Who are the economic winners and losers of all the COVID-19 PCR testing? – Maui Now

A new UH report discusses the economics of profits and premiums stemming from the federal laws governing COVID-19 PCR testing. Photo Credit: County of Maui.

A new report describes how the federal governments response to the COVID-19 pandemic created a perfect storm in which private laboratories could earn huge profits fromPCRtesting while insurance companies could pass those lab fees on to customers through higher health care premiums.

The report, by a team of researchers that included three economists from the University ofHawaiiat Mnoa, was published June 9in the Journal of General Internal Medicine.

The two major components of the federal governments pandemic response the Families First Coronavirus Response and the CARES acts required commercial insurance plans to cover COVID-19 testing costs without any cost-sharing for patients, and did not limit what labs could charge.

In many concentrated insurance markets such asHawaii, insurers have few incentives to negotiate lower prices, said report co-authorTim Halliday, a UH Mnoas economic professor andUHEconomic Research Organizationresearch fellow. They can easily pass these costs onto premiums without losing market share.

The financial consequences of high profit for testing providers are borne by plan sponsors and will likely result in higher insurance premiums other things equal, passing the burden to patients.

Using uniqueHawaiitaxation data on monthly sales, the group analyzed how the COVID-19 pandemic affected the revenue and profitability of independent laboratories. The results showed that private laboratories revenue followed the volume ofPCRtests performed in the state in lockstep. Between May and December 2020, the monthly growth rate of revenue was 8% on average. The researchers estimate that profits perPCRtest were at least $10, but the actual number is likely far greater.

The COVID-19 testing pricing policies are as if designed to channel money from taxpayers, employers and workers to testing facilities and insurance companies, said co-author Ge Bai, health policy and management professor at Johns Hopkins Bloomberg School of Public Health. This study revealed key problems affecting the efficiency of the U.S health care system, namely, rigid government rate-setting, price insensitivity of consumers, and misaligned incentives of insurance companies.

It highlights an opportunity for policymakers to improve the affordability of healthcare services by focusing on addressing these problems.

According to the researchers, examples of issues that contribute to this situation include:

Other team members who contributed to the report:

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Who are the economic winners and losers of all the COVID-19 PCR testing? - Maui Now