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Healthcare Cost Growth Acceleration Continues

John Commins, for HealthLeaders Media, June 22, 2012

Inflation in the overall economy, as measured by the gross domestic product, grew by 2.3% for the 12 month period ending in April, 2012, according to the U.S Bureau of Labor Statistics.

Healthcare costs covered by commercial insurance plans increased by 8.46% over the year ending April 2012, up from the +7.78% reported for March 2012, and Medicare claim costs rose by 2.6%, up from March's +2.42%. Professionals annual growth rate also increased from its March 2012 +5.58% rate to April's +6.18%, and the Hospital Index annual growth rate increased to +5.81% in April, from its +5.44% March rate, S&P reports.

Blitzer says healthcare cost growth is nearing the top of the indices ranges that have been established over the last several years and he's not sure when it will abate. "It came down in 2007 due in part to the economy softening, but as you get farther away from the rate of inflation rate, people get antsy," he says.

He added that it's "nearly impossible to tell" if the Patient Protection and Affordable Care Act has affected cost growth in any direction. "The few things like expanding the population of insured people between 19-26 years old have already been baked into this for a couple of years. It's not clear whether people have started implementing stuff that might get turned down by the Supreme Court," he says.

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.

Healthcare costs began to accelerate in May 2009 and peaked in May 2010, before decelerating through the first half of 2011. The current acceleration trend began in October, 2011.

A further breakdown of S&P indices shows that: the Professional Services Medicare Index rose 3.11% in April, up from March's +3.01%; the Hospital Medicare annual growth rate rose 2.04% in April from its March +1.80% rate; the Professional Services Commercial Index increased to 7.74% in April, from +6.86% in March; and the Hospital Commercial Index rose 8.85% in April from the +8.39% posted for March.

If cost growth continues at this pace, Blitzer says, businesses that provide health insurance to their employees could be "moaning and groaning" this fall when they renegotiate with health plans.

See Also:
Wendell Potter: Health Insurance Industry Lacks Unified Opinion on Reform


John Commins is a senior editor with HealthLeaders Media.

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