January 4, 2021

COVID-19 ONLINE SUPPLEMENT

Introduction to the US Health Care Industry:

Balancing Care, Cost and Access

David S. Guzick, MD PhD

In a June 2, 2020 commentary, Donald Berwick points out that although the novel coronavirus SARS-CoV-2 contains only 15 genes in comparison with 30,000 in the human genome, it has been a powerful adversary. Berwick, founder of the Institute for Healthcare Improvement and former administrator of the Centers for Medicare and Medicaid Services, opines that our response to the challenges posed by the pandemic of coronavirus disease-19 (COVID-19) “may reshape both health care and society.”

An Introduction to the US Health Care Industry: Balancing Care, Cost and Access was in press before COVID-19, which provides an unrivaled opportunity to explore the widespread implications of the pandemic on health and health care. This online supplement will draw connections between the concepts discussed in the book and the harsh truths that the pandemic has revealed.

On January 9, 2020, China reported the first death linked to COVID-19 in the city of Wuhan. By October, there were more than 1,000,000 fatalities world-wide. The first death attributed to COVID-19 in the U.S. occurred in early February, 2020 in Santa Clara, California, based on autopsy findings. The death toll directly linked to COVID-19 in the U.S. eclipsed 100,000 in May, 200,000 in September, and reached 350,000 in early 2021, about 1 death per 1,000 population. As reported in JAMA Network and subsequently in the NY Times, these figures underestimate the number of deaths that are due to COVID-19 based on excesses over projections from historical data. Our collective loss is staggering numerically and incalculable on a human level. While advances in molecular biology and virology, combined with important public-private partnerships, led to the production and initial availability of safe and effective vaccines by the end of 2020, this very welcome development comes at a time when each passing day brings a large and consistent/accelerating number of new cases and deaths. The ultimate disease and death toll of the COVID-19 pandemic will depend on our ability as a nation to effect a rapid and widespread vaccination program while at the same time improving our preventive behaviors during this race to the finish line of pandemic control.

The acceleration of disease and death in the U.S. during March and April of 2020 overwhelmed the capacity of hospitals in some areas of the Northeast, compromising the ability of doctors and nurses to provide optimal care for COVID-19 patients. This phenomenon was subsequently repeated across the Southeast and West in June, in the Midwest and Dakotas over the summer and fall, and now has overwhelmed health systems in many parts of the nation as resurgences have occurred in previous hot spots that were initially controlled. The numerical toll is often expressed in cases, hospitalizations, ICU admissions and deaths, but the human toll is especially devastating because loved ones can not share the final moments of a spouse, parent, grandparent, brother, sister or child, who often pass away in isolated ICU units.

COVID-19 not only caused widespread illness and death, but quickly cratered the economy, with a resulting sharp decline in GDP. Through the first half of March, 2020, employment in the U.S. was at historically high levels, restaurants were full, schools and universities were open, and attendance at sporting events, theaters and other public venues was robust. Ten weeks later, as stay-at-home and other public health policies were instituted, 40 million individuals had submitted initial jobless claims and 25 million were receiving ongoing unemployment insurance benefits, as compared with 2 million before the pandemic. Combining state and federal unemployment assistance, 30 million Americans continue to receive such assistance. Those who could do their jobs from home did so. Those who had to work on-site – such as first-responders, health care workers, grocery store clerks, bus drivers, truck drivers, sanitation workers and many others – put themselves at risk by doing their jobs.

COVID-19 abruptly ended a period of continuous economic expansion since the recession of 2009. From a peak Gross Domestic Product (GDP) or $21.75 billion at the end of 2019, GDP declined to $19.52 billion at the end of the second quarter of 2020, a reduction of 10.25 percent. The second-quarter decline in GDP was the largest quarterly decline since the government began reporting these data 70 years ago. GDP has recovered to $21.17 billion at the end of the third quarter, and promises to continue to recover as vaccination proceeds.

This has been a “K-shaped” recovery, however, in which many segments of the economy have been able to continue through the pandemic (e.g., financial, education, government) or even thrive (e.g., “work from anywhere” technology, communications, on-line shopping, delivery services), while other segments -- mainly the hospitality, travel and other service businesses upon which a large number of low-wage workers depend – have been devastated. The upward-pointing arm of the “K” reflects an employed population who have maintained their empoyment income (and increased their wealth through investments), driving retail sales to new highs. The downward-pointing arm of the “K,” however, reflects the sudden loss of jobs and income among a large number of individuals who work in businesses that have downsized or closed. This has led to the specter of long food lines and, in the absence of government support through the other side of the economic recovery, will lead to credit delinquincies, defaults, evictions and homelessness.

The impact of COVID-19 on nonfarm employees in the U.S. is shown in the figure below from the St. Louis Fed. After a continuous, linear increase in the number of employees in the U.S. since the end of the Great Recession, to a peak of 150.5 million at the end of February 2020, the emergence of COVID-19 in March induced a decline in national employees to 130.3 million by the end of April, a reduction of 14.5 percent. A little more than half of this recdution in employment has been reversed through November 2020, but the curve appears to be plateauing well below the previous peak.

In May, 2020, the phased “re-opening” of the U.S. economy commenced. Although recommended checkpoints for graduated re-opening steps were provided by the Centers for

Disease Control and Prevention (CDC), the U.S. executive branch did not issue any mandated, nationwide rules. Rather, following a “federalist” philosophy, states and municipalities were left to create highly variable guidelines governing the opening of restaurants, hair salons, health clubs, beaches, retail shops, schools and universities. Consequently, there was substantial geographic variability in the use of testing and tracing protocols, facemasks, physical distancing and the size of gatherings. A similar federalist approach has initially been taken to the distribution of vaccines and to the creation and implementation of plans for vaccination of the population.

This reopening process began before the virus was under control: national case rates for infection with SARS-CoV-2 were in the range of 20,000 or more per day, as well as death rates of 1,000 or more per day, with some regions declining and others accelerating. Many states began the re-opening process before the recommended CDC checkpoint criteria were met, and accelerated the re-opening process through its phases without adhering to phase-based checkpoints. States that reopened earlier, and/or had more relaxed public health controls, had greater outbreaks of new cases.

How does the U.S. balance incremental employment and GDP against incremental disease and death? The COVID-19 pandemic is fundamentally changing the way we live, work and play. Its impact is likely to continue even after a vaccine and/or herd immunity is established. Between now and then, the pandemic will reshape our society and institutions.

Many of the central themes of “An Introduction to the US Health Care Industry” are playing out in real time by the evolving pandemic:

· the importance of public health measures, behavioral interventions and biomedical science on population health;

· the impact of politics on health care and health;

· the function – and dysfunction – of a market economy’s “invisible hand” in allocating resources such as diagnostic testing and personal protective equipment, and in fostering new personnel and technology needs in fields such as vaccine development and viral therapeutics, viral laboratory testing, contact tracing and telehealth;

· The inability of a market economy to address a public health crisis without government intervention;

· the role of innovation in the development of vaccines and therapeutics;

· the effectiveness of patient care and its financing under our historically established infrastructure of claims-based health insurance – both private and public – interfacing with a variety of stakeholders including doctors, hospitals, and drug companies;

· the impact on health and the health care industry of large-scale losses of employer-based health insurance;

· the economic value of life as implicitly calculated through policy decisions;

· the inequality of disease and mortality across diverse populations and income groups, and the impact of a viral pandemic in widening inequality in income, wealth and health;

· the impact on ambulatory, hospital and nursing home services; and

· the potential implications for health care reform.

This online supplement explores the effects of COVID-19 in the context of these core themes.

Setting the Stage

Chapter 1 set the stage for an analysis of the US health care industry by reviewing the trajectory of life expectancy since 1900. Due to the deployment of public health measures in the first part of the 20th century, and progress in biomedical science and medical practice since then, there had been steady improvement in life expectancy with two notable exceptions: one was the 1918-1920 downward spike in life expectancy due to “Spanish Flu,” which has eerie parallels to the COVID-19 pandemic; the other has been more recent decline in life expectancy due to diseases of despair, and now an even greater decline due to COVID-19.

A proposition in the theory of epidemiologic transition is that illnesses and deaths in the first half of the 20th century, predominantly due to bacteria and viruses, were gradually replaced by illnesses and deaths due to man-made and degenerative diseases. This proposition has been upended by the stark reality of the COVID-19 pandemic. While the second half of the twentieth century became an era of accelerating breakthroughs in science and technology to address man-made disease, as well as one of improved appreciation of the behavioral causes of acquired disease, the transition away from viral pandemics has clearly not been complete.

