Mar 23, 2020

Quick Reads: COVID-19 and the Transformation of American Healthcare

We no longer have the luxury to debate whether to break down the barriers to innovation in health care
Robert Graboyes Senior Research Fellow

Two short weeks and several lifetimes ago, our world was a simpler place. In seven years at the Mercatus Center, my work has focused on one question: “how do we bring better health to more people at lower cost, year after year?” The answer, scattered across hundreds of papers, essays, speeches, and interviews, has been: stop obsessing over the particulars of health insurance and start sweeping away healthcare’s bureaucratic and self-indulgent barriers to innovation as rapidly as possible.

Proposals have included speeding up FDA procedures, scrapping certificate-of-need regulations, relaxing professional licensure requirements, jump-starting telemedicine, borrowing lean manufacturing from automakers, and imitating the raucous experimentation of information technology.

Until two or three weeks ago, these ideas were an academic exercise. Sticking with the old ways was a luxury of an affluent, healthy population. The somnolent joy of complacency has dissolved overnight into memory.

The disease caused by the new coronavirus—COVID-19—has bestowed a fierce moral urgency on sweeping away the twin curses of by-the-book procedures and conventional wisdom. As of March 23, 2020, the depth and longevity of the crisis cannot be known. But qualitatively, a mephitic microbe has crossed the ocean to weld together the terrors of 1918, 1929 and 1941—crippling fear of contagion, breathtaking loss of wealth, and terrifying loss of life.

Insurance policies—the focus of healthcare debates since World War II—are not the problem. Universal coverage, after all, is slim consolation for the sick and dying left untreated by overwhelmed health care systems in Italy and Spain.

Suddenly, federal and state policymakers are tossing old ways to the wind. The Trump administration, myriad state governors, and countless private agents are trying mightily to reinvent healthcare on the fly.

As this letter goes live, the US Department of Health and Human Services (HHS) has moved to allow doctors, nurses, and other providers to practice across state lines. Federal and state policies are opening the gates to telemedicine. States are abandoning sclerotic certificate-of-need laws which, even in calmer times, obstruct efforts to add hospital beds and intensive units. The Food and Drug Administration’s (FDA) lethargic approval processes are melting before the heat of crisis. With official blessing, Google is harvesting data strewn across the Internet to forecast the enemy’s path, cut it off, and kill it, using the full force of science, technology, and American ingenuity. Patients, doctors, nurses, hospitals, and others are gaining official blessing to enter the fray as best they can.

And yet, the engines of this struggle are still mired in the old ways. Medicare's Politburo-style pricing methods, which drive prices across the healthcare system, mute the signals that should alert manufacturers to slip into high gear to produce facemasks and ventilators. Risk-aversion is baked into the psyches and procedures of the Centers for Disease Control and Prevention (CDC) and FDA, slowing the development of tests and vaccines.

“Amazon is hiring 100,000 new workers for its distribution centers,” the question goes, “so why can’t the federal government do likewise and start rolling out ventilators?” The question yields the answer: because the government is not Amazon. Governments have their place and their virtues. But speed and dexterity and innovation are seldom among them.

Our lives and livelihoods depend on whether habit-bound healthcare can transform itself overnight. The most powerful action that governments can take is to incentivize the private sector to do what it does best—or at least get out of the private sector’s way.  Godspeed to everyone’s efforts. History is watching.  

This Quick Read is posted in conjunction with the prerelease edition of Mercatus’s Healthcare Openness and Access Project (HOAP). 

If you are interested in speaking with Robert Graboyes about his research, please reach out to media@mercatus.org.

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