US Healthcare Costs rose 5.58% over the 12-Months ending May 2011 according to the S&P Healthcare Economic Indices

July 25, 2011 -- 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 5.58% over the 12-months ending May 2011.

 The annual growth rate for the Composite accelerated from its all-time low of +5.37% posted in April 2011. This is still 3.16 percentage points below the highest rate for the Composite index, which was up 8.74% over the 12-months ending May 2010.  

Over the year ending May 2011, healthcare costs covered by commercial insurance increased by 7.35%, as measured by the S&P Healthcare Economic Commercial Index. Medicare claim costs rose at an annual rate of 2.64%, as measured by the S&P Healthcare Economic Medicare Index. The Commercial and Medicare Indices are respectively 0.25 and 0.16 percentage points above their April 2011 annual rates.

"With May's data, we observed a modest acceleration in the annual growth rates in healthcare costs," says David M. Blitzer, Chairman of the Index Committee at S&P Indices. "While we have been experiencing a deceleration trend since early 2010, all headline indices posted slight increases in their annual rates in May 2011. The Composite Index rose by 5.58%, the Commercial Index by +7.35% and the Medicare Index was up 2.64%, compared to their May 2010 levels.  

"Over the past 12-15 months, the story has been a moderation in the rate of increase in healthcare cost, as indicated by the decelerating growth rates across the S&P Healthcare Economic Indices. In fact, the Composite, Medicare and Hospital Indices all posted record low annual rates in their six-year history with April's report. Since May's data covers only one month, we need more time to determine if the trend is changing or if this is a temporary blip, like we saw in January.

"Unlike Medicare, throughout the past year the Commercial Index has remained well above its low annual growth rate of +6.00% posted in September 2005. Its May 2011 reading was +7.35%. The Hospital and Professional Services Indices reported increases of 5.08% and 5.91% respectively. These are slightly higher than the respective +4.85% and +5.71% posted in April 2011.

"In terms of what we are hearing from market participants, both office visit and hospital admission trends are relatively low, which may be a reflection of the overall consumer pullback in medical treatment. Furthermore, many participants have indicated that providers are trying to address health care reform and are looking for ways to control costs. If true, this combination certainly would be a contributory factor to the moderation in cost we have witnessed since early 2010."

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 May 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.