Medicare costs slow dramatically, unlike commercial sector

The cost of delivering healthcare in the hospital setting is continuing to rise, but the sector's inflation has been strongly muted, according to data from the S&P's Healthcare Economic Indices.

The slowdown in the hospital Medicare cost index was particularly dramatic, where the annual growth rate was 1.18 percent, compared to 8.3 percent in August 2009.

However, the same index regarding hospital costs as shouldered by commercial payers was much higher, at 8.36 percent, just one point down from its peak of 9.36 percent in May 2010.

"This phenomenon could be the possible result of two things: Costs for Medicare patients are being better contained than those covered under commercial insurance plans and hospitals are using more procedures and services covered under commercial plans, contributing to the increase in total costs," says David M. Blitzer, chairman of S&P's index committee.

As for overall inflation, S&P concluded that healthcare inflation rose at a 5.77 percent annual rate for the 12 months ending March 2011. That's the smallest rate of growth in nearly four years, and one of the lowest rates since the index began in 2005. That rate compares to 8.74 percent annual growth that occurred during the 12 months ending in May 2010.

"While there was some volatility within months, the general trend has been a slowdown across all ... of the indices we publish. Most of the annual growth rates peaked in the late winter/early spring of 2010. Since then, most of these rates have fallen by 2 percentage points or more," 

For more:
- read the S&P data (.pdf)