Health-care spending up in 2007, but at slower rate

WASHINGTON — U.S. health-care spending in 2007 grew at its lowest rate in nine years, due mainly to a slowdown in prescription-drug spending and lower administrative costs for the Medicare program, according to a new government report released Monday.

While the report doesn't reflect most of the economic downturn that began in December 2007, its authors say that health spending historically has been insulated from the effects of a sour economy. However, experts say this could change given the uncertain economic climate and the increased shifting of payment responsibilities to consumers.

Public and private outlays for health care reached $2.2 trillion, or $7,421 per person in 2007, up 6.1 percent from 2006, the Centers for Medicare and Medicaid Services reported.

The slower growth rate continues a trend that began in 2002. Health spending continued to eat up an increasing share of the nation's gross domestic product, growing from 16 percent in 2006 to 16.2 percent in 2007. Medical spending growth still outpaces overall economic growth, which increased only 4.8 percent in 2007.

More than half the slower growth in overall health-care spending can be traced to slower retail prescription-drug spending, which grew only 4.9 percent in 2007. That's the lowest annual growth rate since 1963, said Micah Hartman, a CMS statistician and the lead author of the report.

Hartman credited the increased use of cheaper generic drugs and slower growth in drug prices for the spending slowdown. Nationally, generic drugs accounted for 67 percent of prescriptions written in 2007, up from 63 percent in 2006 and 60 percent in 2005. In addition, prescription-drug prices grew only 1.4 percent in 2007, compared with 3.5 percent in 2006.

The new availability of generic versions of blockbuster drugs such as Flonase, Pravachol, Toprol-XL, Ambien and Zoloft also helped curb prescription-drug spending in 2007, Hartman said. Growing concerns about drug safety also played a role. Hartman said the Food and Drug Administration issued 68 safety warnings on prescription drugs in 2007 compared with 58 in 2006 and 21 in 2003.