How COVID-19 is Changing the Cost of Healthcare

Primary care is the frontline of patient care, providing the greatest value to our overall health system. However, its effectiveness has suffered over time, in part, to a lack of care coordination, healthcare access for patients, and misaligned payment incentives. Although the pandemic has only further highlighted our current system’s flaws, The Alliance believes there’s good news on the horizon.

As Cheryl DeMars, CEO of The Alliance explained in an interview with InBusiness Madison, “I think [the pandemic] is accelerating the pace at which the public is embracing alternative modes of care delivery.”

New Payment Methods

Patients suffering from common, chronic symptoms may not see their physician due to post-pandemic restrictions limiting their access, their physician not having sufficient ability to test for COVID-19, or they may forego treatment altogether due to fear of contracting the novel virus at their physician’s office. In fact, nearly half of adults (48%) have postponed or skipped medical care due to the coronavirus outbreak.

As fewer patients seek primary care, their providers lose billable hours that are crucial to their fee-for-service payment models. Additionally, more than a third of hospital income is generated via “shoppable” procedures, which are being delayed or cancelled by patients and even the hospitals themselves.

These issues highlight the need for change toward global payments and integrated care models that align patient and provider incentives. The National Alliance of Healthcare Purchaser Coalitions (NAHPC) coined the term for this performance-driven integrated healthcare strategy, “Advanced Primary Care.”

Telehealth – Our New “Normal”

The Advanced Primary Care model emphasizes value over volume and improves access for patients with options like same-day, virtual appointments. An emergency declaration made on March 13 relaxed various federal rules that prohibited the Centers for Medicare and Medicaid from utilizing these virtual appointments. This newfound access to telehealth benefits patients with common, chronic illnesses that need to check in with their doctor regularly.

DeMars believes these new regulations have come to stay. “If people get comfortable with a different way to receive healthcare services, particularly if their experience is positive, this won’t be just a change that’s limited to the current crisis,” she said.

The Future Cost of COVID-19

While value-based care promises future savings, employers may be concerned about the pandemic’s immediate cost impact on health plans.

On its face, the cost of COVID-19 is quite staggering. Private insurers pay as much as $20,000 for pneumonia treatment, and more than $80,000 if the patient requires a ventilator, according to Health Systems Tracker. And because the cost of coronavirus testing is expected to increase as it becomes more widely available (and insurers are required by law to cover those costs), that could mean insurers might overprice their 2021 health plans to offset those costs. Medicare spending may also rise due to increased costs for telemedicine and COVID-19 testing and treatment for at-risk elderly patients.

However, because 37% of private insurance spending on hospital admissions stems from non-emergency surgical procedures. There should be a higher volume of these procedures in 2021, offsetting some of those costs for insurers. Overall, though, employers can expect their health plans to increase in the coming years.

Self-Funding Smart

Healthcare costs will impact self-funded employers differently. While they may see a decrease in spend this year due to the lack of elective procedures, the incidence of COVID-19 testing, the number of cases in their workforce, and the severity of those cases will determine the long-term effects. They will not, however, see the same increasing insurance prices because they own their own plan.

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