COVID-19 - Out-of-Pocket Expenses for Hospitalizations

Thanks to an analysis by the Peterson Center on Health Care at the Kaiser Family Foundation, Americans can get a sense of the potential costs of coronavirus treatment for people with employer health insurance coverage.  While private insurers have agreed to waive copayments and deductibles for COVID-19 tests, America's Health Insurance Plans (AHIP) has made it clear that out-of-pocket costs for hospitalizations would not be waived, meaning that people who have plans with high copayment costs could find themselves with high expenses.  Here's what AHIP has to say:

Now, let's look at the analysis by the Peterson Center.  The analysis opens by noting that the total average cost of treatment (combination of employer plan and employee's out-of-pocket expenses) for pneumonia with major complications and accompanying co-morbidities was $20,292 in 2018 with a range from $11,533 to $24,178 (25th and 75th percentiles).  Here is a graphic showing the total average cost of treatment depending on the level of complexity:

In the case of China, the average length of hospital stay for a patient diagnosed with coronavirus was 11 to 12 days with around 2.3 percent of Chinese COVID-19 hospitalized patients receiving mechanical ventilation support.  In the case of the United States, when ventilator support is required for pneumonia, the average length of hospital stay increases substantially as follows:

1.) Pneumonia with or without major complications or comorbidities - 3.1 days

2.) Respiratory system diagnosis with ventilator support for less than 96 hours - 5.8 days

3.) Respiratory system diagnosis with ventilator support for more than 96 hours - 22.6 days

Obviously, the total cost of treatment rises substantially when mechanical ventilation is required.  Here are the average costs of hospital stays where ventilation is needed (2018 data):

1.) Pneumonia with or without major complications or comorbidities - $12,692

2.) Respiratory system diagnosis with ventilator support for less than 96 hours - $34,223

3.) Respiratory system diagnosis with ventilator support for more than 96 hours - $88,114

Out-of pocket expenses can be significant for patients with employer coverage.  Here is a graphic showing average out-of pocket spending for inpatient admission for pneumonia among enrolees in large employer plans by degree of complexity (2018 data):

The analysis notes that there are three reasons why out-of-pocket expenditures could be higher during this outbreak:

1.) many patients will have higher deductibles, particularly those with private coverage through small businesses and in the individual market.  The Peterson analysis is based on claims from large, more often generous private plans.

2.) The COVID-19 pandemic is occurring early in the calendar year meaning that many people have not yet accrued much health spending to fulfill their deductible.

3.) The Peterson analysis does not include balance billing where an out-of-network provided sends an additional bill directly to the patient for an amount not covered by the health plan.

Let's put these numbers into perspective.  According to Magnify Money (data from the Federal Reserve and Federal Deposit Insurance Corp.), a median American household has $12,330 in total savings in bank accounts and retirement savings accounts.  At the bottom end, 29 percent of households have less than $1,000 in savings.  The analysis by Peterson suggests that hospitalization as a result of a COVID-19 infection could result in severe financial difficulty for a very significant portion of American households, particularly since many of these households likely find themselves without their regular income thanks to the shuttering of the United States economy.  It is no wonder that a survey by the Kaiser Family Foundation found that 36 percent of Americans were worried about being able to afford testing or treatment related to the COVID-19 pandemic.