No Time to Exploit the Crisis

The Coronavirus pandemic has created a significant strain on the U.S. healthcare system and policymakers are rightly taking steps to ensure that Americans stay safe and receive the care they need. In acknowledging the severity of the crisis, Senate Majority Leader Mitch McConnell (R-Ky.) has said that lawmakers will consider an additional COVID-19 relief package focused on healthcare.

However, this should not be an excuse to exploit the crisis and push price fixing and mandates on the healthcare system, as some have proposed.

For instance, lawmakers have called for price controls as a “solution” to surprise medical billing. At the same time, some in the administration are pushing an executive order that imposes a “Buy American” mandate on medicines.

Both proposals would cause lasting damage to the healthcare system and have no place being addressed during the present crisis.

Proponents of this Buy American mandate such as White House adviser Peter Navarro have claimed the proposal is a way to bring back jobs to the U.S. However, it would instead lead to higher costs or shortages, and could undermine the ability of manufacturers to develop cures to the Coronavirus.

While efforts to diversify away from China should be welcomed, a mandate on medical products is the not the right approach – especially during a public health crisis.

The existing supply chain for medicines is complex and incorporates numerous inputs from across the world including raw materials, active pharmaceutical ingredients (APIs), and high precision analytical tools. These supply chains frequently contend with a number of challenges including transportation and logistical obstacles, ensuring supply and demand are met, and mitigating stress caused to the chain due to region-specific disruptions in manufacturing or shortages.

Pharmaceutical manufacturers are racing to develop therapies and vaccines to treat the Coronavirus. However, a Buy America mandate will undercut this work by requiring manufacturers to instead reorganize their supply chains.

This will eventually lead to higher prices. Some estimates show that Buy American mandates lead result in manufacturing costs increasing up to five times higher. Unsurprisingly, this leads to increased prices for consumers whenever they have been tried.

An executive order based on economic protectionism and isolationism will also invite immediate retaliation from our trading partners and provoke the utilization of similar forced localization schemes worldwide.

Unfortunately, this is not the only harmful policy under discussion. 

Lawmakers are pushing the same heavy-handed government approach when it comes to surprise medical billing, which occurs when an individual receives an unexpectedly high medical bill as a result of being out of network or receiving emergency care.

The “solution” in question would have the government set rates for any payments made to out-of-network providers. Thus, benchmark rate-setting would replace private negotiations between insurers and providers with government-set prices, a blatant price control on the healthcare system.

While narrower in scope, this proposal mirrors the proposals found in the left’s socialist “Medicare for All,” which would have the government set rates for medical services across the board.

While Congress should address surprise billing, policymakers should reject any solutions that impose government price controls as it will inevitably lead to shortage and disruption in care.

To be clear, lawmakers are right to look at legislative proposals to help the strained healthcare system in light of the Coronavirus pandemic.

However, this should not be an excuse to use blunt government forces to set prices and mandates, as some are pushing with the Buy American proposal and surprise billing rate-setting.

At a time when patients and providers need all the help they can get, these proposals would undercut the ability of Americans to receive care and cause lasting damage to our healthcare system.

Alex Hendrie is Director of Tax Policy at Americans for Tax Reform.