 2022 and after.
Finally, your point would not explain why health insurers explained their lack of profits in 2024 as because their clients were sicker than the company predicted.
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.
I suspect the DEI Programs had a lot to do with this. 2 or 3 to learn the job under 1-2 to teach it. Schooling, Training and Learn Up classes to take for a decade anyway Etc.
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.
Get rid of insurance covering everything, such as annual wellness visits and semi-annual teeth cleanings, and competition will come back into the marketplace. If insurance only provided catastrophic coverage, there’d be a lot more price discovery going on.
Price discovery can exist for teeth cleanings. Provider and customer know exactly what to expect. But that’s not where the money is. The money is in surgical procedures, proprietary pharma, cancer and other areas where knowledge and negotiating power are lopsided in favor of the provider.
Insurance companies exist because they have the concentrated capital necessary to hire the necessary people to give them the knowledge to negotiate with providers. They are the natural free market solution. Unfortunately, being private, their goal is to take the difference in negotiated price as personal profit.
In some major markets there is only one healthcare provider (the same system owns all the hospitals in the market). Then an insurance company cannot negotiate. There have been some studies on this issue by the KFF (Kaiser Family Foundation).
Yes. I live close to Orlando where Advent Health acts as a monopoly provider. But insurance companies don’t reduce the costs of healthcare. They just fight to take a larger share for themselves than for the provider. Monopoly providers simply get a bigger slice of the pie. There are really only 4 or 5 major insurance providers in the country so they can easily collude to set prices also. My personal doctor only takes cash or Medicare (I’m a cash guy). He refuses to deal with insurance companies or Medicaid. And he charges me $100/visit, regardless of the reason for the visit.
“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.”