In light of Joe Biden's victory and the electoral context in the US, we asked two experts of the American healthcare system, Richard G. Frank and Jonathan Gruber, to give us an insight into the health and economic impact of the crisis on the federal and local healthcare systems, as well as the challenges that these present for the new president.
A devastating impact on the U.S. economy
The Covid-19 pandemic has had a devastating impact on the US economy. Since early March, the US economy has lost 8,717,000 jobs. The unemployment rate peaked at 14.7%, the highest since the Great Depression, and remains at 6.9%, the highest level since November, 2013.
Part of the reason for the economic slowdown was decisions by state and local governments to impose lockdowns or other restrictions on economic activity. But this does not seem to be the main reason. For example, economic activity declined precipitously once the spread of Covid-19 became clear in early March, even though shutdowns didn’t start until the end of the month.
The economic devastation would have been much worse without the massive CARES legislation that was passed on March 27. This $2 trillion bill injected federal support throughout our economy. This included checks to households, a large bonus to the unemployment insurance payments on which unemployed workers survived, loans to small businesses that were forgivable if these firms did not lay off their workers, and an expansion in credit for larger firms. It is difficult to assess the size of the benefit to the US economy from this intervention, but estimates suggest that the positive impacts were substantial.
This is very worrisome, as the support of the federal government for the economy has not been extended. The pain of this cutoff in Federal support was not felt strongly in the second half of this year, since many Americans had saved some of the benefits of the first round. Nevertheless, without additional federal support the economy may well decline further.
Heterogeneous effects on the health care system
The effect on the health care system has been particularly significant – and quite heterogeneous. For some providers, there has been an enormous rise in business from new Covid-19 patients. Indeed, hospital intensive care units were close to overcrowding during the initial surge of the virus and find themselves at their limits again this fall. At the same time, there was a massive decline in the demand for most health services because individuals avoided elective care out of concern about exposure to Covid-19. This stresses the finances of hospitals since the profitability of elective services is much higher. Both hospitals and physicians saw a net decline in business of 50% or more in the early months of the virus.