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Covid-19 Will Be the Ultimate Stress Test for the American Social Safety Net

BLOG - 6 April 2020

The spread of Covid-19 is exposing critical areas of weakness in American social policy and the social safety net: the vulnerability of the healthcare system, the lack of paid sick leave and the federated structure of the social policy system.

In times of crisis, a nation looks to its leaders for honesty, resolve, and solace. But instead of these virtues, President Trump has approached the global Covid-19 pandemic with his characteristic blend of fecklessness, mendacity, and narcissism. So where have Americans been looking for leadership as the crisis unfolds? Largely to governors, many of whom have provided welcome voices of reason and urgency: Mike DeWine of Ohio, Gavin Newsom of California, Larry Hogan of Maryland, and Jay Inslee of Washington come to mind, among others. (Not all governors, it should be noted, have done so well. Gina Raimondo of Rhode Island, for example, tried to close her state’s borders to people traveling from New York. And Ron DeSantis of Florida, a close ally of the president, seemed more intent on protecting beach parties than public health.) How might this tilt toward decentralized leadership shape the American response to the crisis?

At the national level, the macroeconomic impact of the pandemic has been on full display in recent days and weeks. Never— not in 1929, not in 2008 — has the American economy plunged so quickly and precipitously into what is certain to be a deep recession. In just two weeks, nine million Americans have filed new applications for unemployment benefits, more than erasing the cumulative job growth of the first three years of the Trump administration, and job losses will continue. Economists’ estimates of the unemployment rate in the second quarter of 2020 range from 15% to more than 30%, which would be the highest ever recorded in the United States. Similarly, forecasters expect the US’s GDP to decline sharply over the rest of 2020 and perhaps beyond.

Never— not in 1929, not in 2008 — has the American economy plunged so quickly and precipitously into what is certain to be a deep recession.

The US federal government has begun to respond to the looming economic crisis through both monetary and fiscal policy. The Federal Reserve lowered interest rates to near zero and Congress passed a $2 trillion stimulus package,with the possibility of more to come.

But the virus’s human toll — beyond more than 336,000 confirmed cases and 8,700 deaths (as of 6 April) — is just beginning to come into focus. It is increasingly clear that the pandemic is also exposing critical areas of weakness in American social policy and the social safety net.

This is apparent in a variety of ways. Perhaps the most obvious area of vulnerability is the American healthcare system. Some of this fragility is evident in the devastating capacity problems that threaten the system’s ability to care for all the people in the country who will get sick; shortages of reliable Covid-19 tests, ventilators, protective equipment, and intensive care beds are hampering the response to the crisis. The Institute for Health Metrics and Evaluation at the University of Washington estimates that at the pandemic’s peak, the United States will have a shortage of nearly 90,000 hospital beds and almost 20,000 intensive care beds. As reports from the pandemic’s front line are beginning to show, these shortages are putting the lives of both patients and health care workers at risk.

Ten years after the passage of the Affordable Care Act (ACA), moreover, many Americans remain without health insurance. Despite dramatic increases in health insurance coverage since the ACA’s passage, nearly 28 million Americans (about 8.5% of the US population) are uninsured. Given the dramatic increase in joblessness, this number is certain to grow in the coming weeks and months, especially because the Trump administration has declined to open a special enrollment period for people to sign up for health insurance under the ACA. As a recent Kaiser Family Foundation report details, moreover, many uninsured Americans work in jobs that put them at high risk for Covid-19 exposure in industries such as food service, retail, transportation, and health care.

The health insurance gap heightens the risk for the uninsured. The major pandemic legislation passed by Congress and signed by President Trump last week provides for widespread free Covid-19 testing. But free testing is not the same as access to testing. Uninsured Americans are four times more likely than others to have no regular doctor, and three times more likely to postpone seeking medical care because they are afraid of the cost. Without regular access to care, these patients may be more likely to forego testing altogether and thus miss out on needed care.

Moreover, the legislation does not cover the cost of treatment for Covid-19. Uninsured patients who contract the disease and receive treatment are likely to receive ruinously large medical bills. One estimate suggests that the direct cost of Covid-19 treatment could be between $42,000 and $74,000 per patient. Moreover, the byzantine American health insurance system means that even patients with private health insurance could face out-of-pocket costs exceeding $1,000, and as many as one in five could face surprise “out-of-network” charges (for medical services by providers who do not have a direct contract with the patient’s insurance company). The administration announced last week that it will compensate hospitals for the cost of caring for uninsured Covid-19 patients, although critics worry that this move may not go far enough to alleviate the financial burden of care.

Uninsured Americans are four times more likely than others to have no regular doctor, and three times more likely to postpone seeking medical care because they are afraid of the cost.

Another weakness of American social policy exposed by the pandemic is the lack of paid sick leave for most American workers. Although most large companies offer their employees paid sick leave, national law does not require that employers offer workers paid sick leave, although eleven states (plus the District of Columbia) have such a requirement. The lack of sick leave is a double problem. Most obviously, it imposes economic hardship on workers who have to take time off because they get sick. Low-wage and uninsured workers are more likely to work in jobs without paid sick time and they are often reluctant to take time off from work even when they are sick for fear of losing wages or even losing their jobs.

By creating the incentive for workers to go to work even when they are sick, the lack of a uniform sick leave policy poses a stark public health risk, especially in the midst of a worldwide outbreak of a highly contagious infectious disease. Especially early in the spread of the disease, the inclination to work even when sick probably undermined efforts to control the pandemic and exacerbated the spread of Covid-19. The recent federal legislation did provide and fund mandatory paid sick leave for many American workers on a temporary basis, but it will expire at the end of 2020.

A final blow to the already fragile American safety net could come from the federated structure of American social policy.

In numerous other ways, the pandemic will stress test the American social safety net as it has not been tested since the early years of the Great Depression. As joblessness spreads, people will begin to miss mortgage and rent payments and find themselves unable to buy food, medicine, and other necessities. Already fragile systems of housing, food, and income support and social services will be stretched, possibly to the breaking point. 

A final blow to the already fragile American safety net could come from the federated structure of American social policy. Most of these crucial services are provided not by the federal government but by states, whose already fragile finances will be further stretched by the crisis. The federal government can readily borrow money to finance extraordinary expenditures to meet the situation. But states cannot finance needed spending so easily because most are required to balance their budgets every year. As the crisis unfolds, demands for services will grow and costs will rise. Health care costs area already consume more state spending than any other category, and as health costs rise, states may be forced to make drastic choices between health care, education, housing assistance, and other essential services. And as the economy slows down, states are already facing severe revenue shortages; in the state of Massachusetts alone, for example, one estimate shows a revenue shortfall of as much as $750 million in the current year, with greater declines to follow in later years. The federal government can help states make up some of this gap, but states will continue to shoulder much of the burden of caring for those affected, both directly and indirectly, by Covid-19.

So while many of the nation’s governors are filling the leadership vacuum created by the emptiness in the White House, their capacity to ease the crisis will ultimately fail unless the federal government steps up.

 

COPYRIGHT: KENA BETANCUR / GETTY IMAGES NORTH AMERICA / GETTY IMAGES VIA AFP

 

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