By John McManus, president and founder, The McManus Group
The shutdown of the economy from the COVID crisis has created the biggest economic calamity since the Great Depression, throwing over 30 million workers onto the unemployment rolls in just six weeks and pushing the unemployment rate toward 20 percent. For more than 40 percent of these people (12.7 million according to the Economic Policy Institute), a lost job means loss of health insurance and few resources to purchase coverage to protect their families.
Nervous government executives who run Healthcare.gov, the portal for purchasing subsidized individual coverage offered to about 11.4 million Americans, have been quietly contacting contractors to solicit assistance as they fear an avalanche of applications may crash the website as it did when Obamacare was first launched in 2014. A few hundred thousand people typically change plans or newly enroll during the fall open enrollment period. The site is not built for an onslaught of 10 million people or more trying to find new coverage at the same time because theirs has been terminated.
Most employers provide a month of coverage after employees are terminated, but then, employees have to fend for themselves and either pay 102 percent of their employer-sponsored group coverage under COBRA, enroll in an exchange plan provided through Healthcare.gov, or if poor enough, get coverage under a state Medicaid program. Option four is to remain uninsured, a highly stressful situation as a pandemic sweeps the globe.
COBRA is clearly the best option because it does not require individuals to change plans, restart their deductibles (averaging $1,600 per individual) halfway into the year, navigate unfamiliar physician networks that may not be taking new patients during this crisis, or change formularies that may not cover the prescription drugs they need. COBRA allows uninterrupted, continuous coverage, which maintains the same doctors and plan design, and permits a smooth transition for the individual when the business may rehire later when the economy improves.
Yet, the typical monthly COBRA premium for a family is over $1,700 a month, putting it out of reach for many newly laid off individuals with diminished resources. Democrats have proposed a 100 percent COBRA subsidy, but many Republicans fear such a generous contribution, coupled with extremely generous unemployment insurance benefits provided by the stimulus package enacted by Congress in March, would discourage workers from reentering the workforce.
Republicans’ “Hyde Problem”
A more fundamental political obstacle is Republican members’ fear of crossing pro-life groups who oppose any government subsidy for health insurance that covers abortion. The so-called “Hyde Amendment,” first enacted in 1976, prohibits taxpayer funds for abortion coverage. Susan B. Anthony List’s statement is typical of pro-life groups: “Taxpayer funds cannot be allowed to pay insurance premiums for health insurance that covers elective abortion, regardless of whether the payment is delivered in the form of direct payment, reimbursement, tax credits, or other modes of subsidy.”
It does not matter that the high-end estimate (high cost and high utilization) actuarial value of abortion coverage is only about four hundredths of one percent of an employer-sponsored health plan, meaning any subsidy less than 99.96 percent should constitute a safe harbor that limits taxpayer dollars to services other than abortion. If policymakers required employers to establish a separate account for the government subsidy and covenant not to use the funds to pay health insurance premiums, any government contribution would arguably mitigate the concern.
Moreover, most Republicans would be comfortable with a 75 percent subsidy – approximating typical employer contributions – which would provide a safe harbor 625 times the size of the actuarial value of abortion coverage. But that is not good enough for pro-life advocates, since they view government and individual dollars as fungible.
And it’s why pro-life advocates opposed passage of Obamacare in 2010; government subsidies are provided to some plans that cover abortions. It is incredibly ironic that Congress’ failure to provide subsidies for COBRA so that employees can remain on objectively better plans with no disruption, will only drive these people to the very same Obamacare policies pro-life advocates detest.
As staff director of the Ways & Means Health Subcommittee, I helped negotiate the first advanceable and refundable health insurance tax credit, which was enacted in 2002 under the Trade Act for workers laid off due to trade. It provided a 65 percent subsidy and passed with bipartisan support in both chambers, with nary a peep from the pro-life groups.
Yet, eight years later, in the partisan environment of Obamacare consideration, pro-life groups activated their grassroots network to call for the defeat of legislation because it subsidized health insurance policies that cover abortion. That same litmus test applies today, and it has left worried Republican members and staff grappling with solutions that can deliver assistance quickly to individuals in need, but somehow satisfy pro-life advocates. Since health plans cannot be changed mid-year, requiring them to simply drop abortion coverage is not a doable solution, nor would it be accepted by the Democratic House.
The creation of so-called “Pandemic Health Accounts” as some conservative thought leaders have suggested, would suffer from the same Hyde litmus test. Moreover, it would take months to establish the infrastructure that would enable such accounts to assist uninsured individuals in need. COBRA is available now and turning on a subsidy is a straightforward exercise that can be accomplished in short order as it was under the Trade Act as well as the American Recovery and Reinvestment Act of 2009 during the financial crisis.
The dire unemployment situation would certainly be much worse were it not for the highly successful “Paycheck Protection Program” (PPP) enacted by Congress in March and reloaded in April. That program has now provided 23.8 million loans totaling more than $500 billion to small businesses (up to 500 employees) to cover 2.5 months of their payroll. The loans are forgivable if 75 percent is used to cover payroll and the business hires back the same number of employees by the end of Q3.
Drop in Elective Procedures Tests the Healthcare System
PPP has been a lifeline for physician practices, ambulatory surgery centers (ASC), and small hospitals, which have seen “elective procedures” – the lifeblood of the healthcare system – crater. One ASC saw its volume drop from 40 procedures a day to 40 a week two weeks later and now performs just 10 a week. No business is built for the Black Swan event that decimates revenue by 90 percent.
But patients have suffered even more. For example, when Robert Cruickshank went to an ED in Seattle with bad stomach pains three weeks ago, he was diagnosed with gallstones and told to come back for surgery “as soon as possible.” On Friday, his gallbladder-removal surgery was postponed indefinitely.
Policymakers are now realizing the “cure” of containing the virus may be worse than the virus itself. The term “elective” connotes cosmetic, when it really means “scheduled” procedures. Such procedures constitute most non-emergent care, and their delay is neither good for patients nor the healthcare system that serves them.
CMS has issued guidelines to resume elective surgeries, but it will be up to state and local officials to make decisions based on conditions on the ground. And until the COVID crisis is under control, more than half of patients have said they will continue to delay their procedures for fear of contracting COVID while receiving healthcare.
It will be up to the life sciences industry to develop therapies and vaccines that can restore confidence to the healthcare system and the economy — and ultimately heal the country.
John McManus is president and founder of The McManus Group, a consulting firm specializing in strategic policy and political counsel and advocacy for healthcare clients with issues before Congress and the administration. Prior to founding his firm, McManus served Chairman Bill Thomas as the staff director of the Ways and Means Health Subcommittee, where he led the policy development, negotiations, and drafting of the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Before working for Chairman Thomas, McManus worked for Eli Lilly & Company as a senior associate and for the Maryland House of Delegates as a research analyst. He earned his Master of Public Policy from Duke University and Bachelor of Arts from Washington and Lee University.