America’s Broken Health Care System Is the Biggest Obstacle to Containing the Coronavirus

Over the past few weeks, it has become abundantly clear that the US health care system is uniquely ill-equipped to deal with a crisis of this magnitude. For years, physicians, economists, and health advocates have warned that the American health care system is a disaster in waiting. Now the disaster is here.

 

 

 

The US health care system is a dystopian nightmare that’s rapidly unfolding.

 

In New York City, which now accounts for roughly 5 percent of coronavirus cases worldwide, Mayor Bill de Blasio warned on Monday that the city could run out of medical supplies as early as next week. In other places around the country, severe shortages are already a fact of life, with hospitals desperately in need of ventilators, respirators, protective gear (like masks), testing swabs, and hospital beds.

 

These shortages have led to scenes usually reserved for movies about post-apocalyptic societies: In Washington state, hospital workers have resorted to crafting makeshift protective gear out of office supplies, industrial tape, and marine-grade vinyl.

 

Shortages are so acute that TV medical dramas taking place in fictional hospitals, like The Resident, Grey’s Anatomy, and The Good Doctor, are now donating medical supplies to struggling hospitals in the real world. Everywhere, frontline health care workers are terrified to go to work, and doctors and nurses are forced to beg the public to send them personal protective equipment on social media.

 

Shortages, of course, are a global problem, as virtually all of the world’s health care systems—even the best ones—have been overwhelmed by the rapid spread of the virus. Nevertheless, what has become abundantly clear over the past few weeks is that the US health care system is uniquely ill-equipped to deal with a crisis of this magnitude. In fact, it is likely making it worse.

 

For years, physicians, economists, and health care advocates have warned that the US health care system—“a monument to perverse incentives, unintended consequences and political inertia,” as Tim Harford called it in 2019, and the worst among developed nations in terms of cost and waste—is broken. The US currently spends more per capita on health care than any other country in the world, yet its system is incredibly dysfunctional, dangerous, rife with rent-seeking, and at least partly to blame for the decline in American life expectancy.

 

It should have been widely recognized as a disaster in waiting. It wasn’t, and now the disaster is here.

 

How Covid-19 Amplified the Worst Aspects of US Health Care

 

First, there’s the testing debacle. We now know, beyond the shadow of a doubt, that testing as many people as possible, including those who show no symptoms, is crucial in tracing and containing the spread of the virus. It’s one of the main reasons that South Korea has been able to “flatten the curve.” And yet, test rollout in the US has been an unmitigated catastrophe, with limited availability of test kits and a shortage of supplies leading to chaos and sick people being turned away even when displaying clear symptoms of coronavirus.

 

Granted, access to testing has been problematic in many countries, and the failure in the US has more to do with lackluster government response and a series of blunders by the Trump administration than anything else. But in the US there’s another element complicating matters, one that would be considered inconceivable in any other developed nation: an ever-present fear of enormous medical bills that often keeps people from seeking treatment or getting tested, because they assume they won’t be able to afford it.

 

Earlier this month, claims that Covid-19 tests will cost Americans more than $3,000 circulated widely through social media. The claims were false, but in a country where a visit to the emergency room can wind up costing thousands of dollars, they were hardly implausible. What’s more, they relied on real stories, like the Miami man who came back from a trip to China, got tested for coronavirus, and found out that he didn’t have the virus, but that he may owe $3,270. Or the Pennsylvania man who was evacuated from Wuhan, developed pneumonia and was put through a series of tests and two mandatory stays in a hospital isolation unit with his infant daughter. They both ended up testing negative for the virus, but also saddled with surprise medical bills to the tune of $3,918In both cases, the bills included various charges in addition to the coronavirus test itself, but they stoked understandable fears.

 

Earlier this month, Congress passed legislation that would make coronavirus testing free, after Rep. Katie Porter (D-CA) did the math and calculated that testing would cost citizens $1,331 per person at a minimum. This was a crucial and positive development, but would have been far more impactful if the attempts to contain the virus weren’t already hampered by weeks of confusion as to who will bear the costs of testing. And even now, patients could still be exposed to surprise medical bills and may have to pay out of pocket if, for instance, they are tested in facilities outside their network.

