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S&P: US Healthcare Costs Rise 6.27% Over the 12-Months Ending November 2010

 

Standard & Poor'sNew York, NY – Data released today by Standard & Poor’s for the S&P Healthcare Economic Composite Index indicates that the average per capita cost of healthcare services covered by commercial insurance and Medicare programs rose 6.27% over the 12-months ending November 2010. This is a deceleration from the +6.68% reported for the 12-months ending in October 2010.

Claim costs associated with hospital and professional services for patients covered under commercial health plans rose 7.79% over the year ending in November, as measured by the S&P Healthcare Economic Commercial Index. Medicare claim costs for the same services rose at a rate of 3.74% from the previous year, as measured by the S&P Healthcare Economic Medicare Index.  This is the lowest annual growth rate for Medicare claims costs since June 2007, when it was +3.55%. These two measures saw growth deceleration versus their October reports of +8.19% and +4.18%, respectively.

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 in the U.S. 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.

“The slowdown in the annual growth rate of healthcare costs, which started around May 2010, continued through November,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “In the 12-months ended in November, the Composite index rose 6.27%, down about 0.4 percentage points from its October rate and 2.1 percentage points from May. Both the Commercial and Medicare Indices witnessed similar deceleration. With the Commercial Index up 7.79% and the Medicare Index up 3.74% through November, both of these are lower growth rates than witnessed in prior months. As we have noted in the past, expenditures associated with commercial health insurance plans continue to significantly outpace expenditures for Medicare.

“We did notice 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.  Looking even closer at the sub-indices, we see that the annual growth rates for Medicare services provided at hospitals has, in fact, hit the lowest rate in the six-year history for these data, +2.71%. 

“We are continuing to see a downward trend in the annual growth rates across all the indices. Since May 2010, most of the indices annual growth rates have declined month-to-month. Commercial and Medicare Indices showed annual deceleration of 0.40% and 0.45%, respectively, compared to October. Likewise, the Hospital and Professional Services Indices annual rates decelerated by approximately 0.40% each in November compared to the previous month.”

The S&P Healthcare Economic Composite Index is a weighted average of the S&P Healthcare Economic Commercial Index and the S&P Healthcare Economic Medicare Index.  Alternatively, it is a weighted average of the S&P Healthcare Economic Hospital Index and the S&P Healthcare Economic Professional Services Index, as each of these indices has the analogous Commercial and Medicare component.

The table below summarizes the year-over-year change in the S&P Healthcare Economic Indices for the 12-month period ending November 2010. With each monthly release, the index levels, including the 12-month moving averages, are recalculated for the full history of the indices, whenever there are revisions to underlying data used in the models. The entire revised history, as well as full results for the underlying S&P Healthcare Economic Indices, is available from Standard & Poor’s as a subscription service.

S&P Healthcare Economic Indices

The S&P Healthcare Economic Indices were developed in consultation with Health Index Advisors, a joint venture between Aon Hewitt and Milliman, Inc., and were derived from the former Milliman, Inc. Health Cost Index™ which was first published in 1987. The complete methodology, fact sheet and supporting research for the S&P Healthcare Economic Indices are available at www.healthcareindices.standardandpoors.com. A whitepaper introducing the S&P Healthcare Economic Indices has been published by Standard & Poor’s and can be accessed here http://bit.ly/drIgL2.

Standard & Poor’s does not sponsor, endorse, sell or promote any S&P index-based investment product

About S&P Indices

S&P Indices, the world’s leading index provider, maintains a wide variety of investable and benchmark indices to meet an array of investor needs. Over $1.25 trillion is directly indexed to Standard & Poor’s family of indices, which includes the S&P 500, the world’s most followed stock market index, the S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, the S&P Global BMI, an index with approximately 11,000 constituents, the S&P GSCI, the industry’s most closely watched commodities index, and the S&P National AMT-Free Municipal Bond Index, the premier investable index for U.S. municipal bonds. For more information, please visit www.standardandpoors.com/indices.


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