Bloomberg Law
June 11, 2020, 10:00 AM

U.S. Health Care Puts $4 Trillion in All the Wrong Places

John Tozzi
John Tozzi
Bloomberg News

The new coronavirus was a test of America’s ability to protect the health of its people, and the country failed. The U.S. has the greatest number of confirmed cases and deaths in the world. Months after arriving in the U.S., the virus that wrecked the economy with disorienting velocity continues to inflict an unfathomable human toll.

The U.S. isn’t alone in failing to stop the coronavirus. But it is unique in how much of the nation’s economic resources are devoted to health care—about 18% of gross domestic product, more than any other country. The spending, approaching $4 trillion a year from taxpayers, employers, and households, is what makes America’s vulnerability to Covid-19 striking. What are we spending $4 trillion for, if not to avert disease and death?

The virus exposed some of the structural weaknesses in America’s approach to health care and health. Diagnostic tests, delayed and in short supply, were inadequate to detect the virus’s early spread. Hospitals with billions of dollars in revenue couldn’t secure dollar masks to protect staff. Local health departments charged with containing communicable diseases were quickly overwhelmed. They’re now scrambling to hire epidemiologists and contact tracers to track the pathogen as the country reopens. Neglect of public health funding has left U.S. companies playing catch-up to build the infrastructure to develop and manufacture a vaccine.

Beyond those specific failures, underlying inequities make some Americans more vulnerable than others. The virus spreads quickly in settings where people have little power to avoid it: nursing homes, homeless shelters, meatpacking plants, and prisons and jails that detain the world’s largest incarcerated population. Covid-19 kills more people who live in denser cities and crowded homes and work in lower-paying “essential” jobs. Black Americans, who have higher rates of chronic illnesses such as diabetes and asthma, are disproportionately harmed and killed by the virus.

None of this is an accident. It’s the accumulated result of policy and market decisions, choices about how we allocate resources that affect Americans’ health. Once the virus was on the loose, the damage it inflicted was amplified by decisions decades in the making, from how we fund local health departments to which workers get paid sick leave to who can afford proper housing. “A lot of the population has inadequate housing and inadequate nutrition, inadequate free space to get outside,” says Elizabeth Bradley, a long-time health policy researcher who now serves as president of Vassar College. “It’s just watching our system express itself in the extreme, because we’re under duress from this virus.”

“You think we weren’t prepared for this, wait until we have a real global threat for our health security”

Although the U.S. leads the world in Covid deaths, the pandemic has been more lethal elsewhere. France, Italy, Spain, and the U.K. all reported higher per capita death rates. Australia, China, New Zealand, South Korea, and Taiwan have largely contained their epidemics so far and limited deaths.

Clearly, there’s nothing magical about a publicly run medical system or a European-style welfare state when it comes to protecting a population from a novel infectious disease. In the months ahead, every country will debate how to prepare for further waves of Covid-19 and unknown future threats.

America stands out in the amount of money it’s already spending on health care, long a drain on governments, employers, and households. All those sectors now must cope with financial stress. So must health-care providers, who face lost revenue and new costs to adapt their operations for Covid-19.

“Once we come out of this pandemic, there is going to have to be some kind of an evaluation around, Do we need to be spending more on public health? Because the health-care system alone can’t come in and solve these problems,” says Ashish Jha, director of the Harvard Global Health Institute.

Jeanette Kowalik knows America’s neglect of public health well. As commissioner of the Milwaukee Health Department, she’s charged with protecting and improving the health of the city of 600,000. The department’s portfolio is broad, including such tasks as reducing exposure to lead-tainted paint, screening Milwaukeeans for diabetes, and trying to reduce shootings through a “violence interrupter” program.

Kowalik’s budget for this work, before Covid, was about $20 million this year, or $33 for every city resident. Persistent underfunding has left the department with outdated technology and a staff stretched thin. “I’m pretty much trying to manage a pandemic with duct tape and DOS,” she says, referring to the obsolete computer operating system. (The agency’s last DOS computer, she said, was recently removed from its lab after it was deemed a security risk.)

Milwaukee’s epidemiology staff consists of two epidemiologists and two data coordinators, with a director position that’s vacant. Lacking more sophisticated software, they do their analyses of disease trends in Microsoft Excel and Access. “It’s really a huge disservice to our community, because we’re not able to make sense of the data,” Kowalik says. Even with Covid continuing to spread, other public health agencies have reduced staff as tax revenue dwindles. Cincinnati put health workers on furlough. Georgia is considering a state budget that would cut its human development programs, which include public health and other human services, by 14%.

In Milwaukee, a federal relief package sent Kowalik’s department a windfall: $35 million for coronavirus response, almost twice her normal annual budget. That’s helped bring on workers for contact tracing, mostly other city staff who have been furloughed from their usual roles. But it takes time to upgrade systems and hire and train workers—and it would have been better to do that before the pandemic than after. Public health, funded from tax coffers, is used to the boom-and-bust cycle. Money follows, rather than anticipates, crises such as the anthrax attacks after Sept. 11, the 2009 H1N1 flu pandemic, or the Ebola outbreak in West Africa that began in 2014. The federal government created a Strategic National Stockpile of medicine and supplies such as respirators in 1999. Depleted after H1N1, the masks were never sufficiently replenished, leaving the stockpile an inadequate buffer when Covid-19 arrived.

