COVID-19: A Case Study of Government Failure

The federal government was not ready for COVID-19, even though it has dealt with epidemics and pandemics for more than a century.

Covid-19 Government Failures
  • Experience with COVID-19 in Other Countries
  • COVID-19 and Government Failure
  • Lessons from COVID-19
  • Conclusion

Congress should

  • work with the president to reform the federal agencies that were responsible for the country’s fragmented and ineffective response to COVID-19;

  • ensure that the Strategic National Stockpile is supplied at a level sufficient to meet the immediate needs for medical equipment and supplies that an epidemic such as COVID-19 can be expected to generate;

  • fund financial incentives that encourage people to be tested for COVID-19, to seek available treatments, to self‐​quarantine, and to participate in contract tracing efforts; and

  • reject efforts to adopt Medicare for All in response to COVID-19 and instead eliminate the tax subsidies that encourage people to obtain health insurance through their employers and let people purchase health insurance that covers only catastrophes.


Many politicians, interest groups, and commentators contend that the COVID-19 pandemic shows that the United States desperately needs Medicare for All. They point out that COVID-19 exposed the fragility of employment‐​based health insurance coverage. The economic shutdown and resulting job losses meant that many people lost their health insurance coverage when they needed it the most. The cost of COVID-19 testing and treatment compounded the problem by discouraging people from seeking medical care. Proponents believe that if Medicare for All had been in place when the pandemic hit, more people would have been tested, the spread of the disease would have been easier to track, and many lives would have been saved.

It is certainly true that the American health care system has no shortage of pathologies and needs a complete overhaul. But Medicare for All is not the reform it needs. Medicare for All would be vastly more expensive than predicted because special interests dominate the political process. It would also be wildly inefficient because it would increase losses from fraud, waste, and abuse by hundreds of billions of dollars. The question is whether the country’s experience with COVID-19 tips the scale in favor of Medicare for All by showing that universal coverage is needed despite its enormous downsides.

The answer is “no,” for several reasons. First, the pandemic strained the health care systems of many countries, including those with universal coverage of the sort envisioned by Medicare for All’s proponents. Given the universal nature of these challenges, it is implausible that Americans would have fared significantly better had Medicare for All been in place.

Second, the U.S. response to the COVID-19 pandemic is a master class in government failure. Some of the failures involved inadequate or ineffective preparation for a pandemic, while others involved ineffective or irrational responses to COVID-19 once it appeared on our shores. America’s health care system was not responsible for these problems. When patients arrived at hospitals, overworked medical professionals did the best that they could with the available resources. Accountability rests squarely with federal, state, and local governments, which neither prepared for the pandemic sufficiently nor deployed a sensible strategy for getting through it. The primary lesson to be drawn from America’s experience with COVID-19 is that putting the federal government in charge of the health care system would saddle it with administrative responsibilities that it could not possibly handle.

Third, epidemics and pandemics are exceptional events: arrangements meant to handle the normal level of demand for medical services should not be expected to address extraordinary situations. Ordinarily, deductibles and copays are desirable means of encouraging people to use medical services wisely. But they may be counterproductive when an epidemic occurs. Then, the need to track the spread of disease may require people who would not ordinarily seek treatments, including both healthy people and infected people whose symptoms are mild, to be tested. Plans for dealing with an epidemic should therefore include financial incentives encouraging people to participate in testing programs and waivers of copayments and deductibles for people requiring treatment. Similarly, Congress and the president should reform the federal agencies that were responsible for the country’s fragmented and ineffective response to COVID-19, starting with the Department of Health and Human Services (HHS), which along with its component agencies has primary responsibility for responding to epidemics and pandemics.

Experience with COVID-19 in Other Countries

If Medicare for All were a cure‐​all, then countries with universal coverage should have fared better than the United States in adapting to the surge in demand caused by COVID-19. In reality, European states also experienced shortages of tests, hospital beds, doctors and nurses, personal protective equipment, and ventilators. Needing to conserve scarce resources, some European countries released triage guidelines recommending prioritization of treatment for patients who were determined to have a higher likelihood of survival. Canada ran short of drugs. Australia was forced to ration masks and other personal protective equipment. In Japan, clinics turned away patients. Like the United States, countries with national health care systems also sought to “flatten the curve” so that their systems could manage the spike in demand for treatments.

