The correct answer is C. Compounds.

In the context of overcrowded refugee camps where social distancing is impossible and there is a lack of medical supplies, the word "compounds" accurately conveys the idea that these issues make the problem worse. Here's the sentence with the correct word:

"In overcrowded refugee camps, social distancing is impossible, and the lack of medical supplies only compounds the problem."

- "Mingles" (A) means to mix or combine, which doesn't fit the context of worsening a problem.
- "Enhances" (B) means to improve or make better, which is the opposite of what is intended here.
- "Augments" (D) means to increase or make larger, which could be a close fit, but "compounds" more specifically implies making a problem worse.