Pay Providers More to Administer Vaccines


How can the U.S. get more vaccine shots off shelves and into arms? “By harnessing the power of simple economics,” say economists Jeffrey Clemens and Joshua Gottlieb.

In an op-ed in The Hill, they note:

For a two-dose COVID-19 vaccine course, Medicare now pays providers $45, too stingy for this crucial service. The crisis calls for more. Even at $200 per course – over four times current rates – it would cost only $66 billion to fully vaccinate every American. For perspective, $66 billion is just 3 percent of President Biden’s proposed relief bill and less than half of a percent of the estimated cost of the pandemic.

Their proposal is simple: Increase reimbursement rates for vaccinations.

Clemens and Gottlieb:

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Current incentives are failing to get vaccines administered. When reimbursements barely cover costs, pharmacies, doctors and hospitals have little incentive to act quickly. Through mid-January, the data on vaccine distribution reveal a widespread disregard for the urgency of this effort. Only half of the doses distributed to states have been administered — an appalling record.

Increased payments would motivate providers to pull out all the stops. When it’s lucrative to administer vaccines, providers will compete to find eligible patients and encourage vaccination. Because they know their local populations, they are better positioned than the federal government to overcome vaccine hesitancy and improve equity. They can operate longer hours, make the process more convenient and improve public outreach. For normal medical services, reasonable people can disagree about whether medical reimbursements have gone too far, leading to excessive medical costs. But in the case of COVID-19 vaccines, it is clear we have not gone far enough.

The time to write a detailed distribution plan was last spring. New plans, however, cannot erase past failures or restore the lives we have lost. But President Biden can avoid compounding President Trump’s errors. A repeated cycle of logistically complicated, centralized planning would risk doing just that. Such a plan would take months to work out and, because of messes the Trump administration made, would risk sowing additional confusion. Further, a new wave of centralized logistics planning could introduce as many hurdles as it removes. Research has shown that complexity can, by itself, deter providers from participating.

Michael R. Strain — Michael R. Strain is the director of economic-policy studies and the Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute.

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