Article: How will COVID-19 affect the financing of healthcare provision across the US?

George Forsyth, July 2020

How will COVID-19 affect the financing of healthcare provision across the USUsing findings from our syndicated study to assess the impact of COVID-19 on biopharmaceutical market access, Senior Consultant George Forsyth explores the economic impact to the US healthcare system. Published by Pharma Exec in June 2020.

The current coronavirus pandemic sweeping across the globe represents one of the greatest fiscal challenges to US healthcare policymakers in modern times. The Federal Reserve expects the US economy to contract by a staggering 6.5% this year, with approximately 20 million Americans unemployed and many more without medical insurance.

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The eventual impact will depend on the proportion of the US population infected with the SARS-CoV-2 virus. As the infection rate rises, additional healthcare expenditure will be required to treat patients whilst prolonged economic lockdowns will become ever more necessary. Such lockdowns will inevitably cause further job losses, with the newly unemployed also losing their medical insurance and being less able to pay for their healthcare. Fewer businesses, and fewer still making a profit, will result in reduced tax revenues for the Federal government and in turn healthcare funding will suffer. 

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The anticipated increase in direct medical costs as rates of infection rise demonstrate not only the importance of bringing the virus under control, but the necessity for payers to take a flexible approach to management of healthcare costs. A careful balance needs to be struck to ensure sufficient resources are available to treat COVID-19 while adequate funding remains available for the treatment of other conditions. 

Payers’ expectations regarding the economic impact to the US healthcare system caused by COVID-19 was one of a number of areas explored by Research Partnership in the first wave of a syndicated study to assess the impact of COVID-19 on biopharmaceutical market access. Interviews were conducted with payers and advisors in the US,1 Europe, Brazil, and China during April and May 2020. 

US healthcare funding during COVID-19
The Coronavirus Aid, Relief and Economic Security Act

In March, President Trump signed a $2 trillion bill with the intention of stimulating the US economy and protecting workers from loss of income. This package included $150 billion to help support hospitals and medical workers in the fight against COVID-19. $100 billion was allocated to the Public Health and Social Services Emergency Fund, to be made available to eligible health care providers for expenses or lost revenue associated with the epidemic. Furthermore, $1.32 billion was allocated to supplemental funding for community health centers for prevention, diagnostic and treatment efforts related to COVID-19; as well as introducing additional payments for hospitals treating COVID-19 patients, such as creation of a 20% add on payment for hospitals treating Medicare inpatients with COVID-19.

Despite such large sums of money being allocated to providers, many are facing substantial cash shortfalls due to the cancellation of elective procedures on which many rely to generate their income. Paradoxically, some less well-funded institutions have been forced to put their staff on leave in order to make ends meet during the pandemic, increasing the already significant workload burden on remaining colleagues. 

Given the desire amongst providers to avoid costly lockdowns, they are likely to be supportive of funding technologies that can potentially reduce the impact of future outbreaks. 

The first wave of budget allocation ($30 billion) has been distributed to providers based on Medicare billings. This disfavors providers who treat large volumes of poorer patients, as these individuals would not fall under Medicare. In response to this, the US government has stated that the next wave of distributions will go to providers in COVID-19 hotspots, rural hotspots and groups that predominantly treat less well-off patients under Medicaid. Providers are concerned that poor management of funding distribution will mean many organizations fold before they receive the money for which they would otherwise be eligible. 

BARDA funding
Separately to the President’s stimulus package, the Biomedical Advanced Research and Development Authority (BARDA) – a US Department of Health and Human Services office – has been allocating hundreds of millions of dollars to fund and procure COVID-19 medical countermeasures. These range from novel vaccines (including those in development by AstraZeneca, Janssen, Moderna, Merck and Sanofi) to modelling algorithms.

Both the pharmaceutical industry and providers / health plans welcome this funding, given the urgent need for prevention strategies that have the potential to mitigate increased healthcare expenditure. However, with such visible public funding of the research efforts, the American public is expected to hold the pharmaceutical industry to account; especially as funding is coming from their hard-earned tax dollars. 

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