Thursday, Jul 9, 2020 | 1:00 PM ET
Medical Cost Trend in the Midst of the COVID-19 Pandemic
The COVID-19 pandemic has raised many questions about employer healthcare spending in 2020 and 2021. How much will COVID-19 testing and treatment add to employer spending? How much care will be deferred, how much will come back, and will care delays result in poorer health? How will the economic downturn—employment losses, decreases in disposable household income and more—affect healthcare spending?
In interviews conducted in March, April and May, health plan actuaries from 12 national and regional payers told HRI that they remained unsure about the pandemic’s impact on healthcare spending now and projected medical cost trend for 2021. Despite the uncertainty, employers and payers will need to decide what medical cost trend to use when determining next year’s premiums. The unprecedented drop in healthcare utilization in 2020 that resulted from COVID-19 complicates this calculation.
- For 2021, PwC’s Health Research Institute (HRI) has developed three scenarios to guide employers and health plans as they determine the medical cost trend. Read the full report, Medical cost trend: Behind the numbers 2021 to learn more about HRI’s analysis and the factors driving or dampening spending in 2021.
- As the unemployment rate rises, the number of individuals with employer-sponsored insurance will decrease while the number of people who are uninsured or on Medicaid will increase—driving down revenue across the healthcare industry.
- Historically, changes in healthcare spending lag shifts in the general economy. The pandemic downturn appears to be different with healthcare spending sinking with the economy.
- Many of the factors driving or dampening spending before the pandemic - from mental health utilization and new speciality drugs to telehealth and narrow network plans - will continue, either accelerated or decelerated by COVID-19.
Benjamin IsgurLeader, Health Research Institute, PwC
Michael ThompsonPresident & CEO, National Alliance of Healthcare Purchaser Coalitions
Chris WasdenHead of HappifyDTx, Twill