Medicare Growth Hits A New Low

The new S&P Healthcare Economic Index shows that Medicare costs increased at an all time low of 1.97 percent, while commercial insurers saw growth of 8 percent over the 12-months ending September 2011:

“As we enter the fall, we continue to see the summer trends of a deceleration in the annual growth rates of Medicare costs, while those of commercial costs continue to moderately accelerate” says David M. Blitzer, Chairman of the Index Committee at S&P Indices. “The Composite Index posted an annual rate of +5.75%, the Commercial Index +8.03% and the Medicare Index +1.97%. With September’s data, both the Composite and Commercial Indices posted five consecutive months of accelerating annual growth rates. “The three Medicare and the Professional Services indices saw a deceleration in their annual growth rates in September 2011; all other headline indices saw their annual rates increase. The Professional Services Index rate was +5.78%, down 0.05 percentage points from its August rate. The Medicare index was up 1.97%, which is not only a new low in this series’ almost seven-year history, but is now less than one fourth the +8.02% high rate it posted in November 2009. The Economic Hospital Medicare index posted a new low annual growth rate of +0.71%, well below its August 2009 highest rate of +8.30%.

Look:

Last month, HHS announced that the annual increases in premiums for seniors in Medicare Part B will be somewhat lower than expected and attributed the change to “historically low healthcare utilization rates, due in part to the health reform law’s investment in prevention; and the 3.6 percent Social Security cost-of-living hike announced earlier this month.” Comparatively, premiums in employer-sponsored health insurance market increased more than expected — by 9 percent — despite the historically low utilization rates (a result of the recession). As Austin Frakt has explained, the causes of premium changes are somewhat complex, but it makes one wonder about the wisdom of the GOP’s plan to shift seniors from Medicare into private coverage. At the very least, this comparison isn’t very flattering for private insurers or their abilities to control health care spending.