Milliman released a report today that projects the COVID-19 pandemic will reduce U.S. nationwide healthcare expenditures by at least $75 billion and by as much as $575 billion in 2020. The report, “Estimating the financial impact of COVID-19 on 2020 healthcare costs,” models 18 different scenarios with varying infection rates and durations of care deferral.
Key findings of the report include:
- If COVID-19 results in deferred care through the end of June, the net reduction of 2020 healthcare costs through June would be between $140 billion and $375 billion nationally. The net reduction at year-end would depend on pent-up demand as care resumed in the second half of the year.
- If COVID-19 results in deferred care through the end of the year, either because of a “second wave” or elongated first wave of infections, the net reduction of 2020 costs will be between $75 billion and $575 billion nationwide.
- While commercial insurance and Medicare are likely to see net decreases in costs, state Medicaid programs could experience a net cost increase as more people who have lost their jobs enroll in Medicaid.
- Milliman expects an increase in costs after the pandemic due to deferred care and pent-up demand for healthcare services, because a portion of deferred care will be rescheduled and individuals with ongoing healthcare needs will seek care.
- Almost all of the country faces a net decline in health expenditures, though most COVID-19 hot spots see less of a decline, because they are treating more COVID-19 patients. Some of the areas with the least decline include New York City, New Orleans, and Nassau and Suffolk counties on Long Island.
“While the testing and treatment of COVID-19
patients is increasing healthcare 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.
“Ultimately, the magnitude of cost reductions
will depend on how long care is deferred,” said Matt Kramer, consulting
actuary. “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. healthcare
expenditures in 2020.”
“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,” said Charlie Mills, principal and consulting actuary.
To view the complete report, click here.
Milliman will host a public webinar to discuss the analysis and findings on April 29, 2020, at 11:00 a.m. EDT. Interested parties may register for the webinar here.
Two approaches that
governments have taken to combat the coronavirus pandemic are “contain” and “delay.”
The contain strategy is a
rigorous use of non-pharmaceutical measures to isolate all confirmed cases,
suspected cases and close contacts with either confirmed or suspected cases to
contain the transmission of the virus and avoid further spread.
The less aggressive delay strategy aims to slow down the transmission of viruses so that more medical capacity can be put in place before the outbreak, and hoping that vaccine or other medical treatment are developed during the delay period.
In this article, Milliman’s Guanjun Jiang and Qiuwen Peng discuss the differences between the two methods and the differences in local strategies.
The impact of COVID-19 on medical insurers across European countries will vary significantly depending on factors like the profile of infection rates and hospital capacity in each country. However, based on some discussion with insurers across countries and initial modelling there are a number of common themes across Europe including underwriting risk, market and counterparty risk, and operational risks. Milliman’s Joanne Buckle explores these themes and others in her article “How will COVID-19 affect European medical insurers?”
The COVID-19 pandemic will have far-reaching implications for both short- and long-term healthcare costs in the United States. One of the most important questions is how much will COVID-19 cost the healthcare system? Milliman consultants Pamela Pelizzari, Stoddard Davenport, Doug Norris, and Matt Kramer provide some perspective in this episode of Critical Point.
The coronavirus pandemic will have a significant and
long-lasting effect on healthcare systems around the world. Health insurers,
managed care organizations, and third-party administrators provide
infrastructure that facilitates the flow of information and funds throughout
the healthcare value chain. Payers answer benefit and coverage questions,
connect patients to healthcare services, provide reimbursement for services
rendered, facilitate financing, and manage relationships with purchasers.
In the current care delivery and financing paradigm, these day-to-day administrative activities are key to making the U.S. healthcare system work. However, the status quo is threatened as customers and providers experience business interruption on a massive scale due to COVID-19.
In this paper, Milliman’s Barbara Culley, Maureen Lewis, and Andrew Naugle identify five key payer functions that are likely to be affected by the COVID-19 pandemic along with actions payers can take to ensure business continuity while enhancing their contributions to the value chain.
The recent outbreak of H1N11 virus seized worldwide attention and raised concerns about a potential pandemic.
We spoke with Eduardo Lara di Lauro, principal and managing director of Milliman’s consulting practice in Mexico, about the situation and about some of the implications for the insurance industry in that country and elsewhere.
Q: At this point, how much do we know about the progress of the H1N1 strain of the influenza A virus in Mexico?
Eduardo Lara di Lauro: This is very much an evolving situation and we still don’t have the answers to many questions. One of the questions in the air is, “Why Mexico? Why did this flu have more deadly presence in Mexico?” I think that the way the public sector is recording the cases could well be critical. What first brought the outbreak to attention was when physicians began to notice a higher rate than normal of pneumonia in young adults. Every year almost 10,000 Mexicans die from the effects of seasonal flu that complicate producing pneumonia. Usually they are the elderly and the very young, people whose immune systems are not robust enough to fight off the virus. As actuaries, we know how important it can be to determine the best sources of information that provide the greatest amount of detail, in order to accurately determine origins and first causes. We had been having some fatal cases of pneumonia in Mexico previously, but we didn’t know the first causes of those cases until now. Now the physicians are making additional tests in order to determine what the cause of the pneumonia in each case may have been. This flu may actually have been going on for awhile.
I think it’s also important to note that the number of cases so far appears to be relatively small—as of May 6, some 1,112 positive cases, with 42 deaths out of a population of 110 million. The rate is pretty low. Obviously we are still attempting to determine the overall timeframe of the progress of this outbreak, and that will be key to helping us understand where we are. We don’t know yet if this outbreak is just starting, or at the middle, or nearing the end. The number of deaths seems to be stabilizing, perhaps indicating that the first wave of this influenza has peaked. It takes from one to five days from a person getting the virus until the symptoms begin to present, and then tests must be run to determine exactly what it is, which also take time. There are a lot of things we really don’t know yet. The government may have overreacted in terms of the measures taken, telling everyone to stay at home, closing schools, no public events, and so on until May 6. But I would say it’s better to do whatever is necessary to stop the spread of this virus first. As people in Mexico now get back to resuming their normal economic activities it is likely we will see new moderated flu outbreaks in some areas. In order to say the illness is contained we need to have at least 15 days without new cases, according to Mexico’s health authorities.