Medicine During the Pandemic Recession

In June of 2020, the National Bureau of Economic Research declared the nation was in a recession. They wrote, “a peak in monthly economic activity occurred in the U.S. economy in February 2020.” (1) Often mentioned by economists and politicians, when America sneezes, the rest of the world gets a cold. Although the saying dates to Austrian politician Klemens von Metternich in the 1800s, its modern use reflects the U.S. superpower status.

Part of that economic juggernaut is our exemplary healthcare system, one that is very costly per capita but produces high-quality services for the Americans who can access them. Some have argued the healthcare sector is recession-proof. A more accurate description would be recession-resistant but, as we have seen throughout most of 2020, even the healthcare industry is deeply affected by the global pandemic of COVID-19, as “eventually that [resistance] wears off. The impacts of a recession don't skip the healthcare sector, but they do hit it later than most areas, and the industry also takes longer to bounce back,” experts have warned. (2)

Impacts on US Healthcare

“The drop in health care spending earlier this year was unprecedented in U.S. history,” says Jonathan Ketcham, Ph.D., Earl G., and Gladys C. Davis Distinguished Research Professor in Business, W.P. Carey School of Business. When looking at recession effects on healthcare, up until COVID19, it would be safe to assume that the industry is truly immune to the effects of a recession, as seen in the graph. It is a curious phenomenon to see so many healthcare jobs lost in a global health crisis. This gives us a glimpse into how the healthcare industry makes its money: “treating patients for a deadly illness is far less profitable than offering them elective surgeries”, (3) quoted from Isaac Arnsdorf. (4)

Healthcare does seem to be faring better than other industries. The rate of job loss in healthcare is less than the rest of the economy. However, it is important to note that during the Great Recession, as nearly all other jobs were declining rapidly, jobs in healthcare continued to rise at a good rate. Some economists have suggested that this increase is what helped recover the Nation’s economy. (3)

Perhaps it is time to take a look at healthcare in the lens of “pandemic-proof” rather than “recession-proof”. Why is there a difference in the way the healthcare economy fared in past recessions, yet in this one, it has sunken like the others? The answer may very well be insurance. Many Americans receive their health insurance through an employer and when that employment is lost, the insurance goes with it. (5) “In past recessions, patients were insulated from the costs, which made the demand for care what economists call ‘price inelastic’.” In the current pandemic climate, many people are losing their jobs and having to turn to state-funded health insurance which has lower payment margins. Hospitals are designed to thrive in private insurance markets and elective procedures. (6)

Let’s look at some numbers. In 2000, the American Hospital Association (AHA) estimated that private payers were billed at 116% of the cost to the hospital, and 128% by 2008. Based on data from private employers in 25 states, commercial payers were billed at an average of 208%. Based on those numbers, shifting just 10% of privately insured patients to Medicaid would result in a loss of 3.2% of revenue, where before the Great Recession that same change would have caused a 0.8% loss. Since the start of the pandemic, 40.8 million Americans have lost their jobs. (6) It was estimated that 160 million Americans under 65 years of age had health insurance through their employer before COVID-19. Thirty million workers filed for unemployment between March 15 and April 25. (7) According to data on employer-based coverage, that is representative of a loss of up to 20% of the commercial insurance market. Overall, this adds up to a $95 billion loss because of the shift from private to public insurance, and a $33 billion loss due to cost-avoiding behaviors. (6)

Impacts on Arizona Healthcare

"Arizona has one of the strongest economies of all states, and conditions through January, February, and most of March were building on that strong foundation," stated Lee McPheters, director of the Economic Outlook Center in the W.P. Carey School of Business at ASU, “On the plus side, Arizona could be entering the next recession in relatively good shape.” (8) Arizona appeared to be one of the most dynamic economies in the nation when entering the start of 2020.

The Phoenix area was not able to recover from the Great Recession (2007 - 2009) as quickly as the rest of the nation. This was perhaps a great lesson when entering the inevitable recession brought on by COVID -19 a decade later. One huge contributing factor to Arizona’s recession readiness is the transition from a focus on a construction-heavy economy to one that focuses far more on healthcare and bioscience. Christine Mackay, community and economic development director for the city of Phoenix states, “It puts us in a much better position for economic recovery. Healthcare and biosciences are as recession-proof as they can be. People always need healthcare.” (9)

The last recession lasted about 19 months and the effects lingered in Arizona for years. The recent advancements in medical learning and health care facilities have unintentionally provided Arizona with a bit of a recession-vaccine: The area and the state have not avoided the recession completely, but as a whole, the state seems to be protected better than others.

Graph 1. Recessions through U.S. history and the effect on jobs.3

The last recession lasted about 19 months and the effects lingered in Arizona for years. The recent advancements in medical learning and health care facilities have unintentionally provided Arizona with a bit of a recession-vaccine: The area and the state have not avoided the recession completely, but as a whole, the state seems to be protected better than others.