Countries with universal health care systems experienced these problems for the same reason the United States did. No system that is sensibly designed to meet a population’s health care needs during ordinary times will have the capacity needed to handle an epidemic. In the short run, supply is fixed. That is as true for health care as it is for goods and services of other types, such as sanitary wipes, toilet paper, peanut butter, bottled water, and other items that stores ran out of when millions of panicked buyers decided to stock up. The COVID-19 pandemic neither justifies putting the manufacturing sector under government control nor warrants a government‐​run health care system.

COVID-19 and Government Failure

Analysis of the many deficiencies in the federal government’s response to COVID-19 can usefully be categorized as planning failures, preparation failures, and implementation failures. Although failures occurred throughout the federal government and at the state and local levels, this discussion focuses on HHS because it would oversee Medicare for All.

Failure to Plan Effectively

Although most people instinctively look to the federal government to handle emergencies such as pandemics, “the federal government is limited in its ability to mandate a centralized course of action. This is by design; the COVID-19 response is divided among more than 2,000 state, local, and tribal public health departments.” Given this reality, planning and coordination were widely understood to be critical components of an effective response.

As it happens, there was no shortage of planning or plans. The federal government “had dozens of such plans, totaling thousands of pages, issued by different agencies and different presidential administrations, with little thought to how they would be combined or who would implement them.” When critics condemned the Trump administration for ignoring the pandemic plans that the Obama administration left behind, the Trump administration responded by pointing to other plans that were developed more recently.

An enormous amount of effort went into these plans, but even so the Government Accountability Office (GAO) had long been concerned that the federal government was ill‐​prepared for an epidemic or pandemic. In a 2018 report, the GAO noted that “since 2009, [it had] identified broad, cross‐​cutting issues in leadership, coordination, and collaboration that arise from fragmentation throughout the complex interagency, intergovernmental, and intersectoral biodefense enterprise.” The GAO also observed that HHS officials were still “unsure how decisions would be made, especially if addressing gaps or opportunities to leverage resources involved redirecting resources across agency boundaries.” As the GAO dryly noted, “Without clearly documented methods, guidance, processes, and roles and responsibilities for enterprise‐​wide decision‐​making,” a transition “from traditional mission stovepipes toward a strategic enterprise‐​wide approach that meaningfully enhances national capabilities” was unlikely to occur. When COVID-19 brought these shortcomings to the surface, a GAO representative told ABC News that it was “‘surreal’ to watch ‘many of the things we had predicted’ … take place.”

Failure to Prepare

HHS oversees the Strategic National Stockpile (SNS), which originally maintained a supply of pharmaceuticals and vaccines for use in situations such as biological and chemical attacks that would quickly exhaust state authorities’ supplies. The SNS’s mandate later grew to include epidemics, and its inventory expanded to ventilators, personal protective equipment, and other items. The SNS proved its value in responding to Hurricane Katrina in 2005 and the H1N1 epidemic in 2009. Unfortunately, the H1N1 epidemic depleted the SNS’s inventory of masks and other equipment, and neither President Obama nor President Trump expended the political capital needed to obtain sufficient funds to replenish it.

There were other signs of trouble with the SNS. Official government reports going back to the early 2000s warned that the supply of ventilators in hospitals and the SNS fell far short of the number that would be needed in the event of an epidemic or pandemic. In 2010, HHS sought to close the gap by hiring Newport Medical Instruments to build a fleet of inexpensive portable devices. No ventilators were ever delivered. Before production started, Newport Medical Instruments was purchased by Covidien, a large device maker, which backed out of the contract in 2014. It took HHS five years to finalize a new contract—too late to have the ventilators ready for COVID-19. In addition, many of the ventilators that were in the SNS did not work, owing to a contract dispute between the government and the company that maintained them. When COVID-19 hit, the supply of working ventilators was grossly inadequate.