The field partly has been a victim of its own success. “You don’t see the cases of measles that are prevented,” says Amesh Adalja, senior scholar at the Johns Hopkins University Center for Health Security. “You don’t see the cases of tuberculosis that are prevented.” But behind those victories is an infrastructure of sanitation, immunizations, screening, treatment, and other measures developed over centuries. It becomes salient only when it fails. “We always sort of say in public health, if you’re successful, no one knows you did anything,” says Harvard’s Jha. “You don’t have a lot of people advocating for clean water unless you live in Flint, Mich.”

This is evident at the federal level as well. The National Institutes of Health, which funds basic scientific research that is the groundwork for developing drugs, consistently enjoys bipartisan support. The Centers for Disease Control and Prevention hasn’t been able to say the same. President Trump, who in 2019 announced a plan to end the HIV epidemic in the U.S., this year proposed cutting discretionary funding for the CDC by $700 million, or about 9%. CDC Director Robert Redfield told a House committee on June 4: “You think we weren’t prepared for this, wait until we have a real global threat for our health security.”

The U.S. spent about $94 billion on public health in 2018, according to federal data, less than three pennies of every dollar spent on health care. To put that in perspective, it’s about one-third of what the country pays for the net cost of private health insurance—the money for administration and profit that’s left over after health plans pay medical claims. In 2019, five for-profit health insurers together returned $13.9 billion to shareholders in dividends and stock buybacks—an amount greater than the entire CDC budget.

American medical care is provided mostly by private entities, including sprawling hospital systems, physicians in private practice, and global pharmaceutical companies. The price of these services is typically much higher than in other countries, a fact economists attribute to a mixture of insufficiently competitive markets and weaker government price regulation.

Whatever the price, American health care is considered a private good for individual consumption. “In the United States, the medical care system really emerged as a private-sector system, in the sense that it’s an individual commodity that you buy and sell,” says Bradley, the Vassar president. And unlike in some European countries, Americans don’t see health care as the government’s job. Bradley cites the World Values Survey, a global study of public attitudes, which finds that Scandinavians believe the top functions of government to be reducing inequality, promoting literacy, and protecting the health of the population. In the U.S., the priorities are protection from foreign enemies, keeping neighborhoods safe, and spurring economic growth.

Bradley and others argue that this approach has left the U.S. with an abundance of expensive medical technology but a dearth of investment in many other things that influence people’s well-being, including education, housing, and nutrition. Despite the trillions of dollars the U.S. devotes to health care, the country lags behind many other developed economies on health measures such as life expectancy and infant mortality.

“The idea that we can use our resources and spend them differently and get very different outcomes is not a hypothetical one, it’s not theory”

A 2013 report from the National Academies of Sciences, “Shorter Lives, Poorer Health,” documented a “U.S. health disadvantage” afflicting the country across race, ethnicity, and class. The reasons behind it are complex and interrelated, from what we eat and how fast we drive to opioid use and access to medical care. The situation has consequences for the economy—less healthy workers may be less productive—and even military readiness: Obesity has rendered 31% of young adults ineligible for military service, according to a report by a council of retired military leaders. “This points to something much more systemic, much more foundational, that has to do with the conditions of life in this country, not just the health-care system,” says Laudan Aron, a senior fellow at the Urban Institute who co-edited the “Shorter Lives” report. The document foreshadowed declines in life expectancy in the U.S. in recent years and a rise in what Princeton economists Anne Case and Angus Deaton have called “deaths of despair.”

These grim conditions set the stage for Covid-19’s arrival in America. Now the country will have to decide how to proceed. Initial relief from Congress sent billions of dollars to hospitals and medical providers. Lawmakers also sent money to states to bolster health departments. At the state level, both medicine and public health will be competing along with every other priority for a shrinking pool of public dollars if a recession dents tax revenue.

One argument for sustained and robust government public health funding is to think about it like national defense. America spends hundreds of billions of dollars on a standing army, a nuclear arsenal, and military hardware with the clear understanding that security is, in economic terms, a public good that the market won’t sufficiently supply on its own.

We don’t take the same approach to defending against infectious disease threats. If we did, the government wouldn’t have allowed tests to falter for weeks as the virus spread across the country. “Our failure to deal with the pandemic reflects a deep flaw in our system of governance and our political culture,” says David Blumenthal, president of the Commonwealth Fund, a health research nonprofit. “Our continuing hostility and distrust toward government has made it very hard to enable any central authority with the powers that are required to defend us against nonmilitary threats.”

It’s unclear whether the pandemic will change Americans’ thinking about the role of government in protecting people’s health. It took the virus mere weeks to claim more American lives than decades of war in Vietnam, Afghanistan, and Iraq. “If this doesn’t wake people up, I don’t know what will,” Blumenthal says.

Health-focused policies could improve the lives of Americans not just in a crisis, but in the broader context of daily life, the Urban Institute’s Aron argues. And we could do it by using what we already spend on health care more effectively. “The idea that we can use our resources and spend them differently and get very different outcomes is not a hypothetical one, it’s not theory,” she says. “It’s actually being done right now in other places, other advanced democracies, market economies.”

In the months ahead, America will have to decide how to respond to the vulnerabilities Covid-19 laid bare and how to prepare for the next wave—and the next pandemic. The idea that the government should invest in the health and well-being of its citizens has always been in tension with America’s predilection for individual liberty. How much has that cost us?

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John Tozzi in New York at

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