A global pandemic was not unanticipated. In an interview with Anna Rothschild in the Spring of 2019, Anthony Fauci, MD, director of the National Institute of Allergy and Infectious Diseases, stated the following in response to the question of what keeps him up at night: “[T]he thing I’m most concerned about as an infectious disease physician and as a public health person is the emergence of a new virus that the body doesn’t have any background experience with, that is very transmissible, highly transmissible from person to person, and has a high degree of morbidity and mortality. Now what I’ve essentially done is paint the picture of a pandemic influenza. It doesn’t have to be influenza. It could be something like SARS. SARS was really

quite scary. Thankfully, it kind of burned itself out by good public health measures. But the thing

that worries most of us in the field of public health is a respiratory illness that can spread even before someone is so sick that you want to keep them in bed. And that’s really the difference.”

Other notable figures also expressed prescient concerns. In a 2015 TED talk, Bill Gates showed a cartoon of a virus with spikes (see figure below), looking much like the SARS Co-V-2 virus responsible for COVID-19, and predicted that if anything kills millions of people over the next few decades, it will most likely be a virus “transmitted through the air” and not a nuclear war. He goes on to opine that, on the heels of the Ebola epidemic, the world in 2015 was not ready for the next viral pandemic, but stated that the Ebola epidemic could “serve as an early warning, a wake-up call, to get ready.” Gates closed by stating: “If we start now, we can be ready for the next pandemic.”

Clearly, the world and our nation were not ready. When survival tables over next few years are tabulated for the United States, the reduction in life expectancy caused by diseases of despair in recent years, while important in its own right, will barely be noticeable compared to the decline that will be seen because of COVID-19.

One of the key themes in Chapter 1 is that extensions in the duration and quality of life resulting from progress in biomedical science and clinical practice have been offset by increases in the prevalence of chronic medical conditions that are largely due to behavioral factors. A related point can be made about the variable impact of COVID-19 internationally, which has been related directly to differences between countries in the timing and extent of personal behaviors – i.e., wearing masks, maintaining physical distance, and avoiding large groups, especially indoors. In turn, variations among countries in these behaviors are related to differences in culture, leadership and political environment. Chapter 1 points out the behavioral basis for many forms of cardiovascular disease, cancer and other medical conditions that bcame prevalent beginning in the second half of the 20th century, and that much of the progress in treating these illnesses represented the triumph of biomedical science and its translation into clinical practiee. Similarly, biomedical science has come to the rescue against the COVID-19 pandemic, which has been intensified by behavioral factors.

Indeed, in setting the stage for an analysis of U.S. health care, Chapter 1 emphasized that population health status is often impacted more by prevention than by treatment. This is starkly exemplified by COVID-19. In an analysis of data available by May, 2020, for example, it was estimated that if preventive public health control measures in the U.S. were instituted one week earlier in the U.S., deaths directly attributable to COVID-19 could have been reduced by 55% by May, 2020. Indeed, had such earlier measures been instituted, the savings in illnesses and deaths (in comparison with the observed reality) would continue to accumulate, and facilitate the ability of vaccination to control the epidemic. An updated analysis published in November, found that more than two-thirds of all US COVID-19 deaths could have been prevented if the federal government had required all states to adopt policies that mirrored those of the earliest-acting states. Moreover, disparities in health status and the linkage between health and wealth have been accentuated by the pandemic: as will be illustrated, COVID-19 occurs much more commonly among minorities, the elderly, and those with low-incomes.

Overall, the core paradox of U.S. health care – that our nation has the worst population health among high-income countries despite spending about twice as much per person on health care – has been accentuated by the pandemic: The U.S. has state-of-the-art biomedical science and technology, extraordinary medical training that serves as an international model, advanced hospitals with the latest in ICU design and technology, workflows designed to meet the highest safety standards, and sophisticated digital medical record and communication platforms. Yet, our nation was ill-prepared for the virus as evidenced by the inability to curb spread of the virus in its early stages in comparison with peer nations internationally, and by rates of cases and deaths that continue to be among the highest in the world.

The political, cultural, historical and economic forces that shaped the U.S. health care industry, described in detail in Introduction to the US Health Care Industry, also shaped the nation’s response to COVID-19. Specifically, these forces led to a haphazard, uncoordinated response to COVID-19. Public health controls were delayed and fragmented. Diagnostic testing was initially flawed at the federal (CDC) level, and then inefficiently and unevenly developed and deployed in localities and health systems. The distribution of personal protective equipment (PPE) to needed health facilities was impeded by an imperfect marketplace in which prices were bid up by states competing with one another for PPE items, and in which there was a lack of clarity about federal-vs-state ownership of PPE. The rapid increase of COVID-19 cases in some areas, and the resulting need for diagnostic testing, ICU beds and ventilators, overwhelmed the capacities of well-equipped, elite hospitals and health systems. The fear of COVID-19 infection in viral “hotspots” led people with symptoms of acute medical conditions to stay at home instead of visiting an emergency room, adding to higher-than-expected death rates. Conflicting public messages combined with the politicization of preventive practices such as mask wearing and avoidance of large gatherings, especially indoors, led to increases in cases and deaths after the premature “re-opening” of local economies. And finally, the assignment of responsibility for vaccination plans and implementation to the states, already strapped for financial resourses and health care personnel, is a policy that repeats the failed federalist approach to PPE testing and tracing and imposes a needlessly greater challenge to our nation’s ability to mount a program of vaccination that will reach as many people as possible as quickly as possible.

The remainder of this supplement highlights the implications of COVID-19 for each of the major sections of An Introduction to the US Health Care Industry: economic underpinnings, historical evolution, contemporary environment and future reforms.

Economic Underpinnings of Health Care Services

In this section of the book, the assumptions underlying a well-functioning market economy were described, and an explanation was given for why imperfections in the market for health care goods and services – related to the intrinsic nature of health care and to the establishment of a claims-based, fee-for-service system of health insurance – have led to higher prices and higher utilization than would have occurred under a competitive market environment.

One major impact of COVID-19 was reduced utilization by fiat. Policies regarding business closures and stay-at-home measures to combat the virus, instituted by mid-March, 2020 in most states, typically also included curtailing elective surgical cases and restrictions on in-person medical visits. Thus, there was a marked downward shift in the demand curve for health care. This would have resulted in reduced prices if a competitive market were operating. In health care, however, price is determined not by the intersection of supply and demand but by negotiated contract between providers, hospitals and insurers. Consequently, prices generally remained the same despite the reduction in demand. Another important phenomenon affecting utilization was the substitution of telehealth for in-person visits, spurred by increased rates of reimbursement for telehealth visits during COVID-19.

Based on data from 51 health care systems in 40 states, comparison of a two-week period in late March/early April, 2020 with the same two weeks in 2019 revealed a decline of 54 percent in the number of unique patients who sought hospital care across all service lines. While health care service volumes are now recovering, and will increase towards baseline (i.e., pre-COVID-19) levels as public health controls are relaxed, utilization per capita of conventional health care services may never reach previous pre-COVID-19 levels, since many individuals have found that they can take care of their medical needs in other ways.

Besides its effect on utilization, another key implication of the COVID-19 pandemic relates to the inability of a market-based industry to respond to a public health crisis. While physicians and hospitals are not pure profit-maximizers, sustainability of any business in a market economy requires that revenues exceed costs. This reality, captured by the “no margin, no mission” motto of the Daughters of Charity, applies to doctors, other health care providers, hospitals, nursing homes, imaging and outpatient surgery centers, diagnostic test developers, drug companies, PPE manufacturers, and other economic stakeholders. These business entities are individually ill-equipped and unprepared to mount an effective, comprehensive response to a viral pandemic. Management of a public good, such as prevention or containment of a viral pandemic, requires a well-thought-out, coordinated, centralized governmental intervention. In the U.S., there was no uniform national policy regarding masks, physical distance, indoor gatherings or testing and tracing. Instead, there was decentralization of responsibility to states and outsourcing of the manufacture of diagnostic testing, PPE, ventilators and other needed equipment to the private sector. The overall result was a delayed, haphazard, uncoordinated and economically inefficient response to the COVID-19 pandemic, leading to sequential, epidemic outbreaks in different regions that is prolonging its time course nationally.

