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 5.73% over the 12-months endingAugust 2011. This is a marginal increase over the +5.69% annual growth rate posted inJuly 2011and the fourth consecutive increase since the index hit its lowest annual growth rate of +5.32% inApril 2011.

As measured by the S&P Healthcare Economic Commercial Index, healthcare costs covered by commercial insurance increased by 7.89% over the year endingAugust 2011, also increasing for the fourth consecutive month. Medicare claim costs, however, hit a new low, rising at an annual rate of 2.16% as measured by the S&P Healthcare Economic Medicare Index. The Medicare index recorded its highest annual growth rate of +8.02% inNovember 2009. It has consistently and sharply decelerated since then, by about 5.86 percentage points in under two years.

The Hospital and Professional Services Indices posted increases of 5.43% and 5.84%, respectively, from theirAugust 2010levels. These are minor changes from the +5.31% and +5.89% respective annual rates posted inJuly 2011.

"As the summer of 2011 ended, we continued to observe the recent trend of a deceleration in the annual growth rates of Medicare costs and a sustained acceleration in the annual rates of commercial healthcare costs," saysDavid M. Blitzer, Chairman of the Index Committee at S&P Indices. "The Composite Index posted an annual rate of +5.73%, the Commercial Index +7.89% and the Medicare Index +2.16%. With this month's data, the Medicare index is almost one-fourth of its peak annual rate of +8.02% recorded inNovember 2009. This is a very sharp deceleration.

"In fact, all three Medicare indices saw deceleration in their annual growth rates inAugust 2011, while most of the other indices saw their growth rates increase. The Professional Services Index was the only other to record a modest deceleration in its annual rate, with +5.84% being down 0.05 percentage points from its July annual rate. The divergence between the rate of cost increases between Medicare and commercial plans has become larger over the summer months. The Medicare and Hospital Medicare indices both recorded record lows in the six-plus-years history of these indices, +2.16% and +0.81%, respectively. As we caution every month, these indices represent total costs not just prices, so increased costs could be due to prices going up, increased utilization, or some combination of the two.

"If you further separate commercial plans' costs into their hospital and professional services components, you can see that theAugust 2011commercial hospital index is above the rate it posted at the beginning of the year – specifically +9.05% in August versus +8.68% in January. In contrast, the commercial professional services index has decreased to +6.68% from its +7.25% January growth rate. The increasing growth rate for hospitals is primarily due to rising rates of employment and wages. Professional services wages have also seen increasing rates during 2011; however, employment trends have declined over the same period."