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US Healthcare Costs Grew 5.28% in 2011

John Commins, for HealthLeaders Media, February 22, 2012

J.D. Kleinke, a healthcare economist with the American Enterprise Institute, says higher deductibles, co-pays and premiums have been slowing cost growth by forcing healthcare consumers to be frugal. 

"The 10-year trend is that healthcare is normalizing," Kleinke told HealthLeaders Media. "The standard deductible 10 years ago was $200. That was the same deductible as in the 1950s. The deductible for health insurance didn't change during a time when everything else in the economy went up by an order of magnitude. The health insurance industry accommodated a huge amount of waste. People used it more than they needed and physicians were more than happy to deliver more care than needed because it was somebody else's money."

"It took 20, 30, 40 years to get out of control. Then the reaction in the 1990s was to blame the doctors and the hospitals and beat them up and do this utilization review stuff, and that didn't work. Now for the last 10 years it's been the demand side," Kleinke said.

The S&P indices also show that month-to-month healthcare cost growth accelerated in December, up from +4.85% in November to +5.28% in December. Commercial plan costs increased from +6.63% in November to +7.11% in December, while Medicare costs increased from +2.15% in November to +2.51% in December.

David M. Blitzer, chairman of the Index Committee at S&P Indices, said in the report that costs are trending back toward acceleration after a lull in November.

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1 comments on "US Healthcare Costs Grew 5.28% in 2011"


Jackie Larson - Avantas (2/22/2012 at 12:21 PM)
A lot of interesting facts and figures presented here. What is not mentioned however are the causes behind the rising costs: Labor. According to the AHA's 2011 Cost of Caring report, "the majority of spending on hospital services goes to caregivers and other hospital workers, and these costs are rising." William Bertschinger, divisional chairman of finance at the Mayo Clinic, at a speech given in January, 2010, at the Symposium on Payment Solutions for Healthcare Providers and Payers in Las Vegas noted that labor accounts for 70 percent of healthcare costs passed along to consumers. Without question, the area that can have the single greatest impact on the rising costs of healthcare is labor. We find that most hospitals can experience labor savings of 3-6% and often greater by implementing some very basic workforce management methodologies and practices. On this scale, the possible savings per hospital is incredibly substantial. On the unit level, this amounts to roughly $100K per unit, per year.