The figure shown below is a conceptual diagram constructed by David Ho, a distinguished virologist, comparing a national policy of uniform public health controls with sequential regional policies. This figure, which is a screenshot from a television interview, illustrates the idea that sequential outbreaks prolong the duration of a pandemic.

Actual rates of COVID-19 per million population in different states across the U.S. reflect sequential outbreaks in accordance with Dr. Ho’s model. Using data from the Johns Hopkins

University Center for Systems Science and Engineering, Professor Wade Fagen-Ulmschneider of the University of Illinois created an interactive database that allows construction of the first figure below (as of Jan 3, 2021). The first wave of outbreaks was mainly in New York, New Jersey and Connecticut, reflecting millions of passengers on flights from Europe to New York before such flights were closed down. This was followed by a second wave in states such as Arizona, Florida and Louisiana, and a third wave in states such as N. Dakota, Wisconsin and Iowa. A fourth wave has now developed, including states likek New York, California, Tennessee and Mississippi, that had previously experienced large outbreaks and in which there is now a resurgence of cases

There is a several-week lag between a rise in COVID-19 cases and its impact on mortality. After public health controls were instituted in many regions of the U.S. through the Spring, there was a steady decline in cases. Relaxation of these controls in a number of states around Memorial Day, however, was associated with a subsequent increase in daily deaths (Covid Tracking Project. second figure below, data as of Jan 1, 2021), rising to about 1,000 throughout the summer of 2020, and to about 2,500 – 3,500 by the end of 2020. The cumulative death toll in the U.S. thus far is 350,000, about 1 death per 1,000 population.

South Korea and New Zealand stand as examples of how early, intensive, and coordinated responses led to control of the viral spread with comparatively minimal fatalities. In mid March, the U.S. and South Korea had the same number of deaths due to COVID-19; seven weeks later, South

Korea had fewer than 300 deaths while the U.S. had more than 70,000. In New Zealand, after an initial

exponential increase in case numbers due to the entry of students and tourists from other countries, strict public health controls were implemented in a uniform manner across the nation. Cases and deaths declined rapidly. Indeed, based on data from Johns Hopkins (as of 1-3-21), the U.S. has the fourth highest rate of deaths per 100,000 population internationally among the most affected countries. As of October 10, 2020, deaths per 100,000 population in the US were 105.7, while the respective rates in many major countries were far lower: e.g., Australia (3.64), Japan (2.60), New Zealand (0.51), and China (0.34). The lowest death rate per 100,000 population is in Taiwan (0.03). To our north, the rate for Canada is 48.12.

On the other hand, several European countries that were able to reduce daily case rates to very low levels for several months after the initial outbreak of cases in March and April, 2020, have now experienced a resurgence of cases that began in association with relaxation of public health measures during the summer tourist season.

Chapter 7 reviewed inequalities in wealth, health and access to care. It was shown that the distributions of income and wealth in the United States have become increasingly unequal since the 1980s, such that the top 1 percent now earns 23 percent of total income and holds 40 percent of total wealth. Pre COVID-19, health status also became increasingly unequal as a function of income and education. Post COVID-19, inequalities in both income and health are likely to

widen even more because of differences in the ability to work from home. Those who can work

at home are likely to be educated, higher-income, white workers in cognitive occupations. By contrast, “essential” workers who must work on site, such as mass transit employees, supermarket cashiers, and nursing home assistants, are likely to be less educated, lower-income, and non-white. Data from the Bureau of Labor Statistics, as reported by the New

York Times, indicate that 61.5 percent of people who are in the upper quarter of income can work from home, while only 9.2 percent of those in the lower quarter of income can do so.

People with lower incomes were more likely to become unemployed due to COVID-19 as well. This is reflected in the “K-shaped” economy as introduced earlier. By mid-May, 2020, according to a Federal Reserve survey, almost 40 percent of individuals earning less than $40,000 lost their jobs. Contributing to this extraordinary rise in unemployment, the steepness of which was unprecedented, was a Paycheck Protection Program (PPP) that initially proved to be relatively inaccessible to small businesses, which often employ lower-wage minority workers. (The average loan amounts in the second phase of the PPP indicated that the needs of small businesses were better addressed.) As reported by MarketWatch, a Gallup poll released on June 1, 2020, revealed that 95% of workers in low-income households had either been laid off as a result of the COVID-19 pandemic (37%) or experienced a loss in income (58%). A loss of jobs results in reduced access to health care among those newly unemployed, , either through the loss of employer-sponsored health insurance or the lack of sufficient funds to purchase individual health insurance through Marketplace exchanges or other means. According to a study conducted by the nonpartisan FamiliesUSA, job losses between February and May, 2020 resulted in 5.4 million workers losing their health insurance, a figure that was almost 40 percent higher than the loss of insurance in any previous recorded recession. Because the greatest loss in employment occurred among people of color, they also suffered the greatest loss of health insurance.

Minority-owned businesses have also been disproportionately affected by COVID-19. It has been estimated that 90 – 95 percent of Black-owned and Latinx-owned businesses had little chance of receiving a PPP loan due to the lack of strong banking relationships. Analysis of data from the Current Population Survey indicated that between February and March, 2020, there were a loss of 41 and 32 percent loss of Black-owned businesses, respectively, and in comparison with a 17 percent loss of White-owned businesses.

Finally, COVID-19 has taken a disproportionate toll on the health of African-Americans and other minorities. This has occurred not only because of less access to care, but because of a variety of attributes unrelated to access, including increased co-morbidities and where and how people live, including a greater reliance on public transit. Analysis from the the CDC that combines individual and county data, as reported in the New York Times, show a rate of infection from the SARS-CoV-2 virus that is three times higher in Latinx and African Americans

than in their white neighbors, and a mortality rate that is twice as high. These are averages; in an analysis of mortality by age performed by Brookings (see chart below), the ratio of death rates comparing Black people to white people ranged from 10:1 in the 35-44 year old age group to 2:1 in the 85 years and over group. Hispanic/Latino people had death rates that were somewhat lower than Black people but still much higher than white people.

In a May 7, 2020 New Yorker interview, Evelynn Hammonds, who serves as chair of Harvard’s department of history of science, reviewed the intersection between race, disease, and pandemics. Historical antecedents make clear, she argues, that epidemic diseases “lay bare and make visible inequalities in a society.

Historical Evolution

Chapters 8-12 describe the origins and evolution of the various stakeholders that now make up the US health care industry. Important themes included: providers and hospitals ensuring that they would be paid primarily on a fee-for-service basis; a health insurance enterprise that arose to support this system with claims-based coverage; facilitation of the industry’s growth by political interventions that

provided tax benefits for employer-based health insurance and created government programs (Medicare, Medicaid and Marketplace Exchanges) that solidified the claims-based insurance backbone;

drug and device manufacturers that were supported by a series of laws and policies (for example, those around patent evergreening and the proscriptions against both price negotiation and the use of cost considerations in making coverage determinations); and decentralized, state administration of some programs, such as Medicaid.

This infrastructure created a health care industry in which each segment pursues its individual goals based on a market-based philosophy. A viral epidemic, however, has far reaching implications for overall population health and the broad economy, matters that no one health care entity or industry segment can successfully address. Public health investment in the prevention and containment of a viral pandemic, or in its mitigation once a pandemic is entrenched, is a public good requiring government action. Education of the general population around specific personal health practices and public health control measures is not fully the responsibility of any individual stakeholder in the health care industry. Neither are the population-wide testing and tracing protocols that are needed to contain outbreaks, nor the rapid development and deployment of vaccines. The benefits of preventing the spread of viral infection go beyond the individual and accrue to the population at large.

As has occurred frequently in the evolution of US health care, addressing the COVID-19 pandemic was seen through a decentralized, market-driven lens. While this may seem attractive in theory, it proved to be extremely difficult to implement in practice. Hospitals had built their business models based on high occupancy rates of general medical-surgical beds and ICUs; they therefore had little capacity for even a moderate influx of additional patients requiring ICU beds and ventilators, much less surge capacity for a rapid influx of cases. States were seen as responsible for utilizing stockpiles of PPE and ventilators, and for procuring and coordinating such equipment as needed. But most states had no such stockpiles, and found themselves in bidding wars with each other for the same equipment.

Furthermore, the manufacture and distribution of ventilators, PPE and diagnostic tests were left to the invisible hand of the market instead of being actively coordinated and supported at the federal level. A similar approach is being taken by the outgoing Trump administration with respect to vaccination. Hopefully, a more coordinated national approach, with significant investment of federal resources, will occur under the incoming Biden administration.

