S&P: Healthcare expenditures for commercial plans up 3.5% in the 12 months ended November 2013

Data released today for the S&P Healthcare Claims Indices show healthcare costs rose 3.5% in the 12 months ended November 2013 compared to the 4.9% rise for the 12 months ended November 2012. Medical costs—inpatient and outpatient hospitalization plus professional services—rose 3.7% and prescription drugs rose 2.6% over the same period. All rose at a slower pace than a year earlier.

Among the key components of medical costs, inpatient fee-for-service rose 3.5% compared to 4.5% in the earlier period while outpatient fee-for-service costs rose 5.2% compared to 8.0% in the earlier period. Prescription drug expenditures were up 2.6% versus 2.9% one year ago. These figures, which represent the most current data available, are based on expenditures incurred in the 12 months ended November 2013.

Because of standard industry lags in invoicing claims and resolving disputed charges, it is not possible for the indices to be calculated without a lag. Trends in healthcare expenditures are calculated as the average index level in the 12 months ended November 2013 compared to the average index level in the 12 months ended November 2012 and stated as a percentage, in accordance with the usual practice with healthcare cost analyses.

“The growth in healthcare spending continues to slow,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The key question in the slowdown is whether we are seeing a shift in healthcare cost trends that is sustainable or whether we are merely observing the slower pace of overall inflation and weak economic growth. One way to gain some insight is to look at unit cost measures for healthcare derived from the S&P Healthcare Claims Indices.”

“The data show that prescription drug trends tend to lag shifts in inflation while trends in inpatient unit costs don’t show any obvious relation to inflation shifts,” continues Blitzer. “The pattern in prescriptions may reflect consumer preferences towards generic drugs. While the general rate of inflation may affect trends in inpatient medical care, it is probably not the dominant factor. The current low inflation rate is a factor in slowing growth in healthcare expenditures, but low inflation alone will not control the growth in healthcare costs.”

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