US Healthcare Spending Declines from COVID-19, But Remains High

Healthcare spending in the US is declining for the first time in years because of the unprecedented COVID-19 pandemic, according to a new report from the Peterson-KFF Health System Tracker.

Tracking gross domestic product (GDP) across large, wealthy countries, the Health System Tracker recently found that healthcare’s share of US GDP actually fell by 1.8 percent as of the third quarter of 2020 (on an annualized basis).

Spending on health services and prescription drugs also fell by about 0.5 percent by October 2020 (also on an annualized basis).

Healthcare spending is likely down because of orders issued at the start of the pandemic that limited the services providers could deliver, including high-profit elective surgeries and non-emergent care.

Volumes dipped by an average of 60 percent for practices during the spring, according to data from the American Medical Group Association (AMGA).

Similarly, annualized healthcare spending fell by a low of 32 percent in April, the Health System Tracker found.

Spending has started to increase again as communities reopened after shelter-in-place orders, yet year-to-date healthcare spending is still down by about 2 percent in 2020 compared to the same period in 2019. And it could end up lower than it was in 2019, KFF says.

“This is the first time expenditures for patient care have fallen year-over-year since data became available in the 1960s,” Drew Altman, president and CEO of the Kaiser Family Foundation, said in a recent column on the impact COVID-19 has had healthcare spending.

“The largest drop-offs were in outpatient care as people put off elective services or doctors offices and outpatient clinics shut down. Telehealth visits increased dramatically but did not make up all of the difference,” Altman stated.

Despite a historic decline in healthcare spending though, the US continues to be one of the most expensive countries for health services.

According to the Health System Tracker’s latest numbers, per person health spending was $11,172 in 2018, which is about double that of peer countries.

Additionally, healthcare’s share of the economy may have fallen during the pandemic, but “it appears that health spending may represent a somewhat larger share of the economy in 2020 than it did in 2019,” the report stated.

In 2018, healthcare accounted for about 18 percent of GDP, whereas health spending averages 10 percent of GDP in comparable countries.

Prices for health services in the US continues to be the culprit for costly care since utilization is similar, and in some cases lowers, in comparable countries, researchers wrote in the report.

Additionally, the report indicated that the COVID-19 pandemic is doing little to improve quality of care in the US.

“The decline in health spending reflects forgone and delayed medical care, which could have long-term implications for health outcomes and costs. Rates of cancer screenings abruptly dropped early on in the pandemic, and office visits for newly diagnosed cancer patients have not returned to baseline levels thus far. In November 2020, about one in four people (24%) reported that, due to the pandemic, they did not get needed medical care for something unrelated to the coronavirus,” the report stated.

Furthermore, the COVID-19 pandemic has shone a light on longstanding disparities in health system performance.

“Health disparities in the U.S. are likely to worsen due to the pandemic. COVID-19 related hospitalizations and mortality have disproportionately impacted Black, Native American and Alaska Native, Hispanic, and low-income people in the U.S. Although the U.S. health system’s performance has generally improved over time across many indicators, many disparities have persisted across racial or ethnic groups and by gender, age, health status, and income level,” according to the report.

The COVID-19 pandemic has certainly upset the entire healthcare system, and while the healthcare cost curve may seemingly be bending, researchers are unsure just how this decline will impact other health system performance factors, like health outcomes, access to care, and quality.