By Abe Sutton
The COVID-19 pandemic has highlighted the need for health policy reform in the United States.
In this piece, I walk through three health policy takeaways from COVID-19, which include socializing communicable disease costs, shifting insurance markets from the employer to the individual, and deregulating the supply side of health care.
Socializing the cost of containment for communicable diseases
While some believe COVID-19 makes the case for single-payer, their claim is far too sweeping. Many of the problems we face, from supply shortages to medical challenges, would not be any better under a government-run health system. However, COVID-19 has revealed how vulnerable our economy is to communicable diseases.
Unlike non-communicable diseases, a large share of the benefit from preventing communicable diseases spreads to a community, rather than sitting with an individual. As such, there is a strong case to account for these externalities by having taxpayers pick up the costs of preventing and containing communicable diseases. Practically, this would mean expenses for services such as routine vaccinations should not fall on individuals or their insurers alone. It may also mean refocusing the WHO on communicable diseases.
Policymakers should assess who benefits from different health expenditures and socialize costs when insufficient benefit falls on the care recipient. They should also condition rejoining the WHO on the organization adopting a renewed communicable disease mission.
Empowering patients to choose their health plan
Economists of both parties have long lamented the inefficiencies of insuring working-age Americans through their employers. Their complaints fell on deaf ears as political practitioners recognized the challenges of upsetting the current system. Politicians who take on employer-sponsored insurance directly face misleading attacks.
Still, some progress was made prior to COVID-19. The Obama administration built the health exchanges to enable straight-forward patient shopping for plans. And the Trump administration opened up a pathway for employers to shift their employees to the exchanges. Significantly, this pathway preserved the tax-advantaged treatment of employees’ insurance. Together, these moves lay the groundwork to empower working-age Americans to choose the plan that is right for them.
COVID-19 has since strengthened the case for separating insurance from employment. Too many Americans lost their job-based insurance en masse at the most inopportune time when the pandemic caused economic headwinds. This reality adds new salience to the need to incentivize employers to support their employees’ enrollment in the individual market.
Policymakers should encourage the shift from the employer to the individual market, to allow patients to choose the plan that is right for them. Under a Biden administration that may mean providing exchange subsidies to those who use employer funds to purchase exchange plans. Under a second Trump term that may mean increasing the tax subsidy for employers who subsidize employees purchasing on the exchanges. Either way, there should be an effort to build on the changes to date in light of COVID-19.
Deregulating the supply side of healthcare
Of these three takeaways from COVID-19, deregulation has gotten the most attention to date. It had some prominent traction pre-pandemic and has since taken off, with advocates observing that some regulations relaxed to combat COVID-19 were evidently never needed in the first place. Changes have occurred rapidly at both the federal and state levels.
For example, New York State has allowed allied health professionals and physicians licensed in Canada to practice. It has also allowed New York pharmacies to receive medical supplies from wholesalers located in other states. It seems unlikely these suddenly unnecessary laws were once critical for public health reasons. Indeed, California recently moved to permanently loosen restrictions on Nurse Practitioners, allowing them to practice to the full extent of their training.
Some of these restrictions originated in the folly of the health planning movement. Others reflect powerful incumbents seeking anti-competitive protection. Either way, removing these restrictions has the potential to spur innovation, lower costs, and improve quality. This would happen as additional providers and suppliers compete for patients, or at least compete for in-network status. The new choices patients face should force providers and suppliers to improve and accept lower margins.
Policymakers should double down on removing supply-side restrictions to put patients in control of their health care. Early in the next term, an updated choice and competition report should be prepared in accordance with section 6 of Executive Order 13813. This report should assess progress to date on the recommendations from the prior report, refine the approach going forward, and include state-by-state assessments of what remains to be done.
Combined, these changes would strengthen the resilience of our health system, leaving us better prepared for the next pandemic. They would also strengthen market forces in healthcare, empowering patients to drive down the cost of care and demand the services they desire.
If our health system shifted in the ways outlined above, providers and suppliers would need to focus on the ultimate consumer, the patient. Under our current system, providers and suppliers have too often ignored patient preferences as they seek to serve payers. This left an opening for consumer-focused brands to rack up huge margins by serving patients directly. COVID-19 highlights the imperative for change.