Rate of Growth in Healthcare Costs Accelerate in the New Year According to the S&P Healthcare Economic Indices

NEW YORK, March 17, 2011 /PRNewswire/ -- Data released today by Standard & Poor's 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 6.29% over the 12-months ending January 2011. This is an increase over the 6.05% annual growth rate in the December 2010 reading for this index, and the first time this rate has accelerated since May 2010.

Over the year ending January 2011, healthcare costs covered by commercial insurance rose by 8.03%, as measured by the S&P Healthcare Economic Commercial Index. Medicare claim costs for hospital and professional services rose at a slower rate of 3.40%, as measured by the S&P Healthcare Economic Medicare Index. Following the Composite, both the Commercial and Medicare indices recorded an increase in annual rates of change compared to the +7.72% and +3.27% respective prints posted for December.

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.

"In January, we saw the annual growth rates in healthcare costs picking up slightly after six consecutive months of decelerating rates in the latter half of 2010," says David M. Blitzer, Chairman of the Index Committee at Standard & Poor's. "The Composite Index rose by 6.29%, the Commercial Index was up 8.03% and the Medicare Index was up 3.40% compared to their January 2010 levels. The annual growth rates for these headline indices – Composite, Commercial and Medicare – are up 0.24, 0.31 and 0.13 percentage points from their respective December 2010 rates. If you look at all of the sub-indices in this family, only the Hospital Medicare Index reached a new low, +1.72% in January 2011 versus the same month in 2010.

"In the past year we began to see a trend of deceleration in annual growth rates for the nine indices in this family, especially in the second half of 2010. The first month of the New Year shows a departure from this trend; but it is too soon to predict if this is an anomaly or a sign of what 2011 has in store for us. The S&P Healthcare Economic Hospital and Professional Services Indices annual growth rates were +5.64% and +6.76% for January 2011, respectively, versus December 2010 prints of +5.56% and +6.34%.

"As observed for the majority of these indices six-year history, the rate of change in expenditures associated with commercial health insurance plans continues to outpace expenditures for Medicare.  The only time we ever saw this relationship reversed was for a brief period in late 2005. In the past year alone, the gap has widened by more than 3.0 percentage points."

As part of our annual review process, with this month's update S&P Indices has published the weights used in the S&P Healthcare Economic Indices calculations for 2011. We have reviewed various weights and factors used in the healthcare models and updated those with more recent data. These revisions do not include changes to historical weights. Please refer to the methodologies posted on our Web site at www.healthcareindices.standardandpoors.com to review these updates.  

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 January 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 Standard & Poor's 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 Standard & Poor's 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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