NCPA - National Center for Policy Analysis


January 7, 2009

Health-care spending grew at its lowest rate in nearly a decade in 2007, but it continued to swallow an ever-bigger portion of U.S. gross domestic product and family budgets, a new federal study shows.  The study, being published in Health Affairs, found:

  • Restrained by a sharply slower growth in prescription-drug spending, the nation's health-care tab grew 6.1 percent to $2.2 trillion, or $7,421 a person.
  • That's down slightly from the 6.7 percent growth in 2006.
  • But health-care spending again expanded faster than the overall economy, suggesting its share of GDP will climb as the economy remains mired in a protracted recession.
  • In 2007, health care consumed 16.2 percent of GDP, up from 16 percent in 2006.

While most health-care services grew at the same rate or faster in 2007 than in 2006, the pace of prescription-drug spending slowed to its lowest rate in 45 years, climbing 4.9 percent, compared with an 8.6 percent increase the year before, the study found.

The slower growth stems primarily from big shifts in the pharmaceutical landscape.  Generic drugs, which can be 80 percent cheaper than their brand-name versions, have found wider use as a wave of blockbuster drugs -- such as anticholesterol pills Zocor and Pravachol, and antidepressant Zoloft -- have lost patent exclusivity in the past three years.

While health-care spending is rising at its slowest rate in years, it still continues to climb much faster than GDP or wages. "Recent history has shown that through the downturns, health spending has remained somewhat insulated from the effects of a slowing economy and has increased as a share of GDP," said Micah Hartman, the study's lead author and a statistician with the Center for Medicare and Medicaid Services.

Source: Vanessa Fuhrmans and Jane Zhang, "Health-Care Outlays Climb at Slowest Rate in Years," Wall Street Journal, January 6, 2009, and Micah Hartman, et al., "National Health Spending In 2007: Slower Drug Spending Contributes To Lowest Rate Of Overall Growth Since 1998," Health Affairs, Vol. 28, No. 1, January/February 2009.

For WSJ text:

For study abstract:


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