Exactly Wrong: Why American Health Care Can’t Manage COVID-19, and How to Design a Better System
The US health care system needs to be redesigned from the ground up.
Is health care a public good? The COVID-19 pandemic has brought this contentious question to the fore. The US health care “system” fails to provide basic health care for tens of millions of people, compounding the inability to respond to the outbreak. COVID-19 exposed the weakness of the nation’s fragile public infrastructure and the inability of private infrastructure to act.
Failure is a defining theme in design and engineering. So a design perspective may shed light on health care failures and whether health care should be treated as a public or private good.
In free markets, design and production of services and products fail when there are mismatches between how a problem is formulated, what skills are available to tackle it, and what organizational and institutional structures are involved. My colleagues and I have developed an approach, called PSI theory, that describes a design problem in terms of these three factors, which we designate as problem, social, and institutional spaces. Problem space (P) is characterized in terms of the complexity of the system for a service or product being designed, the complexity of the disciplines involved, and what knowledge is available to tackle the problem. Social space (S) is characterized in terms of people’s available skills and capabilities, the range of perspectives needed, and whether these perspectives are included in the design process. And institutional space (I) is characterized by the accessibility of knowledge, institutional arrangements, and the nature of ties (strong or weak) within and across institutional structures.
COVID-19 exposed the weakness of the nation’s fragile public infrastructure and the inability of private infrastructure to act.
Addressing any design problem requires these three spaces to be codesigned. If they are, then failures can be quickly corrected—for instance, when an automobile manufacturer quickly remedies a defect in their vehicles. Can our theory be applied to understand failures in the design and production of public or private goods? Let’s examine this question in the context of health care delivery and services in light of COVID-19.
In the United States, health care is treated primarily as a private good and only partially as a public good. As such, health care is subject to markets determining the level of service. Markets provide services based on a person’s ability to pay for them, making health care a personal responsibility. But during public health emergencies, such as the spread of influenza or coronavirus, it suddenly becomes a public good. Even then, vaccination, a key to overcoming infectious diseases, is treated as a private good that must be paid for through private insurance or personally, leaving some people unable to obtain it.
In his 1963 article that launched the field of health economics, the American economist and Nobel laureate Kenneth Arrow makes the case that traditional market models will not work given the uncertainties in health care. Any solution to improving access to health care will require income redistribution, which is not easy. Different people also have different health needs over time—changes that are compounded by income, occupational safety, lifestyle, nutrition, and exposure to disease vectors.
Arrow’s thesis is that health care does not conform to the conditions of well-functioning markets, because it is not competitive. This is in contrast to commodities, where at least theoretically it is possible to achieve equilibrium conditions between supply and demand. His claim, although rather startling for economics, is not as provocative when viewed from a design perspective.
There are many causes of market failures in health care. For example, the lack of paid sick leave and the inability to pay for care leads to market failures through externalities. A sick person going to work endangers the health of others, resulting in loss of productivity and lives. This is now happening in cases of COVID-19 infection in meatpacking plants in North Dakota and elsewhere.
Another market failure comes on the skill side. The high cost of medical school in the United States means that it has the lowest ratio of internists to specialists for any developed country. Students choose to become highly paid specialists to pay off their debts and to avoid the high administrative costs of having to deal with many different insurance plans. According to our study of this problem, internal medicine practitioners have roughly four times the number of administrative tasks to deal with than do specialists. It is no wonder that many internists are leaving practice, a trend that is creating an even bigger vacuum in the skill base.
How can the nation balance these skill sets? New York University’s recent decision to forgive student loan debt to those who pursue internal medicine is a welcome corrective measure—but much more is needed.
In the United States, health care is treated primarily as a private good and only partially as a public good.
On top of all this, the US population is aging, putting even more pressure on the system. The failure of the private insurance market means that emergency care is extremely expensive. These mismatches reduce doctors’ ability to screen people in the early stages of a health problem. By the time patients arrive to get health care, they are worse off than if they had been screened earlier. As a health official once told me, your body is like a car: if you do not do preventive maintenance, you have to pay for the repairs whether you have insurance or not. As many people cannot afford to pay, inflated costs are passed on as higher rates to the insured consumer. The conflict between health care as a private and public good becomes apparent.
Viewed through PSI theory, the current health care system contains three interacting I-space systems: the institutional structure of the system, the structure of institutions generating the skill base, and the structure of private insurance companies and hospitals. From a design perspective, this is the worst possible arrangement. The nation’s COVID-19 response has demonstrated that institutional structures (I space) combine with an insufficient professional skill base (S space) and with a mischaracterization of the health care problem (P space) to produce poor outcomes.
These interlinked health care markets lead to cascading market failures and public health disasters. The system design is not set up to meet the demand for health services, since the goal is not about maintaining people’s health but about maximizing profits. A design that does not try to obviate failures will be under stress in normal times and will collapse under pandemic stress, as can be seen today. Congress and other stakeholders are scrambling to react to a failed system. They are trying to negotiate who will pay for health costs related to the pandemic. These negotiations increase the transaction costs and time involved.
Designing health care as a public good would reduce system complexity. A systems designer would work to identify where failures occur and why, in order to anticipate and prevent them well before a system comes under stress. How can this be done? First, it is necessary to plan and develop a professional skill base to match the demand. Second, institutional structures should be simplified by minimizing the number of types of entities involved. This will likely require adopting a single-payer insurance program, such as Medicare for all.
The system design is not set up to meet the demand for health services, since the goal is not about maintaining people’s health but about maximizing profits.
The next step is bringing together people with a range of skills and perspectives to explore new institutional arrangements to frame health care delivery as a public good. Germany, Taiwan, and South Korea are examples of governments with well-designed health care systems, and their responses to the COVID-19 pandemic have been among the best in the world. Taiwan and South Korea redesigned their public health systems after the H1N1 influenza pandemic of 2009, so when COVID-19 arrived they had institutional infrastructure in place to deal with it. That meant that laws, processes, and medical personnel were ready; the government knew that it needed to provide clear and accurate advice; and people were ready to follow advice because they trusted the government and knew the consequences of noncompliance.
For the United States, the prognosis is poor unless a social consensus can be reached. A market-based health care system with profit as the primary motive chooses the calculative efficiency of meeting short-term goals over delivering effective health care over the long term. If the nation does not redesign the system to address these failure modes, future health care needs and pandemics will lead to even more catastrophic consequences than what is happening today.