Healthcare Cost Growth Deceleration Continues

John Commins, June 17, 2011

The average per capita cost of healthcare services covered by commercial insurance and Medicare grew 5.39% over the 12 months ending in April 2011, continuing an 11-month deceleration of cost growth, Standard & Poor's Healthcare Economic Indices show.

April's results represent the lowest cost growth in the six-year history of the S&P measure, and reflect a continuing deceleration in Composite healthcare cost growth from the +5.77% annual growth in March, +6.17% in February, and +6.31% in January 2011 for the composite index, S&P said.

"Historically, there has been a general pattern of healthcare trends declining on a lagged basis following economic downturns. Much of our spending on healthcare is related to supply-side factors – in particular, the supply of new technology and procedures," David M. Blitzer, chairman of the Index Committee at Standard & Poor's, said in the report. "It takes considerable time for investments in healthcare to translate into increased supply and, conversely, reduced investments often result in a reduction in trend a few years later. The decline in index growth rates that began in mid-2010 may be a result of trends slowing due to reduced capital spending during the recession that began in 2007."

Even with the deceleration, healthcare costs grew at nearly double the 3.2% growth in overall inflation as measured by the Consumer Price Index for the same 12-month period ending in April, Bureau of Labor Statistics data show.

A further breakdown of S&P's indices show that, over the 12 months ending April, healthcare costs covered by commercial insurance rose +7.13%, down from +7.57% for the 12-month period ending in March, as measured by the S&P Healthcare Economic Commercial Index. Medicare claim costs rose at an annual rate of +2.48%, for the 12-month period ending in April, down from of +2.78% for March, as measured by the S&P Healthcare Economic Medicare Index. This is also the lowest annual rate of growth posted for the Medicare Index in its six-year history, S&P said.

John Commins

John Commins is a senior editor at HealthLeaders Media.

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