Implications of Early Health Care Spending Reductions for Expected Spending as the COVID-19 Pandemic Evolves | Health Care Economics, Insurance, Payment | JAMA Internal Medicine | JAMA Network
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Figure 1.  Weekly Total Medical Spending and Spending Changes Through the First Week of April 2020 by COVID-19 Activity, Timing of Social Distancing Policies, and Location
Weekly Total Medical Spending and Spending Changes Through the First Week of April 2020 by COVID-19 Activity, Timing of Social Distancing Policies, and Location

A, Total medical spending in dollars and (B) relative to week 9. High-activity refers to high cumulative incidence of confirmed COVID-19 cases by April 7, 2020. Early vs late social distancing refers to state order to stay at home, shelter in place, or close nonessential businesses before vs after April 1, 2020. Lower spending during the week of January 1, 2020, is consistent with overlap with a national holiday (utilization was consistently lower in 2019 during holiday weeks). COVID-19 indicates coronavirus disease 2019.

Figure 2.  Weekly Aggregate Medical Spending Through the First Week of April 2020, by Type of Care
Weekly Aggregate Medical Spending Through the First Week of April 2020, by Type of Care

A, Aggregate medical spending in dollars and (B) spending relative to week 9. Weekly aggregate spending is displayed by type of care: acute inpatient, emergency department, ambulatory surgery center (ASC), outpatient care in hospital-owned facilities, outpatient care in office setting, telehealth, urgent care centers, and retail clinics. Post-acute spending is not displayed because it constituted a small proportion of spending for the predominantly non-elderly, commercially insured population. Enrollees aged 65 years or older accounted for approximately 16% of spending, as expected from the smaller share of the total Medicare population covered by FAIR Health data relative to the share of the commercially insured. The week of January 1, 2020, was lower for some spending categories owing to overlap with the holiday period. Telemedicine is not shown in panel B because the level of growth from week 9 exceeded 1000%.

1.
Raifman  J, Nocka  K. COVID-19 US State Policy Database. Boston University School of Public Health. Updated July 2, 2020. Accessed July 9, 2020. https://docs.google.com/spreadsheets/d/1zu9qEWI8PsOI_i8nI_S29HDGHlIp2lfVMsGxpQ5tvAQ/edit#gid=2102005060
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New ICD-10-CM code for the 2019 Novel Coronavirus (COVID-19). Centers for Disease Control and Prevention. Updated April 1, 2020. Accessed July 9, 2020. https://www.cdc.gov/nchs/data/icd/Announcement-New-ICD-code-for-coronavirus-3-18-2020.pdf
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Healthcare Facilities: Managing Operations During the COVID-19 Pandemic. Centers for Disease Control and Prevention. Updated June 28, 2020. Accessed July 9, 2020. https://www.cdc.gov/coronavirus/2019-ncov/hcp/guidance-hcf.html
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Mehrotra  A, Chernew  ME, Linetsky  D, Hatch  H, Cutler  D. The Impact of the COVID-19 Pandemic on Outpatient Visits: Practices Are Adapting to the New Normal. The Commonwealth Fund. Updated June 25, 2020. Accessed July 9, 2020. https://www.commonwealthfund.org/publications/2020/jun/impact-covid-19-pandemic-outpatient-visits-practices-adapting-new-normal
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Dafny  LS, McWilliams  JM. Primary Care Is Hurting: Why Aren’t Private Insurers Pitching In? Health Affairs Blog. Updated May 21, 2020. Accessed July 9, 2020. https://www.healthaffairs.org/do/10.1377/hblog20200519.916904/full/
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Cutler  DM, Frank  RG, Gruber  J, Newhouse  JP. Strengthening The Medicare Trust Fund In The Era Of COVID-19. Health Affairs Blog. Updated June 10, 2020. Accessed July 9, 2020. https://www.healthaffairs.org/do/10.1377/hblog20200608.322412/full/
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    1 Comment for this article
    EXPAND ALL
    How Do Surges in COVID-19 Affect Healthcare Spending?
    Michael McAleer, PhD(Econometric),Queen's | Asia University, Taiwan
    The analysis of the relationship between reductions in early healthcare spending and expected spending on COVID-19 is a welcome, critical, and informative public and private healthcare policy issue, which depends on a number of important assumptions and interpretations, including:

    (1) use of 2019 data to correct for unreported claims may be problematic as it presumes that the health insurance industry was the same in 2019 as it is during the COVID-29 pandemic;

    (2) inclusion of COVID-19 inpatient spending in 2019 and 2020 cannot be compared as the pandemic started in 2020, although it was notified to the WHO in
    2019;

    (3) sample of changes in spending is from 3 March 2020 to 7 April 2020, which leads to a relatively small sample;

