Hurricanes, healthcare, and elections

Things are mostly back to normal in DC today: Schools and government offices are open, trains and buses are running on their usual schedules, and there are few outward signs that Hurricane (or Superstorm) Sandy passed through here less than 48 hours ago. The situation is apparently far worse in New York and New Jersey, where flooding damaged millions of homes and hundreds of miles of subway tunnels. Millions of people from the Carolinas to Maine lost power, and many are still without it. The US death toll has reached 40.

With Election Day less than a week away, Hurricane Sandy reminds us how much we depend on the federal government. ("A Big Storm Requires Big Government," is how one New York Times editorial puts it.) Local and state governments and emergency responders are essential, but they need help from the federal level. NOAA’s National Weather Service provided data that let us prepare for the storm. The much-improved-since-Katrina Federal Emergency Management Agency, in response to governors’ requests, is sending rescue teams to affected areas and has positioned supplies of bottled water and other essentials in key spots. Affected residents and businesses can apply for assistance grants, and state and local governments are requesting FEMA to help with cleanup costs. Those filing insurance claims for flood damage probably have coverage through the National Flood Insurance Program, which is part of FEMA.

If you spend much time online, you may already have seen video clips of Mitt Romney suggesting, at a GOP primary debate, that he doesn’t want the federal government to spend money on disaster relief (or presumably not until the federal debt’s down to $0) – instead, he’d apparently like to send those responsibilities to states and the private sector. Matt Yglesias at Slate’s Moneybox posts the clip and points out that delaying repair of storm-damaged infrastructure until states can come up with the money to fix power lines and bridges will only slow economic productivity. He also notes that even without a specific plan to de-fund FEMA, Romney’s spending plans will require a 34% across-the-board cut in non-defense programs other than Social Security.

I have both mathematical and moral disagreements with Governor Romney’s position on the role of the federal government, and they apply to healthcare as well as to disaster assistance. On the mathematical side, it comes down to efficiency and risk pooling. It doesn’t make sense for each state to fund its own weather service. It’s more efficient for FEMA to have six Mobile Emergency Response Support teams and a national stockpile of emergency supplies that it can send out to the areas that need them, rather than expecting each state to have all the resources it needs to meet any disaster that may strike. (This isn’t to say states shouldn’t engage in their own preparations, but it reduces the likelihood that any given state will have tons of food and water supplies expiring if no major disasters strike for a few years.) When disasters strike several states at once, as Sandy has, it’s useful to have a federal agency that can offer similar resources to each state simultaneously, and coordinate those efforts.

Risk pooling is a central concept in health insurance, and it applies to disasters as well. The more people you have paying into an insurance system, the lower the probability that catastrophic illnesses in a few participants will exceed the system’s overall resources. With a bigger group of taxpayers funding emergency preparedness and response, we’re more likely to have the resources to address major disasters whose costs dwarf most states’ individual budgets. This does mean that some states – like those most prone to hurricanes or wildfires – will get federal disaster assistance several times in a decade, while others may go several years at a stretch without receiving such aid. I’m okay with that.

States can face different kinds of natural disasters with different frequencies, and their populations can also face different healthcare needs. Medicaid is a federal-state partnership that provides healthcare to low-income children, pregnant women, seniors, disabled residents, and some adults. States commit to providing healthcare to everyone who’s eligible, and costs can increase rapidly when economic problems leave more residents falling under the income threshold and when large numbers of beneficiaries will require costly services like extended nursing-home stays. States don’t have to bear all the risks of such cost increases, though, because the federal government pays a share of all Medicaid healthcare expenditures. This is especially helpful because the federal government can deficit spend more easily than states, the vast majority of which have statutory requirements to balance their budgets each year.

