Coronavirus and the American health care system

By Larry Zielinski

1. Investment in public health
   
   The United States health care spend exceeds $3.6 trillion annually, or 18% of our total GDP. Only 2.5% of that total is spent on public health, a decline of 20% since 2002.
   
   COVID-19 brought our underfunded public health system to its knees. America paid with a death toll far greater than it should have been.
   
   Just as 9/11 spawned increased spending in security measures, we can expect a surge in public health-related spending, regardless of who wins the election in November.
   
   
2. A new infectious disease business model
   
   In the first half of the last century, the major killers were infectious diseases like tuberculosis, measles and smallpox. All have been virtually eliminated through widespread precise diagnosis and effective drug treatments.
   
   Over the last several decades, pharmaceutical companies were rewarded through the development of “blockbuster” drugs—products that treat lifetime, chronic diseases on a continuous basis. Drugs cost billions to develop, and the blockbuster model supported the industry.
   
   Left behind were new infectious disease treatments, which cost just as much to develop but are taken for a very short period.
   
   When a needed service is not sustainable for private enterprise, it requires government intervention—in this case, a new version of an old pharma model would have the government helping to fund basic research into promising therapeutics, and then engaging private companies to bring them to market. On the diagnostic side, private companies need a national government strategy to scale quickly. Patents and future profits need to be shared.
   
   And while all of us have benefitted from the globalization of supply chains, the pandemic showed that health care—like national defense—is a market that needs to be nationalized, at least for critical items.
   
   
3. The impact of health disparities
   
   State after state has reported much higher COVID-19 fatality rates among African Americans. Health disparities are nothing new—Black Americans have higher incidences of disease in nearly all the leading causes of death in America. People with underlying conditions are much more susceptible to fatal outcomes in the pandemic.
   
   But what is killing African Americans in this country goes well beyond the health care system and into the social determinants of health: economic stability, good education, healthy food access, affordable housing and safe neighborhoods.
   
   Government spending without addressing these underlying social determinants is doomed to fail. Enlightened health care systems like Johns Hopkins are pursuing an “Anchor Mission” promoted by the Democracy Collaborative, which includes active local hiring, local sourcing and investment in the communities they serve. Health systems could be joined by other major employers.
   
   If policymakers can create an economic foundation, at-risk populations may finally get the health care every American deserves.
   
   
4. Acceleration of value-based care
   
   One of the primary causes of America’s ever-escalating health care costs—and our poor health outcomes—is the way we reimburse doctors and hospitals. Our fee-for-service system of paying for each visit, each test and each hospital stay encourages more volume. This half-century-old system started to be disrupted with the passage of the Affordable Care Act and its introduction of value-based care models, which put health care providers on a budget and allows them to share the risk—and the rewards—of maintaining high-quality care within financial guidelines.
   
   The pandemic showed in stunning fashion how ineffective fee-for-service reimbursement can be. All parts of the system were crippled as in-person volume dropped. What is needed now is a commitment to those value-based models, where physicians and hospitals are rewarded for keeping people healthy, regardless of where care is delivered.  
   
   The death of fee-for-service medicine is long overdue—and the pandemic may just have dealt it the final blow.
   
   
5. The growth of public insurance options
   
   America is unique in our reliance upon employer-based health insurance, which covers half of the population. The system has been supported by a $280 billion annual federal tax subsidy, which exempts employer-paid premiums from federal income and payroll taxes.
   
   This spring, nearly 40 million Americans applied for unemployment insurance because of the pandemic, and many of them had lost their health insurance.
   
   At the same time, publicly supported health insurance is growing: Medicaid for the poor and subsidized health exchange policies for those above Medicaid eligibility guidelines.
   
   While it is doubtful COVID-19 will mark the demise of employer-based health care, it is fair to assume non-employer options will continue to grow in the years ahead.
   
   
6. More industry consolidation—and higher prices
   
   In every industry, the pandemic will eliminate small businesses and marginal companies that lack the capital to sustain their revenue loss. In health care, that means the continued growth of large regional oligopolies in health care delivery and national oligopolies in health insurance.
   
   Unfortunately, study after study has shown this kind of consolidation leads to substantial price increases, as larger health systems and insurance companies use their size for market leverage in contract negotiations.
   
   I am convinced that one of the major reasons for America’s disproportionate death rate in the pandemic lies in our uncoordinated, dysfunctional health care system. We rightly applaud the doctors, nurses and allied support staff as heroes—but our heroes are fighting this war with a creaking, ineffectual support structure. It will change permanently—and in many ways for the better—as COVID-19 subsides.

Larry Zielinski is executive in residence for health care administration in the School of Management and brings 35 years of industry experience, including terms as president of two health care organizations, to his role.