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Three Questions

Will COVID-19 Force Us to Rethink Our Healthcare System?

Twin health and economic crises have brought a fundamental weakness of the U.S. healthcare system into sharp focus. Since health insurance is tied to employment in the United States, Americans are losing their insurance—26.8 million of them so far, according to the Kaiser Family Foundation—just as they need it most. We asked economist Fiona Scott Morton, an expert on the healthcare industry, what a better system would look like.

A patient outside Gateway Care and Rehabilitation in Hayward, California, in April 2020. Photo: Yalonda M. James/The San Francisco Chronicle via Getty Images.
A patient outside Gateway Care and Rehabilitation in Hayward, California, in April 2020. Photo: Yalonda M. James/The San Francisco Chronicle via Getty Images.

How has the COVID-19 crisis exposed the weaknesses of the U.S. healthcare system?

In the United States, most commercially insured people get coverage from their employers. But then when a person loses their job, they lose their health insurance. During a pandemic, when many people are losing jobs and it’s hard to get another one because there is a dangerous disease causing widespread illness, is exactly the time when you want health insurance. Economists have been pointing this out for years. Auto insurance, for example, is not attached to anyone’s job. I think the pandemic will strengthen the call for some reform to insurance that both increases the number of insured people and is not employer-based.
 
Has the Affordable Care Act helped fill the gap as people lose their employer-based insurance?

Yes. The ACA exchanges are a place where people can go to buy policies that are subsidized (if your income is low enough) and reasonably competitive (in many states there are several providers on the exchange). Because everyone is supposed to have insurance—though Republicans took away the penalty for non-compliance—the risk is about average, and so prices on the exchange reflect that (they are lower than the individual market used to be).

What’s the policy solution?

There are many possible solutions. One short-term solution would be to expand Medicare to cover anyone who lost coverage from their employer during this time period and/or anyone who is sick with COVID and their family. Another would be to expand Medicaid eligibility to a higher income level. Both of these require federal money, but of course these folks are going to the hospital anyway, so likely we are spending these resources regardless.

In the longer run, there is an ACA option: Allow employers to take the full contribution being made on behalf of the employee and put it in their paycheck instead, and send them to the exchange to buy a policy themselves. It would be best if this purchase was deductible from income so no one paid tax on it or if all employer-sponsored insurance stopped being non-taxable. The key is that the company does not get a subsidy for purchasing insurance that is not available to the individual purchasing insurance.

Another way is to expand Medicare to cover everyone. This is hard to transition to because the money currently being spent on private health insurance is a combination of personal and corporate funds and it would need to become government income (which would likely be enough pay for Medicare because Medicare costs less per person than private insurance).

Department: Three Questions