updated 1/8/2004 2:47:32 PM ET 2004-01-08T19:47:32

Health care spending in the United States reached $1.6 trillion in 2002, an annual increase of 9.3 percent fueled by rising hospital spending and prescription drugs costs, the federal government reported Thursday.

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The increase outstripped growth in the economy for the fourth consecutive year, according to the federal Centers for Medicare and Medicaid Services.

Early indications, however, are that spending slowed in 2003, according to the report, published in the journal Health Affairs.

“We are expecting some slowdown to occur ... as a result of the economic slowdown,” Katharine Levit, a CMS official and the lead author of the report, said at a news conference.

The annual CMS report analyzes spending trends in the public and private health care sectors. The $1.6 trillion figure means that health care spending averaged about $5,440 per person in 2002.

While the rate of growth on prescription drugs costs slowed in 2002 to 15.3 percent, drug spending remained the fastest-growing item in health care. That trend is expected to continue for the next 10 years.

Hospital spending rose 9.5 percent, reflecting increasing use of hospital services, rising wages of hospital workers and hospitals’ growing ability to negotiate prices with private insurance plans, the report said.

The authors also took note of a significant increase in consumers’ out-of-pocket spending due to increases in co-payments for drugs and services and in deductibles, the amount consumers must pay before insurance benefits begin.

Similar increases in the future actually could slow the rate of growth in health care spending, the report said. “As consumers share more of the increases in cost, the value of health services will be more closely weighed against other purchases, underscoring the considerable value of some services and the discretionary nature of others,” they wrote.

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