January 20, 2011

Health Care Costs Still Rising, but Rate Slows, S&P Finds

Increases outpace inflation, but Medicare growth rate slowest in six years

According to data released Thursday by Standard & Poor’s for the S&P Healthcare Economic Composite Index, health care costs are still rising, but their rate of increase has been slowing since May of 2010.

Year over year, the cost of health care services covered by commercial insurance and by Medicare rose 6.27% for the year ending in November. For the year ending in October, the rate had been 6.68%.

The rate of increase in health care expenses still outpaces inflation by a wide margin; the all-item Consumer Price Index (CPI) for the last year was 1.5% before seasonal adjustment.

David M. Blitzer, chairman of the index committee at Standard & Poor's, said in a statement, “The slowdown in the annual growth rate of healthcare costs, which started around May 2010, continued through November.” He went on to say that expenditures associated with commercial health insurance plans continued to significantly outpace expenditures for Medicare.

“We did notice,” he added, “that the growth rates for services provided under Medicare coverage are approaching or reaching new lows. The Medicare composite posted an annual growth rate of +3.74% in the 12 months ending in November. The lowest rate was +3.47% in December 2006.” He pointed out that the sub-indices indicated that annual growth rates for Medicare services at hospitals is now at the lowest rate in the six-year history of the data, at 2.71%.

S&P Healthcare Economic Indices
(12-Month Moving Average)

Index

1-Year Change (%)

S&P Healthcare Economic Composite Index

6.27%

S&P Healthcare Economic Commercial Index

7.79%

S&P Healthcare Economic Medicare Index

3.74%

S&P Healthcare Economic Hospital Index

6.26%

S&P Healthcare Economic Hospital Medicare Index

2.71%

S&P Healthcare Economic Hospital Commercial Index

9.04%

S&P Healthcare Economic Professional Services Index

6.06%

S&P Healthcare Economic Professional Services Medicare Index

4.93%

S&P Healthcare Economic Professional Services Commercial Index

6.53%

Source: Standard & Poor's. Data through November 2010

Data on the cost of health care comes in the wake of Republicans’ vote in the House on Wednesday to repeal the Affordable Care Act. It remains to be seen whether a vote for repeal will succeed in the Senate.

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