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U.S. Healthcare Spending Growth Rate Slows Again

Earlier this month, the Centers for Medicare and Medicaid Services (CMS; Baltimore) released its annual update on healthcare expenditures in the United States. The latest report is for 2005 and showed the rate of growth in healthcare spending declining for the third consecutive year. Spending growth increased 6.9% in 2005 compared to 7.2% in 2004 and 8.1% in 2003. The report attributes the decline in the rate of healthcare spending growth primarily to weaker growth in prescription drug outlays, caused in part by greater use of generic formulations.

U.S. healthcare expenditures for 2005 were $1.988 trillion, or 16.0% of the nation's gross domestic product (GDP)--a slight increase over its 15.9% GDP share in 2004. U.S. healthcare spending as a percentage of GDP is significantly higher than that of any other nation. Internationally, the average rate of healthcare spending among nations with developed economies is around 9% of GDP. Similarly, healthcare spending per capita is far and away the highest in the United States. In 2005 it was $6997--a 10.7% increase over 2004 at $6322.

Although overall healthcare spending has a high positive correlation with spending for medical devices, equipment, and supplies, the CMS report does not readily delineate data about such costs.

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