S&P: US Healthcare Costs Up 6% in 2010, But Growth Slowing

The average per capita cost of healthcare services covered by commercial health plans and Medicare programs rose 6.06% in 2010, matching the lowest growth rates in four years, and continuing seven consecutive months of cost growth deceleration, according to the Standard & Poor's Healthcare Economic Indices.

A further S&P breakdown shows that – even with its older, sicker population and higher utilization, Medicare’s growth in per capita costs – at 3.27% in 2010 – was less than half the rate of cost growth for commercial plans, which saw an increase of 7.75% for the year.

David M. Blitzer, chairman of the Index Committee at Standard & Poor’s, said the slower rate of growth in Medicare, doesn’t necessarily mean the federal government does a better job delivering healthcare. “The federal government does a better job than the private sector of legislating prices,” Blitzer said. “It’s a combination of the Medicare fee caps that are set by the government, even after they’re moderated from time to time by Congress. And, almost inevitably, there is cost shifting. I don’t think that Medicare is necessarily doing a better job of cost containment, but they are doing a different job of writing down the price list.”

The S&P monthly estimate for the 12-month period ending in December showed that medical inflation slowed 0.21% when compared with the 6.27% growth reported for the 12-month period ending in November 2010. The rate of growth has fallen 2.68 percentage points since May 2010, Blitzer says.

“The December year-end report shows that the trend of slowing annual growth rates in healthcare costs that started in early/mid-2010 continued through the end of 2010,” Blitzer says. “The Composite Index posted a new recent low in the annual growth rate (+6.06% in December), a level last seen nearly four years ago during the summer of 2007.”