Pre-pandemic employment in biosciences for the Phoenix-Mesa-Chandler metropolitan area was sitting at about 44,700 jobs. In April, while most job forces were starting to feel the pain of state-wide shelter in place orders, the jobs in biosciences in this area grew to 46,200. Meanwhile, healthcare sectors were being hit by a decline in patients seeking elective procedures and non-essential healthcare services. This may have factored into the decline from 335,300 jobs in February to 318,200 by July. (8)

How to Respond

The U.S. economy will recover but it will continue to evolve, as it always has. More physicians are shifting toward digital forms of patient care. However, this still leaves some questions about patients who are losing their insurance coverage and procedures that must be done in person. Doctor’s offices saw a nearly 60% drop in visits early in the pandemic, with ophthalmology and dermatology seeing a drop in visits greater than 70%. Now, nearly 30% of these visits are provided via telemedicine, but this technological shift has only partially compensated for the drastic decrease in in-person care. (10)

Employee care is more important now than ever. Employers should promote mental health care for their employees to keep morale up in difficult times. Fears about job security, financial security, and health security are at an all-time high. Mental health care is paramount and needs to be discussed and addressed. (11)

A COVID-19 vaccine is inevitably on the horizon and plans for distribution should be developed now. Guidelines need to be put into place so that the most vulnerable have access to the vaccines as they come out, and that those who can wait do so. Access to vaccines needs to be planned so that there is not a rush and a subsequent shortage. It is important that there is a way for those who are uninsured to have access to vaccination at an affordable price. (12)

Most importantly, the public needs to be educated, informed, and engaged. The public needs access to clear and understandable facts from trusted, reliable sources. Overcoming the pandemic will rely on improving communication and educating the public. (12)

Broad actions moving forward are reliant upon expanding health insurance and strengthening the nation’s public health infrastructure. (12) In addition to accessible health coverage, public health at all levels should be better funded. Because of the impact of the epidemic, federal funding will likely be necessary to get the public health system where it needs to be to protect our country from something like the COVID-19 pandemic happening again in the future. (12)

By Hailey Lowery, MPH Candidate, Class of 2020, A.T. Still University, sa180293@atsu.edu

Cited Sources: (Numbered in parentheses above)

1. Determination of the February 2020 Peak in US Economic Activity. June 8, 2020. The National Bureau of Economic Research. Cambridge, MA. Accessed online at https://www.nber.org/cycles/june2020.html.

2. Myth diagnosis: Is healthcare recession proof? November 22, 2019. Healthcare Dive. Accessed at https://www.healthcaredive.com/news/myth-diagnosis-is-healthcare-recession-proof/567470/.

3. Why 1.4 million health jobs have been lost during a huge health crisis. May 8, 2020. The New York Times. Accessed online at https://www.nytimes.com/2020/05/08/upshot/health-jobs-plummeting-virus.html.

4. ‘An arm and a leg’: Health care takes a financial hit in the midst of a pandemic. May 11, 2020. KHN Podcast. Accessed at https://khn.org/news/podcast-an-arm-and-a-leg-health-care-takes-a-financial-hit-in-the-midst-of-pandemic/.

5. Health care workforce is recession proof. Is it ‘pandemic proof’? April 20, 2020. Politico. Accessed online at https://www.politico.com/full/10.1056/NEJMp2018846.

6. Are U.S. hospitals still “recession-proof”? September 24, 2020. New England Journal of Medicine. Accessed online at https://www.nejm.org/doi/news/2020/04/20/health-care-workforce-crisis-197468.

7. How the Covid-19 recession could affect health insurance coverage. May 4, 2020. Robert Wood Johnson Foundation: Quick Strike Series. Accessed online at https://www.rwjf.org/en/library/research/2020/05/how-the-covid-19-recession-could-affect-health-insurance-coverage.html.

8. Arizona braces for a Coronavirus recession. March 18, 2020. AZ Central: Arizona Republic. Accessed online at https://www.azcentral.com/story/money/business/economy/2020/03/18/arizona-likely-heading-recession-along-u-s/5071487002/.

9. Phoenix invests big in healthcare and biosciences, hoping to boost economy and add jobs. September 17, 2020. AZ Central: Arizona Republic. Accessed online at https://www.azcentral.com/in-depth/news/local/arizona-science/2020/09/13 bioscience-and-health-care-industries-expand-and-add-jobs-phoenix/3392691001/.

10. Health care spending has actually plunged in the middle of the pandemic. Here’s why. May 7, 2020. CNN Business. Accessed at https://www.cnn.com/2020/05/07/economy/health-care-downturn-coronavirus-pandemic/index.html.

11. Moving forward differently. July 16, 2020. Atlantic Health System. Accessed at https://www.atlantichealth.org/about-us/stay-connected/news/contentcentral/2020/covid-19-coronavirus/community-conversations/moving-forward-differently.html.

12. A roadmap to reset the nation’s approach to the pandemic. 2020. Association of American Medical Colleges. Accessed at https://www.aamc.org/covidroadmap/roadmap#inequities.