COVID-19: A Natural Experiment in Cutting Health Costs

We didn’t expect this: COVID-19 is a boon to the health insurance industry. Despite a health crisis killing someone every minute in the U.S., costs for medical care are down. That’s because of people avoiding or delaying healthcare – possibly putting their health at risk. But for health insurers, that means a big increase in profits this year. It also means that we are in the midst of a big natural experiment in cutting health costs because of COVID.

Some of these changes will be harmful, but some may be helpful. If we study the results carefully, we may learn to better distinguish health spending that is smart from that which is wasteful.

Telemedicine Grows, But Outpatient Care Drops

One thing is clear right up front. People are avoiding doctors offices and outpatient clinics. The Peterson-KFF HealthSystem Tracker tells us that this is where the biggest drop in spending has been. One response has been a rapid growth in telemedicine. But even with all that growth, telemedicine has not offset the drop in face-to-face outpatient care. Old habits die hard.

Spending on tests (i.e. COVID testing) is up. Costs in nursing homes are up even more. Overall, hospital spending is down, but not nearly as much as the drop in outpatient care.

The reduction in spending was the biggest in March and April. Then, as people adapted, spending rebounded. However, we don’t yet know what this fall’s resurgence in the virus will to to the healthcare system.

Preventive Care Takes a Big Hit

The other clear pattern is that preventive care is taking a back seat. Cancer screenings are down. So, too, are childhood vaccinations. The Healthcare Cost Institute reports that people have cut back on just about any routine care that they can. The only exceptions are things that won’t wait – like childbirth.

Unfortunately, that will very likely mean that more people are more vulnerable to this virus. Patients are more vulnerable to COVID if chronic conditions like obesity, heart disease, or diabetes are not well cared for.

Consuming more healthcare is not always better. The U.S. spends almost twice what most other countries do on healthcare. But Americans are no healthier because of it. Without a doubt, some of the cutbacks in healthcare during the pandemic will be harmful. But some may may point to opportunities for more efficient care – telemedicine, for example.

This is a big, unplanned natural experiment. If we are wise, we will learn from it.

Click here, here, here, and here for further perspective.

Coping with COVID, photograph © Transformer18 / flickr

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December 3, 2020