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Health Spending Lowest in 40 Years, But HCFA Estimates Trend Won't Last

Fueled by slowdowns in both private- and public-sector spending, health care expenditures in the U.S. rose 4.8 percent in 1997 — the lowest rate of increase since the government began keeping statistics in 1960. (See charts) But the Health Care Financing Administration, which released the tallies last month, warned that higher medical inflation was likely to return in the not-too-distant future.

The slowdown in the growth rate was slightly more discernible than that of 1996, when medical inflation clocked in at 4.9 percent. Private-sector expenditures rose 4.3 percent, up a tick from 1996's 4.2-percent rate, but a 5.3-percent public-sector increase was down from a year ago, when the rate was 5.7 percent. Total 1997 expenditures of $1.1 trillion accounted for 13.5 percent of gross domestic product, lowest since 1992.

Individual components of the data bear close scrutiny. HCFA says spending for prescription drugs increased 14.1 percent last year, while the 5.3-percent out-of-pocket spending increase was greater than overall private-sector inflation for the first time in a decade. And HCFA reiterated its prediction of earlier this year that overall health care expenditures are likely to double by 2007.

HCFA says that a steady drop in freestanding home-health services can be chalked up, in part, to Medicare fraud-and-abuse detection activities.

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