U.S. Healthcare Costs Climb 6.19% Over 12 Months

The average per capita cost of healthcare services covered by commercial insurance and Medicare grew 6.19% over the 12 months ending in February 2011, but those rates of growth continue to decelerate, Standard & Poor's Healthcare Economic Indices show.

February's results reflect a deceleration in healthcare cost growth from the 6.31% increase in annual growth rate posted in January 2011 for this index, S&P said.

Even with the deceleration, healthcare costs grew by more than triple the 2.1% growth in overall inflation as measured by the Consumer Price Index for the same 12-month period, Bureau of Labor Statistics data show.

In its six-year history, the highest annual growth rate for the S&P Composite index was during the 12-months ending May 2010, when it posted +8.74%. With February's report of +6.19%, claims costs growth rates have decelerated 2.5 percentage points in nine months, S&P said.

A further breakdown shows that, over the 12 months ending February, healthcare costs covered by commercial insurance rose by 7.97%, as measured by the S&P Healthcare Economic Commercial Index. Medicare claim costs rose at an annual rate of 3.22%, as measured by the S&P Healthcare Economic Medicare Index. This is the lowest annual rate of growth posted for the Medicare Index in its six-year history, S&P said.

"The slowdown in Medicare claim costs may be having some impact on other factors in the healthcare industry," said David M. Blitzer, chairman of the Index Committee at Standard Poor's, in a media release.

Blitzer said S&P observed some interesting trends in hospital and physician wages and employment that reflect the changes in claims costs. "While growth in hospital wages has remained relatively stable over the past year, in the range of 3% - 4%, hospital employment growth has slowed down significantly," he said. "Between 2008 and early 2009, annual hospital employment growth rate was in the 2%- 3% range; however, since the middle of 2009, the rate has been consistently below 1%."

Blitzer said that physicians, who may have more flexibility in their choice of insurance contracts, have not been impacted as severely. "Physician wages were growing by about 5.4% as of February 2011, almost double their pace of 12-months ago; employment has seen a slowdown, but still registered an annual growth rate around 2.5% as of February," he said. "If the growth in insurance claims costs continue to slow down, whether due to contract negotiations for commercial insurance, or Medicare regulations or both, we will likely see an impact on employment, wages and benefits in the healthcare industry."

The S&P Healthcare Economic 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, S&P said.