The Economics 101 of Post-Pandemic Healthcare

While “opportunity” is rarely used to describe the COVID-19 pandemic, Americans have had a unique opportunity to witness both the strengths and pitfalls of the healthcare system over the past year. The high cost of medical care provides a strong entrepreneurial culture that the pharmaceutical industry harnessed to create and distribute innovative treatments rapidly.

Yet, the pandemic thrust the shortfalls of the healthcare industry into prominence, from the intensity of emergency rooms brimming to capacity with intubated patients to the glaring disparities in access to healthcare. With this new recognition of health inequality, the American public has an opportunity to scrutinize the current healthcare system and demand that policymakers enact bold, sweeping changes.

In a 2019 poll, 59 percent of Americans reported that the government should be fully or partially responsible for healthcare. That number is up to 63 percent in July 2020, likely due to the pandemic. This increase is prominent among Democrats and Republicans (4 and 5 percentage points, respectively), indicating strong bipartisan support for reform that includes more government control of healthcare distribution.  

Conceptually, healthcare reform is frequently floated but rarely defined. Change is a call to action that ignores the complex, interwoven implications of idealistic policies on society. The abstract idea of change holds lofty promises, yet this ideal fails to define each innovative policy solution’s specific consequences on the population experiencing the problem.

The highly unequal distribution of COVID-19 cases and deaths toward minority and low-income communities demonstrates the lack of healthcare accessibility for disadvantaged subgroups. This blatant inequality, coupled with economic instability, has turned this ethereal idea of progress into a list of tangible changes. Americans can, and should, demand mental health parity, elimination of employer acquired insurance, and improvements to telemedicine for increased accessibility.

Demand #1: Strong Legislation Ensuring Mental Health Parity

Parity guarantees that insurance companies provide the same benefits—such as the number of fully covered visits and maximum out-of-pocket deductibles—for mental health services as they do for physical health procedures. This equitable access is vital for increasing the universality and affordability of mental health services for patients.

The first major step toward parity was the 1996 Mental Health Parity Act. This law forbade insurance companies from imposing higher annual and lifetime limits on patient out-of-pocket spending for mental health than physical health. Despite the valiant effort at parity, the law only applied to employer-sponsored plans at workplaces with more than fifty employees. Additionally, insurance companies could waive the parity requirement if they could prove that their costs increased by greater than 1 percent. This loophole permits insurers to avoid the parity law and forces clients to accept lackluster mental health coverage.

Passed as part of the Affordable Care Act, the 2010 Mental Health Parity and Addiction Equity Act (MHPAEA) attempted to remedy some of the 1996 Act’s pitfalls. The MHPAEA required almost all plans to provide equitable physical and mental health coverage regardless of the number of employees a company has. However, it does not enforce parity in reimbursement rates, allowing insurance companies to require those who can not obtain in-network mental health care to pay in full. The bill also does not apply to Medicare, Veterans Administration, and some state Medicaid programs; these three categories make up about 41 percent of insured Americans.

Loopholes for insurers and lackadaisical government enforcement results in out-of-network doctors providing 32 percent of mental and behavioral outpatient services in 2016, compared with 6 percent of non-mental healthcare. While the remaining parity roadblocks may seem minuscule compared to recent progress, the pandemic has highlighted the need to fill these gaps due to the increased demand for mental health services and the shift in how Americans are obtaining insurance. 

In mid-July last year, 53 percent of Americans believed the pandemic negatively impacted their mental health, a twenty-one-point increase from March. Worsening mental wellbeing increases the need for behavioral health services. Use of the federal emotional distress hotline increased by one thousand percent in April, with significant increases in suicides, substance abuse, and overdose deaths. 

This rising need for mental health services will soon exceed the capacity of psychiatric services in America. While many who have mental and emotional challenges brought on by the pandemic do not require a medication-prescribing psychiatrist, counselors and psychologists are not trained overnight. The need for additional counseling is immediate, but the emerging cohort of mental health professionals is still years away.

Economics 101: Increasing demand for mental health care combined with a decreasing quantity of affordable services creates shortages, forcing patients to choose expensive out-of-network services to access care. 

Demand #2: Reform Employer-Provided Insurance 

The pandemic has also shifted how Americans receive health insurance. In 2017, 56 percent of Americans received health insurance through their employer; however, that has recently dropped to 49 percent. This reduction is unsurprising, as the unemployment rate during the pandemic hit an almost unprecedented high of 14.8 percent last April. Higher unemployment marks seismic changes in how Americans obtain health insurance; fewer people are eligible to receive the higher-regulated employer-sponsored health plans.

Newly unemployed people have limited insurance options; maintaining coverage through their furloughed employer, obtaining coverage through a spouse, purchasing insurance from the individual marketplace, continuing health coverage through government-sponsored COBRA, or becoming uninsured. Mental health parity is less regulated in all of these options than employer-sponsored healthcare. Consequently,  there is more leeway to provide inferior and more expensive mental health coverage.

