Healthcare Costs Increase at a More Moderate Pace in 2010 According to the S&P Healthcare Economic Indices

NEW YORK, Feb. 17, 2011 /PRNewswire/ -- 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 6.06% over the 12-months ending December 2010. This is the seventh consecutive month where we have seen a deceleration in the annual rate of change for the S&P Healthcare Economic Composite Index. The annual rate of change is down 2.68 percentage points from its May 2010 peak reading.

In the year ending December 2010, healthcare costs covered by commercial insurance rose by 7.75%, as measured by the S&P Healthcare Economic Commercial Index. Medicare claim costs associated with hospital and professional services for patients covered under Medicate increased at a more modest 3.27% rate over the year ending in December, as measured by the S&P Healthcare Economic Medicare Index. Compared to May 2010, they are down 2.13 and 3.57 percentage points, respectively.  For the Medicare Index, the annual growth rate has been reduced by more than half its rate posted in May.

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 December year-end report shows that the trend of slowing annual growth rates in healthcare costs that started in early/mid-2010 continued through the end of 2010," says David M. Blitzer, Chairman of the Index Committee at Standard & Poor's. "In the 12-months ended in December 2010, the Composite Index rose 6.06%, down about 2.10 percentage points from its December 2009 rate and 2.68 percentage points from its high in May 2010. The Commercial Index was up 7.75% and the Medicare Index up 3.27% in December 2010, both displaying deceleration similar to the Composite Index.  As we have seen through most of the indices six-year history, the rate of change in expenditures associated with commercial health insurance plans continue to significantly outpace expenditures for Medicare.

"The Composite Index posted a new recent low annual growth rate of +6.06% in December, reaching rates last seen almost four years ago, in the summer of 2007. The Medicare Composite, however, did reach a new low of +3.27% in December 2010 -- the lowest annual growth rate in the six-year history of the index. The growth rates for services covered by Commercial insurance also reported a deceleration compared to previous months; but at +7.75% in December 2010, it is well above the historical low of +6.00% annual growth rate posted in September 2005.

"The year 2010 was highlighted by a trend of deceleration in annual growth rates for all three headline indices -- the Composite, the Medicare and the Commercial Indices. Especially since May 2010, most of the indices annual growth rates have declined month-to-month. The S&P Healthcare Economic Hospital and Professional Services Indices also show a similar moderation in the rate of increase of annual growth rates, posting +5.60% and +6.34% rates for December 2010, respectively, versus May 2010 prints of +7.99% and +9.33%, respectively."

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 December 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.

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

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SOURCE Standard & Poor's