Several governmental reports also noted that the SNS had far too few N95 masks. In 2015, the government projected that between 1 billion and 7 billion masks would be required in the event of a flu‐​like pandemic, depending on the severity of the outbreak. When COVID-19 reached America’s shores, the SNS had only 10 million N95 masks. The SNS was also short of swabs, transport media, and the reagents that were necessary for COVID-19 testing to proceed.

Rushed efforts to obtain ventilators and other medical equipment proved to be costly. The government turned to contractors that it had not previously done business with, including some that had been accused of fraud. Unsurprisingly, there were problems, including allegations of excessive prices, failure to deliver the goods in question, and fraud.

Failure to Respond/​Ineffective Responses

The Centers for Disease Control and Prevention (CDC), which is within HHS, has primary responsibility for responding to epidemics and pandemics. COVID-19 showed that the CDC was not up to the task. Consider its attempt to screen passengers and facilitate contact tracing by designating a small number of airports as entry points for Americans returning from China. The effort was hampered by the CDC’s “decades‐​old notification system,” which could not handle the flood of information. When its system went offline in mid‐​February and the flow of data stopped, local officials who asked how to handle incoming passengers were reportedly told, “Just let them go.” After reviewing hundreds of pages of internal correspondence, ProPublica wrote, “What comes through clearly is confusion, as the CDC underestimated the threat from the virus and stumbled in communicating to local public health officials what should be done.”

The CDC also botched the testing process. Because SARS‐​CoV‐​2, the virus that causes COVID-19, is a new variant, a new test was needed to diagnose patients and track its spread. German researchers developed one in mid‐​January, but the CDC decided not to use it, and the Food and Drug Administration (FDA), another agency within HHS, prevented private laboratories from developing tests of their own. The CDC’s initial test, which it released later that month, was faulty. The CDC also distributed the few kits that it produced equally to labs across the country without regard to the size of local populations. The result was a dramatic shortage of valid tests in populous areas, creating the false impression that the number of cases in the United States was low.

The initial version of the COVID-19 diagnostic test was faulty because of problems at the CDC’s lab. “At one point, a Food and Drug Administration official tore into lab officials … telling them their lapses in protocol, including concerns that the lab did not meet the criteria for sterile conditions, were so serious that the FDA would ‘shut you down’ if CDC were a commercial, rather than government, entity.” Also, because the CDC had not involved private labs, academic institutions, or other organizations capable of creating tests, there was no alternative development pipeline. Finally, the CDC underestimated the need to mass produce tests quickly. Its plan for scaling up production “didn’t envision engaging commercial lab companies for up to six months.”

The CDC’s coordination with state and local public health authorities was also poor. For example, it asked state officials to use a web platform called DCIPHER to report information about persons with suspected or confirmed infections. ProPublica notes, “But it wasn’t until the week of Feb. 24—the same week that the U.S. would discover its first case of community‐​acquired COVID-19—that the CDC scheduled a training [session] for states on how to use the platform.” Getting the names and email addresses of the state employees who would use DCIPHER took even longer.

The New York Times summed up matters:

The C.D.C., long considered the world’s premier health agency, made early testing mistakes that contributed to a cascade of problems that persist today. … It failed to provide timely counts of infections and deaths, hindered by aging technology and a fractured public health reporting system. And it hesitated in absorbing the lessons of other countries, including the perils of silent carriers spreading the infection.

The agency struggled to calibrate its own imperative to be cautious and the need to move fast as the coronavirus ravaged the country. … In communicating to the public, its leadership was barely visible, its stream of guidance was often slow and its messages were sometimes confusing, sowing mistrust.

Lessons from COVID-19

COVID-19 came out of the blue, but epidemics are an old problem. Since yellow fever killed about 10 percent of Philadelphia’s population in 1793, the United States has experienced over a dozen major epidemics, including scarlet fever, typhoid fever, Spanish flu, polio, measles, whooping cough, HIV, and H1N1. Indeed, the CDC, originally called the Communicable Disease Center, was created to address the risk of an epidemic.

