Healthcare costs in the United States continue to rise but at a declining rate according to the latest S&P Healthcare Economic Composite Index update.
The index indicates that the average per capita cost of healthcare services covered by commercial insurance and Medicare programs increased by 5.77 percent over the 12 months ending March 2011. After a temporary increase reported with January's data, healthcare costs have resumed their deceleration in annual growth rates – in the 12 months ending January and February 2011, the index had posted increases of 6.3 percent and 6.17 percent, respectively.
[See also: U.S. healthcare costs continue to rise.]
The S&P Healthcare Economic Indices, which include the commercial and Medicare indices, estimate the per capita change in revenues accrued each month by hospital and professional services facilities for services provided to patients covered by Medicare and commercial health insurance programs.
The Composite index, at +5.77 percent, is virtually back to the lowest annual growth rate in its six-year history, which was +5.76 percent in June 2007. The highest annual growth rate for the Composite index was during the 12 months ending May 2010, when it posted +8.74 percent. In the 10 months measured from this peak, this index has gone through a sharp deceleration, down 2.97 percentage points.
Over the year ending March 2011, healthcare costs covered by commercial insurance rose by 7.57 percent, as measured by the S&P Healthcare Economic Commercial Index. Medicare claim costs rose at an annual rate of 2.78 percent, 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.
"The annual growth rates in healthcare claim costs remain positive, but with declining rates," said David M. Blitzer, chairman of the index committee at Standard & Poor's.
"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. 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 come from the Hospital Medicare Index, where the annual growth rate fell from +8.3 percent in August 2009 to +1.18 percent in March 2011," he said. "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 percent in May 2010, and is still reporting a healthy +8.36 percent as of March 2011."
Blitzer said this phenomenon could be caused by two factors:
- Costs for Medicare patients are being better contained than those covered under commercial insurance plans; and
- 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," he said.