How COVID-19 Might Affect Health Care Costs

May 1, 2020 / Amanda Chase, Horsesmouth Assistant Editor

As the coronavirus spreads rapidly across the United States, private health insurers and government health programs could potentially face higher health care costs. However, the extent to which costs grow, and how the burden is distributed across payers, programs, individuals, and geography are still very much unknown. This brief lays out a framework for understanding changes in health costs arising from the coronavirus pandemic, including the factors driving health costs upward and downward. We also highlight some special considerations for private insurers, Medicare, and Medicaid programs.

The pandemic is likely to put upward pressure on Medicare spending due to the following factors: the number of Medicare-covered COVID-19 hospitalizations; how much Medicare pays to treat COVID-19 patients, taking into account the share of hospitalized patients requiring ventilator support, and the 20 percent increase in Medicare payments for COVID-19 patients; the share of COVID-19 patients requiring post-acute SNF or home health care, and the intensity of services they receive; the cost of medications used to manage patients outside the hospital setting; the cost of a vaccine, when it becomes available; and the number of beneficiaries who are tested for the coronavirus.

However, just like in private insurance and Medicaid coverage, increases in Medicare spending may be partially offset by delayed or forgone procedures and office visits. A reduction in spending due to postponement of such procedures would offset the increase in Medicare spending for COVID-19 patients, at least in the short term. It is not yet known what share of these procedures will be rescheduled for later this year or shifted into 2021, or whether the delay in care will lead to costly adverse health events down the road.

For Medicare beneficiaries, the impact of COVID-19 on out-of-pocket spending in the short term will depend on whether they are infected and whether they require hospitalization for treatment. Although beneficiaries will face no out-of-pocket costs for testing or testing-related services, many would face exposure to costs for treatment, unless they have supplemental coverage that will pay some or all of these costs, or are enrolled in a Medicare Advantage plan that is waiving cost sharing for treatment. For patients who do not have COVID-19, they may face a drop in spending if they delay health care services they might otherwise have received, such as elective procedures or office visits. Over the longer term, beneficiaries could face an increase in out-of-pocket costs for Medicare premiums and deductibles if Medicare spending for 2020 increases due to COVID-19 (beyond what it otherwise would have).

You can find the full Kaiser Family Foundation study here.


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