Right-sizing American health care: A potential silver lining to COVID-19

Right-sizing American health care: A potential silver lining to COVID-19
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The coronavirus crisis has wreaked havoc on the lives of Americans and the economy. But fear of the coronavirus has changed the cost-benefit analysis for medical services in ways that may be potentially positive for the future of U.S. health care. 

Everyone in health care talks about putting patients first. But there has never been a context in which patients have been forced to take the lead in determining which health care services are worth the collateral risks.

Since January, U.S. medical personnel have earned the nation’s gratitude by grappling with the coronavirus infectious disease (COVID-19) health crisis. Instead of a net positive margin, health care systems paradoxically expect to lose a total of $202.6 billion in revenue between March 1 and June 30, while medical personnel have been fired and furloughed in unprecedented numbers. 

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Patients have disappeared from the health care system in droves even as hospitals have beckoned patients to return now that the worst of the crisis is past. Patients have shown that they believe the benefits of certain categories of medical services are simply not worth the collateral COVID-19 risk. Patients may be wrong in overestimating the extent of the COVID-19 risk relative to the benefits of health care services. But this paradigm shift has created a market metric for understanding which medical services patients value as truly “essential” and a perspective on what the “right size” of our massive American health care system ought to be. 

Government and private insurers have sought to contain costs and mitigate moral hazard by capping reimbursements to health care systems and imposing copayments and deductibles on patients. This top-down approach has failed to contain the costs of American health care, which accounts for 18 percent of our GDP and has outpaced the rate of economic growth for decades. Medical systems often sidestep reimbursement limits by incentivizing physicians and other health care providers to engage in excess preventive medicine and elective procedures that mitigate patient risks and liability concerns. Compliance with the sea of government red tape means that staff outnumber doctors 16 to 1, most of whom have no interaction with patients yet massively inflate health care costs. 

Financial deductibles, copayments and value-based health care have all failed to curb the enthusiasm of patients and health care systems to spend “whatever it takes” to identify and address potential health issues.

The coronavirus outbreak has changed the equation for medical systems and patients by forcing both to consider the non-economic costs of health care. The crisis has inadvertently introduced the “COVID copay,” which has transformed the demand for medical services. Between March 1 and April 15, hospitals experienced a 56 percent decline in patients. Relative to health care volume in January, inpatient admissions have dropped 30 percent, emergency room visits have decreased by 40 percent and outpatient surgery procedures have dwindled by a whopping 70 percent. This has left a massive hole in hospital budgets throughout the country and raised the question of how much potential overconsumption of health care resources is routinely taking place. In the short run, this shift has been ruinous for hospitals in causing massive losses and layoffs. In the long run, policymakers in health care should apply lessons learned from the response to the coronavirus. 

The full extent of the COVID-19 copay is just beginning to unfold as a metric for assessing which health care services patients truly value. As states reopen their economies, hospitals have clamored to reclaim lost revenues by asking patients to return. The question is how patients will respond as they consider the risk of COVID-19 exposure when deciding which health care services they value.  

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This bottom-up approach is obviously far from definitive in establishing which tests and procedures are truly necessary. But it represents a meaningful market metric for considering what consumers value as necessary care. Some patients may delay legitimately needed medical attention, which could lead to more severe or life-threatening conditions. However, the COVID-19 fear factor will change patients’ cost-benefit analysis for the foreseeable future as patients will push back against medical recommendations that they perceive as unnecessary.

Debates on health care reform have almost always focused on top-down incentives imposed by the federal government, insurers and health care systems. Yet, this crisis has for the first time placed the broader costs of seeking medical care at the forefront of patients’ minds. Tragic though this outbreak has been, we need to apply the lessons from this experience to determine priorities for the post-COVID-19 health care landscape and not squander the opportunity to right-size American health care. 

Dr. Kim-Lien Nguyen is an assistant professor of medicine at David Geffen School of Medicine at UCLA and a practicing cardiologist.