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APRIL 15, 2020 -- The cost to US health insurers of the COVID-19 pandemic might be anywhere between $56 billion and $556 billion in 2020 and 2021 combined, depending on how many people are infected, according to a new report prepared for America's Health Insurance Plans (AHIP), the industry trade association.
The report, by the Wakely Consulting Group, modeled healthcare utilization and costs on the basis of published studies for infection rates ranging from 20% to 60% of the population. The researchers also calculated the costs if only 10% of the population — half of the lower bound of infection rates in the studies — was infected with the coronavirus.
The report evaluated these scenarios for a population of 255 million insured people, including members of commercial, Medicare Advantage, and Medicaid managed care plans.
If just 10% of this population was infected, insurance-allowed costs would range from $56.2 billion to $92.7 billion during the 2-year period. If 20% of the people were infected, the cost range would be $112.5 billion to $185.4 billion. If 60% caught the virus, it would cost insurers from $337.5 billion to $556.1 billion.
Wakely also estimated that plan enrollees would pay 14% to 18% of the annual allowed costs. Thus, copayments and deductibles would cost plan members $10 billion to $78 billion in 2020 and 2021, again depending on the infection rate.
For each person admitted into intensive care, the costs — on average — could exceed $30,000, according to an AHIP news release.
To estimate inpatient costs, they used the 75th percentile of admission costs for patients with ICU admissions and the 25th percentile of admission costs for non-ICU cases. Other cost figures came from claims databases.
The researchers assumed that 75% of total costs would be incurred in 2020, and 25% of costs would occur in 2021, after the pandemic waned. It's notable, however, that such a high cost was projected for the second year of the disease.
While experts disagree on how long the pandemic might last, there is a consensus that only a vaccine will knock it out completely. Such a vaccine may be available in a year to 18 months, but it may take longer, some experts say, according to a report by CNN.
In the baseline scenario of a 20% infection rate, the report said, 51 million Americans would be infected, and the number of confirmed cases would be 35.6 million. These estimates indicate that 43% more people would be infected than would have positive test results.
About 5.5 million people, or 11% of the 51 million infected, would be hospitalized with COVID-19, the report said. Of these individuals, 1.3 million would be transferred to the ICU.
Outpatient hospital services would be required by 21.4 million people, and the same number would require professional services. (Professional services in the hospital were apparently included in inpatient costs.) Drugs would be prescribed to 15.9 million patients, and 380,000 would require other services such as skilled nursing and home health care.
Inpatient costs outweighed all other expenses in the infection rate scenarios. At the high cost estimate for each of the three models, inpatient costs were 85% of total spending. At the low cost estimates, they comprised 79% of total costs.
Although the elderly are more vulnerable than younger people to COVID-19, the projections in the Wakely report show that Medicare patients would generate much lower spending in every scenario than commercial patients did, simply because the latter were more numerous. Medicaid managed-care organizations patients accounted for slightly lower costs than the Medicare patients did.
Limitations of the Report
The researchers acknowledged a number of limitations in their study. Whereas they made adjustments for age and gender, they didn't risk-adjust for individuals with higher-risk conditions.
They also didn't account for patients who delayed various kinds of care because of social distancing guidelines and other factors. This might save insurers some money in the short run but could drive costs up later if the deferrals in care led to complications, the report authors note.
The modeling also did not adjust for potential out-of-network costs or the waiving of COVID-19 testing and treatment costs by some health plans. Because the analysis was completed just before the passage of the CURES Act, it did not take into account that law's increase in Medicare payments for COVID-19 care.
Moreover, the study did not adjust for changes in coverage status and utilization patterns as a result of potential job or income losses related to the crisis.
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