The biggest swing in Q1’s GDP report came on healthcare prices and spending. The Bureau of Economic Analysis’ first estimate projected healthcare spending exploded by 9.9%, the most in more than 30 years. By the third estimate, the BEA found healthcare spending actually fell by 1.4%.
The BEA released its second-quarter advance estimate on Wednesday. There wasn’t much news on the healthcare spending front — it was flat at about a 0.7% growth rate. Healthcare prices grew at a 1.8% annual rate in the second quarter, lower than overall inflation.
But even those encouraged by the numbers warn that, again, they could be subject to massive revisions from the BEA. Jason Furman, the chairman of President Barack Obama’s Council of Economic Advisers, included this chart in the White House’s statement on the GDP estimate.
It shows how the first estimate of healthcare spending in GDP is all over the map compared to the final estimate. That’s because the BEA doesn’t have a lot of data to work with when producing its first estimate.
A BEA spokesman told Business Insider last month that the agency used “information on Medicaid benefits and on ACA insurance exchange enrollments as well as other available data” in the first estimate.
“These data sources suggested a relatively large increase in health care spending. Based on these data sources, we had assumed that ACA related effects boosted consumer spending on healthcare services by about $US37 billion for 2014Q1 (in current dollars),” the spokesman said.
The eventual revision was based on a new set of data from the Commerce Department’s quarterly services survey.
That survey provided a few important data points: Healthcare and social assistance spending, overall, plunged 2%. Revenue for hospitals (-1.3%), medical labs (-6.4%), and outpatient care (-3.6%) all fell in the first quarter of 2014 when compared to the final three months of 2013.
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