Healthcare Costs Continue to Climb, but Rate Slows

"If you look over the last year or so of data, it is apparent that the rates of increase in healthcare costs continue to slow down," David M. Blitzer, Chairman of the Index Committee at Standard & Poor's, said in the report. "While there was some volatility within months, the general trend has been a slowdown across all nine of the indices we publish. Most of the annual growth rates peaked in the late winter/early spring of 2010. Since then, most of these rates have fallen by 2 percentage points or more."

Blitzer said the biggest slowdown has been in the Hospital Medicare Index, where the annual growth rate fell from +8.30% in August 2009 to +1.18% in March 2011. "On the other hand, we have not seen an equal trend for the Hospital Commercial Index, where the annual growth rate peaked at +9.36% in May 2010, and is still reporting a healthy +8.36% as of March 2011," he said. "This phenomenon could be the possible result of two things: (1) costs for Medicare patients are being better contained than those covered under commercial insurance plans and (2) hospitals are using more procedures and services covered under commercial plans, contributing to the increase in total costs. We see a similar differential across the Professional Services Indices, but not as severe."

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.