 

 

And while the testing is free, the treatment isn’t (as the health insurance industry’s trade group clarified in response to Trump’s erroneous claim that insurers agreed to waive all coronavirus-related copayments). A March 13 analysis by the Kaiser Family Foundation estimated the cost of Covid-19 treatment could top $20,000, with average out of pocket expenses for individuals exceeding $1,300. Last week, Time covered the story of Danni Askini, a Boston-area woman who was diagnosed with Covid-19 after experiencing chest pains and shortness of breath so severe that she had to go to the ER three times. The cost of her treatment: $34,927.43. Askini, it should be noted, was uninsured, but so are 28 million other Americans, alongside millions more who are under-insured.

 

Needless to say, it is absolutely crucial during a pandemic that people who are sick get the help they need, both for their sake and the general public: if sick people don’t seek help and go to work or carry on as usual, they risk infecting others. But in a health care system whose defining feature is a debilitating fear of exorbitant medical bills, the task of locating those who are infected and properly isolating and treating them becomes particularly onerous. 

 

That many Americans, particularly in rural areas, have lost access to their local hospitals due to a hospital merger wave that concentrated two-thirds of the country’s hospitals into chains and led to a rash of “unprofitable” hospital closures in recent years, is definitely not helping.

 

Moreover, the American health care system is so fragmented, inefficient, and disorganized—a jumble of insurance, pharmaceutical, and hospital oligopolies, along with chronically-underfunded public health agencies—that even referring to it as a system feels downright deceitful. As physician and Harvard Medical School instructor Adam Gaffney wrote in The Guardian, it is more akin to “atomized chaos.” 

 

In today’s America, private hospitals, states, and municipalities are apparently expected to fight each other for critical supplies, all while the federal government explicitly tells them to fend for themselves. The chaos and confusion that followed the rollout of Covid-19 testing displayed this perfectly: In the wake of the outbreak, the tales of Americans navigating byzantine bureaucracies, both private and public, in attempt to get tested have practically become a burgeoning literary genre.

 

That Americans find it incredibly difficult to decipher the myriad of special interests that comprise the American health care “system” is nothing new. But now doctors, working against the clock in the face of overwhelming demand and despite severe shortages in equipment and supplies and, find themselves wasting precious hours arguing with insurers:

 

 

What’s more, a majority of American workers—more than 150 million—are currently insured through their employers. What happens to those workers if the worst predictions about the Covid-19 economic crisis come true and millions of Americans lose their jobs, and therefore their health coverage?

 

As author former health care executive Wendell Potter recently noted, this is not a hypothetical scenario: During the Great Recession of 2007-2009, millions of Americans lost their health insurance. The difference is that the Great Recession wasn’t accompanied by the biggest health crisis the world has seen in 100 years.

 

The employer-based framework of US health care, the result of post-World War II arrangements between businesses, unions, and government, has come under increased scrutiny in recent years due to rising premiums and deductibles (which have doubled over the past decade) and its tendency to make people fearful of leaving jobs they’re unhappy with. But what the Covid-19 crisis is showing us is just how unreliable the employer-based framework really is.

 

Critics of the American health care system have long argued that the US has the best health care system in the world—if you happen to be rich. The Covid-19 crisis has shown this to be true, demonstrating the extent to which the country’s extreme inequalities are reflected in its health care system.

 

Eager to ensure critical supplies, the New York Times reported that cities and states engage in “bidding wars” against one another, with poorer states left “at the mercy of the rich ones.” And while ordinary people—including health care workers, the most exposed to the risk of infection—have been having a hard time getting tested, the rich, the famous, and the politically-connected have been able to get tested quickly and easily, even when they show no symptoms. “Perhaps that’s been the story of life” is how President Trump, when asked why rich people are allowed to jump to the head of the line, explained this.

 

Meanwhile, desperate Americans, eager to figure out if they’ve been infected so they can protect themselves and their loved ones, resort to unapproved do-it-yourself test kits.

 

At the heart of this unfolding crisis is the fact that the US health care system prioritizes the profits of the various business interests that dominate it over what’s good for patients and the public at large. This was particularly evident last month, when Health and Human Services Secretary Alex Azar—a former pharmaceutical executive and lobbyist for Eli Lilly—refused to commit that a future vaccine for the coronavirus will be affordable: “We work to make it affordable, but we can’t control that price because we need the private sector to invest.”

 

The problem with a health system that revolves around corporate profits instead of healing is that it inevitably creates incentives for profiteering. This could be glimpsed in a remarkable story at The Intercept last week, in which investigative journalist Lee Fang reported that investment bankers have been pressing health care companies and drug firms to consider ways to profit from the Covid-19 crisis. One of these companies, Fang reports, is Gilead Sciences, the pharmaceutical company that gained notoriety when it hiked the price of a hepatitis C drug to $1,000 per pill back in 2014. Gilead also manufactures Remdesivir, a drug seen as a potential treatment for Covid-19. Already, Fang writes, investors are pressuring the company to “create a business out of remdesivir.”