Such coordination could have occurred from the beginning of the pandemic under the Defense Production Act of 1950 (DPA), which allows the President to accept and prioritize contracts for materials deemed necessary for the national defense regardless of a loss incurred by business, to designate materials to be prohibited from hoarding or price gouging, and to allocate materials, services and facilities to promote national defense. While President Trump issued an executive order on March 18th that activated the provisions of the DPA, he also stated that “hopefully there will be no need” to implement these executive orders, and that he would do so only in a “worst-case scenario.” On balance, there has been limited federal activity related to the implementation and enforcement of these executive orders. One notable example pertains to masks, which are thought to be the single most important public health tool available to combat the spread of COVID-19. The DPA could have been used to direct the production and subsidy of medical quality, N-95 masks for the entire population, and the importance of their consistent use could have been emphasized in consistent, widespread public messaging across mainstream and social media. Instead, the U.S. population accessed masks produced with variable quality in the marketplace, and their use was impeded by confusing messaging. The incoming administration has indicated that the DPA will be invoked to address some of these issues around testing and PPP, and especially to facilitate widespread and rapid vaccination.

In areas where an exponential surge in cases initially occurred, notably in New York, New Jersey and Connecticut due to a large influx of asymptomatic and presymptomatic carriers from Europe in February, there was a significant shortage of ventilators, PPE for health care workers, and diagnostic tests. Hoarding and price gauging for these items was extensive. Shortages impaired the quality of care provided to COVID-19 patients and caused the spread of infection among medical personnel.

Because of the federal emphasis on local procurement of diagnostic testing resources, and reliance on market players to develop and commercialize diagnostic test kits and the equipment needed to analyze the results, testing capacity was initially extremely limited in the U.S., and therefore reserved for only the sickest patients and their providers. In January and February of 2020, economists and national security advisors warned the White House of the coming pandemic, describing it as the “greatest security threat” of the Trump presidency, and indicating a health emergency on par with the Spanish Flu a century ago. These warnings, however, were not publicly conveyed even though the president privately acknowledged to reporter Bob Wodward in January, 2020 that the coronaviruss would be “tricky” to control because of its airborne transmission and was “deadly stuff.” Among the many implications of downplaying this expert advice, one that affected diagnostic testing was the delay in establishing a Medicare billing code for a SARS Co-V-2 diagnostic test at a time when the limited test capacity focused on high-risk, older individuals covered by Medicare. Moreover, for the first six months of the pandemic, the only tests available were based on polymerase chain reaction (PCR) amplification of the viral genome, a method that required time-consuming extraction of viral RNA and specialized analytic equipment. For hospitals that developed their own tests, shortages occurred in needed reagents, specialized swabs, and other materials. Subsequently, when testing became more widespread, extending to younger individuals who were covered by private health insurance, commercial labs charged insurance companies up to eight times the amount that Medicare paid for these tests.

By contrast, the success of South Korea in controlling the spread of COVID-19, as highlighted earlier, was in part the result of its approach to testing. As pointed out by Elisabeth Rosenthal, MD, South Korea “engaged its private test manufacturers with a plan in January, promising them quick approval for a coronavirus test and the widespread use of it in nationally organized and financed testing. With a guaranteed market, 10,000 tests a day were available within weeks, allowing the country to avert a shutdown.” By the time diagnostic testing was needed in the U.S., the proven S. Korea test could have been implemented immediately and extensively had the federal government utilized the authorities of the Defense Production Act to do so.

During the initial surge in cases in the Northeast, a shortage of tests hampered efforts to test contacts. Moreover, delays in results of 7 days or more meant that asymptomatic or presymptomatic contacts who did not self-isolate infected many others before a positive test result was known. High-throughput testing with short turn-around times became available, but in a fragmented and inadequate manner. Thus, when surges in cases occurred across the sunbelt in the summer of 2020, the fragmented testing capabilities that had evolved to that point could not meet the moment: in affected cities, there were long lines for tests, delays of a week or more for results to be reported, and antiquated, inadequate technology such as sending results by fax, which collectively hampered case reporting and contact tracting, thus allowing the disease to spread relatively unfettered by public health controls. As reported by Sarah Kliff and Margot Sanger-Katz, the director of the Harris County Public Health Department (which contains Houston), Dr. Umair Shah, stated that: “From an operational standpoint … the data is [sic] moving slower than the disease.”

Using alternate methods, point-of-care tests from samples of saliva or nasal swabs were developed by a variety of laboratories – often partnerships between Universities and industry – in late Spring, but initially were available on a limited basis, e.g., for hospital house staff or professional athletes. Such tests became more widely available by the end of the summer and began to be used in conjunction with professional sporting events and the opening of Universities. On December 15, 2020, an over-the-counter Covid test was given Emergency Use Authorization by the FDA. This test is based on the detection of fragments of SARS-CoV-2 protein antigens and is less accurate than a PCR test for the virus’s genome. Nonetheless, it is relatively inexpensive, takes 15 minutes, and can be done at home uksing a simple nasal swab. As vaccine distribution rolls out, it can mitigate against spread of the virus if used by those who are concerned about an exposure, and/or who work in jobs that involve frequent public contact.

Successful contact tracing, another key to control of viral spread, is dependent not only on testing but on knowledge of the location of contacts. In contrast with Canada and countries in Western Europe and Asia that have made significant progress in controlling COVID-19, as of late July, the U.S. has not employed coronavirus tracing apps, as has been described in Statista. In early September, a partnership between Google and Apple that had previously partnered to produce a tracing app announced an updated, automated platform for COVID-19 contact notification that could be deployed on a state-by-state basis if states chose to do so without having to build their own app.

Contemporary Environment

An analysis of care, cost and access in the United States health care industry is presented in chapters 13-20.

Care

The “care” component was analyzed in terms of evidence-based practice, cost-effectiveness

and cost-utility analysis, regulatory affairs, and patient care quality and safety. COVID-19 impacts all of these areas:

Evidence-based practice.

The tension between wanting quick solutions to the pandemic (i.e., drugs for treatment and vaccines for prevention), and the timeline needed to establish safety and efficacy for drugs and vaccines according to accepted standards, has highlighted the importance of randomized clinical trials (RCTs).

Treatments: The first antiviral medication found to be effective in treating COVID-19 in acutely ill hospitalized patients was remdesivir, based on an a phase 3, placebo-controlled RCT, the “Adaptive Covid-19 Treatment Trial,” for 1063 patients with evidence of lower respiratory tract involvement. Those who received remdesivir had a significantly faster median time to recovery (11 days) than those who received placebo (15 days). Results thus far for patients with more moderate disease are less clear, however. In an open-label, phase 3 RCT of 584 patients with moderate COVID-19, at 11 days after initiation of treatment in comparison with standard care, patients receiving a 10-day course of remdesivir did not show a significantly higher odds of a better clinical status distribution on a 7-point ordinal scale than patients receiving standard treatment. Those receiving a 5-day course did have a statistically significant improvement in clinical status, although the authors opined that this “difference was of uncertain clinical importance.”

Clinical improvement in comparison with placebo or standard care is not the same as a cure; the use of virus-neutralizing monoclonal antibodies was authorized for emergency use by the FDA in November. A variety of candidate agents that employ different molecular targets are also being studied. Advances in the clinical management of patients with COVID-19 who are sick enough to be in ICUs are continuing as clinicians gather more experience in treating the disease. These advances currently include the judicious use of steroids, anticoagulants and antiplatelet drugs, and greater reliance on oxygen delivered through face masks rather than a ventilator.

The efficacy of hydroxychloroquine, an anti-malaria drug, was initially granted emergency use authorization (EUA) by the FDA. This drug was touted by the U.S. president, against the advice of his scientific and public health leadership, as an effective treatment of COVID-19 based on anecdotal reports and small case series (the lowest levels of evidence reviewed in chapter 13). On June 15, 2020, the FDA withdrew its emergency use authorization, out of concern about accumulating evidence on the potential for cardiac toxicity, and because of the absence of RCT data demonstrating efficacy. Regarding the efficacy of hydroxychloroquine as a prophylactic drug, a randomized, double-blind, placebo-controlled trial published in the New England Journal of Medicine in 821 asymptomatic individuals exposed to SARS-Co-V-2 found no evidence that it prevented infection. For those with early symptoms of COVID-19, an RCT published in the Annals of Internal Medicine found no difference between hydroxychloroquine and placebo in the reduction of symptom severity.

