Coping with the Coronavirus Requires Freeing Healthcare Providers

February 28, 2020

As the coronavirus continues to spread across the world and threaten public health, its emergence is inspiring some to rethink the American healthcare system.

In mid-December, an unknown virus began spreading in Wuhan, China. Soon after, Chinese officials alerted the World Health Organization about the virus, shortly before it began spreading across the world. As of February 27, there have been 82,777 cases confirmed and 2,814 deaths worldwide, and 60 cases in the United States. On February 28th, the World Health Organization upgraded its global risk assessment for the potential spread and impact of the novel coronavirus from “high” to “very high.”

As experts grapple with assessments of the severity of the virus, and continue to gather more information about it, there is little doubt it may pose a serious test of our already government-dominated healthcare system’s ability to respond to crises.

Because of the threat posed by this potential epidemic, some are portraying this as decisive evidence that Medicare-for-All is essential to combat it. Agree or disagree with that assessment, coronavirus has the potential to expose the serious problems with the US healthcare system. While we should not design policy or institutions solely based on rare, cataclysmic events, institutions should be robust enough to fare well in those situations.

Unfortunately, many believe the US may not be able pass that test.

While the best in the world, healthcare in the US is expensive, and we spend more than any other country. As of 2018 with Obamacare, 27.9 million Americans did not have health insurance, which can make paying for healthcare difficult. Even for those with insurance, the average deductible for a single earner is $1,655, double the average of $826 just a decade ago. Deductibles for coverage on the Obamacare exchanges are more than $4,000. If that didn’t make purchasing healthcare services difficult enough and as Independent Institute Senior Fellow John Goodman shows in his award-winning book, Priceless: Curing the Healthcare Crisis, government regulations have created a system of opaque pricing—so it’s nearly impossible to know prices before a treatment and compare between facilities. If patients receive treatment at a facility out of their insurance network, they face stiff charges and surprise billings weeks and months after the fact.

Furthermore, government needlessly limits the supply of healthcare with certificate-of-need laws, which prevent healthcare providers from offering new services. Occupational licensing poses barriers to entry for professionals, reducing the number of professionals across the range of medical disciplines and increasing prices. Compounding these problems, scope-of-practice laws limit the procedures those licensed professionals can do, further restricting access.

Most of these problems were explained well in a recent Washington Post op-ed by Helaine Olen, “Coronavirus Makes the Case for Medicare-for-All.” Getting tested for the coronavirus is expensive, and the unknown price makes people worry and wait to get tested. The expense often causes them to delay care. During the outbreak of a highly contagious virus, this can be deadly, as she points out.

Can Medicare-for-All solve such healthcare issues? At first glance it might appear so, adding coverage for everyone and limiting out of pocket expenses should make it easy to get care.

But there are problems with Medicare-for-All. Some of the methods of cost savings for Medicare-for-All would shrink the number of hospitals and the number of healthcare professionals, reducing access and creating long waits for care. It would also be far more centrally planned than our current, imperfect system. Central government planning suffers from an inability to move resources to their highest valued uses. Nobel Laureate economist Friedrich Hayek called it the knowledge problem because without price signals, central planners do not have the requisite knowledge of the best use of resources.

Bureaucracies, like a government healthcare system, struggle to respond to rare events. For example, FEMA struggles with hurricane response and getting resources to the affected areas. However, they may be better at snow removal in Minnesota, where it not infrequent, but a common and predictable occurrence.

Private businesses are nimbler and able to react before storms. When forecasts cause people to buy more supplies before a storm, the firms run low on stock. As this elevated demand causes shortages, they have to raise prices. But this price increase encourages more resources to be shipped into the area, which alleviates the shortage and meets the suddenly elevated demand. Firms don’t need to know the accuracy of storm forecasts or even that a storm is coming, the profit motive guides them.

So how does all of this help us with the coronavirus?

There is an alternative to Medicare-for-All and our current system: more transparency and actual competition. True reform requires liberating doctors and patients by allowing them to interact in innovative ways to help meet the unique individual medical needs of an epidemic crisis. For example, by eliminating insurance providers from the payment process, Walmart’s new clinics offer simple tests at drastically lower prices, with CVS already planning to follow. By advertising and competing on price, firms have an incentive to reduce costs and sell at a lower price. Whether it’s footballs or healthcare doesn’t matter.

We can remove the certificate-of-need laws to allow more hospitals to open and expand access for patients. We can reduce the barriers-to-entry of occupational licensing where it is unnecessary, to increase the number of healthcare providers. We can expand healthcare professionals’ scope of practice to allow them to practice to the full extent of their training and serve even more patients. These simple changes, combined with transparency and competition on price, will stop the astronomical bills from out-of-network treatment and the all-too-common surprise billing that make patients delay care in the first place.

By allowing an actual market to function, we can reduce costs and expand access to care, all the while making healthcare more able to respond to sudden events. I lament the fact that few people can afford the $1,400 coronavirus test. But rather than implementing Medicare-for-All, we should take simple and practical measures that free patients, doctors, caregivers, employers, employees from the perverse restrictions that raise the cost of healthcare, reduce its quality, and make care less accessible for those in urgent need.

Mrs. Olen is right that viruses do not care about deductibles, co-pays, and network provider, but neither does the Walmart clinic. Our current system may be costly, but it doesn’t have to be if we break the cycle of government interference.

Conor Norris is a Catalyst Policy Fellow and a Research Analyst with the Knee Center for the Study of Occupational Regulation (CSOR) at Saint Francis University. His areas of interest include occupational licensing and health care scope of practice laws, monetary policy, and long-run growth. Conor is an alumnus of the Mercatus Center MA Fellowship at George Mason University, where he received his MA in economics in 2018. He interned at the Cato Institute in 2017 in the Center for Monetary and Financial Alternatives. He loves reading good history books and bad puns and is still bitter that the Star Wars expanded universe is no longer cannon. Conor grew up in Williamsport, Pennsylvania and after spending two years in Arlington, Virginia, he now lives in Altoona, PA.
Catalyst articles by Conor Norris