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Health care spending slows in '07

Increasing use of generic drugs creates savings

Published January 6, 2009 at 12:05 a.m.

Spending on health care slowed slightly in 2007 as consumers turned more to generic drugs instead of brand names to fill their medicine cabinets, the government reported Monday.

Although the cost of buying drugs, visiting the doctor or going to the hospital continued to increase faster than the overall economy, the 6.1 percent growth rate for all health care spending was the slowest since 1998. In 2006, spending increased 6.7 percent.

Officials worry that devoting more and more resources to health care makes it harder for families to meet other pressing priorities and for businesses to compete internationally.

Overall, Americans spent $2.2 trillion on health care, an average of $7,421 a person, for the year.

About 67 percent of medications dispensed in 2007 were generic drugs - up from 63 percent the year before. Generics can cost as little as one-third the price of brand-names.

Historically, health spending has been somewhat insulated from the effects of a slowing economy, which means health care makes up an even greater share of the overall economy during recessions. In 2007, the health sector's share came to 16.2 percent, up from 16 percent the year before.

Among the major components of the health industry, officials found:

* Hospital spending, which makes up nearly one-third of health spending, rose 7.3 percent. In the 1990s, spending on hospital services grew at a 5.2 percent rate, in part because of more tightly managed care from insurers.

* Spending for physicians and clinical services grew 6.5 percent, the same rate as the year before.

* The cost of nursing home care increased 4.8 percent.

* Spending for home health care increased by 11.3 percent.

* Spending for private health insurance grew 6 percent, unchanged from the year before.

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