Why does my blutooth output sound bad when input is on? When I have my bluetooth headphones connected to my mac, if an application is using the Input, the quality of output is extremely degraded. Why is this? How can I fix it?

This can be reproduced by going to the input tab of system preferences while listening to music in the background.

Here's video of whats going on in Audio MIDI setup, the Format seems to be degraded to 16kHz.

https://i.imgur.com/qi356xp.mp4 

Kinda of relevant. I found this app and in the description it says something interesting:


  Get the best audio quality. macOS will normally use the SCO codec if it think you're going to use the microphone.


Could this be the issue I am having? 

I just checked by holidng the option key (suggested by @bmike) on the menu bar icon. The codec does indeed switch from ACC to SCO when the mic is activated.



Also relevant:

https://discussions.apple.com/thread/7814292?answerId=31255072022#31255072022
https://audaciousfox.net/2017/airpods-macos-call-quality-fix
I'm just going to say it.. the "fix" of switching to the internal mic is not really a fix. It's a workaround, for a broken experience and promise. Lots of people post this as a fix. It's not. Imagine Apple advertising their headphones like this - "Enjoy bluetooth music and talking with your iPhone, iPad, and MacBook*(quality will be significantly degraded when using bluetooth microphone). That would be a joke, but it's actually what is happening. When people buy bluetooth headphones, they want to listen AND talk with them, not switch to a MacBook internal microphone. To be fair, all of my bluetooth headphones have this issue. You can see in the Audio MIDI app that bluetooth input is set in stone to use a lower quality. I even tried a tutorial I found online where the person said that changing the bluetooth plist file would fix it, but I tried it and no fix. For whatever reason, Apple choose to set the bluetooth input to the lowest possible quality on a MacBook.. but that's not the case for iPad and iPhone. So why is it like this on a MacBook? Apple? We are waiting for you to give us a true "fix". 

-Here's a link to the fix that worked for someone, but not for me.. maybe it'll work for you. https://discussions.apple.com/thread/6879939