How have health spending and utilization changed during the coronavirus pandemic?

When the severity of the coronavirus pandemic first became apparent, projections of how it would affect health spending varied widely; some experts expected health spending to rise and others thought it might fall.  Early on, health care utilization dropped substantially, but telemedicine use increased. In more recent months, in-person care has mostly rebounded, although that trend could now reverse as the pandemic worsens across the country.

In this chart collection, we summarize what we know so far about how health costs and utilization have changed during the pandemic. This builds on other work we have done looking at the potential cost of treating coronavirus hospitalizations and a brief explaining the factors driving costs higher or lower and particular considerations for private insurers, Medicare, and Medicaid. Our October 2020 web briefing also discusses these issues in detail.

Taken together, the available data suggest that, by the end of 2020, health spending may be somewhat lower than it was in 2019. Any decrease in health spending would be historic, as health costs tend to rise faster than inflation and have even grown during past periods of economic downturn.

However, if there is indeed a drop in health spending in 2020 relative to 2019, it will be much more modest than early data indicated. The most recent data as of third quarter show that year-to-date health services spending is down about 2%. When adding in spending on prescription drugs, total health spending was down by just about 0.5% on an annualized basis as of October. As hospitalizations for COVID-19 have spiked since October, when the most recent spending data are available, it is not yet clear how health spending trends might change by the end of this calendar year. So far this year, the U.S. GDP has fallen by 1.8%, meaning that, although health spending has likely fallen, it may represent a somewhat larger share of the economy than in past years.

So far in 2020, health services revenue has fallen by 2.4% compared to 2019

One way to look at health spending is to use the Quarterly Services Survey (QSS). In the first quarter of 2020 (January through March), spending on health services was relatively flat, rising by 0.3% compared to the same quarter in 2019, according to data from the QSS. Across all health services, which excludes prescription drugs and social services, health services revenue was down by -8.6% relative to the second quarter of 2019. In third quarter 2020, health services revenue was up by 1.3% from third quarter 2019.

Year-to-date, the QSS shows that health services spending is down by 2.4% as of the third quarter 2020 (relative to year-to-date spending at this time in 2019). For comparison, health services revenue increased by 5% in 2019 over 2018. The QSS data do not include spending on pharmaceuticals, which, as discussed more below, have been spared from pandemic-related spending drops.

Spending on health services dropped sharply in March and April 2020, but has mostly recovered since

Another way to look at health spending trends is to use the personal consumption expenditure (PCE) data from the Bureau of Economic Analysis (BEA), which is published monthly on an annualized basis. Like the QSS, the BEA’s personal consumption expenditures (PCE) data show spending on health services was down sharply in spring 2020. (The monthly figures are estimates, and are later adjusted, in part based on results from the QSS.)

At the nadir in April 2020, personal consumption expenditures on health services (not including pharmaceuticals) were down by -31.9% on an annualized basis. 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. However, after plummeting in spring 2020, spending on health services has rebounded, and by October, was down just -1.7% from the previous year (seasonally adjusted at annual rates).

The chart above does not include spending on pharmaceuticals and other medical products, which as of October 2020, was up 6.3% year-over-year. Prescription drug revenue has not suffered from the pandemic the way health services revenue has, as the latter fell largely due to social distancing and the delay or cancelation of elective procedures. Combined spending on health services and prescription drugs was down by -0.5% as of October 2020 (seasonally adjusted at annual rates).

As of third quarter 2020, U.S. GDP was down by -1.8% (seasonally adjusted at annual rates), relative to third quarter 2019. This suggests that health spending may represent a somewhat larger share of the economy in 2020 than in past years.

Year-to-date, the largest drops in health services spending have been in ambulatory care settings

Year-to-date, the Quarterly Services Survey shows that health services spending is down by 2.4% as of third quarter 2020 (relative to year-to-date spending as of third quarter in 2019). Ambulatory care settings, like physician offices (-4.0%) and outpatient care centers (-4.7%), have seen some of the largest drops in revenue year-to-date. Although not shown in this chart, dental providers have seen some of the largest drops in revenue among health services.

As can be seen by clicking on the second and third quarter tabs in the chart above, revenue for some health service providers has been volatile. For example, spending on medical and diagnostic laboratories was down by -14.6% in the second quarter of 2020, but as COVID-19 testing became more widely available in the third quarter, spending on labs was up by 22.2% compared to the previous year. On net, laboratory revenue is up 1.2% so far in 2020, compared to this point in 2019.

Similarly, hospital revenue was down by -5.5% in the second quarter of 2020, with the cancelation of many elective procedures, but revenue bounced back in the third quarter, rising 2.9% over the previous year. Year-to-date hospital revenue (as of the end of third quarter 2020) is therefore down by -1.7% compared to this time last year.

Hospital admissions fell in the spring of 2020, but were back to about 95% by July

An analysis of hospital utilization data by Epic and KFF found that while hospitalizations had fallen in the spring of 2020, admissions had picked back up to about 95% of expected utilization by July 2020. As these data only go through August 2020, it is not yet clear how the latest spike in hospitalizations due to COVID-19, which have led some hospitals to reach capacity, will affect utilization by the end of the year.


Telemedicine use grew rapidly during the pandemic, but not enough to offset drops in in-person office visits

Although most employer health plans cover telemedicine services, our analysis found that telemedicine uptake before the coronavirus pandemic remained low. In 2018, 2.4% of large group enrollees who had an outpatient office visit had at least one telemedicine visit. 

However, with social distancing, changes to provider payment for telehealth, and recommendations to call ahead to providers, telemedicine use has increased with the pandemic, according to analysis by IQVIA. Even so, as the chart above demonstrates, telehealth use was not large enough to fully offset the drop in in-person care. (Earlier analyses from Epic Health Research NetworkFAIR Health, and CVS Health all show sharp increases in telemedicine use relative to the period before the pandemic.)

There was an abrupt drop in cancer screenings early in the COVID-19 pandemic

As of late April, there had been a sharp drop in the number of cancer screenings relative to before the pandemic hit the United States, according to an analysis of electronic health records by Epic Health Research Network. According to the analysis, the average weekly screenings for breast, colon, and cervical cancers represent drops of 94%, 86%, and 94% relative to the averages before January 20, 2020. A follow-up analysis by Epic found that there were an estimated 285,000 missed breast cancer screenings, 95,000 missed colon cancer screenings, and 40,000 missed cervical cancer screenings so far in 2020.

An analysis by IQVIA found that oncology visits for newly diagnosed cancer patients began to increase in summer, but and had still not reached baseline in October. If cancer cases are missed or patients are diagnosed at later stages, this could have long-term impacts on both health outcomes and costs. Similar patterns can be seen for other serious and chronic diseases.

With uncertain short and long-term effects of COVID-19, many insurers held 2021 premiums flat

Individual market insurers are required to file detailed premium justifications to state regulators for the coming year. We analyzed these filings to assess the effect COVID-19 will have on 2021 premiums. In their rate filings, most insurers pointed to remaining uncertainty surrounding pent-up demand for delayed or forgone health services in 2020, the costs associated with distributing coronavirus vaccinations, and the direct costs of treating people with COVID-19. Of those insurers that specified a rate impact due to the pandemic, most said the pandemic would have a net-zero effect on their costs in 2021, with some insurers saying they expect costs to drop and others expecting costs to increase. This variation in expectations across insurers illustrates the remaining uncertainty of how the pandemic will continue to affect the U.S. health system in the coming year and beyond.