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Controlling Health Care Costs

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How Has Medicare Spending Changed During the COVID-19 Pandemic?

Health visitor and a senior man during home visit

The COVID-19 pandemic has altered patient care in multiple ways, including a disruption in face-to-face office visits and a decline in the volume of ambulatory care visits. Early on, the Centers for Medicare and Medicaid Services and Congress enacted payment changes, including expanded coverage of telemedicine services, to ensure that Medicare beneficiaries were able to access needed care. Understanding how beneficiaries’ health care spending changed during the pandemic may inform expectations about health care use even after the pandemic has ended. Researchers at the Commonwealth Fund and CareJourney, a health care analytics company, analyzed changes in monthly spending by the traditional Medicare program between January and October 2020. The new data, available on the Commonwealth Fund’s Medicare Data Hub, show how traditional Medicare spending changed among selected beneficiary groups during the first year of the COVID-19 pandemic.

Changes in Traditional Medicare Spending

We compared spending in the traditional Medicare program (i.e., not including Medicare Advantage) from January through October 2020 to spending during the same months in 2019.1 Spending on traditional Medicare was 7 percent lower during this period in 2020.2 Just before the pandemic, in January and February of 2020, traditional Medicare spending was slightly higher compared to the same period in the prior year (average of $32 billion per month in 2020 compared to $31 billion per month in 2019), but spending dropped dramatically from March to May 2020, bottoming out in April at $23 billion, which was $10 billion less than in April 2019. In June, monthly spending rebounded to levels similar to January and February 2020 and continued at that pace for the rest of the year.

Notably, there was no surge beyond January 2020 levels in traditional Medicare spending during the latter half of the year. This suggests that care forgone during March through May had not yet produced a delayed response in pent-up demand.

The analysis found that traditional Medicare spending was lower on average in 2020 than in 2019 across all age groups; larger declines in spending occurred among white people compared with people of color and those not eligible for Medicaid. In contrast, Medicare beneficiaries who received Medicaid benefits (known as dual eligibles) had smaller-than-average decreases in spending between March and May of 2020, suggesting that these vulnerable beneficiaries were less likely to avoid or delay care. (More information about these spending trends during 2020 across different subgroups can be found on the Medicare Data Hub.)

Our analysis suggests that after declining in the spring of 2020, traditional Medicare spending returned to its prepandemic baseline but did not surpass it. Understanding which health care services were skipped during early 2020 and whether care was delayed or forgone completely could provide important information about the appropriateness and necessity of many health care services and the effects of missed services on health outcomes. These answers also may provide insights into whether and how aggressively providers should reach out to beneficiaries to ensure they receive needed services or whether traditional Medicare spending could be reduced over the long term by identifying which health care services might be safely skipped.

NOTES

1 All analyses, unless otherwise noted, include fee-for-service spending under Medicare Part A (hospital insurance), Part B (medical insurance for certain physician services, outpatient care, and medical supplies), and Part D (prescription drug coverage) for beneficiaries in the traditional Medicare program.

2 Traditional Medicare spending including Part A and Part B was similarly 7 percent lower between January and October 2020 relative to the same months in 2019.

Publication Details

Date

Contact

Arnav Shah, Senior Research Associate, Policy and Research, The Commonwealth Fund

[email protected]

Citation

Arnav Shah et al., "How Has Medicare Spending Changed During the COVID-19 Pandemic?," To the Point (blog), Commonwealth Fund, Apr. 12, 2021. https://doi.org/10.26099/ebrx-mt16