Washington Must Add Medical Capacity

By David Clingingsmith (@dclingingsmith), Sue Helper, and Scott Shane (@scott.shane), economics faculty at the Weatherhead School of Management at Case Western Reserve University

Over the past week, American policymakers have begun imposing severe restrictions on economic and social activities to combat the spread of COVID-19 necessary to “spread the curve” and lower the infection rate to a level that the health system in the United States can handle.

We applaud policymakers for this urgent and much-needed policy response to lower demand for healthcare. But as economists, we believe policymakers need to take dramatic action on the supply side as well.

At the end of 2019, a national hospital system with a slack capacity of approximately 350,000 beds matched supply and demand. That worked fine before Covid-19. It doesn’t work now.

Social distancing to flatten the curve makes perfect economic sense. It reduces demand for medical care. But it is not enough.

We are not going to be able to stop the virus from spreading. Even if our controls reduce the infection rate of the virus from 60% of Americans to say, around 20%, this still means 66 million people will be infected.

About 15% of those who contract COVID-19 need hospitalization and stay in the hospital for a median of 10 days. That is 10 million hospitalizations in a system that has a slack capacity of about 350,000 beds. Completing all these hospitalizations in the current system will take 280 days or nine months.

To meet this challenge, policy makers also need to immediately increase the supply of medical care. We need respirators, negative-pressure hospital rooms and the expertise and skills of medical professionals.

Is boosting supply possible? Yes.

According to a report by Forbes, ventilator manufacturers have excess capacity. These producers should be mandated to increase production immediately and the Federal government should buy all output.

The federal government has the authority under the Defense Production Act of 1950 to move inputs from other industries to producers of needed medical supplies. While we might not be able to get supplies from overseas in time, we can move them from other industries. If we do not call on these powers now, then when should we?

With the designs and assistance from medical equipment manufacturers, other industries too can shift production from existing products (e.g. automobiles) to medical supplies (e.g., ICU beds). We should follow the lead of the UK and convert auto manufacturing to ventilator production.

Hotels — which are not being used much these days — can be converted into hospitals. Tented and modular units can be erected by the military in the parking lots of most American medical facilities.

Remember the tiny house movement? Why can’t we build tiny houses on vacant lots in American cities? When this is all said and done, those can be disinfected and given to the homeless.

Contractors can be taught to build negative-pressure rooms. Many competent engineers know how to do this. We can mandate the provision of blueprints and designs and pay a handsome licensing fee to the owners of any proprietary technology.

Medical personnel from different fields can be retrained quickly to do this work. Medical and nursing schools can suspend the current academic year and their personnel can be hired to produce online training for healthcare providers to care for COVID-19 patients. Everyone should be paid for what they do to help.

What is the status of such plans and ideas? We have heard nothing of the sort from federal leaders, and the time to act — to make a critical difference — is slipping away.

We had a shock to the system that boosted demand for healthcare. We are rightly acting to reduce further growth in demand. We must act fast to boost the growth in supply.

In July, 2020 we will have an equilibrium level of hospital capacity that is much higher than what we imagined we would need in December 2019.

While we cannot predict black swans, we can learn to respond quickly to them.

Scott Shane is the A. Malachi Mixon III Professor of Entrepreneurial Studies; Sue Helper is the Frank Tracy Carlton Professor of Economics and former chief economist at the U.S. Department of Commerce and David Clingingsmith is Associate Professor of Economics — all at the Weatherhead School of Management at Case Western Reserve University.