And You Thought Health Insurance Was Bad

By Kim Bellard, January 28, 2021

I spend most of my time thinking about health care, but a recent The New York Times article — How the American Unemployment System Failed — by Eduardo Porter, caught my attention. I mean, when the U.S. healthcare system looks fair by comparison, you know things are bad.

Long story short: unemployment doesn’t help as many people as it should, for as much as it should, or for as long as it should.

It does kind of remind you of healthcare, doesn’t it?

The pandemic, and the associated recession, has unemployment in the news more than since the “Great Recession” of 2008 and perhaps since the Great Depression. Last spring the unemployment rate skyrocketed well past Great Recession levels, before slowly starting to subside. Still, last week almost a million people filed for unemployment benefits, reminding us that unemployment is still an issue.

Mr. Porter reports:

· “In 2019, only 27 percent of unemployed workers received any benefits, a share that has been declining over the last 20 years.

· The benefits have eroded as well, to less than one-third of prior wages, on average, about eight percentage points less than in the 1940s.”

The states range from 58% of unemployed workers in New Jersey who receive benefits to 9% — 9%! — in North Carolina. Robert Moffitt, a Johns Hopkins economics professor, told Mr. Porter: “The program was set up to have tremendous cross-state variation. This makes no sense. It creates tremendous inequities.”

As with our healthcare system, “broken” isn’t really a good description. Each is working the way they’ve been designed. Unfortunately, if you’re poor or sick, and especially if you are both, they’re not designed to help you. Not until the poor and sick start making significant campaign contributions anyway, or at least vote in larger numbers.

Many unemployed workers, of course, also lose their health insurance when they lose their jobs, since ours is a predominantly employer-based health insurance system. As many as 15 million people may have lost their employment-based coverage due to the pandemic. If they work for the right kind/size of employer, they may be eligible for COBRA coverage, but paying for it may be difficult, between loss of employer contribution, low UI benefits, and delays in receiving UI.

At least under ACA they may have coverage options, including subsidies, through the Marketplace or Medicaid, — unless they live in one of the states without Medicaid expansion.

Even in the states that have expanded Medicaid, the economic crisis has hit their tax revenue severely, while increasing the number of Medicaid enrollees, creating a double whammy. The same, of course, is happening with the money to pay unemployment benefits, causing almost half the states to ask for federal loans.

In other words, when we have the worst crises — like a pandemic — both our unemployment insurance and our health insurance systems do worst. Those are the times we rely most on the government, but our federalism system of shared federal/state responsibilities is failing the latest crisis.

Mr. Porter sees hope:

Perhaps there is an upside to the current crisis: The glaring insufficiencies of the regular unemployment system may encourage states and the federal government to undertake comprehensive changes.

Perhaps. If the pandemic continues long enough — as it might — it might force deep structural changes. So far, the various relief bills have just added more patches to our patchwork quilt approach towards UI. But if in the coming months vaccines mitigate the impact, and the economy picks up, then our typical reaction will be to commission some studies and just kick the can further down the road.

ACA made our health insurance system less patchwork, with more uniform requirements, more subsidies, less discrimination against preexisting conditions, and broader Medicaid options. The Biden Administration may, and should, further improve these. Let’s hope that it takes a hard look at how it can do something similar with unemployment insurance.

This post is an abridged version of the original posting in Medium. Please follow Kim on Medium and on Twitter (@kimbbellard)