    (4) aggregate medical spending decreased across virtually every category considered, including elective procedures and age, though not necessarily gender, race, ethnicity, and socio-economic circumstances;

    (5) COVID-19 had a significant effect on medical spending, especially in the early phase;

    (6) massive reductions in non-COVID-19 healthcare expenses, especially for the aged, offset those on COVID-19 cases;

    (7) negative correlations between reductions in early healthcare spending and expected spending on COVID-19 might continue as the pandemic unfolds, though they need not remain below the levels observed before COVID-19, especially as the winter season approaches in the northern hemisphere;

    (8) net gains to commercial insurers in 2020 need not continue as extended waves of COVID-19 continue to expand exponentially.
    CONFLICT OF INTEREST: None Reported
    READ MORE
    Research Letter
    COVID-19: Beyond Tomorrow
    November 9, 2020

    Implications of Early Health Care Spending Reductions for Expected Spending as the COVID-19 Pandemic Evolves

    Author Affiliations
    • 1Department of Health Care Policy, Harvard Medical School, Boston, Massachusetts
    • 2Division of General Internal Medicine and Primary Care, Department of Medicine, Brigham and Women’s Hospital, Boston, Massachusetts
    • 3USC Schaeffer Center for Health Policy & Economics, University of Southern California, Los Angeles, California
    • 4FAIR Health, Inc, New York, New York
    • 5Division of General Internal Medicine, Department of Medicine, Beth Israel Deaconess Medical Center, Boston, Massachusetts
    JAMA Intern Med. 2021;181(1):118-120. doi:10.1001/jamainternmed.2020.5333

    The effect of the coronavirus disease 2019 (COVID-19) pandemic on health care spending in the US has important implications for payers, clinicians, hospitals, health care systems, and patients, and has been the subject of much debate. Understanding how early spending changes varied by disease incidence and implementation of policies to limit transmission can inform expectations about health care spending as the pandemic evolves.

    Methods

    For the first 14 weeks of 2020, we analyzed multipayer deidentified claims from FAIR Health spanning roughly 75% of the commercially insured and 50% of the Medicare Advantage population. Our analysis included fee-for-service (not capitated) claims submitted to FAIR Health by June 25, 2020, and used 2019 data to correct for unreported claims (eAppendix in the Supplement). The study was determined not to be human subjects research and thus not reviewed by the Harvard Medical School Committee on Human Studies.

    We calculated weekly aggregate medical spending in total and categorized by type of care and 4 prespecified groups of states defined by cumulative incidence of confirmed cases by April 7 (COVID-19 activity) and timing of social distancing policies1 (1) New York; (2) high activity (excluding New York); (3) low activity, early social distancing; and (4) low activity, late social distancing (eAppendix in the Supplement). We also examined spending for typically elective procedures and COVID-19 inpatient spending (where identifiable by an emergently introduced diagnosis code).2

    We focused on changes in spending from week 9 (ending March 3, 2020) to week 14 (ending April 7, 2020). We quantified the extremeness of these changes using a randomization inference approach (eAppendix in the Supplement).

    Results

    From week 9 to 14, aggregate medical spending decreased by $2.7 billion per week, or 46.0% (Figure 1). Spending decreased across all categories of services except telehealth, ranging from −26.9% for inpatient to −86.2% for ambulatory surgical center care (Figure 2).

    Spending reductions were greater in New York (−48.8%) and other high-activity states (−49.9%) than low-activity states, where the reduction was greater in those implementing social distancing policies earlier (−44.2%) rather than later (−39.7%). Identifiable inpatient spending for COVID-19 increased more in high-activity than low-activity states (reaching 25.2% vs 3.5% of week 9 total inpatient spending by week 14), but total inpatient spending fell similarly in high-activity (−25.1%) and low-activity (−26.9%) states. In contrast, spending on elective procedures declined more in high-activity (−85.5%) than low-activity (−76.1%) states. Within each state category, spending reductions for elderly and nonelderly enrollees were largely similar.

    All reductions were more extreme than all values produced by permutations of week pairs in 2019; differential percentage reductions in total spending associated with COVID-19 activity and social distancing were more negative than 99.7% and 95.5% of estimates produced by these permutations, respectively.

