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How fast are healthcare costs escalating? 2 studies tell the tale

Christian Schappel
by Christian Schappel
April 28, 2011
2 minute read
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We’re all used to the dismal truth that healthcare costs are going up. The real question is, how much?
Overall healthcare claims costs are expected to continue increasing in the low double digits, according to a recent trend survey by Wells Fargo Insurance Services.
Based on the data provided by more than 60 insurance carriers, here’s a breakdown of the projected increases in the national average cost of claims for various types of plans: (Note: Insurance premiums are expected to rise at similar rates.)

  • HMO plans — 9.6%
  • PPO and CDHP/HDHP plans — 10%
  • Exclusive provider organization (CPOs) plans — 10%
  • Indemnity plans — 11.1%
  • Prescription drug plans — 8.7%.

What’s causing the increases? According to the survey, claims costs are being driven by healthcare reform provisions, increased use of healthcare services, an aging population, advancements in medical technology/medication and inflation.
The silver lining
If there’s any good news to come from this survey, it’s this: Although costs continue to rise in the double digits, there is some evidence that the rate of increase is slowing down.
The Wells Fargo survey says the growth rate for healthcare costs is slightly lower than it was six months ago.
Those findings appear to mirror new data from Standard & Poor’s Healthcare Economic Composite Index.
The index data indicates that the average per capita cost of healthcare services increased by 6.19% over the 12-month period ending this past February.
That’s a slight drop from the 6.31% increase posted this past January — and a huge drop from the 8.74% increase posted for the 12-month period ending May 2010, which was the highest growth rate for the index in its six-year history.
One reason the Index Committee at S&P gave for the declining growth rate: the slowdown in hospital employment growth.
S&P data indicates that the annual hospital employment growth rate from 2008 to 2009 was in the 2-3% range. But since mid-2009, the rate has consistently been below 1%.

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