The COVID-19 crisis has already killed tens of thousands, shut down large portions of the economy, and tested the limits of the U.S.’s healthcare system.
The pandemic has prompted significant lifestyle changes for people stuck inside practicing social distancing, leaving open major questions about how much of this reshaping of behavior is permanent, from production supply chains to governments and companies.
Of all the areas, one stands out as likely to see significant change: healthcare, the primary stage for the coronavirus crisis.
Even before the coronavirus came to the U.S., changing America’s expensive healthcare system (17% of GDP compared to a world average of under 10%) to a large degree defined the presidential primaries, led by Sen. Bernie Sanders’ central campaign issue, Medicare for all.
During the coronavirus, shortcomings of the current system and the trial by fire of telemedicine could retool our healthcare system going forward, according to a note from Morgan Stanley healthcare analysts.
"The outbreak has enforced sudden systemic changes in the U.S. healthcare system," the analysts wrote. "The national health emergency is altering the behavior of regulators, government, hospitals, suppliers, and healthcare providers."
Morgan Stanley said it is seeing "unprecedented flexibility and cooperation" coming out of this crisis.
"While some changes will be temporary, we think others will stick," the note said.
Five key areas:
Regulation is becoming more flexible
In early March, the Centers for Medicare & Medicaid Services (CMS) moved quickly to change reimbursement for telehealth services, allowing Medicare patients to receive telehealth care. Previously, only people with waivers could get telehealth paid for — often rural patients far away from clinics. At the same time, other government agencies like the FDA have pressed on the accelerator, bulldozing regulatory hurdles for new companies and faster trials for more innovation.
Hospitals have been able to be more flexible to meet their needs; medical residents and nurse practitioners have been allowed expanded powers, and telehealth has finally been implemented in a meaningful way.
Besides telemedicine, the coronavirus crisis could even push some aspects of drug trials online. Morgan Stanley noted that companies like IQVIA (IQV) have used remote monitoring in place of on-site monitoring in some cases, as in-person activity is less feasible during the social distancing period.
Telemedicine is finally here
When authorities relaxed telemedicine rules and regulations in March and April, the nascent industry exploded. If you can’t get an appointment with your eye doctor in person, or show your pediatrician your child’s rash in person, it’s now likely done online.
Morgan Stanley analysts noted that in February, surveys they conducted with various medical innovators showed serious pessimism. At that time, just 20% of the innovators surveyed said that the low-single-digit adoption rate would go to 25% within three years.
“Fast forward seven weeks, usage of virtual health solutions has increased significantly nationwide,” said Morgan Stanley, noting that in an April 10 survey, 50% of clinicians said they were using telemedicine. This trend has been broadly observed, as companies like Doxy have seen a “thousandfold” increase and millions of Americans have gone online instead of to the clinic.
Morgan Stanley pointed to the fact that New York State has merged hospital systems into a single system, that governors in various regions are working together, and that healthcare records may become even more portable in the post-coronavirus era.
“After the COVID-19 pandemic, we don't expect the state to continue to run the health system, but we do expect to see a more collaborative environment that fosters data interoperability and record sharing,” Morgan Stanley wrote.
What to expect going forward, the analysts posit, could be less siloing of data and resources — buoyed by changes in privacy regulation — and more crossover between the medical world and the consumer technology world.
An expanded healthcare model
Two big things happened at the same time that could have a profound impact on healthcare moving forward: a global health crisis and millions of people losing their employer-based health insurance.
This may not result in a “Medicare for all” plan, but there are many realistic possibilities for more public healthcare.
"We expect [this] will impact the U.S. political and policy debate regarding health insurance and the uninsured," Morgan Stanley analysts wrote. "We see the pandemic adding fuel to the shift towards government-sponsored programs, particularly as social norms and attitudes towards the role of the federal government in healthcare are likely to change.”
Long-term poll tracking from Kaiser Family Foundation shows that smaller incremental changes are most likely to have broad support, which matches with Morgan Stanley’s predictions.
Specifically, the analysts foresee the possibility of states waiving work requirements for Medicaid and expanding the Affordable Care Act. The analysts also see possibility in Joe Biden’s proposal to lower the eligibility age of Medicare to 60 from 65.
Some of the medical supply chain will come home
The medical equipment shortages from the coronavirus pandemic has revealed the fragility of the medical supply chain. In the past 10 years, a lot of manufacturing left the U.S. — including critical tools like personal protective equipment, swabs, and ventilators.
"In the post-COVID year, we expect to see an acceleration of the repatriation of manufacturing for both medical components and drug APIs [active pharmaceutical ingredients] as well as a rethinking of just-in-time inventory throughout the supply chain,” Morgan Stanley analysts wrote.
As Yahoo Finance reported, there is another alternative to manufacturing repatriation: higher inventory stocks of emergency health equipment that could be used until domestic manufacturing spins up in a crisis.
While the pharma supply chain hasn’t been particularly affected the way other parts have been, Morgan Stanley pointed to active pharmaceutical ingredients as having similarly long supply chains that span continents. Already, the analysts wrote, Europe has been having discussions over the overreliance on China for drug manufacturing — and looking to incentivize on-shoring.