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S&P: Private Health Insurance Costs Increasing Faster Than Medicare

If you are still wondering why proposals to expand the role of private insurance in the Medicare program would shift the costs of coverage from the government to the beneficiaries and force those beneficiaries to pay more for the same coverage, this latest estimate of health care costs really closes that circle. Note that while per capita costs for private insurance rose by 7.89 percent in August — during a period of below-average care utilization — Medicare costs increased by just 2.16 percent:

An index following the average cost for health care is up a fourth consecutive time, after it hit a bottom in April, Standard & Poor’s Ratings Services said.

According to the ratings firm’s latest index report, the average per capita cost of health care covered by commercial insurance and Medicare rose to 5.73% over a 12-month period ended in August. The increase is just above the 5.69% index level set in July. The index hit a recent nadir in April at 5.32%.

Commercial insurance rose by 7.89% in August, using the same moving year-long marker. But Medicare claim costs hit a new low, rising at an annual rate of 2.16% during the same time period. The highest rate for Medicare growth was 8.02%, set in November 2009.

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In other words, “future retirees” or whoever else Republicans want to shift into private insurance would have to swallow those higher cost increases that result from private insurers having higher administrative spending, less efficiencies, and limited leverage.