Health Care Spending in U.S. Grew at Lowest Rate in a Decade

TUESDAY Jan. 6, 2009 -- Due to slower spending on prescription drugs, health-care spending in the United States grew at the lowest rate in a decade in 2007, a new federal report found.

Yet despite the slowdown, most health-care costs continue to rise, with consumers' out-of-pocket expenses having increased 40 percent in the last 10 years, largely due to an aging population and chronic diseases such as high blood pressure and diabetes, a second report found.

Both reports are published in the January-February issue of Health Affairs.

"National health spending declined to 6.1 percent in 2007, the slowest rate of growth since 1998 and 0.6 percent lower than the 6.7 percent growth in 2006," Micah Hartman, a statistician at U.S. Centers for Medicare & Medicaid Services, and lead researcher of the first report, said during a Monday afternoon teleconference.

"In 2007, expenditures reached $2.2 trillion or $7,421 a person," Hartman said. "Spending share of gross domestic product was 16.2 percent, a slight increase from the 16.0 percent in 2006."

The decline in the rate of health-care spending continues a trend started in 2002, Hartman said.

According to the CMS researchers, the rate of slower growth in prescription drug spending was due largely to slower growth in price increases, increased use of generics, and increased consumer concerns about drug safety.

Spending on prescription drugs grew 4.9 percent in 2007, down from 8.6 percent in 2006, contributing to more than half of the decreased spending rate. This is the slowest rate since 1963, according to the report.

Another reason for the slowing of health-care spending was a reduction in administrative costs associated with Medicare, which dropped from 62.5 percent in 2006 to 10.7 percent in 2007, largely because of the one-time impact of the Medicare prescription plan that started in 2006.

However, public health-care spending outpaced private spending, including increases in Medicaid spending. Other health-care spending --including hospitals, private health insurance, nursing homes and doctors' fees -- all continued to climb, the report said.

"This is another reminder that the cost of health care continues to be a real and pressing concern facing the American public and the federal government," Kerry Weems, CMS acting administrator, said in a prepared statement. "This report -- like the reports issued last year on the financial status of Medicare and Medicaid -- is a stark reminder that we must redouble our ongoing efforts to reform the delivery of health-care services in this country to bring about the goal of affordable, high-quality health care for all Americans."

In the second report, researchers from the Maryland-based Center for Health Policy and Research, Social and Scientific Systems found that consumers' out-of-pocket expenses for health care continued to increase at a fast clip. The out-of-pocket increase owed largely to the increase in chronic diseases such as high blood pressure and diabetes, particularly among baby boomers and older adults, according to Kathryn Paez, lead author of the study.

Average annual out-of-pocket spending increased from $427 in 1996 to $741 in 2005, according to the report.

"Chronic conditions are more than just a health issue for the elderly -- they are a household economics issue for every American," Paez said in a prepared statement. "Taking the time and making the effort to prevent diseases such as high blood pressure and diabetes will save Americans money and increase their quality of life."

Paul Precht, director for policy and communications at the Medicare Rights Center, said he thinks health-care costs will continue to rise, and the lower rate in the increase in spending on prescription drugs will be short-lived.

"The slower growth in prescription drug spending, largely attributed to the increased substitution of generics for blockbuster brand name drugs whose patents expired, underscores the importance of generic drugs in restraining cost growth for medical care," Precht said.

"For Congress, they should focus attention on creating a pathway for FDA approval of generic biologics that creates comparable savings and on removing legal and regulatory obstacles that retard the introduction of generics," he added.

Also, Precht said, there are no signs of slower growth in price increases for brand name drugs. "In addition, the sharp rise in Part D premiums for 2009 shows that the period of relatively slow growth in Part D costs (2006-2007 in this report) is over," he said.

More information

For more on health-care costs in the United States, visit the Kaiser Family Foundation.

Posted: January 2009


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