U.S. health spending hits $2.2 trillion in 2007

By Maggie Fox, Health and Science Editor

WASHINGTON, Jan 6 (Reuters) - Americans spent $2.2 trillion on healthcare in 2007, or $7,421 per person, according to a U.S. government report released on Tuesday.

The 6.1 percent rate of growth over 2006 was the lowest since 1998, mostly because growth in spending on drugs slowed, the team at the Centers for Medicare and Medicaid Services found.

Cheaper generic drugs and worries about drug safety helped slow spending growth but the numbers kept the United States far ahead of all other countries on health spending.

Health spending represented 16.2 percent of U.S. gross domestic product, up slightly from 16 percent in 2006, the researchers reported in the journal Health Affairs.

"Slower spending growth for prescription drugs was one of the major factors driving down overall healthcare spending growth in 2007," Micah Hartman, a statistician at CMS who worked on the report, told reporters in a telephone briefing.

"In 2007, retail prescription drug spending increased 4.9 percent to $227.5 billion; this was a deceleration from 8.6 percent growth in 2006," the CMS team wrote.

Some of this loss hit drug companies.

Sanofi (SASY.PA) sleeping pill Ambien, Coreg, a heart failure drug made GlaxoSmithKline (GSK.L) (GSK.N) and Pfizer Inc's (PFE.N) blood pressure drug Norvasc all lost patent exclusivity in 2006, making room for less expensive generics.

Generic drugs, which cost 30 percent to 80 percent less than brand names, accounted for 67 percent of the market, up from 63 percent in 2006.

SAFETY CONCERNS

"Increased safety concerns for certain prescription drugs in 2007 also likely influenced the drug spending trend, as the Food and Drug Administration issued 68 'black box' warnings, compared to 58 in 2006 and 21 in 2003," they wrote.

Hartman said his team presumed there must be a link between these black box warnings -- the strongest type of safety warning for prescription drugs -- and the decline in drug use.

Medicare, the federal health insurance plan for the elderly, spent 19 percent more on retail prescription drugs.

In 2007, 31 percent of healthcare dollars went to hospitals, 21 percent to physicians and clinics, 10 percent to drugs and 25 percent to other services such as dental and home health services.

Private insurance paid for 35 percent of this, Medicare footed the bill for 19 percent, Medicaid and the State Children's Health Insurance Program paid for 15 percent, and 12 percent came from out of pocket. Other sources included Department of Defense spending and philanthropy.

Hospital spending was $696.5 billion, a 7.3 percent increase, while doctor and clinical services spending was $478.8 billion, up 6.5 percent.

Medicare spent $431.2 billion overall in 2007, up 7.2 percent, while spending for Medicaid, the joint state-federal health plan for the poor and disabled, grew 6 percent to $329.4 billion. Much of the growth in Medicaid spending was in payments to hospitals, the report found.

"Private health insurance premiums increased 6 percent to $775 billion in 2007," the report reads.

People spent $268.6 billion out of their own pockets for healthcare, up 5.3 percent from the year before.

Numbers could change this year, Hartman said, noting the recession that began in December 2007. "This recession is already longer than any recession we have seen in the past 20 years," he said.

(Editing by Eric Beech)