S&P: US Healthcare Costs Rise 7.32% Over the 12-Months Ending August 2010

Commercial Health Plan and Medicare Costs Also on the Rise

Oct 21, 2010, 10:00 ET from Standard & Poor's

NEW YORK, Oct. 21 /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 private insurance and Medicare programs rose 7.32% over the 12 months ending August 2010. Hospital and physician claims for patients covered under commercial health plans were the hardest hit, as claim costs associated with commercial health plans rose 8.66%, as measured by the S&P Healthcare Economic Commercial Index.  Medicare claim costs for services rendered by hospitals and physicians rose a more modest 5.08%, as depicted by the S&P Healthcare Economic Medicare Index.

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 index levels versus the same month of the prior year.

"Healthcare costs continued to rise in the month of August. The annual rates of change for the Composite, Commercial and Medicare Indices were +7.32%, +8.66% and +5.08%, respectively. August data shows that the most significant rise in healthcare costs was those covered by commercial health insurance plans," says David M. Blitzer, Chairman of the Index Committee at Standard & Poor's. "If you look at these data by service provider, the annual change in hospital claims costs, at +7.41%, are only slightly above those for professional services, +7.01%.  This is far different than what we witnessed in the middle of 2009, when hospital claims costs were rising close to 8.0% per year, while professional services were growing at a more modest 6.0%.

"Looking across the family of S&P Healthcare Indices, we have seen a trend of moderation in the annual growth rates, particularly in the last 12 months. This is most prominent with Medicare claims costs.  In November 2009 those costs were rising at an annual rate of 7.94%.  With August's report we see that the rate has fallen to +5.08%.  

"Two caveats to these figures: first Medicare is subject to different regulatory and market effects than the Commercial Index.  Second, these data, which are through August 2010, do not reflect any impact of the recently passed federal health care legislation. As the cost of healthcare is a daily topic of discussion, we expect many to use these indices to understand changes in healthcare costs for the insured population in the U.S., by both service provider and by benefits coverage."

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 August 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 an underlying data used in the models. The entire revised history, as well as full results for the underlying S&P Healthcare Economic Indices are available from Standard & Poor's as a subscription service.

S&P Healthcare Economic Indices

(12-Month Moving Average)


1-Year Change (%)

S&P Healthcare Economic Composite Index


S&P Healthcare Economic Commercial Index


S&P Healthcare Economic Medicare Index


S&P Healthcare Economic Hospital Index


S&P Healthcare Economic Hospital Medicare Index


S&P Healthcare Economic Hospital Commercial Index


S&P Healthcare Economic Professional Services Index


S&P Healthcare Economic Professional Services Medicare Index


S&P Healthcare Economic Professional Services Commercial Index


Source: Standard & Poor's

Data through August 2010

The S&P Healthcare Economic Indices were developed in consultation with Health Index Advisors, a joint venture between Aon Hewitt and Milliman, and were derived from the former Milliman Healthcare Cost Indices™ which were first published in 1987. The complete methodology, fact sheet and supporting research for the S&P Healthcare Economic Indices are available at www.standardandpoors.com/indices.

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