2020 Health Care Costs Trending Down, But That Might Not Be Good

A new report on health care costs in the United States is making waves for a reason never seen before - health care spending appears to be about 2 percent lower this year than last.

For context, this slight decrease is the first one ever observed since data on health care spending first became available in the 1960s, according to the Kaiser Family Foundation report .

That sounds like a good thing, right? After all, health care costs in the United States are exorbitantly high compared to other countries. The Centers for Medicare & Medicaid Services report that total health care spending here reached $3.6 trillion in 2018, accounting for nearly 18 percent of the United States' Gross Domestic Product. No other global power comes even close.

But public health experts and economists agree that the reasons behind this drop in health care spending aren't completely encouraging. That's because the decrease is directly tied to the pandemic and it proves that many Americans are forgoing care that they need, such as cancer screenings and immunizations.

In a state like South Carolina, where cancer rates are already considerably higher than the rest of the country, missed appointments and delayed care will likely spell much bigger problems - and higher costs - down the road.

"You're probably going to see exponential increases in health care spending," said Melanie Cozad, an assistant professor at the University of South Carolina's Arnold School of Public Health.

She noted that the bulk of health care spending in the U.S. is observed at end-of-life. Catching cancer earlier, for example, saves lives and saves the system money. But that happened less frequently in 2020 when most hospitals and health care providers across the state suspended the bulk of elective procedures this past spring.

"To me, as a economist, it's a short-term versus long-term trade off," Cozad said.

Kelli Kennison, a clinical assistant professor at the Arnold School of Public Health, agreed with Cozad that the decrease in spending this year signals future problems.

"Mammographies are down. Colonoscopies are down," Kennison said. "The immunizations are really concerning, as well. Catching all of those children up on immunizations ... is going to be a challenge for the health care system."

For what it's worth, the 2 percent drop in health care spending is only a momentary blip in time, said Robert Hartwig, an economist and the co-director of the Risk and Uncertainty Management Center at the Darla Moore School of Business.

There is every reason to believe that the system will make up most of its losses in 2021, he said. Hospitals in South Carolina and across the country lost billions of dollars when they suspended elective procedures this past spring. And while the COVID-19 pandemic continues to surge across the country, hospitals and other health care providers, such as dentists and optometrists, are keeping their doors open.

"They're being much more judicious in terms of making decisions," Hartwig said. "It'll be far less painful (in terms of financial losses) to health care providers than it was earlier in the year."

Stock prices for health insurance and life insurance companies have similarly rebounded, Hartwig said, offering another indication that the health care economy is well on its way to recovering any losses incurred earlier this year.

While the 2 percent slip in spending won't likely usher in any long-term trends in terms of health care spending, experts agree there is a silver lining. The pandemic has forced providers, patients and health insurers to embrace the use of telemedicine - a platform that could help reduce health care spending in the long run by saving time and reducing the amount of physical space doctors and their staff need to deliver care.

Historically, health insurance companies have paid doctors and hospitals more money to treat patients in person. This still remains the case, but reimbursements for telemedicine visits are increasing, said Dr. Edward O'Bryan, the executive director of MUSC Health Solutions.

And higher reimbursements offer an incentive for providers to promote digital appointments.

Before the pandemic, there was less than a one percent adoption rate of "true telemedicine services" among patients in the U.S., he said. "It was very slow going."

According to the Centers for Disease Control and Prevention, the use of telemedicine during the last week in March this year was up 154 percent compared to the same week in 2019.

Providing health care this way just makes sense, O'Bryan said.

"It's always fascinated me when you're sick with something - you don't know what it is - you go sit in a waiting room with other sick people. It's a ... strange concept," he said. "That's exactly how pandemics start - crowding sick people together."