Modest Acceleration in US Healthcare Costs According to the S&P Healthcare Economic Indices

NEW YORK, Aug. 18, 2011 /PRNewswire/ -- Data released today by S&P Indices for the S&P Healthcare Economic Composite Index indicate that the average per capita cost of healthcare services covered by commercial insurance and Medicare programs increased by 5.61% over the 12-months ending June 2011. Since posting its lowest annual growth rate in its more than six-year history – +5.37% in April 2011 – the rate for this index accelerated in both May and June.

Over the year ending June 2011, healthcare costs covered by commercial insurance increased by 7.48%, as measured by the S&P Healthcare Economic Commercial Index. Medicare claim costs rose at an annual rate of 2.50%, as measured by the S&P Healthcare Economic Medicare Index. This was the lowest annual growth rate recorded for the Medicare Index in its history, which goes back to January 2005.  

The Hospital and Professional Services Indices reported increases of 5.16% and 5.89%, respectively, from their June 2010 levels. For the Hospital Index, this rate is slightly higher than the +5.08% posted in May 2011; whereas the Professional Services Index is marginally lower than its +5.91% rate posted in May.

"With June's data, we saw general acceleration in the annual growth rates in healthcare costs primarily led by medical costs funded by commercial insurance plans," says David M. Blitzer, Chairman of the Index Committee at S&P Indices. "The Medicare Index, on the other hand, was down 0.18 percentage points from its May 2011 annual rate and recorded its lowest annual growth rate in its more than six-year history. The Composite Index rose by 5.61%, the Commercial Index by +7.48% and the Medicare Index by +2.50%, compared to their June 2010 levels.  

"Overall, healthcare costs continue to rise as observed by the S&P Healthcare Economic Indices. However, while the Composite and Commercial Indices saw increases in annual growth rates, the Medicare Index decelerated and posted a record low annual rate with June's report. With +4.46% and +0.97% respective annual rates, the Professional Services Medicare and Hospital Medicare Indices also saw decelerating annual growth rates compared to their May readings. The Hospital Medicare Index is only 0.04 percentage points above its lowest annual rate of +0.93%, seen in April 2011.

"Although rates have been slightly up in most indices over the past two months, the overall story continues to be moderation in trends over the past 12-15 months. As noted in prior reports, some market participants are reporting relatively low trends in office visits and hospital admissions, as well as steps being taken to address healthcare reform and control costs.  If true, these could be contributing to these lower trends. Based on historic patterns, we also would expect a reduction in healthcare spending on a delayed basis following an economic downturn, due to the considerable lag between investments in healthcare and increased supply. So, much of the reduction in trends could be driven by reduced capital spending during the recession. We will need more data to determine whether the slight increase in the past two months is a temporary increase or if it is a sign that trends are beginning to rise."

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 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 June 2011. 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 S&P Indices as a subscription service.

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 S&P Indices and can be accessed here http://bit.ly/hhTvLb.

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.

SOURCE Standard & Poor's

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