The transfusion of serum from patients convalescing from viral infection, which contains antibodies against the infecting virus, has been shown to be effective in trenting patients during previous outbreaks of respirtatory viral epidemics. In the U.S., randomized trials are ongoing to assess the safety and efficacy of convalescent serum in the treatment of hospitalized patients with COVID-19. In late August, 2020, data from a national observational study, run by the Mayo Clinic, were posted on a non-peer-reviewed preprint server. Among 35,322 patients followed in this open-label protocol, the 7-day mortality rate was 8.9 percent for patients receiving plasma with a high antibody titer, as compared with 11.6% for those receiving plasma with low titers. Similarly, the 30-day mortality was 21.6 percent vs. 26.7 percent for high and low antibody titers, respectively.

While these data are promising in suggesting potential benefit, obseravational studies are always subject to selection and other biases, and in this case it is not known whether the estimated 5.1 percent lower mortality observed at 30 days in the patients receiving plasma with high antibody titers will be sustained. In Chapter 13, it was emphasized that randomized controlled trials (RCTs) are needed to establish the efficacy of medical treatments, and examples were given of widespread medical treatments that were promulgated on the basis of observational studies only to be found ineffective by RCTs.

In the case of convalescent serum for the treatment of COVID-19, NIH leaders considered the Mayo Clinic data from a nonrandomized design to be insufficient to justify an EUA by the FDA. Shortly thereafter, however, an EUA was granted based in large part on these data. In an accompanying news conference the FDA commissioner exaggerated the findings by citing a relative improvement in mortality as though it were an absolute improvement. This misrepresentation of the data were criticized by Mayo investigators and other scientists, and the statement was retracted by the commissioner the nextday. This episode raised the issue of political interference with an agency that is supposed to be independent in its scientific assessments. The pervasive role of political influence on the science of evaluating treatment efficacy was discussed in Chapter 14. COVID-19 has been no different. As noted at the outset of this supplement, forces that have historically shaped the overall structure of the U.S. health care industry are the same as those that are now shaping the nation’s response to COVID-19. Pt differently: “Plus ça change, plus c'est la même chose.”

An insidious adverse effect of the politically tinged promotion of convalescent serum to treat COVID-19, and the FDA’s granting of an emergency use authorization, is that we might now never know its true efficacy because the RCTs will now be difficult if not impossible to complete. How many patients will agree to particpate in an RCT in which there is a 50 percent chance that they will receive placebo when they could access convalescent serum with 100 percent certainty under the EUA?

Preventive behaviors: In early March, 2020, most states imposed stay-at-home orders, a lockdown on economic activity outside of “essential” businesses and services, and mandates or strong recommendations regarding hand-washing, the wearing of facemasks, maintaining a distance between individuals of at least 6 feet, and avoiding indoor gatherings. There was substantial variation, however, in the timing and strictness of these policies among states, and among counties within states. One study confirmed the importance of “social distance” by comparing the growth of confirmed COVID-19 cases across U.S. counties between March 1 and April 27: It was estimated that “adoption of government-imposed social distancing measures reduced the daily growth rate of confirmed COVID-19 cases by 5.4 percentage points after one to five days, 6.8 percentage points after six to ten days, 8.2 percentage points after eleven to fifteen days, and 9.1 percentage points after sixteen to twenty days.” Modeling data on mobility patterns in the U.S., as reported in The Lancet, confirm the importance of social distancing in controlling viral spread.

Masks have also been shown to be important in the slow of COVID-19 spread. In a natural experiment in Kansas, where 15 counties put into place mask mandates while 90 counties did not. As seen in the figure below, COVID-19 cases per 100,000 population remained flat in counties without mask mandates while declining sharply in counties that mandated masks.

Ultimately, given the absence of population-wide adherence to core public health measures in the U.S., control of the SARS-Co-V-2 virus responsible for COVID-19 will require herd immunity or a vaccine. Current studies of exposure based on the prevalence of individuals with circulating antibodies against SARS-CoV-2 would suggest that herd immunity is years away. Moreover, if there prove to be no safe and effective vaccines or treatments, the development of herd immunity implies hundreds of millions of COVID-19 illnesses in the U.S. – along with it’s as-yet-unknown long-term sequellae – and millions of deaths.

Vaccines: In view of the absence of a simple, highly effective treatment, and the lapses in population adherence to preventive peronal behaviors, a safe and effective vaccine had always been seen as the medical savior against COVID-19. While new vaccines have always taken many years to pass FDA milestones in establishing safety and efficacy, much attention and effort was directed at shortening this timeframe without skipping any steps that would potentially jeopardize safety or raise concerns about the validity of clinical trial results.

Vaccines against a viral infection work by producing antibodies to the virus. Historically, vaccines have been created by attempting to mimic the active immunity that occurs when a person is infected by the virus. This was accomplished in most vaccines by injecting inactive (“killed”) virus into an individual; these inactivated viruses still contain their signature protein coat that elicits the antibody response. Vaccines that have been developed against the SARS-CoV-2 virus work by a different mechanism. Instead of injecting inactivated virus, a genetic message is introduced into a person’s cells, using messenger RNA or viral vectors, to produce the specific spike proteins of the SARS-CoV-2 virus. These are the antigens that then elicit the antibodies that protect against infection with the live virus. Scientifically, these new methods of vaccine design, based on government funded, basic-science research over the past several decades as reported in Scientific American, have led to the development of safe and effective vaccines in a time frame that would have been considered impossible in the past. In addition to the excellent Scientific American article linked above, a thorough and insightful history has been written by Lawrence Wright in the New Yorker.

This process was greatly assisted in the U.S. by “Operation Warp Speed,” which had a goal of helping industry to develop and establish the safety and efficacy of vaccines that could scale up to deliver 300 million vaccine doses, with aa goal of 20 million people vaccinated by January, 2021. While the U.S. has not met its goals for the pace of vaccination (5 million vaccinated in early January, 2021) it is truly an extraordinary achievement that two vaccines based on a messenger RNA platform, one produced by a partnership between Moderna and the NIH and the other by a partnership between AstrZeneca and Oxford University, received emergency use authorization by the FDA in the second half of December, 2020, less than a year after the DNA sequence of the virus was reported by Chinese scientists. By running parts of the process in parallel rather than in sequence, and by manufacturing large amounts of vaccine even before it was known whether the vaccine would be approved for use, the time from vaccine design to population vaccination was dramatically shortened without skipping steps that ensures safety and efficacy.

As an example of the efficacy data that were independently reviewed by a data safety and monitoring committee before FDA authorizaion, shown below is a graph taken from Pfizer’s report to the FDA. In this double-blind, randomized clinical trial comparing vaccine and placebo, it can be seen that starting about 10 days after injection with the placebo or vaccine, those receiving the vaccine (in blue) show hardly any additional infections, while cases among those receiving the placebo (in orange) continue to accumulate. It can also be seen that the two curves diverge before the second “booster” dose of vaccine on day 21. Comparing rate of infections in the vaccine group vs. the placebo group, the Pfizer vaccine was found to be about 95 percent effective in preventing COVID-19. Similar efficacy was found for the Moderna vaccine.

Minor side effects (e.g., sore arm, headache, tiredness) were seen at rates similar to those experienced with other vaccines. Anaphylactic reactions were seen in rare cases. According to the CDC, it is recommended that anyone who has a severe allergy (e.g., anaphylaxis) to any of the Pfizer vaccine ingredients should not receive this vaccine.

At the time of this writing in early January, 2021, much more vaccine has been produced than is getting into people’s arms. As with COVID-19 testing and the distribution of personal

protective equipment (PPE), there has been no national vaccination plan. Vaccines are being distributed to the states, and each state is expected to develop its own plans for vaccinating its residents. There is a large amount of variability among states in the amount of planning they have done, and in the resources that they have available to execute any plan that has been developed. This mindset of “leave it to the states” will hopefully change with the new administration in the White House. It’s hard to think of a more pressing national challenge, which merits the needed financial and human resources from the federal government, than a national plan to vaccinate as many people as quickly as possible.

