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Health Spending Is Taking Up Bigger Chunk of National Purse

Cheryl Clark, for HealthLeaders Media, May 4, 2009

Though the rise in healthcare spending has slowed, it's taking up a much bigger space in the nation's budget,  says a new report from the California Healthcare Foundation.

The report showed  that national healthcare spending reached $2.2 trillion, or $7,421 per person, in 2007 representing more than 16% of the gross domestic product. Continuing at the same pace, it will reach 20.3% of the country's gross domestic product by 2018.

"Although there has been some moderation in health spending growth in recent years, its share of the economy continues to grow," the report says.

"This report shows the very trend that's behind a lot of the financial woes of the healthcare industry," said CHF senior program officer Marian Mulkey. "The fact that we are spending more and more on healthcare services translates into higher premiums, and makes it harder for businesses and employees to afford coverage. This documents the problem that is at the heart of the debate about health reform."

Mulkey said that the report, the sixth one in a series of annual reports, called Health Care Costs 101, is based on data from the Centers for Medicare and Medicaid Services.

Among the points in the report:

  • Healthcare costs grew nationally by 6.1% in 2007, the smallest increase since 1998, extending a five-year decelerating trend. Yet it continues to outpace inflation and is projected to reach $2.5 trillion this year.
  • The recession will more than offset the recent moderation in health spending, causing medical care's share of the GDP to rise rapidly to 17.6% this year.
  • Per person costs for healthcare increased 81% between 1997 and 2007.
  • While out of pocket costs for consumers continue to rise, over the past 40 years they have declined as a share of overall health spending, and are now flat at about 14%.

Cheryl Clark is senior quality editor and California correspondent for HealthLeaders Media. She is a member of the Association of Health Care Journalists.
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