HealthCalifornia's COVID-19 Outbreak

California’s COVID-19 Outbreak


Inpatient and outpatient payments are the largest category of healthcare costs, and include payments to hospitals, clinics, and physicians. In 2018, the US spent $6,625 per person on inpatient and outpatient payments, compared with $2,718 in comparable countries. This difference represents a 76% difference in healthcare spending between the US and other countries. The costs of inpatient and outpatient care are likely to remain high, however. Price transparency initiatives are being pursued in an effort to help patients understand the estimated costs of their care.

Health services spending dropped 8.6% in the second quarter of 2020 compared to the second quarter of 2019

The Centers for Medicare and Medicaid Services recently released data on total health expenditures in the U.S. between 1970 and 2019. The total expenditure reached $3.8 trillion in 2019 and $74.1 billion in 1970. However, healthcare spending in the United States has fallen 8.6% between 2020 and 2019 due to an outbreak of COVID-19, largely due to social distancing and the postponement of elective procedures.

The decline is still a substantial amount, but is in the middle range of expected outcomes, despite the relatively high number of Americans who were uninsured. CBO also notes that real state and local spending is expected to begin recovering in the third quarter of 2020 and fourth quarter of 2021, after the COVID-19 epidemic subsides. That is good news for those seeking health insurance.

Net cost of health insurance declined 3.8% in 2019

While overall healthcare spending continued to decline last year, personal health care spending increased at a faster rate. Of this increase, the fastest increases were seen in physician and clinical services, hospital care, and retail prescription drugs. Meanwhile, the net cost of health insurance, which includes administrative and tax expenses, and underwriting gains and losses, declined 3.8% in 2019. This decline was due to the suspension of the tax on health insurance providers.

The federal government and households financed about half of the nation’s health care expenditure in 2019. As baby boomers age into Medicare, their health care spending will continue to grow. This means that they will consume $1 out of every $4 spent. Health care spending will be closely monitored over the next few years as policymakers and stakeholders assess its impact on the health system, economy, and state budgets. While net cost of health insurance declined 3.8% in 2019, the decline isn’t as large.

COVID-19 costs are likely to persist

COVID-19 has already had a profound effect on healthcare access in California, and the effects are likely to continue into the early part of 2021. The impact of COVID-19 is evident in four trends that can be considered in healthcare access. These trends include changes in health care coverage, employment, and utilization patterns. While each trend is different, they all contribute to a picture of how COVID-19 is affecting the state’s healthcare system.

Although the legislation has attempted to address the short-term negative effects of COVID-19 on providers and the U.S. population, COVID-19 costs are likely to persist in healthcare. As a result, many states and private insurers are now struggling to meet COVID-19’s high costs. Delaying COVID-19 treatments may worsen health outcomes and increase spending in the future. The rising costs may also alter access to care for enrolled individuals.

Price transparency initiatives help patients understand estimated cost of care

The recent announcement of a new federal rule requiring price transparency in healthcare has a number of implications for both providers and patients. It aims to promote consumer-style competition to reduce health care costs both individually and system-wide. However, healthcare does not follow traditional consumer-economics principles, with most patient care being emergent and discretionary. In fact, more than seventy percent of hospital admissions are unscheduled. As a result, it is difficult for consumers to compare estimates across providers.

Insurers should include information about their negotiated prices in their provider directories, and they should encourage patients to seek out higher-value providers. Providers should also provide their episode-based costs, which would guarantee the cost of healthcare. Medicare claims should also be publicly available for greater transparency. Although the government has made these measures a high priority, they are still not enough to ensure that patients are informed about the cost of healthcare.

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