15 Ways Government Policy Got In the Way of Our Response to Coronavirus

There are those, such as Peter Nicholas over at The Atlantic, that argue that there is no such thing as a libertarian in a pandemic. How can there be? We are faced with a pandemic in which only the government can provide the solution, or so goes the argument. I can acknowledge that the government has a role to play in handling the pandemic. For example, testing is vital in fighting coronavirus (COVID-19), which is why I wouldn't have a problem with government subsidies for both molecular and serological testing. After all, I am a proponent of limited government, not a proponent of no government whatsoever. At the same time, I remain skeptical of government largesse being the solution to the problem. Over the past few weeks, I have been keeping track of the developments of COVID-19 and how we, either as a society or a nation, have responded. What I have noted is that there were multiple instances in which government regulation that existed prior to the COVID-19 outbreak undermined our response to adequately fight COVID-19. Not convinced yet? Read on.


1. Federal testing regulations. One of the largest criticisms of the United States' response to fighting COVID-19 is that there was not mass testing at the onset. If we were able to identify hotspots, who is infected and needed to be isolated, along with other epidemiological data, we could have greatly limited COVID-19's influence on our lives. I agree that President Trump did not respond to the severity of COVID-19 soon enough. Even if he had, something else was already in the way: the Food and Drug Administration (FDA).

• The first emergency use authorization (EUA) that the FDA issued was on February 4 for a real-time diagnostic panel. The issue with this diagnostic panel is that only the Centers for Disease Control and Protection (CDC) could administer it. Its next emergency use authorization was not until March 13. 
• While private-sector organizations and postsecondary institutions were all too eager to get testing kits manufactured, the CDC warned them to not do their own testing without an EUA from the FDA. It took until February 29 for the FDA to start developing a fast-track, which was over a month after the first COVID-19 case was identified in the U.S. on January 21. Here is an article from the New York Times outlining it further.
• Even better, Germany already had a test available, and China had five COVID-19 tests on the commercial market. The FDA does not grant reciprocal approval for testing already approved in other countries because FDA regulations dictate that they need to be approved by the FDA first. If the FDA were not strangled by its own red tape, we would not have had nearly as bad of a shortage in testing kits as we had. 
• As of date, the FDA's EUAs do not apply to at-home testing. Let's forget that errors can be detected with positive/negative controls, at which point you simply do a re-test. The main issue with this restriction is that merely visiting the hospital can result in a COVID-19 infection. 
• If you need a timeline for how the FDA and CDC dropped the ball on the testing, here is one from The Dispatch. Also, here are scathing reports from ProPublica and USA Today on this debacle. 

2. Tariffs on medical products. I have no love for Trump's trade war for China. As I have argued before (see here and here), Trump's tariffs on Chinese imports have lowered employment, translated in a smaller GDP, and made consumer goods more expensive. Now we have another reason to show disdain for this trade war: the tariffs on imports of Chinese medical products. In its analysis on these tariffs, the Peterson Institute for International Economics shows how these tariffs have made it more difficult for the United States to get valuable medical equipment (see below). The differences were especially noticeable for CT systems, patient monitors, and thermometers. Even for those where imports were not negative, the tariffs cost additional resources, resources that could have been spent on fighting COVID-19.

3. Certificate of need laws and hospital beds. This next grievance has to do with state-level policy. In 35 states, there exists what is known as certificate-of-need (CON) laws. The idea of CON laws is to have state planning agencies approve major capital expenditures for certain health facilities in order to keep hospitals from overspending. According to Mercatus Center data, 28 states have CON laws for hospital beds. More striking is the research that the Mercatus Center conducted on CON laws in its February 2020 report. The takeaway from this reports that "controlling for other factors, relative to patients in non-CON states, patients in CON states have access to fewer hospitals per capita, fewer hospital beds per capita, fewer dialysis clinics, fewer ambulatory surgical centers, fewer medical imaging services, and fewer hospice care facilities." What is scary is what Mercatus Center found for the state of New York, the state most heavily hit by COVID-19. If CON laws did not exist in New York, New York would have 317 hospitals across the state instead of its current 220 hospitals.   CON laws have not only limited healthcare access in a time of need, but they put thousands of lives at risk in the middle of this pandemic. Even without a pandemic, the Mercatus Center found that the mortality rate for states with CON laws was higher than those without (Koopman and Stratmann, 2016).