Cost-utility analysis

Cost-benefit analysis, as well as its cost-utility analog when health care interventions are involved, is the public sector version of supply-demand analysis in the private sector. To conduct cost-benefit or cost-utility analysis for public projects, or for health care initiatives that save or extend lives, it is necessary to value life. The instinctive response to the notion of putting a dollar value on life is that it is impossible to “price the priceless.” Yet for costly public projects that result in lives saved, like those considered by government entities such as the Consumer Product Safety Commission, the Environment Protection Agency, the Department of Transportation and Federal Aviation Administration, valuing life is routinely done to assess whether taxpayer dollars should be invested in the proposed project. Likewise, to assess whether a new drug should be approved for use by government-supported health programs, in most countries its cost in saving a predicted number of quality-adjusted life years (QALYs) is compared against some benchmark of the dollar value of a QALY. While this is not done explicitly in the U.S. because of political considerations discussed in Chapter 14, policy decisions pertaining to COVID-19 implicitly value life.

Faced with a deadly, novel pandemic virus that is spread mainly through airborne transmission person-to-person, for which neither a drug treatment nor a vaccine is available, the major ways to protect against widespread infection and death is to maintain physical distance between one another, to wear masks and to avoid large gatherings, especially indoors. To effect these public health control measures, most states in the U.S. initially closed all but “essential” businesses and imposed stay-at-home policies. There is an economic cost to such measures, including increased unemployment and reduced GDP, but the implicit calculation was that saving lives was worth more than the cost of constraining the economy.

At the time that these policies were instituted in early-mid March, 2020, no reliable data were available on how many lives would be saved or on the immediate or downstream economic costs. It just seemed like the “right” decision to impose public health controls to avert what was predicted to be hundreds of thousands of deaths from COVID-19. And when it was believed several weeks later that the economic pain of continuing the “shutdown” of the economy exacted too great a cost: even when the number of lives lost eclipsed 100,000 – and then 200,000 and 300,000 – an implicit calculation was made that the incremental benefit of “reopening the economy” was of greater value than the incremental lives lost from potentially premature reopening.

It is too early to make even rough calculations on the implicit benefit/cost ratio, as we do not have reliable data on either the numerator or denominator. But COVID-19 has brought into focus the fact that in health related issues, we inevitably engage in valuing life. Having crossed this Rubicon, U.S. policies on utilizing cost in making coverage decisions broadly about health care treatments will hopefully catch up to the rest of the developed world.

Regulatory Affairs

COVID-19 prompted an inconsistent regulatory response from the executive branch of the federal government. In some aspects, like the acquisition and distribution of personal protective equipment (PPE), ventilators and laboratory testing, the White House followed a federalist philosophy and assigned responsibility to the states. The genesis of this position has its origins in the original Supreme Court case of Gibbons v. Ogden. Under this unanimous decision, the ability to impose isolation and quarantine conditions was substantially reserved unto the states. On the other hand, the commerce clause of the Constitution allows Congress to respond to a public health crisis that affects interstate trade, and the Defense Production Act of 1950 (DPA) gives the federal government broad authority to direct private companies to meet the needs of national defense. Since its signing by Harry S. Truman, the DPA has been used by many presidents in cases of domestic emergencies and recovery from terrorist attacks. In the case of COVID-19, given the movement of infected individuals across state borders, the DPA could have been used to ensure the coordinated production of needed supplies in areas where large outbreaks occurred. As noted above, in practice the DPA was used only sparingly to meet PPE, ventilator, and diagnostic testing needs early in the pandemic.

In other respects, a federalist philosophy was replaced initially by an expression of absolute executive branch power to control the opening of the economy and to overrule any state Governor’s COVID-19 edicts. Many legal scholars and sitting governors found this assertion to be without legal basis. Later, without invoking executive authority but using political influence, the White House was successful in prompting some governors who were aligned with the president to reopen their state economies early. Such actions subsequently led to large outbreaks in these states.

Besides regulatory issues affecting the production and procurement of medical supplies and the closing and opening of the economy, another set of regulatory matters prompted by COVID-19 pertains to privacy rights under HIPAA. To combat the spread of the virus, broader knowledge of the identity of infected patients and tracing information on their contacts are required. Whether information on patients’ prior or current infected COVID-19 status will have a discriminatory impact for their future employment or health care costs are unknown.

The fiscal response to COVID-19 by Congress has also impacted the Anti-Kickback and Stark laws. Recent Congressional stimulus bills and their provider payment and rate-cut formulas (to help restore many health care providers to a “functional” level) have likely undercut the cost savings, waste avoidance and high integrity goals under the original legislative intents of the Anti-Kickback and Stark laws. As reported in Kaiser Health News and the New York Times respectively, maintaining high prudence in controlling financial healthcare waste and mandating discipline for healthcare providers to adjust to reduced federal reimbursements were seemingly both ignored:

“… More than 3,000 hospitals that treat outsize numbers of Medicaid or uninsured patients, for instance, will share in an $8 billion windfall through the stimulus provision that reverses cuts in their Medicaid payments for 2020 and 2021. As was recently reported hospitals will rake in at least $3 billion more because of a temporary suspension of a 2% cut in Medicare fees, according to the Federation of American Hospitals, which represents more than 1,000 for-profit hospitals and health systems.

In March, lawmakers sought to address that with a vast federal economic stimulus package that included $175 billion for the Department of Health and Human Services to hand out in grants to hospitals. But the formulas to determine how much money hospitals receive were based largely on their revenue, not their financial needs. As a result, hospitals serving wealthier patients have received far more funding than those that treat low-income patients, according to a study by the Kaiser Family Foundation.”

Depending on the course of the COVID-19 pandemic and the evolving political environment, it is unclear whether there will be a return to the same levels of congressional focus and zealous executive branch enforcement of these core healthcare regulatory laws.

Safety and quality

Conflicted messaging in the U.S. between public health officals and scientists regarding the importance of uniform public health measures has jeopardized the safety of the U.S. population with regard to morbidity and mortality from COVID-19. Ideally, there should have been consistent and compelling communication that wearing masks, physical distancing and avoiding large gatherings is a public health imperative that saves lives. But instead of communicating that Americans should uniformly take these measures to protect one another from the spread of infection – analogous to the prohibition against indoor smoking to protect others from cancer due to second-hand smoke, and the enforcement of speed limits to protect others from high-speed driving – wearing masks, physical distancing and avoiding large gatherings have been presented by the U.S. President and many governors as an optional decision in which there is individual choice as a reflection of personal freedom. The lack of uniform public health measures led to a succession of many outbreaks of COVID-19 throughout the nation, and ultimately a reversal of the decline in cases that had occurred nationally during Spring, 2020. Unfortunately, but predictably, in October 2020 there has been a steeper rise in cases. Conspicuously, following an early October event at the White House in which public health measures were not observed, an outbreak occurred among White House officials, including the President, and among members of Congress, staff, reporters and others attending the event.

For those individuals who become sick with COVID-19, the safety with which they can be evaluated and treated in health care facilities has been impacted by the spread of the pandemic and our nation’s response. Before COVID-19, hospitals, ambulatory centers, nursing homes and other health care facilities expended enormous effort to ensure an environment of high-quality, safe health care, as described in Chapter 16. Now they have an additional challenge: protecting their patients and health care staff against COVID-19.

Despite early warnings of the coming pandemic and the need to plan for the production and distribution of PPE to health care workers, availability of PPE was inadequate when the surge in COVID-19 cases occurred. Time summarized the situation in late March, 2020: “In more than a dozen interviews, medical professionals from California to New York painted a picture of scarce resources, growing anxieties, and frustrations with hospital administrators and the government for failing to adequately prepare. Chief among their concerns was the lack of personal protective equipment (PPE), including masks, gowns and eye gear…[A] lack of this gear means they face a high risk of exposure to the virus—which, in turn, means accidentally exposing other patients, their own families, and their colleagues at a time when hospitals cannot afford to have critical personnel on the sidelines.”

These shortages continued into late April. A summary of 17 interviews of health care workers across the U.S. found that states and hospitals faced unusual challenges in their efforts to secure PPE: a strained global supply chain and the administration’s “encouragement of states to hunt down supplies on their own has created a chaotic competition for PPE and medical equipment. In some cases, states have accused the federal government of seizing shipments of protective equipment to distribute to another region, though the Federal Emergency Management Agency has denied those claims.” One hospital physician in Georgia was quoted as saying: “There’s no way that anyone could possibly think that what is happening now is acceptable … To feel that you can’t do your job without begging, especially if you’re putting your body on the line, that you can’t get the tools you need without being gaslighted or interrogated, there’s something belittling and patronizing about it.”

A British study assessed the risk of hospital-acquired SARS-Co-V-2 infection. It was estimated that hospital-acquired infection was responsible for 20 percent of COVID-19 cases among patients, but almost 90 percent of cases among health care workers.