Jeffrey Young at the Huffington Post points out that Romney cited Arizona and Rhode Island as models for state-level Medicaid innovations, but would slash the federal Medicaid funding that allowed these states to alter their Medicaid programs. Ezra Klein at Wonkblog notes that federal funds allow Massachusetts to operate its innovative health insurance system, which Governor Romney helped design and which provided a model for the federal Affordable Care Act. Young gives some numbers on how Romney’s proposed Medicaid cuts would affect state programs:

A plan authored by Rep. Paul Ryan (R-Wis.), Romney's running mate, and adopted by the Republican-led House this year, would cut federal Medicaid spending by $810 billion over a decade, according an Urban Institute analysis issued Tuesday. Including Romney's vow to repeal Obama's health care law, the Medicaid cuts would total $1.7 trillion. Together, these plans would reduce enrollment in Medicaid by as much as 37.5 million, or half of those projected to receive benefits under current law by 2022, the report says.

Romney favors converting the existing Medicaid entitlement program into a system under which states would receive lump sums of money each year in the form of "block grants," as well as eliminating some federal requirements. Romney would cap federal spending growth for Medicaid at inflation plus one percent per year, which is below the rate at which health care costs are rising.

Under Romney's plan, the federal government would bear less of the Medicaid risk – of more low-income residents and more-costly health conditions – and states would bear more. Many states would respond by reducing eligibility or benefits or both. And if you don’t think you personally will be affected by such changes, ask yourself whether you or a loved one might ever need long-term care. Medicare generally doesn’t pay for long-term care, and most family budgets can’t cover nursing-home costs that can exceed $50,000 per year. Medicaid pays for over 40% of long-term care in the US;  these services accounted for 32% of the program’s total spending in 2010.

The Affordable Care Act is President Obama's signature achievement, and it's major step toward reducing the risks that many of us have worried about -- risks like not being able to get insurance due to pre-existing health conditions, losing employer-sponsored insurance along with a job and being unable to afford another policy, or hitting the lifetime maximum for how much an insurer will spend on one person. If the Affordable Care Act stands, we'll be able to stop worrying about these kinds of things. Romney, however, has pledged to repeal the ACA.

This brings me to my moral disagreement with Mitt Romney. I think we should bear the risks – of natural disasters, health problems, and other tough situations – as a nation. Given our vast wealth, I think we should be able to commit to ensuring that low-income residents get healthcare and states get disaster assistance, even if we have raise taxes to do it. I don’t want to see healthcare crises or moves into nursing homes bankrupting families. Even if governors or individuals make bad decisions about managing money or their health, I want them to fall into a safety net, not into ruin. We’re stronger as a nation when work together as a whole – and sometimes it takes a hurricane to remind us of that.

More like this

House Republicans have released –and rushed through two committees—the American Health Care Act, which would result in destabilized individual insurance markets and millions of people losing health insurance. The Congressional Budget Office hasn’t yet released its estimate of the likely impacts,…
A policy brief about Congressional Republicans’ bill to replace the Affordable Care Act has two Medicaid provisions that could prove seriously detrimental to public health and states’ finances: Gutting the ACA’s Medicaid expansion, and changing the current Medicaid financing structure. A Center on…
While we take a breather during this holiday season, we’re re-posting content from earlier in the year. This post was originally published on January 6, 2014. by Liz Borkowski, MPH Now that it’s 2014, millions more people in the US have health insurance coverage (either Medicaid or private…
Several of my favorite health policy bloggers have explained why raising the Medicare eligibility age is a terrible idea -- in short, it would save the federal government money, but increase spending overall (with states, employers, and existing Medicare beneficiaries all facing higher costs) and…

"Given our vast wealth..."

Hmmm, perhaps you've been on another planet these past 4 years.

By R.L. Schaefer (not verified) on 31 Oct 2012 #permalink

A 2011 GDP of $15 trillion qualifies as wealthy. The distribution of it is the question.

What do you do when you run out of other people's money?

By Randy means (not verified) on 01 Nov 2012 #permalink

It's *our* money. And, personally, I'm happy to pay taxes for Medicaid and disaster relief in New York. I might need that kind of help someday, too.