Hood column: Crisis hastened health care reforms

Published 12:00 am Tuesday, June 1, 2021

By John Hood

For all the suffering and damage caused by the COVID-19 pandemic, there’s at least one silver lining: the experience may alter our health care system for the better.

North Carolina is among many jurisdictions that adjusted its policies so medical providers could effectively respond to the crisis. The federal government changed its rules to allow more Medicare coverage of telemedicine services. Our state lifted a ban on out-of-state providers offering telemedicine, and also relaxed certificate-of-need restrictions so hospitals could add beds, ambulatory surgical centers could act as emergency hospitals, and a range of providers could buy more equipment.

The worst of the COVID crisis is over, thank God. (And thanks to our top-notch pharmaceutical industry.) As lawmakers consider the longer-term consequences and implications, they ought to consider making their temporary policy responses into permanent policy reforms.

Ask North Carolinians who did a telemedicine visit at some point over the last year. While some had a poor experience — and of course there are many doctor visits and medical procedures that can only performed in person — most telehealth patients say they are satisfied with the care and insights they received.

Similarly, to the extent medical providers exercised their enhanced flexibility, were patients harmed? Did offering more services in more places make health care less responsive and more expensive? In the main, no.

Improving access to health care is about more than who pays the bill. It’s about options. It’s about price and quality. It’s about the size of that bill, in other words, and who possesses both the information and the incentives to make decisions about it.

As American Enterprise Institute fellow Bret Swanson observes, a lack of innovation in the delivery of medical services is a key reason why American productivity isn’t going up as fast as it once did. The health-care sector is rapidly approaching 20% of the nation’s total gross domestic product. And it is notoriously bureaucratic and hidebound.

Here’s another way to think about the problem. Since 2000, average consumer prices have gone up by 54%. That average is, however, the result of a very large spread. The prices of high-tech products such as phones, computers, and smart TVs have plunged — by 80% or more in some cases. Cars, clothes, and furniture have also experienced lower-than-average inflation.

Hospital services, on the other hand, cost about 200% more today than they did two decades ago. And, no, hospital care is not 200% more pleasant, comfortable or efficacious.

The late economist William Baumol observed long ago that productivity gains may be inherently more difficult to achieve in sectors such as health care, education and the performing arts because introducing technological innovation doesn’t just increase output per worker. It also alters the actual service being delivered — and not for the better.

Baumol famously offered the example of symphonic music. Assembling, staging and compensating a full orchestra is an expensive undertaking and reaches an inherently limited audience. You can reach a vastly larger audience by recording the orchestra’s performance and selling it. But listening to an audio file is just not the same thing as experiencing a live orchestra.

Point taken. But, of course, most of us still listen to most of our music in the form of recordings. We happily take the tradeoff, because if we can only listen live, our access to music would be severely curtailed.

Similarly, while an in-person visit to the doctor has features that a telehealth visit can’t duplicate, the difference isn’t infinitely valuable. For some routine check-ins and minor afflictions, an online or video consultation is sufficient. By permanently changing our financing and regulatory policies to accommodate that, we save scarce resources for redeployment to other medical services — or to other goods and services — which confer greater consumer benefits per dollar spent.

I wish North Carolina had already liberalized its health-care regulations years ago. Naturally, I wish it hadn’t taken a deadly pandemic to break the logjam. But broken it is. And it shouldn’t be rebuilt.

John Hood is a John Locke Foundation board member and author of the new novel Mountain Folk, a historical fantasy set during the American Revolution (MountainFolkBook.com).