4. Anti-price gouging laws. When disasters hit, people stock up on things. In this case, people fear that they will be stuck in their homes for a certain amount of time without essential supplies. Anti-price gouging laws exist to try to prevent companies from "exploitative behavior." I covered the topic of price-gouging in 2012, but it merits repeating. Prices increase and decrease all the time. Prices especially increase during an emergency. But prices are not just about a dollar amount. Prices are a mechanism that signal to producers and suppliers what consumers want the most. Not only does allowing for prices to increase decrease the incentive to hoard, but it allows for much-needed goods to get to consumers faster than they otherwise would. If you want to know why there is a shortage of toilet paper and hand sanitizer, you can thank anti-price gouging laws.

5. FDA regulations on surgical face masks. The testing is not the only thing that the FDA is impeding. HHS official Dr. Robert Kadlec estimated we would need 3.5 billion masks to fight COVID-19, but only have 1 percent of that on hand. The reason that companies have not ramped up production is not because they don't want to, but because of the FDA's "premarket notification" guidelines. These guidelines dictate the approval process takes six months for a new product. The FDA rescinded these guidelines as of March 26, but as we saw with the testing kits, delaying production has all sorts of negative consequences.

6. CDC regulations on N95 masks. It is not only a shortage on surgical face masks (see difference between surgical mask and N95 mask here), but N95 masks, which are close-fitting masks that has a very efficient filtration of airborne particles. The regulations behind N95 masks fall to the CDC. The issue with current regulations is that it can take 45 to 90 days to get approved. While this might not seem like a long time, it is a lifetime in the middle of a pandemic.

7. FDA regulations on hand sanitizer. Washing our hands is one of the best ways, along with social distancing, to help minimize the spread of COVID-19. Hand sanitizer is flying off the shelves, which has caused a shortage. Alcohol distilleries want to produce hand sanitizer, not only because they want to help, but also it will help keep their businesses afloat during these tough times. Nearly 600 distilleries have shifted some of their production to hand sanitizers. However, it is difficult when FDA regulations get in the way. Although the FDA released follow-up guidance on March 27 saying they won't take action against these distilleries, but nevertheless expect them to follow strict guidelines. One major guideline is requiring a denaturant, which is not required by World Health Organization (WHO) standards. These FDA regulations are making it more difficult for people to acquire a much-needed product.

8. FDA regulations on ventilators. Ventilators are another key good into fighting COVID-19 since it is an upper respiratory disease that requires a ventilator for those with severe symptoms. Many states have dealt with ventilator shortages. Anesthesia gas machines and positive-pressure breathing devices could have been converted into ventilators when COVID-19 was first an issue. However, it was not permitted by the FDA until they issued an EUA on March 27. This EUA also allows for some modifications to be made on hardware, software, and materials, which is nice because normal approval vis-a-vis the 510(k) takes over 100 days. While it's better late than never, we had ample warning that COVID-19 was coming, and the FDA getting out of the way could have meant having more ventilators ready before the COVID-19 peak arrived.

9. Employer-sponsored insurance. Employer-sponsored insurance is a tax break that allows employers to exempt certain health-care uses of income from being taxed if they are to pay for an employee's health insurance. I have criticized this tax break (see here and here) because it makes income inequality worse, it drives up health care costs in a way not seen in other countries because only the United States has this tax break, and the most relevant of reasons to hate it: it ties health insurance to employment. This has not become apparent because only recently have we seen the massive job losses. With millions losing their jobs, we are going to see decreased health access, which has the real potential to strain the healthcare system and impede our responsiveness to COVID-19.

10. H-1B Visa Caps. The H-1B Visa Program has allowed U.S. companies to hire foreign technical talent, and has overall been helpful to the United States. Presently, there is an annual H-1B visa cap of 65,000 professionals and 25,000 students. This becomes problematic with COVID-19 because more than one in six medical professionals are foreign-born. It is not just hospitals that use the H-1B visa, but also biomedical companies.  Keeping out foreign-born medical professionals and researchers only hinders our ability to come up with a response to COVID-19.

