Doctors and nurses are operating in some of the most extreme conditions they've ever faced, and hospitals are facing severe financial stress. The rescue package passed by Congress in March was a critical step forward, and just last week the president signed a necessary supplemental coronavirus relief package from Congress for a total $175 billion in hospital funding.
The near disappearance of routine care and elective surgeries as well as sharply higher supply and labor costs to prepare for a potential influx of critically ill COVID-19 patients have delivered a major blow to hospitals and other care providers. That's why health insurance providers supported massive federal financial support for hospitals, and many are working locally to speed reimbursement and deliver other assistance to providers.
As long as hospitals and care providers continue to experience significant losses due to this pandemic, they deserve more help. Doctors and nurses are continuing their lifesaving work despite the tremendous risks to themselves and their families, and they all deserve our gratitude and support.
Policymakers must find ways to stabilize hospitals, but without raising costs for patients or harming others. Unfortunately, some policymakers are considering short-sighted government mandates that would create a whole new healthcare cost crisis. They would require health insurance providers to make forward-looking or "advanced" payments for services that have not actually been provided. This is essentially robbing Peter to pay Paul, and we shouldn't destabilize our health insurance market during a historic crisis.
Advanced payments are not new. Many health insurance providers have value-based payment arrangements (e.g., capitated population-based payments) in place with hospitals, health systems and physician practices. These partnerships provide predictable upfront cash flow to providers to improve accountability for the total cost of care and quality. When we get past COVID-19, encouraging more of these arrangements over fee-for-service payments would be beneficial.
Local health insurance providers are also partnering with individual hospitals on other advance payment arrangements in response to COVID-19. But they are not a panacea for a systemic crisis like this. Not every hospital needs advanced payments, and not every health insurance provider can make them. A blanket mandate for advance payments would cause more problems than it would solve—because eventually the added costs will hit American families.
Like hospitals, many health insurance providers are feeling the significant financial strain of this pandemic. It is estimated that health insurers will spend as much as a half-trillion dollars helping to fight this disease as they waive patient costs for COVID-19 testing, cover out-of-pocket costs for treatment, extend premium grace periods to employers and individuals, extend supplies of medications and expand telehealth services.
Recent studies have shown testing, treatment and care for COVID-19 alone could cost health insurers more than $556 billion over two years—more than the total capital and surplus held by the entire health insurance industry in 2018.
Mandatory advanced payments would further strain the health insurance industry and draw down from needed reserves. Some smaller or regional insurance carriers may not even have the ability to take part in such financial arrangements. The health insurers that have not provided this service in the past may find it impossible due to financial status, legal obstacles or the status of their operational systems.
Now more than ever, we must ensure that people are able to access the care they need by ensuring that their current coverage remains strong and stable. Risking the solvency of health insurance providers is too dangerous a course to take.
As we continue dealing with this crisis, we will all continue to rely on hospitals and the healthcare heroes who are answering the call of duty. We also need to make sure that health insurance providers can continue fulfilling their obligations to the patients they cover. Together, we can overcome this crisis—the American people are counting on us. Our healthcare system is up to the challenge.