Study: Medicare Spending Could Reach $115 Billion on COVID-19 Care

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The novel coronavirus (COVID-19) pandemic has the potential to inflate Medicare spending by up to $115 billion over the next year, according to a recent study released by the National Association of Accountable Care Organizations (NAACOS).¹

The study analyzed inpatient admission rates for COVID-19 incidents, the potential spread of infection and the average cost for a 90-day hospital stay due to pneumonia, which is among the deadly complications of COVID-19.

The data included costs for hospitalization, rehabilitation, skilled nursing care, home health care and ambulatory services.

COVID-19 effects on doctors and hospitals

Accountable care organizations (ACOs) may bear the brunt of COVID-19 treatment costs.

An accountable care organization is a network of doctors and hospitals that share a financial and medical responsibility for providing coordinated care to patients. ACOs are created in an effort to limit unnecessary health care spending.

ACOs typically feature a primary care physician (PCP) who coordinates patient care with various specialists throughout the organization’s network. Some types of Medicare Advantage plans (Medicare Part C) operate as an ACO.

The ACO model encourages quality of care by reimbursing providers on a basis of patient outcome as opposed to the number of services rendered. 

ACO’s must meet a benchmark spending target. If they stay under that benchmark, they receive a share of the cost savings. But if they exceed the benchmark spending, they must reimburse Medicare for the difference. 

Doctors and hospitals in ACOs will most likely face unprecedented treatment costs due to the ongoing COVID-19 outbreak.

The Centers for Medicare & Medicaid Services (CMS) announced several measures of regulatory relief for ACOs and other value-based programs during the COVID-19 outbreak, including the extension of deadlines for quality-of-care reporting.

Notes on the NAACOS study

The NAACOS study authors noted a few caveats to their data:

• While the high end of the treatment costs estimate was $115 billion, the low end was $38 billion. The COVID-19 outbreak remains a fluid situation, and its full potential effects remain unknown at this time.

• Because the outbreak is still in its relative infancy, there is only a limited amount of data pertaining to health care utilization due to the disease.

• Estimates are based on how other countries, like China, have dealt with the disease. Those practices could differ from how patients are treated in the U.S. 

The adoption of extreme social distancing measures could also potentially affect infection rates and treatment costs.

¹ NAACOS. (March 24, 2020). Potential Impact of COVID-19 on Medicare Spending: Implications for ACOs. Retrieved from https://www.naacos.com/potential-impact-of-covid-19-on-medicare-spending--implications-for-acos.

Christian Worstell is a health care and policy writer for MedicareSupplement.com. He has written hundreds of articles helping people better understand their Medicare coverage options.