11. Telemedicine. Videoconferencing has given healthcare professionals the ability see and sometimes treat patients from long distances. This sounds like a great way to help patients, especially with the recommended social distancing for COVID-19. A trip to the hospital could risk COVID-19 infection for either the patient or the physician, which is why allowing for telemedicine is all the more important. While President Trump allowed for telemedical consultations, that order only applies for Medicare. There are 36 states (and DC) that require an in-person visit for write a prescription. Some states even require an assistant ("telepresenter") to be present.

12. State-level scope-of-practice laws. As the Mercatus Center brings up in its analysis on these laws, there is 1 physician for every 500 U.S. citizens. If you include nurses, physician assistants, and other medical professionals, that number goes up to 1.6 caregivers per citizen. A 2015 study from the University of California-San Francisco suggests these laws lower access to care. Mercatus Center research also shows that these laws drive up costs without making patients safer. A report from the Brookings Institution comes to a similar conclusion about these laws. Providing caregivers full practice authority would improve their ability to pick up the slack when the demand for medical services is so high.

13. Occupational licensing. Occupational licensing is a government regulation mandating a license before practicing a certain vocation. I have criticized occupational licensing under normal circumstances since it restricts employment (especially for individuals of a lower socio-economic status), boosts the prices for goods and services, and exacerbates income inequality. Occupational licensing comes with another flaw: a lack of portability across state lines. One state is going to have a greater need for healthcare workers than others. With the current occupational licensing scheme, physical assistants and nurses cannot cross state lines to help those in greater needs. Massachusetts' Governor Baker has allowed for temporary licenses for out-of-state nurses, as did the governors of Maryland, South Carolina, and Texas. The barriers of occupational licensing normally limit access to health care, and are particularly acute in an emergency such as this one. Let's hope governors have the sense to lift these barriers during the pandemic, as well as evaluating the idea of universal license recognition once we're out of this crisis.

14. Freight and hours of service (HOS) rules. The freight industry is the lifeline that is helping keep the current economy afloat. Normally (49 CFR §395.3), a trucker can work 14 hours a day, which includes 11 hours of driving and a number of breaks. The Federal Railroad Administration (FRA) temporarily waived these rules for trains, as did the Federal Motor Carrier Safety Administration for trucks. States are also removing their own HOS rules. While this is an improvement, there are still regulatory ambiguities, including what is considered "routine" and which products fall under exemption.

15. The Jones Act and Shipping Costs. Known as the Merchant Marine Act of 1920, the Jones Act restricts the transport of U.S. goods by mandating that any transport of goods between U.S. ports has to be done on U.S.-made and U.S.-operated ships. Much like with HOS rules, the Jones Act makes freight shipping more difficult. The Jones Act is bad enough policy under normal circumstances by driving up the cost of shipping and costing the U.S. economy. By repealing the Jones Act, it will lower freight costs for to ship medicinal goods, which will make it easier to fight COVID-19.

Postscript: This list doesn't touch upon the government's response either through monetary policy or such fiscal policy as the gargantuan CARES Act, the latter of which I intend to cover in future blog entries. This list is what government regulations existed prior to COVID-19 that created shortages in healthcare workers, necessary medical supplies, and made it more difficult for people to buy goods in a time of crisis. If the pandemic has taught us anything, libertarianism and the call for limited government are far from dead. If anything, we could have been better prepared had it not been for all of these inane and burdensome regulations. Because of the red tape at both the federal and state levels, COVID-19 ended up taking more lives than it otherwise would have. It has been a sobering lesson in how unnecessary the vast majority of government regulation truly is.

What we are seeing is a surge of deregulation so that companies are free to solve problems instead of being hobbled by red tape. Even better, companies don't need a directive to help. Pulmotect's aerosol drug, PUL-042, that has already been effective in fighting SARS and MERS, is being tested to see if it can treat COVID-19. Clearwater Paper is manufacturing more paper products. Honeywell and 3M are creating more N95 masks. Not only is Dyson ramping up ventilator production, Medtronic voluntarily released the patent on its ventilator so everyone can produce more ventilators. The list goes on, but U.S. companies are stepping up to help defeat COVID-19.

While there is a role for government to play in helping the spread of infectious disease, its main role should be to get out of the way and let private-sector actors fight the good fight.