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

 |  By John Commins  
   January 21, 2011

The average per capita cost of healthcare services covered by commercial health plans and Medicare programs rose 6.27% in the 12 months ending in November 2010, but the rate of growth continues to decelerate, Standard & Poor's said Thursday.

The S&P Healthcare Economic Indices monthly estimate for November showed that medical inflation slowed 0.41% when compared with the 6.68% growth reported for the 12-month period ending in October 2010 – a deceleration trend that's been in place since May, said David M. Blitzer, chairman of the Index Committee at Standard & Poor's. "We are continuing to see a downward trend in the annual growth rates across all indices," Blitzer said. 

Healthcare cost increases continue well above the rate of inflation in the larger economy, which grew 1.1% for the 12-month period ending in November as measured by the Consumer Price Index. Most of that growth was fueled by energy costs, the Bureau of Labor Statistics reports.

Blitzer speculated that some of the reduced rate of growth in healthcare costs may be attributed to the recession and the slow recovery. "People are being tight with their money and that includes spending on healthcare," he said. "Some healthcare is discretionary, some is not. Some is sort of adjustable in that you may be able to resolve the problem cheaper but not as effectively."

Although the growth in the rate of healthcare costs has slowed since May, Blitzer said that's not necessarily a permanent trend.

"It's encouraging but I don't think it's earth shattering. We see movements every month and the 12 month changes go up and down," he said. "There is nothing in this report that says that healthcare costs are only going to go up with the rate of inflation. Healthcare continues to account for more and more of the economy. It'd be nice if we could stabilize that and spend the money for other things."

 

The November S&P indices also found that:

  • Claim costs associated with hospital and professional services for patients covered under commercial health plans rose 7.79% over the year ending in November, down from 8.19% for the year ending in October 2010.
  • Medicare claim costs for the same services rose 3.74% from the previous year -- the lowest annual growth rate for Medicare claims costs since June 2007, when the rate of growth was 3.55%. In the year ending October 2010, Medicare claims costs rose 4.18%.

"Since May 2010, most of the indices annual growth rates have declined month-to-month," Blitzer said. "Commercial and Medicare indices showed annual deceleration of 0.40% and 0.45%, respectively, compared to October. Likewise, the hospital and professional services indices annual rates decelerated by approximately 0.40% each in November compared to the previous month."

Blitzer said growth rates for services covered by Medicare are approaching new lows. "The Medicare composite posted an annual growth rate of +3.74% in the 12-months ending in November. The lowest rate was +3.47% in December 2006," he said. "Looking even closer at the sub-indices, we see that the annual growth rates for Medicare services provided at hospitals has, in fact, hit the lowest rate in the six-year history for these data, +2.71%."

The S&P indices estimate the per capita change in revenues accrued each month by hospital and professional services facilities for services provided to patients covered under traditional Medicare and commercial health insurance programs. The annual growth rates are determined by calculating a percent change of the 12-month moving averages of the monthly index levels versus the same month of the prior year.

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

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