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Health Spending Slows, but Will It Last?

Slowdown in Prescription Drug Spending Is Welcome News but May Be Short-Lived

WebMD Health News

Jan. 6, 2009 -- The United States spent $2.2 trillion on health care in 2007, a record despite a substantial slowdown in the growth of medical costs, according to federal data released Tuesday.

The figure of $2.2 trillion represents an average $7,421 for every U.S. citizen and a record 16.2% of the nation's gross domestic product. Analysts and policy makers have called that level of health care spending unsustainable.

Overall spending grew at 6.1% in 2007, the slowest rate in nearly 10 years. Still, officials warn that health spending is likely to accelerate again without major reforms.

"Sure, we're happy about that," says Richard Foster, the chief actuary for the Centers for Medicare and Medicaid Services, the federal agency that released the data. "I wouldn't expect the 6.1% to necessarily continue."

Spending on prescription drugs rose at the slowest rate in decades in 2007. Analysts say that was the main factor behind lower overall spending growth. Private insurance companies as well as government programs like Medicare and Medicaid are relying more heavily on generic drugs, which are typically half as expensive as branded drugs, says Micah Hartman, a statistician with the National Health Statistics Group, which published Tuesday's report.

"It's not the slowest rate of growth ever, but it's the slowest rate of growth since 1963," Hartman says.

Overall, the nation spent $697 billion on hospital care in $479 billion on doctor and clinic visits in 2007, the report concludes.

Household Burden

U.S. households shouldered nearly one-third of all medical costs in 2007, more than either the federal government or businesses, according to the report.

The average U.S. household spent 6% more on health costs in 2007 than the year before. That's a flat growth rate over the two years, analysts say.

The report comes as President-elect Barack Obama and Congress prepare plans to reform the U.S. health care system. Obama has said expanding access to coverage and controlling costs are his main goals.

Foster, the government actuary, says policy makers may not have much time before drug costs and overall health spending begin to accelerate.

"I wouldn't expect the good news to continue," he says.

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