Cost

Chapters 16-19 address the role of price and quantity in determining health care expenditures (or “cost”), and the impact of market imperfections. Regarding price, a variety of factors prop up the prices of health care goods and services at higher levels than they would be if patients were responsible for the full price and if a well-functioning market economy for health care were operational. These factors include health insurance, monopolistic aspects of hospitals and physicians, and drug patents and their evergreening. Similarly, a variety of factors support the utilization of health care goods and services at higher levels than would occur at a competitive market equilibrium. These factors include insurance-based price subsidies, co-pays and deductibles, drug rebates and coupons, and induced demand by providers and drug and device manufacturers.

The COVID-19 pandemic does not change the fundamental dynamics of these market imperfections. Adding COVID-19 to this historical chassis, however, is likely to have an enduring effect on utilization and price. As already noted, there was a marked reduction in hospital volumes during April, 2020, when much of the country was observing state and local stay-at-home orders, and when hospitals were asked not to perform elective surgical cases. This reduction in volume reflected not only restrictions on elective cases, but fears about becoming infected in a hospital environment. Many consumers of health care learned how to access needed medical information, counseling and treatment electronically without leaving home. Many hospitals and physicians’ offices report that clinical activity has now plateaued at about 85-90 percent of pre-COVID levels, inclusive of telehealth visits. Across time, it is likely that the higher proportion of telehealth to in-person visits that occurred in the early phases of COVID-19 will gradually be reduced, but remain at a greater level than was the case prior to the pandemic.

An increasing uptake of telehealth services will have significant implications for workforce needs and innovations in software engineering. Legal, financial, administrative and organizational services will evolve to support this burgeoning arm of the health care industry. While it is unlikely that prices for mainstream health care will decline, extensive use of telehealth, including the creation of telehealth business arms by “Big Tech” and entirely new business models outside mainstream medical practice, could change the utilization mix and intensity of health care services and reduce their associated prices.

Besides its impact on health care expenditures, COVID-19 has many other economic, social and population health effects:

· A high unemployment rate means that millions of people have already lost – or will lose – their employer-sponsored health insurance. Job cuts are occurring in industries that are most likely to employ low-wage individuals who cannot work from home. Thus, the loss of jobs and health insurance affects those least able to afford it. These individuals in the lowest income strata, who already have a disproportionately high prevalence of co-morbidities leading to chronic illness, and of debilitating addictions and premature deaths, find themselves in an even more desperate situation.

· School closures in the Spring of 2020 also exacerbated the hardship, as they disproportionately affected the over 1.3 million U.S. school children who are homeless, for whom the support of a school environment is particularly essential. Schools also provide significant social support for the many low-income households that consist of a single female parent with one or more children who increasingly face the burden of not only job insecurity but now a lack of school-based education, food and child care. When K-12 schools resumed in August/September, COVID-19 remained persistent in most states. Due to the risk of spreading COVID-1919 if classes were held in person, many school systems in major cities decided to deliver their eductational programs strictly (or mainly) online, a phenomenon that adds to the hardship for essential workers who cannot work from home.

· The stress associated with unemployment adversely affects both physical and mental health. Job loss is associated with increased mortality, particularly for low-skilled workers. Heart disease, the leading cause of death in the U.S., is 15–30 percent higher in men unemployed for more than 90 days, and involuntary job loss can more than double the risk of stroke and increase the likelihood of persistent depressive symptoms. Loneliness and long-term social isolation is associated with a 30 percent increase in mortality risk, coronary heart disease and stroke.

· As of early January, 2021, 350,000 Americans have died as a consequence of COVID-19, and thousands more have died prematurely because of non-COVID-related heart, vascular, or other acute conditions for which care was delayed. To family and friends, this has entailed a cost that, while “calculable” in dollar terms in some respects as discussed above, is incalculable in terms of the grief and mourning that they feel.

· Finally, there is the huge financial cost of COVID-19 unrelated to direct medical expenses. Some major examples include: (1) PPE for health care workers, as well as masks, sanitizers, and other expenses purchased by the general population; (2) a declining GDP, discussed on p.2 above, which the Mercatus Center estimated at about $2.14 trillion for the first two months; and the trillions of dollars committed through actions taken by Congress, the Federal Reserve, the executive branch, and various federal agencies.

Access

Access to health care has been compromised by the COVID-19 pandemic due to increased unemployment. Either because of the loss of employer-sponsored health insurance, or the loss of income to purchase individual policies on the Marketplace exchanges, losing a job is often associated with losing health insurance. It has been estimated by the Robert Wood Johnson Foundation that Medicaid coverage would be available to about half of the newly jobless in states that expanded Medicaid, and to about one-third of the newly jobless in the 15 states that have not participated in Medicaid expansion. In total, including the purchase of private policies on Marketplace exchanges or elsewhere, it is estimated that about a quarter of these workers and their dependents in expansion states will become uninsured, while about 40 percent in non-expansion states will become uninsured.

Recent legislation has blunted the potential for impaired access to health care. The Families First Coronavirus Response Act increases the federal Medicaid matching rate, requires Medicaid to cover COVID-19 testing, and allow states to extend Medicaid coverage to uninsured people for COVID-19 testing. This legislation does not provide coverage, however, for general medical care for the uninsured. Moreover, the $2 trillion CARES Act (Coronavirus Aid, Relief, and Economic Security Act) did not provide a health care safety net for the newly uninsured, such as specific insurance subsidies or a reopening of the Marketplace exchanges.

In summary, widening disparities in illness and death rates due to COVID-19, and also in access to health insurance and health services, are evolving in association with widening inequalities in employment and income.

Improving the Balance of Care, Cost and Access

Macro Considerations

The concluding section of Introduction to US Health Care looks to the future. Several macro considerations profoundly affect health and health care, but cannot be addressed by the health care industry per se. These forces include the social, behavioral and environmental determinants of disease; biomedical and population health research; and the overall economy and federal budget. The COVID-19 pandemic accentuates the importance of each of these three powerful forces.

· In the absence of an effective treatment or vaccine against SARS-Co-V-2, during the first ten months of the pandemic the only defense we had against spread of the virus was behavioral: personal hygiene, physical distance, wearing masks and avoiding large gatherings, especially indoors. Unfortunately, many Americans did not embrace these behaviors. As the vaccine roll-out occurs, this phenomenon – borne of social, cultural and political forces – will extend the time course of the viral pandemic and lead to greater illness and death than would have occurred if everyone followed the guidance of national public health experts.

· Behaviors that extend and exaggerate the pandemic have been reinforced by the decentralized approach to policies on public health controls. The continuation of high-risk activities – such as choir singing at church services, large numbers of people at political rallies or swearing-in ceremonies, crowded beaches and bars during national holiday weekends, and the convergence of hundreds of thousands of people to events such as a motorcycle rally – can become “superspreaders” in which infections increase geometrically, both locally and in the communities of attendees when they return home. The superspreader phenomenon is well documented in a recent Science paper that focues on nursing homes and an international business conference as examples.

· COVID-19 has also driven home the importance of biomedical research and its clinical application. Budgets proposed in February, 2020 called for marked reductions in funding for the National Institutes of Health, the National Science Foundation, and other federal agencies involved in biomedical and population science. Extensive news coverage of the science needed to combat COVID-19, however, has created an acute awareness of the critical role played by research, and the importance of methodologic rigor to ensure that any treatment or vaccine released for commercial use is safe and effective. Work remains to be done, however, in convincing the public to be vaccinated if an effective vaccine becomes available. Polling initially indicated that only about half of the population plans to be vaccinated; 20% say they will not and another 30% are not sure. As the epidemic continues to rage in a manner that brings the virus “close to home” for more and more Americans, and as the efficacy of the vaccines become more widely recognized, hopefully a lerger fraction of the population will seek vaccination.

· Finally, COVID-19 complicates the need for fiscal responsibility in any restructuring or reform of the US health care industry. Starting from a position where the U.S. already spends twice as much per capita on health care than the average of peer high-income nations but has the worst outcomes in population health status, it simply doesn’t make sense to spend more than twice as much. Moreover, additional health care spending would face the headwinds of the federal budget: demographic pressures on the already large fraction of the budget spent on health care, combined with spiraling debt and deficit. And yet, additional funds will be needed to cover the costs of COVID-related testing, prevention and treatment; and also potentially to provide some measure of health insurance coverage for the newly unemployed and uninsured. When these and other related costs become concrete, it will be even more difficult to argue for additional reforms that further add to the US debt and deficit.

