National health care spending grew at its lowest rate in nearly a decade in 2007, largely as a result of slower spending on prescription drugs, according to a report by government analysts published today in the new January/February 2009 issue of Health Affairs. The analysts from the National Health Statistics Group in the CMS Office of the Actuary report that health care spending grew 6.1 percent in 2007, down slightly from 6.7 percent in 2006 and the slowest rate of growth since 1998. Overall, health care spending reached $2.2 trillion, or $7,421 per person.

Health care and the economy. Health spending growth overall outpaced the slowing economy and consumed a larger portion of gross domestic product in 2007, reaching 16.2 percent, up from 16 percent in 2006. Although prescription drug spending slowed significantly in 2007, reaching its lowest rate of growth in 45 years, most other health care services grew at about the same rate or faster from 2006 to 2007, the government said. Writing in today’s New York Times, Robert Pear noted: “In recessions, when the economy contracts, health spending usually continues to increase. So federal economists and statisticians said that health spending probably accounted for an even larger share of the nation’s economic output in 2008.”

Prescription drugs. The slowdown in the rate of growth for prescription drug spending contributed to more than half of the overall deceleration of growth in national health spending. Spending for prescription drugs grew 4.9 percent in 2007 to $227.5 billion, down from 8.6 percent in 2006, and the slowest rate of growth since 1963. “A tough time to be in be in the drug business,” noted today’s Wall Street Journal Health Blog.

The CMS analysts attribute the drop to three key factors:

  1. an increase in the dispensing rate for cheaper generic medications;
  2. slower overall growth in prescription drug prices; and
  3. increased concerns about the safety of certain prescription drugs influenced by a larger number of “black-box” warnings from the Food and Drug Administration (FDA) in 2007.

Fuel for health reform? Today’s Wall Street Journal reports that the new government numbers “are likely to add fodder for all sides of the health-overhaul debate expected to take center stage in Washington this year. As health costs continue to mount, some Democratic leaders argue an ambitious overhaul can’t be delayed. Other lawmakers say it would be far too costly, particularly as President-elect Barack Obama and Congress need to contend with a broken economy.”