COVID-19 could cut health care costs by up to $575B

The COVID-19 pandemic could reduce health care costs nationwide by up to $575 billion in 2020, according to a new report by a leading consulting and actuarial firm.

Analysts from Seattle-based Milliman Inc. said that the lingering health crisis caused by the novel coronavirus was leading patients to put off elective procedures, in a trend that would “dwarf” the added costs of COVID-19 testing and treatment.

“While the testing and treatment of COVID-19 patients is increasing health care costs across the country, these expenses are dwarfed by the cost reductions resulting from the deferral of nearly all elective care and other care that can be delayed,” said Doug Norris, principal and consulting actuary.

Related: What health care costs will look like post-COVID-19

The study, titled “Estimating the financial impact of COVID-19 on 2020 healthcare costs,” found that deferred care would result in a net reduction of $140 billion and $375 billion in health care costs through the end of June. The total reduction at year’s end would ultimately depend on pent-up demand as procedures resume in the second half of 2020, but a second wave of infections could push that number as high as $575 billion, the report said.

“Ultimately, the magnitude of cost reductions will depend on how long care is deferred,” said Matt Kramer, a consulting actuary with Milliman. “If there is a second wave of infections, or if the first wave is elongated and lasts into the fall, some amount will be offset, but regardless of the scenario, we expect COVID-19 will actually reduce U.S. health care expenditures in 2020.”

Milliman expects that nearly the entire country will see a decline in health expenditures, though most so-called “hot spots” like New York City and New Orleans could see less of an impact due to treating a higher number of COVID-19 patients. State Medicaid programs, meanwhile, stand to experience a net cost increase as more people who have lost their jobs enroll in Medicaid, the report found.

Milliman also said it expects to see a rise in costs as the pandemic recedes and patients with ongoing health care needs begin to reschedule procedures and seek care.

“Deferral of care will have a significant short- to medium-termed effect on health expenditures, but some of that will boomerang back when patients can access care normally and proceed with services that were delayed,” Charlie Mills, a principal and consulting actuary, said.

Milliman said it plans to host a public webinar to discuss the report’s findings April 29 at 11 am.

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