Reform or Radical Restructuring

It has been argued by Victor Fuchs, a prominent health economist, that the COVID-19 pandemic has highlighted the dysfunctionality of the US health care system and has presented a timely opportunity to think boldly about its future. It will indeed be important to think through the potential for bold steps towards universal coverage and its financing in a clear-eyed manner. Unaltered by COVID-19, however, are the fundamental arguments for or against a reform strategy versus a radical restructuring as embodied by Medicare for All. The major problems with Medicare for All remain: First and perhaps formost, there is the prospect of executive rule on all aspects of health care practice and budgeting, by a President appointee as Secretary of HHS reporting directly to the President, with potentially little or no oversight. This consideration has taken greater valence in view of White House intrusion into FDA and CDC policies and communications regarding COVID-19, and the reporting of a September 15, 2020 directive that “barred the nation’s health agencies, including the Food and Drug Administration, from signing any new rules regarding the nation’s foods, medicines, medical devices and other products, including vaccines,” with such power reserved for the Secretary of HHS. In addition there would remain substantial concern about the financial unsustainability of Medicare for All, discussed in Chapter 22, heightened further by what would be the incremental centralized costs of COVID-19. And the profoundly disruptive macroeconomic consequences of making private health insurance illegal would also remain. A reform strategy also has its problems, among them that 100 percent universal comprehensive health care coverage will not be reached, and that each specific proposal for reform will draw the ire of the affected stakeholder(s) and will therefore be difficult to achieve.

Some health care innovations that have arisen in response to COVID-19 might, indeed, accelerate proposals for reforms that were already underway. For example, while Medicare and commercial payers were hesitant to pay for telehealth visits prior to COVID-19, the reimbursement environment for telehealth will perhaps become more favorable. As another example, real world evidence from large data sets pertaining to access of health care for non-acute conditions during COVID-19 can potentially shed light on the clinical and financial effects of substituting telehealth and urgent care visits for ED visits. This type of information could help health care systems, especially self-insured systems, create care models that improve outcomes while reducing cost. More generally, accumulating information from large data sets on “what works” and “what doesn’t work” in response to the prevention, diagnosis, containment and treatment of COVID-19 might pique public interest in comparative-effectiveness research in health care overall. Increased support for such research is a key reform that has the potential to improve the quality of care while reducing expenditures.

Another set of reforms that might be prompted by COVID-19 relate to the need to improve health care access among the unemployed. While the CARES act included generous provisions for unemployment payments, it did not include subsidies for health insurance. Some form of auto-enrollment and/or insurance subsidies could potentially be implemented for COVID-related job loss, and perhaps be extended to those who are unemployed more generally.

COVID-19 may also impact health care pricing reforms. When effective drug treatments and vaccines become available for COVID-19, their pricing will become an issue of widespread public interest. Not only does the pandemic nature of the viral illness demand a public health approach to pricing, but in many cases the development of these products have been a joint venture between pharmaceutical companies and governments. If success is achieved in reaching agreeable pricing that covers manufacturing costs and allows for sufficient profit to account for development costs, this might serve as a model for the future pricing of new treatments for a variety of medical conditions.

Finally, in view of the mis-steps that have occurred in the containment and mitigation of COVID-19 in the U.S., an important reform would be greater investment in public health and pandemic prevention. Although Bill Gates warned of a global viral pandemic in his 2015 TED talk, we were woefully unprepared for COVID-19 when it arrived, due to a lack of funding for pandemic prevention and management, and for public health generally. Indeed, federal offices that were designed to prepare the U.S. for potential pandemics were eliminated in recent years, and overall funding for public health has declined. As reported by Trust for America’s Health, this growing neglect of public health investment occurred despite a median return on investment of public health interventions in high-income countries of 14 to 1, and widespread public support for investment in public health. Polling in 2018 indicate that 89 percent of respondents believed that public health plays an important role in the health of their community and 57 percent were willing to pay higher taxes to ensure that everyone has access to basic public heath protections.

A public good like prevention of a pandemic is not something that buyers pay for directly (although there are examples of indirect payments, through taxes, for public health interventions like a clean water supply, fluoridation, food safety inspection, etc.). Moreover there are no private sellers of pandemic prevention, since this needs to be a population-wide endeavor. These considerations prompt the need for public intervention.

One approach proposed by Thomas Frieden, director of the CDC from 2009 – 2017, is to create a Health Defense Operations budget designation to prevent detect and respond to health threats, a designation that would exempt these public health protection funds from Budget Control Act caps. In testimony before the House “Labor-H” Appropriations Subcommittee, Frieden argued that this commitement to a public health protecton budget would “bring stability and security to our efforts to keep Americans safer from epidemics,” a goal that should be universally endorsed.

Parallels Between the Spanish Flu and COVID-19 Pandemics

As George Santayana famously said, "those who cannot remember the past are condemned to repeat it.” What can be learned from the historical record of the Spanish flu? While there are a number of biologic distinctions between the H1N1 virus of the Spanish Flu and SARS-CoV-2 virus of COVID-19, the epidemics caused by these two viruses in the U.S. share eerie parallels regarding the role of the federal government in the spread of illness and death.

The viruses responsible for the Spanish Flu and COVID-19 are both RNA viruses, which tend to accumulate mutations as they replicate. Such mutations could change a variety of viral features, including its binding sites and infectivity. Influenza viruses often retain these mutations, leading to a drift in its antigenic profile (or sometimes a more extensive “shift”) that prompts the need for new vaccines each year. Moreover, influenza also has a distinct mutation-augmentimg seasonality, a characteristic that the COVID-19 virus has not yet demonstrated.

Although coronaviruses tend to “proofread” errors during replication and fix them to reduce the mutation rate during replication, important mutations in the SARS-CoV-2 virus have already been documented. The strain that spread so quickly in Europe and the U.S., for example, has a mutated “spike” protein in comparison with the strain that first appeared in China, making it many-fold more infectious. That said, the relative genetic stability of the novel coronavirus would suggest that its future disease pattern in the U.S. – i.e., outbreaks vs. containment – will depend to some extent on mutations but much more on the degree to which the population embraces public health recommendations regarding personal hygiene, masks, physical distance, and the avoidance of large gatherings, especially indoors.

In 2004, John Barry published a comprehensive narrative on the Spanish flu, entitled The Great Influenza: The Story of the Deadliest Pandemic in History. Worldwide, the Spanish flu was astonishingly deadly: it resulted in 50 million deaths, which would be equivalent to 220 million deaths today. Almost 700,000 of these deaths occurred in the U.S., which would be equivalent to about 2.2 million deaths today when adjusted for current population size. One of the reasons for the population-wide devastation of the Spanish flu was the virulence of the H1N1 virus, resulting in a mortality rate among those infected comparable to the SARS-CoV-2 virus of the COVID-19 pandemic. But a more fundamental reason was the absence of any public health control measures for a long period of time as disease and death grew exponentially. In an interview with Terry Gross, host of “Fresh Air” on National Public Radio, Barry states that much of the disease spread was due to the almost solitary focus on WWI by the federal government, and the public denial of the pandemic’s severity for fear of its effects on morale:

“…Woodrow Wilson, the president, was entirely focused on the war - entirely - and the entire government was focused on the war. And therefore, national public health leaders echoed the president, and they ignored it. The disease was called Spanish influenza, and they said things like… “this is ordinary influenza with another name”– or, “you have nothing to worry about if proper precautions are taken.” There was no Tony Fauci back then. Around the country, local public health officials almost entirely echoed that and so did local politicians. So the result was people were being lied to and, frankly, people died unnecessarily…And also once they recognized that they were being lied to, that this disease was violent and lethal, it led to almost a fraying of society in some places. I think that society ultimately is based on trust. And once trust disintegrated, society began to fray.”

Conclusion

Taking into consideration the accumulating data on the outcomes of the U.S. government’s approach to COVID-19 in comparison with countries in the European Union, Canada and Asia, one can’t escape the conclusion that the U.S. government has acted too much like it did during the Spanish flu and not enough like the contemporary responses of many of major nations around the world. The delay in the U.S. response to COVID-19, and the lack of a uniform, national approach, has led to unnecessary illness and death.

Based on recommendations from public health experts, and on lessons from the historical Spanish flu experience and from other nations that responded successfully to COVID-19, the public’s health and a smooth re-opening of the U.S. economy and society