Health Care Spending Index

Standard & Poors compiles several indices, including some related to health care.  The health care ones are based on a methodology originally constructed by Milliman and AonHewitt.  One intent is to track health care spending growth on a rolling twelve month basis.  The most recent release includes data for the twelve months ending March 2011.  The information is based on federal databases and reflects amounts actually received by health care providers–hospitals and professionals–for services.  As such, it may not be completely accurate, but the trend is likely correct, since whatever biases exist probably don’t change from period to period.  (S &P Index)

The current report shows that the average per capita spending went up by 5.77% in the last twelve months ending in March.  This represents a decrease from most recent months’ rolling twelve month average, which were in the 6.1-6.3% range.  The current growth rate is almost the lowest in the six year history of the index and is significantly down from its high of 8.74% for the period ending in May 2010.  It should be noted, however, that this growth rate is still far above general inflation or GDP increases.  For commercial insurers the rise was 7.57% and for medicare only 2.78%.  This surely reflects Medicare’s ability to set prices by fiat and cost shifting to and the weaker market power of commercial insurers.

Hospital costs for Medicare rose only 1.18% but for commercial payers they went up by 8.36%.  Professional services increased 4.84% for Medicare and 6.69% for commercial payers.  It should be remembered that this index only shows the per capita spending increase; it does not break that into utilization and unit price components.  Given other evidence, such as the Milliman report we recently profiled, most of the increase is undoubtedly on the unit price side, providing another indicator that regardless of what is happening in the broader economy, health care price inflation is alive and kicking.