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.
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.
In November 2019, the Centers for Medicare and Medicaid
Services (CMS) released the request for applications (RFA) for the Direct
Contracting (DC) model’s Professional and Global options. The RFA contains a
significant amount of important information for program participants. This new
payment model gives participating provider organizations two options for
risk-sharing arrangements as well as the opportunity to receive a prospectively
determined, more predictable revenue stream. Applications for the first program
year are due to the Center for Medicare and Medicaid Innovation by May 1, 2020.
The DC payment model options are conceptually similar to the other CMS accountable care organization (ACO) options, the Medicare Shared Savings Program (MSSP), and the Next Generation ACO model. Participants take on risk and earn potential rewards based on the efficiency and quality of care for aligned beneficiaries.
This paper by Milliman’s Matt Kramer, Erica Reijula, and Sam Shellabarger compares and contrasts the financial benchmark methodology between DC and MSSP.
In January 2019, the Centers for Medicare and Medicaid
Services (CMS) released Part II of the 2020 Advance Notice and Draft Call
Letter, which contains the proposed methodological changes for the 2020
Medicare Advantage (MA) capitation rates along with Part C and Part D payment
In the letter, CMS issued a request for comments on the
potential use of risk-based arrangements for pharmacy benefits in contracts
between MA plans and contracted providers. CMS noted that risk-based
arrangements in contracting for pharmacy benefits may be another tool to drive
down the cost of Part B drugs in MA and Part D drugs for MA and Part D plans.
CMS requested information on the barriers, feasibility, benefits, and drawbacks
for these types of arrangements between MA plans and contracted providers.
As part of its August 2018 proposed rule, CMS asked how
accountable care organizations and Part D sponsors in the Medicare Shared
Savings Program “could structure the financial terms of these arrangements to
reward Part D sponsors’ contributions towards achieving program goals.” There was
also a request for information in that rule regarding “barriers to developing
In this article, Milliman’s Matt Kramer, Simon Moody, and Michael Hunter provide a summary of the key issues providers need to consider before taking on Part D risk, an increasingly common ask from MA organizations, and highlight some of the complexities and common barriers observed when advising provider clients on their strategies for Part D risk.
The Medicare Shared Savings Program (MSSP) final rule includes changes to the financial benchmark methodology that measures the gross savings or losses of an accountable care organization (ACO) under the MSSP. Four key elements of the financial benchmark methodology changed: agreement period length, regional fee-for-service (FFS) adjustment, risk adjustment, and trend.
In this paper, Milliman’s Jill Herbold, Cory Gusland, Charlie Mills, and Matt Kramer discuss these changes and important implications for Medicare ACOs. Each of these changes in the MSSP’s financial benchmark methodology will have significant implications for most ACOs. Given the increase in the agreement period length from three to five years, it is critical that ACOs assess how the final rule will affect their financial benchmarks and related strategies.