Abstract
This study investigates the forces that contributed to severe shortages in personal protective equipment in the US during the COVID-19 crisis. Problems from a dysfunctional costing model in hospital operating systems were magnified by a very large demand shock triggered by acute need in healthcare and panicked marketplace behavior that depleted domestic PPE inventories. The lack of effective action on the part of the federal government to maintain and distribute domestic inventories, as well as severe disruptions to the PPE global supply chain, amplified the problem. Analysis of trade data shows that the US is the world's largest importer of face masks, eye protection, and medical gloves, making it highly vulnerable to disruptions in exports of medical supplies. We conclude that market prices are not appropriate mechanisms for rationing inputs to health because health is a public good. Removing the profit motive for purchasing PPE in hospital costing models, strengthening government capacity to maintain and distribute stockpiles, developing and enforcing regulations, and pursuing strategic industrial policy to reduce US dependence on imported PPE will help to better protect healthcare workers with adequate supplies of PPE.
•Market failure and government failure contributed to PPE shortage during COVID-19
•Dysfunctional hospital budgeting models disincentivize adequate inventories of PPE
•Federal government failed to maintain and distribute domestic inventories of PPE
•Pursue strategic industrial policy to reduce US dependence on PPE supply chain
•Market prices are inappropriate mechanisms for rationing inputs to health, like PPE