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Medicare and COVID-19

COVID Q&A with Professor Jennifer Mellor on June 1, 2020

Medicare is the main source of health insurance for 60 million Americans and accounts for roughly 20% of all healthcare spending in the U.S. We spoke with Jen Mellor, Professor of Economics and Public Policy and Director of the Schroeder Center for Health Policy, to hear about how the COVID-19 pandemic is affecting the Medicare program.

Q.  What types of people have health insurance coverage through Medicare, and how is the COVID-19 pandemic affecting them?

A.  Medicare is a social insurance program that covers almost all persons age 65 and older. In fact, the majority of people in Medicare – about 85% -- are eligible because they fall into this age group. Medicare is also an important source of coverage for people who are under age 65, disabled, and receive Social Security disability insurance (SSDI) benefits. Medicare also covers people under age 65 who have end-stage renal disease or ALS (amyotrophic lateral sclerosis, known as Lou Gehrig’s disease).

Given the age and existing health conditions of Medicare beneficiaries, the coronavirus pandemic is a real concern. We see this in the hospitalization rate for COVID-19. The CDC recently did an analysis of COVID hospitalizations in 14 states using data from March. In that month, there were 4.6 COVID hospitalizations for every 100,000 persons in the population. When they looked at hospitalizations of people age 65 and up, there were 13.8 hospitalizations for every 100,000 persons in the population in that age group. Another way we see the toll COVID is taking on Medicare beneficiaries is in the share of deaths occurring in older populations. For example, new data from Florida show that 83% of COVID-19 deaths occurred in the age 65 and up population. Virginia data from June 1 show that 77% of COVID-19 deaths occurred to people age 70 and older. Disability is more difficult to measure, but we do know that people with underlying illnesses like hypertension and diabetes are disproportionately affected by coronavirus.

Q.  How has Medicare changed its coverage of services to deal with the COVID-19 pandemic?

A.  Medicare covers the cost of coronavirus testing, including the test that identifies whether someone has developed antibodies to the virus. These tests do not require any cost-sharing on the part of the beneficiary, that is, there are no copays or deductibles. If a Medicare beneficiary requires a hospitalization to treat COVID-19, Medicare covers that as well. However, Medicare beneficiaries who are not in Medicare Advantage – people who have “traditional Medicare” and make-up the majority of the Medicare population – are responsible for a deductible of $1,408 for each hospital stay. If they don’t have another source of insurance to cover this deductible, they must pay it themselves, out-of-pocket. The Kaiser Family Foundation put out some data in May showing that about 6 million Medicare beneficiaries have no other source of insurance, and of these, about 1 in 4 has less than $20,000 in annual income. So, for some, the out-of-pocket cost of a COVID hospital stay could be significant, and that’s not counting the healthcare they might need beyond a short-term hospital stay.

Another way Medicare coverage has changed relates to telehealth services. In early March, Medicare began to expand coverage to telehealth services so that more beneficiaries could see their physicians and other healthcare providers without having to physically go to a hospital or doctor’s office. Before then, telehealth was limited to people who lived in rural areas.

Q.  Some of your prior research has looked at changes in Medicare payments to different types of providers – inpatient hospitals, hospital outpatient departments, and skilled nursing facilities. Is COVID-19 affecting Medicare payment of providers who deliver services to Medicare beneficiaries?

A.  It is, and in a very different way. In most of the past few decades, the Medicare program would typically change the way providers were paid in an effort to generate cost savings, or to discourage providers from doing too much care. So, for example, in some of my past research, I’ve studied how providers responded to Medicare pay cuts, and how hospitals responded to Medicare’s readmission penalties. Now the concern is paying providers more to help them do what we need them to do during the pandemic. The Coronavirus Aid, Relief, and Economic Security or CARES Act included a number of provisions to help providers, and these worked through Medicare in some cases. For example, inpatient hospitals are receiving a 20% add-on Medicare payment for treating COVID-19 patients, and this has been made retroactive to late January 2020. The CARES Act also suspended a 2% Medicare payment cut that would have gone into effect under previous legislation. In addition, the CARES Act included $100 billion in funding for hospitals and other providers; some of these funds were distributed to hospitals based on their past year Medicare reimbursements, so that providers that relied on Medicare more received larger amounts of funding.

Q.  What kinds of research questions related to Medicare will you be thinking about in the wake of the pandemic?

 A:  Just about every aspect of health policy – how people get access to healthcare, how we pay and how much we pay for healthcare, and the quality of that care – stands to be affected by the pandemic. Medicare is no different – there will be far-reaching effects on some Medicare patients and providers.  Of key interest to me is how the most vulnerable members of our communities are affected by the pandemic – both its health and economic impacts – and what health policies can do to address this. I have a particular interest in people who are on Medicare because of their age or disability, but who also have low incomes. Their access to care is likely to change for various reasons. They may have new financial hardships that make paying copays more challenging. They might not have access to the technologies required for telehealth services, and they may face new hardships getting to in-person appointments as things open up. The providers who typically treat these patients may be financially struggling themselves, and there’s a real concern that clinics and physician offices in some areas may be forced to close their doors. These are issues that policies could address in the months ahead, and these are topics we need researchers to document and study.    

For more reading:

Morbidity and Mortality Weekly Report, “Hospitalization Rates and Characteristics of Patients Hospitalized with Laboratory-Confirmed Coronavirus Disease 2019 — COVID-NET, 14 States, March 1–30, 2020

Tampa Bay Times, “In Florida, 83 percent of coronavirus deaths are people 65 and older

Virginia Department of Health, “COVID-19 in Virginia, Data Download

Kaiser Family Foundation, “Medicare Beneficiaries without Supplemental Coverage Are at Risk for Out-of-Pocket Costs Relating to COVID-19 Treatment

Centers for Medicare and Medicaid Services, “Medicare Telemedicine Health Care Provider Fact Sheet