Advocates have sought to build a case for Medicare for All on the back of the COVID-19 pandemic, but the federal government’s inept response actually shows that it should not be entrusted with the massive additional administrative burdens that Medicare for All would entail. Disaster preparation is a core responsibility of government. Even though the federal government has dealt with epidemics and pandemics for more than a century, it was not ready for COVID-19. The first lesson the pandemic teaches is that when the federal government mishandles a core responsibility, it should not be saddled with additional administrative burdens. Instead, reform should focus on improving the performance of the federal agencies that were responsible for the country’s fragmented and ineffective response to COVID-19.

The government’s record of mismanaging the existing Medicare program makes the same point. Every year, fraud, waste, and abuse consume hundreds of billions of Medicare dollars. The federal government also has never been able to control Medicare’s cost because special interests dominate the policymaking process. Medicare cannot bargain with drug makers over prices for medications covered by Part D because Congress, acting under pressure from the industry, prohibited it from doing so. Like COVID-19, Medicare is a case study in government failure.

What explains the enthusiasm with which advocates have argued that COVID-19 proves the need for Medicare for All? The adage “never let a good crisis go to waste” provides one reason. Many of the politicians and commentators who are making a COVID‐​19‐​based case for Medicare for All have always been enthusiastic proponents of Medicare for All. They see the pandemic as an opportunity to advance their preferred policy agenda.

Admittedly, though, epidemics and pandemics do invert the ordinary logic of health policy. In ordinary times, there is a danger of overconsumption because insurers and other third‐​party payers bear most of the cost of medical services. This danger is addressed with deductibles, copayments, and other arrangements that encourage moderation. But during an epidemic or pandemic, tracking and limiting the spread of disease require everyone’s participation—including uninfected people and people with mild symptoms who would not ordinarily seek medical treatment.

A successful plan for dealing with an epidemic or pandemic would therefore subsidize (and might even reward) testing, treatment, and vaccination. A successful plan would also encourage people to respect quarantine orders and create arrangements to monitor compliance. But the existence of a short‐​term crisis such as the COVID-19 pandemic should not blind us to the long‐​term (and far greater) need for incentives to moderate health care consumption in ordinary times. Proponents who seek to create a COVID‐​19‐​based case for Medicare for All would fix a short‐​term problem by creating a long‐​term disaster.

COVID-19 also revealed to many people a long‐​standing problem with employment‐​based health insurance. When a fast‐​spreading disease throws millions of people out of work, many employees lose their insurance along with their jobs. A response plan that subsidizes testing and treatment would make this problem less severe, at least for medical needs attributable to the epidemic. However, patients with other medical problems would still need a solution for their problems with employment‐​based health insurance.

Policies designed to make health care as affordable as possible would serve the country well in ordinary times and during epidemics or pandemics. Employment‐​based health insurance does not do this. It drives up prices and total spending by inflating demand and creating severe agency costs. Medicare for All would have the same effects, and the taxes needed to pay for it would make people poorer and impede economic growth.

A better approach would encourage the development of retail medicine by eliminating existing tax subsidies for employment‐​based health insurance; by allowing people to purchase only the amount of coverage they want, including bare‐​bones catastrophic policies; and by expecting people to pay for routine services and treatments directly—the same way they pay for food, housing, and most other goods and services. Then, market forces would pressure providers to compete for customers by offering better services at lower prices. Experience with LASIK eye surgery, cosmetic surgeries and procedures, blood tests and body scans, and most recently with walk‐​in clinics run by Walmart and other retailers show this conclusively. When people pay for medical services directly, prices decline and health care is convenient and accessible.

Conclusion

The federal government was not ready for COVID-19, even though it has dealt with epidemics and pandemics for more than a century. It is magical thinking to believe that the same federal government that wasn’t ready for COVID-19 could efficiently handle the massive administrative burden associated with Medicare for All. Rather than give the federal government more things to do, we should ask it to do fewer things better. A good start would be to improve the federal government’s ability to respond to epidemics and pandemics.

Charles Silver and David A. Hyman

Charles Silver is a law professor at the University of Texas at Austin.


David A. Hyman is a law professor at Georgetown. They are adjunct scholars at the Cato Institute and coauthors of Overcharged: Why Americans Pay Too Much for Health Care.