COVID-19 Healthcare Spending Hinges On Hospitalization Rates

June 02, 2020 - As payers setting rates for 2021 seek greater clarity on coronavirus costs, experts warned in a recent Health Affairs article that the direct medical COVID-19 healthcare spending could range from $163.4 billion to $654 billion.

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If the population’s infection is around 20 percent, experts estimated that direct medical costs could be around $163.4 billion. However, if the level of infection reaches 80 percent, direct medical healthcare spending could be as high as $654 billion.

The researchers used a computational model to estimate the amount of resources and the costs by using a probability tree to test known potential outcomes. For situations in which the data on coronavirus was lacking, the researchers referenced costs for severe pneumonia.

“The purpose of this study was not to evaluate the value of specific interventions such as social distancing, but to determine the direct impact of the pathogen. Therefore, costs of various epidemic responses were not included,” the researchers noted.

Solely observing the direct medical costs of symptomatic cases, the researchers concluded that direct medical cost of a symptomatic individual would amount to around $3,045.

A mild case, however, that could be treated via an in-person visit or telehealth consultation would cost between $57 to $96. If patient and provider only used telehealth, it could be as low as $17 to $32, depending on the patient’s age.

But once a hospitalization is necessary, the costs escalate rapidly. Hospitalization for coronavirus would cost a median of $14,366, though these costs decrease for patients after age 65.

For post-discharge costs, the researchers ran a scenario in which they cut down the reported values by half in order to make them comparable to other nations with similarly high GDP. Under such a scenario, the median post-discharge cost for a person between the ages of 65 and 84 was $17,682.

In a scenario in which 80 percent of the population became infected, the direct medical costs ($654 billion) plus the following year of post-discharge costs could amount to a median of $859.6 billion. If the post-discharge costs were made comparable with other high-income nations, though, the median cost would be $756.1 billion.

The researchers found that halving the hospitalization rate led to significant decrease in costs. In contrast, decreasing the death probability had nearly no impact, even when decreasing it by a relative 95 percent.

If 20 percent of Americans had the coronavirus, 53.8 million would likely become infected, with direct medical costs amounting to approximately $163.4 billion. Including costs for the following year after discharge, the median cost would be $214.5 billion. These results were similar to the scenario for 80 percent of the population contracting the virus in that hospitalizations had far greater impact on costs than death rate.

The research pointed toward a few key findings that payers, providers, and policymakers can keep in mind as they begin to prepare for 2021.

First, symptomatic coronavirus cases are far more costly than other infectious diseases. This includes influenza, to which the disease is frequently compared. This is because of the higher probability of hospitalization and death.

That being said, the researchers also found that the follow up costs are similar to the costs for individuals who have survived diseases such as ARDS and sepsis in which they experienced major complications.

“The significant differences in medical costs by attack rate show the value of any strategies that can keep the attack rate as low as possible and, conversely, the potential cost of any ‘herd immunity’ strategies that allow people to get infected,” the researchers added.

The study confirmed that resources are far below the necessary levels needed to handle the pandemic.

The unknowns surrounding healthcare costs have created an atmosphere of uncertainty in the healthcare industry. Payers have taken steps to prevent patients from taking on the bulk of out-of-pocket healthcare spending and provide financial support as they take in greater income from deferred care.