US Healthcare Cost Trends Are Mixed According to the S&P Healthcare Economic Indices

NEW YORK, Sept. 15, 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 5.71% over the 12-months ending July 2011. This index has seen a modest acceleration in annual growth rates for three consecutive months -- with readings of +5.34%, +5.55% and +5.59% in April, May and June, respectively.

As measured by the S&P Healthcare Economic Commercial Index, healthcare costs covered by commercial insurance increased by 7.73% over the year ending July 2011. Medicare claim costs rose at an annual rate of 2.35%, as measured by the S&P Healthcare Economic Medicare Index. With July's data, the Medicare index reached yet another low in its six-and-one-half year history. The index is 5.67 percentage points below its high annual growth rate of +8.02%, recorded in November 2009.

The Hospital and Professional Services Indices posted increases of 5.34% and 5.90%, respectively, from their July 2010 levels. For the Hospital Index, this is 0.22 percentage points higher than its June annual rate; and for the Professional Services Index this is just a slight change of +0.03 percentage points from its June annual rate.

"Continuing the general trend witnessed since April, July saw some modest acceleration in the annual growth rates in commercial healthcare costs, while there was modest deceleration in Medicare costs," says David M. Blitzer, Chairman of the Index Committee at S&P Indices. "The annual growth rate of the Commercial Index rose by 0.29 percentage points, while that of the Medicare Index dropped 0.15 percentage points. The Composite Index's annual rate was +5.71%, the Commercial Index +7.73% and the Medicare Index +2.35%, versus July 2010.  

"Six of the nine headline indices saw accelerations in annual growth rates -- the exceptions being the three related to Medicare. The Professional Services Medicare and Hospital Medicare Indices saw their annual rates decelerate to +4.15% and +0.94%, respectively. For the Hospital Medicare index, this rate is only 0.01 percentage points above its April 2011 record low. At +5.90% and +5.34%, the Professional Services and Hospital Indices annual rates were above their June readings. Likewise, the Professional Services Commercial Index and Hospital Commercial Index also saw accelerating annual rates of +6.64% and +8.78%, respectively.

"In analyzing these statistics, we do want to remind you that growth rates in these indices reflect changes in healthcare costs, not just changes in healthcare prices. While commercial costs are increasing at faster rates than Medicare, it could be attributed to a number of factors -- changes in utilization (the rate at which services are used by the insured population), new services and technology, changes in benefits coverage, and contractual reimbursement provisions, in addition to changes in prices. Medicare is a single provider, whereas private insurers face competitive pressure and are likely to negotiate with healthcare providers to be the insurer of choice to businesses and consumers."

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 July 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

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