One out of five Americans who lost their jobs is now uninsured. While Americans historically accepted employer-sponsored insurance, massive job loss and the Pandemic-driven focus on community health has enticed people to rethink their stance on the government’s role in providing health insurance in favor of a more collectivist approach. A June 2020 poll indicated that 74 percent of Americans believe that a government-regulated and subsidized option should supplement employer-sponsored insurance. 

Government-sponsored programs provide stability by creating a large pool of risk that allows those with expensive medical conditions or low incomes to afford care regardless of economic circumstances outside their control. Expanding government-sponsored options, including the ultimate extension to universal coverage, would ensure that unforeseen and uncontrollable economic circumstances do not impact people’s access to both mental and physical healthcare.

Job loss during the pandemic was unequally distributed along racial lines, exacerbating the need to pivot to government-sponsored healthcare options. In June, the unemployment rate was 14.9 and 14.6 percent for Black and Hispanic people compared to 9.2 percent for White people. Social determinants of health already decrease marginalized groups’ overall well-being, and the pandemic has left these same individuals disproportionately unemployed. 

Many jobs filled by non-White communities already have lower than average rates of employer-sponsored health insurance. For instance, jobs in the food-service industry overrepresent Hispanic and Black workers but are frequently uninsured. In the private sector, employer-sponsored medical insurance is only available to 27 percent of workers in the bottom tenth wage bracket—a demographic overly represented by minority workers—compared with 94 percent of workers in the highest 10 percent income bracket. Providing government-sponsored insurance options would help redistribute the negative impacts of poverty and marginalization among Americans by removing the income barrier to healthcare.

Economics 101: Resources promote opportunity. When the unemployed cannot access health insurance (the resource), society enters a spiral that further marginalizes already disadvantaged groups and focuses healthcare resources on a smaller subset of the population.

Demand #3: Strengthen Telehealth Regulations

While increasing coverage options would help minority and low-income communities receive health care, other demographic factors, including the urban-rural divide, severely impact communities’ access to care. Telehealth is a promising solution, expanding health providers’ ability to connect with more physically isolated patients. 

Telehealth allows patients to seek personalized professional medical advice without requiring a method of transit to a physical office. Telehealth allows those recovering from surgery to attend follow-up appointments at home, away from the threat of hospital-acquired infections. 

Telehealth also allows insurance companies to practice gatekeeping by requiring patients seeking reimbursement for specialty health services to get a referral first. While requiring patients to interact with a chain of healthcare professionals can become a blockade to accessing care, it can also reduce unnecessary travel for in-person appointments through nurse-led monitoring clinics. It is a win-win situation in which patients submit symptoms and receive real-time advice from medical professionals, while providers can direct scarce in-person healthcare resources to those who need it most.

Despite the economic benefits, accessibility remains a concern. Those without reliable internet access, the majority of whom are elderly and/or low income, cannot obtain the convenient care telehealth provides. Communicating over the internet is already more difficult than in-person in most instances; lower technological competence among the elderly exacerbates this barrier. While telehealth can lower costs for the healthcare system, overreliance on virtual medicine isolates vulnerable populations from care due to a lack of accessibility to new technologies. 

Regulations requiring equal reimbursement rates between telehealth and in-person visits are even further behind mental health parity. Only twenty-three states and DC enforce telehealth parity, allowing insurance companies to reduce the amount they are willing to pay for virtual services compared to traditional in-person medical visits. Due to a lack of federal guidelines, insurance companies in states without the parity law can also change coverage based on the insurance plan’s price. Telemedicine is largely regulated on a state-by-state basis, creating disjointed messages around payment and quality of care requirements.

Economics 101: Quantity and price must be in equilibrium; the reduced costs and improved convenience of telehealth are counterbalanced by a lower quality of service. 

Despite the plethora of negatives this pandemic has brought, the complete upheaval of our lifestyles provides an opportunity to demand systemic change. The elimination of many social and cultural activities and isolation among communities due to social distancing policy are just a few factors that contribute to the overburdening of the mental healthcare system, highlighting the need for mental health parity. 

High and unequal unemployment rates demonstrate the pitfalls of employer-sponsored coverage and provide a chance to shift toward government-sponsored options that are more impervious to economic turmoil. Despite quality concerns, telemedicine expands healthcare access through a virtual system. It exposes the need for policies to answer the legal and moral questions originating from this relatively new platform. 

Americans can, and should, demand more government involvement in regulating and distributing healthcare, focusing on affordability, quality, and accessibility. The pandemic creates an opportunity to focus on improving government-sponsored options instead of propping up a failing system. The disruption of private healthcare has normalized this line of questioning and hopefully dismantles these failing structures. Government-sponsored healthcare patches the holes left by an overreliance on employer-sponsored insurance by widening access to affordable, quality coverage.

Economics 101: Government-run monopolies are efficient (just don’t get caught calling it “socialism”)

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