U.S. healthcare spending slows to $2.2 trillion in 2007

Twitter icon
Facebook icon
LinkedIn icon
e-mail icon
Google icon
Despite dip, healthcare spending outpaced overall economic growth. Image Source: ABC News  

U.S. healthcare spending grew 6.1 percent in 2007 to $2.2 trillion, or $7,421 per person, which was the slowest rate of growth since 1998, and 0.6 of a percentage point lower than the growth of 6.7 percent in 2006, according to a report by the Centers for Medicare & Medicaid Services (CMS).

The agency said that healthcare spending, however, continued to outpace overall economic growth, which grew by 4.8 percent in 2007.

“This is another reminder that the cost of healthcare continues to be a real and pressing concern facing the American public and the federal government,” said CMS Acting Administrator Kerry Weems. “This report…is a stark reminder that we must redouble our ongoing efforts to reform the delivery of healthcare services in this country.”

The slower growth in 2007 was attributed mostly to slower growth in both retail prescription drug spending and Medicare spending associated with administering Medicare benefits. Even as healthcare spending growth slowed, the healthcare spending share of the U.S. gross domestic product continued to climb, reaching 16.2 percent in 2007, up by 0.2 percentage point from 2006.

Hospital spending, which accounts for about 30 percent of total healthcare spending, grew 7.3 percent in 2007, compared to 6.9 percent in 2006. The 2007 increase was partially driven by strong growth in Medicaid spending. In contrast, Medicare spending growth for hospital services remained stable at 4.6 percent, reflecting slower growth in fee-for-service inpatient and outpatient use; however, there was strong growth in Medicare managed care hospital spending due to an increase in the number of beneficiaries enrolling in Medicare Advantage plans, according to the agency.

Retail prescription drug spending grew 4.9 percent in 2007, slower than the 8.6 percent growth in 2006. CMS said that the deceleration in 2007 was the result of several factors, including sustained growth in the generic dispensing rate, slower growth in prescription drug prices and growing consumer concerns for drug safety.

The generic dispensing rate continued to climb in 2007 as several major blockbuster drugs lost patent-protection; this continued growth in the use of generics contributed to both a deceleration in total expenditures as well as prices, according to the agency.

Prescription drug prices, as reflected in the National Health Expenditure Accounts, grew 1.4 percent in 2007, much slower than the 3.5 percent growth in 2006. CMS said that the lower price growth was not only driven by the increased use of generics, but also by the introduction and continuation of generic drug discount programs by retail chain stores.

The findings can be found in a report by CMS’ Office of the Actuary, released Tuesday in Health Affairs.