 

 

Universal Health Care and Flattening the Curve

 

While it’s too early say definitely what’s the best way to deal with the crisis, when looking at the countries that have managed to “flatten the curve,” or are on track to do so, two things become apparent: One, they committed to mass testing and taken early measures to detect, isolate, and contain the disease; and two, they have universal health care systems that don’t deter people from seeking medical care due to fear of exorbitant costs.

 

Taiwan, for instance, has managed to avoid the worst of the crisis, with only 215 cases so far, despite its proximity to China, partly thanks to efficient government response and partly thanks to its lauded (and Medicare-inspired) single-payer health insurance system, which covers nearly all of its of population and keeps costs down.

 

In South Korea too, the New York Times reports that officials “credit the country’s nationalized health care system, which guarantees most care, and special rules covering coronavirus-related costs, as giving even people with no symptoms greater incentive to get tested.”

 

There are, of course, those that dispute the connection. One of them is the presumptive Democratic nominee, Joe Biden. At one point during the latest Democratic presidential debate on March 15, Biden dismissed the notion that a universal health care system might be better positioned to handle a pandemic like the coronavirus. “With all due respect for Medicare for All, you have a single-payer system in Italy—it doesn’t work there,” Biden said.

 

Biden was partly right: a universal health care system does not, in and of itself, cure epidemics. And Italy does indeed have a universal health care system—often ranked among the world’s best—and yet, as it became inundated with Covid-19 cases, it collapsed all the same. 

 

But Biden was also wrong, and misleading. There are many possible causes for the enormous crisis currently unfolding in Italy—early missteps by government officials come to mind—but the design of the Italian health care system was not one of them. In fact, the Italian system was in some ways better positioned to handle a crisis like the Covid-19 outbreak than the US: It had more hospital beds per capita, more doctors per capita, and was considered to be one of the best-performing systems among OECD countries; health care spending in Italy is lower than the OECD average, yet its life expectancy is higher than the average, whereas the US spends much more than the OECD average on health but has a lower life expectancy and worse avoidable mortality rates.

 

What’s more, not all of Italy’s regionally-based health care system is in the same terrible state as Lombardy, where the health care system collapsed. The health care system in Lombardy, the region most impacted by the coronavirus, is also the one most oriented toward private health care of all the 20 regions that comprise the Italian National Health Service. The Veneto and Emilia Romagna regions, where there’s more public control over health care, have fared much better

 

More than anything, the Italian case testifies to the importance of massive testing and early detection, showing that no matter how good a health care system is, it too can become overwhelmed when faced with an epidemic-level surge in demand.

 

A country could have a universal health care system and still respond atrociously during a crisis—the UK’s disastrous response to Covid-19 is a case in point. Nevertheless, as Taiwan and South Korea show, having a centralized system that is able to mobilize, coordinate, and respond quickly, and also doesn’t frighten people to such a degree that they refuse to see a doctor, can be a huge asset during a global pandemic.

 

Americans, who have been putting off medical treatments long before the coronavirus, already know this. While Biden has all but won the Democratic primary, exit polls have consistently shown that a majority of Democratic voters support Medicare for All, Bernie Sanders’s proposal for a single-payer system. In October, a CBS News poll showed that 66 percent of Americans—among them 91 percent of Democrats, 67 percent of Independents, and 34 percent of Republicans—support a “government health insurance plan for all.” A recent Kaiser Family Foundation poll has produced similar results.

 

Politicians know this too. In the short term, the government response to the coronavirus will likely make the US health care system lean a bit more toward other socialized health care systems, with the government requiring private insurers to make coronavirus testing free by covering its costs and with politicians like Biden proposing that the government cover at least some of the cost of treatment. When it comes to dealing with a pandemic, there’s no substitute for massive government intervention. 

 

But these are just one-off measures that do nothing to improve the fundamentals of American health care or help prepare the US for future pandemics. Whether any of these emergency measures will lead to long-term reform in US health care remains to be seen. But the Covid-19 outbreak has made one thing impossible to deny: the US can’t afford to run its health care system the way it has so far. 

 

ProMarket is dedicated to discussing how competition tends to be subverted by special interests. The posts represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty. For more information, please visit ProMarket Policy.