June 26, 2022

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Covid-19 Expected to Reshape Health-Care Sector, HHS Says

The coronavirus pandemic will reshape health-care spending, even though its full impact on the sector isn’t yet known, the Department of Health and Human Services said in a report that found health-care spending increased at a relatively slow pace in 2019 due to greater hospital care and drug expenditures.

Federal officials warned that the findings don’t include any of the effects of the coronavirus pandemic on health-care spending.

“Although the full impact of the pandemic on the health-care sector is not yet known, it is certain that it will have profound consequences on the provision and consumption of health care goods and services, as well as on the payers, programs, and sponsors that fund that care in 2020 and perhaps beyond,” according to the report compiled by actuaries at the Centers for Medicare and Medicaid Services.

The health-care spending rate during 2019 outpaced gross domestic product growth of 4{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}, while the share of the economy devoted to health care, as measured by the GDP, was relatively stable, increasing to 17.7{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}.

The steady pace that began in 2016 followed years of marked increases. A moderation in the spending rate has been linked in part by some health economists to a stabilization and decline in the number of people gaining health-insurance coverage following the passage of the Affordable Care Act and its Medicaid expansion.

Debate persists over how the pandemic might affect U.S. health-care spending, with some economists predicting early on that the pace of growth will slow because of a drop-off in elective procedures and in-person medical care.

“At the nadir in April 2020, personal consumption expenditures on health services (not including pharmaceuticals) were down by -31.9{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} on an annualized basis,” according to a Dec. 1 report by the Kaiser Family Foundation. “This was unprecedented as year-over-year personal- consumption expenditures on health services have grown every month since the data became available in the 1960s.

But the worsening pandemic, and more spending on hospitalizations, could have the opposite effect, others say. The U.S. is one of the most expensive countries for health services due to high prices, according to Kaiser data.

Medical prices in 2019 increased 1.1{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} compared with 2.3{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} in 2018, according to the federal report released Wednesday. Hospital prices increased 2{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} in 2019 compared with 2.4{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} in 2018.

In 2019, spending increases in hospital care, prescription drugs, as well as doctor and clinical services led to a 5.2{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} rise in personal health-care spending compared with 4.1{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} growth in 2018.

Medicare spending reached $799.4 billion in 2019, accounting for 21{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} of total national health-care expenditures. Enrollment in Medicaid was estimated to have decreased 1.5{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} in 2019 after a smaller decline of 0.9{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}  in 2018.

Total Medicare spending rose 6.7{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} compared with growth of 6.3{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} in 2018. Medicaid spending growth per enrollee accelerated to 4.5{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} in 2019 from 4{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} in 2018.

Growth in expenditures for hospital care accelerated to 6.2{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} in 2019 compared with 4.2{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} in 2018, according to the report.

Prices for prescription drugs declined 0.4{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} in 2019 after a larger decrease of 1.0{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} in 2018, as price growth slowed for brand-name drugs and declined for generic drugs. Drug pricing has been a major focus of Congress and President Trump, who has released a series of actions in recent months aimed at curbing costs going forward.

“Faster growth in utilization contributed to the acceleration in total retail prescription spending growth,” according to the report, which noted that retail prescription-drug spending reached $369.7 billion in 2019, increasing 5.7{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} in 2019 from 3.8{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} in 2018.

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