Medicare Growth Rate at an All-time Low

April 29th, 2011

Newly published Standard & Poor’s (S&P’s)¬†Indices show the average cost of health care continues to rise, but at a much slower pace than previous years. Although the entire health care industry is likely to feel the pinch, hospitals are showing the greatest strain, as indicated by employment rates.

S&P Indices for the S&P Healthcare Economic Composite Index, published April 21, show that the average per capita cost of health care services covered by commercial insurance and Medicare programs increased by 6.19 percent over the past 12 months ending February 2011. Compared to the 6.31 percent increase the prior month, however, this is a decline of 0.12 percentage points in one month.

Health care costs covered by commercial insurance rose 7.97 percent over the past year, as measured by the S&P Healthcare Economic Commercial Index. This growth rate is down 0.08 percentage points from January levels.

Medicare claim costs rose at the lowest annual rate of growth posted for the S&P Healthcare Economic Medicare Index in its six-year history: 3.22 percent, for a decline of 0.21 percentage points from January levels.

The February 2011 S&P Healthcare Economic Hospital and Professional Service Indices annual growth rates were 5.51 percent and 6.68 percent, respectively. These rates, too, are down from their January levels by 0.16 and 0.10 percentage points, respectively.

“While all of the indices have seen their growth rates decelerate over the past year, Medicare claim costs, particularly those associated with hospitals, have witnessed the largest slow down,” said David M. Blitzer, chairman of the Index Committee at S&P. “This slowdown in Medicare claim costs may be having some impact on other factors in the health care industry.”

Specifically, hospital employment growth is down. Between 2008 and early 2009, the annual hospital employment growth rate was in the 2.0-3.0 percent range, Blitzer said. Since the middle of 2009, however, the rate has been consistently below 1 percent.

Blitzer said physicians may not be as impacted by the slowdown because they “have more flexibility in their choice of insurance contracts.” The rate of growth for physician wages doubled in the past year, growing by approximately 5.4 percent in the past month, and physician employment registered at an annual growth rate of about 2.5 percent as of February.

“If the growth in insurance claim costs continue to slow down, whether due to contract negotiations for commercial insurance, or Medicare regulations, or both, we will likely see an impact on employment, wages, and benefits in the health care industry,” Blitzer said.

S&P Healthcare Economic Indices


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