How Health Costs Might Change with COVID-19

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How Health Costs Might Change with COVID-19 Private health insurers and government health programs likely will face higher health care costs due to coronavirus testing and treatment, though other related factors could offset some increased spending. A new analysis takes a deep dive into the forces likely to push overall health spending up or down for private insurers, Medicare and Medicaid. While the number and severity of COVID-19 cases remains unknown, the analysis highlights that private insurers pay as much as $20,000 for patients hospitalized for pneumonia treatment and more than $80,000 for patients who require a ventilator during their stay – levels of care analogous to what COVID-19 patients might require. Hospitalization costs for Medicare and Medicaid patients would be lower on average for each admission, as those programs typically pay lower rates than private insurance. While the cost of coronavirus testing is relatively low, spending could increase significantly across programs if testing is implemented on a large scale across the nation. These costs would be paid by private insurers and public programs, which are required by new legislation to cover the tests without charging cost-sharing to patients. At the same time, the coronavirus pandemic and the social-distancing measures in place across the country are leading to people and providers forgoing or delaying other care, unless it is urgent. The analysis estimates that under normal circumstances 37% of private insurance spending on hospital admissions stems from non-emergency surgical procedures. To the extent people forgo rather than delay such care, the reduced spending could offset some of the additional costs of treating people with COVID-19 for private insurers and government programs. The uncertainty poses challenges for commercial insurers, who must file 2021 rate information with state regulators in the coming months. The uncertainty around COVID-19’s net impact on next year’s costs could lead insurers to overprice their plans, particularly in the Affordable Care Act marketplaces, where most customers receive tax credits that shield them from the higher premiums. Medicare’s spending could also rise as older adults are at higher risk for COVID-19 hospitalizations, ICU admissions and death. Medicare will incur new costs for coronavirus testing, and to pay providers for telemedicine.  In addition, new legislation requires Medicare to increase payments to hospitals for each COVID-19 admission. These new costs will be offset to some degree by fewer non-urgent hospitalizations, procedures and office visits. An increase in total Medicare spending could mean higher premiums and cost sharing for beneficiaries in the future. State Medicaid programs likely will experience increased costs not only from the treatment of COVID-19, but also due to increased enrollment as millions are expected to lose their job-based coverage. Some of the cost-cutting mechanisms employed under past recessions may not be an option in the midst of the coronavirus pandemic. The analysis is part of the Peterson-KFF Health System Tracker, an online information hub dedicated to monitoring and assessing the performance of the U.S. health system. Filling the need for trusted information on national health issues, the Kaiser Family Foundation is a nonprofit organization based in San Francisco, California.
Contact: Craig Palosky | (202) 347-5270 | cpalosky@kff.org
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