May 21, 2020 - Health

The coronavirus is slowing health care spending

Illustration of a medical symbol peeling to reveal money
Illustration: Aïda Amer/Axios

The coronavirus pandemic will likely reduce total U.S. health care spending — at least for a while.

The big picture: The pandemic is a health care crisis, but it's costing less than the other, routine care that's been postponed because of it.

By the numbers: Before the pandemic hit, the U.S. was projected to spend $4 trillion this year on health care, due in large part to the continued rise of prices.

  • A new Kaiser Family Foundation report and a new Health Affairs post by Richard Kronick, a former federal health policy researcher, indicate the pandemic may not increase spending and could lower spending below the $4 trillion projection.

Between the lines: Far fewer people went to their doctors and hospitals in March and April, according to KFF.

  • Health insurance companies have confirmed they are sitting on a lot of cash because medical providers aren't billing for as many services, drugs and equipment.
  • COVID-19 hospitalizations are so far tracking below expectations, but that could change "if we are individually and collectively extremely stupid" about reopening the economy, Kronick wrote.

The wild card: How quickly patients come back.

  • J.P. Morgan's May Proprietary Hospital Survey of 316 hospitals showed "significant improvement" in hospital revenues during the first two weeks of May, indicating some services are rebounding.
  • Congress also has subsidized the health care industry with $175 billion, or 5% of health care spending, in a bid to keep things normal.
  • "It is not yet clear how these upward and downward cost pressures will balance out in 2020 and 2021," KFF's researchers wrote.

What we're watching: Private insurers are setting premiums for next year, and states are looking at Medicaid budgets. Understanding how the pandemic is affecting the health spending influences how much everyone will pay in premiums and taxes going forward.

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