    Discussion

    The early phase of the COVID-19 pandemic was associated with a massive decrease in medical spending for the privately insured. Areas with higher COVID-19 activity had larger spending reductions, as increases in COVID-19 spending were more than offset by decreases in spending on non–COVID-19 care. Spending reductions in high-activity states were similarly substantial for seniors, who are at greater risk of hospitalization for COVID-19. Findings for low-activity states suggest a relationship between elevated concern for viral transmission (manifest as earlier distancing policies) and lower use of medical care. As cases surge in new areas and concerns about transmission prompt states to reimpose restrictions, these findings suggest that health care spending will likely rise and fall inversely with the severity of the pandemic and remain below prepandemic levels for its duration. Resurgent or persistent concerns may limit spending via demand-side or supply-side mechanisms, including patient fear of exposure and effects of infection control measures on faciliy capacity and nonessential care.3

    The findings of this study do not reflect intensified COVID-19 testing or pent-up demand from deferred care. As incidence fell after our study period, outpatient utilization rebounded but remained below prepandemic levels through mid-June 2020,4 even for older adults for whom pent-up demand should be greater. Our findings suggest that subsequent COVID-19 surges that started in late June should be associated with corresponding spending reductions.

    For commercial insurers, the prospect of net gains in 2020 raises questions about optimal use of unspent premium dollars5; rebates mandated by medical loss ratio regulations are partial and delayed by design. For Medicare Advantage plans, our findings suggest potentially substantial cumulative savings. Medicare could remand these savings to preserve the Trust Fund as tax revenue falls.6

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    Article Information

    Accepted for Publication: August 14, 2020.

    Corresponding Author: J. Michael McWilliams, MD, PhD, Department of Health Care Policy, Harvard Medical School, 180 Longwood Ave., Boston, MA 02115 (mcwilliams@hcp.med.harvard.edu).

    Published Online: November 9, 2020. doi:10.1001/jamainternmed.2020.5333

    Correction: This article was corrected on December 7, 2020, to fix an error in the author order of the byline.

    Author Contributions: Dr McWilliams and Ms Russo had full access to all of the data in the study and take responsibility for the integrity of the data and the accuracy of the data analysis.

    Concept and design: All authors.

    Acquisition, analysis, or interpretation of data: All authors.

    Drafting of the manuscript: McWilliams, Russo.

    Critical revision of the manuscript for important intellectual content: All authors.

    Statistical analysis: McWilliams, Russo.

    Administrative, technical, or material support: Mehrotra.

    Supervision: McWilliams.

    Conflict of Interest Disclosures: Dr McWilliams reports serving as a paid member of the Academic Advisory Board for FAIR Health. No other conflicts were reported.

    Disclaimer: The conclusions reached reflect the interpretation of the authors alone and do not necessarily reflect the views of FAIR Health, Inc.

    Additional Contributions: We thank David Cheng, MS, Josh Smolinsky, MS, and Eric Okurowski, MBA, of FAIR Health, Inc, for conducting the data analysis, providing claims expertise, and constructing data visualizations. They were not compensated.

    References
    1.
    Raifman  J, Nocka  K. COVID-19 US State Policy Database. Boston University School of Public Health. Updated July 2, 2020. Accessed July 9, 2020. https://docs.google.com/spreadsheets/d/1zu9qEWI8PsOI_i8nI_S29HDGHlIp2lfVMsGxpQ5tvAQ/edit#gid=2102005060
    2.
    New ICD-10-CM code for the 2019 Novel Coronavirus (COVID-19). Centers for Disease Control and Prevention. Updated April 1, 2020. Accessed July 9, 2020. https://www.cdc.gov/nchs/data/icd/Announcement-New-ICD-code-for-coronavirus-3-18-2020.pdf
    3.
    Healthcare Facilities: Managing Operations During the COVID-19 Pandemic. Centers for Disease Control and Prevention. Updated June 28, 2020. Accessed July 9, 2020. https://www.cdc.gov/coronavirus/2019-ncov/hcp/guidance-hcf.html
    4.
    Mehrotra  A, Chernew  ME, Linetsky  D, Hatch  H, Cutler  D. The Impact of the COVID-19 Pandemic on Outpatient Visits: Practices Are Adapting to the New Normal. The Commonwealth Fund. Updated June 25, 2020. Accessed July 9, 2020. https://www.commonwealthfund.org/publications/2020/jun/impact-covid-19-pandemic-outpatient-visits-practices-adapting-new-normal
    5.
    Dafny  LS, McWilliams  JM. Primary Care Is Hurting: Why Aren’t Private Insurers Pitching In? Health Affairs Blog. Updated May 21, 2020. Accessed July 9, 2020. https://www.healthaffairs.org/do/10.1377/hblog20200519.916904/full/
    6.
    Cutler  DM, Frank  RG, Gruber  J, Newhouse  JP. Strengthening The Medicare Trust Fund In The Era Of COVID-19. Health Affairs Blog. Updated June 10, 2020. Accessed July 9, 2020. https://www.healthaffairs.org/do/10.1377/hblog20200608.322412/full/
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