Bill of Health - A worker gives directions as motorists wait in lines to get the coronavirus (COVID-19) vaccine in a parking lot at Dodger Stadium, Friday, Jan. 15, 2021, in Los Angeles, covid vaccine distribution

Countercyclical Aid Is Not Enough to Fix the Broken US Approach to Public Health Financing

By Philip Rocco

In the last month, the U.S. Centers for Disease Control and Prevention’s failed responses to COVID-19, ranging from “testing to data to communications,” have prompted a call to reorganize the agency.

Yet restructuring the CDC will have little effect on pandemic preparedness if the decentralized American approach to health finance remains in place. This structure was already stripped bare by decades of state and local austerity even before the first cases of COVID-19 were identified, and has been further worn down since 2020.

If the pandemic has taught us anything about public policy, it is that the model of countercyclical federal aid — which expands at the onset of an economic crisis but abates as that crisis is resolved — is fundamentally inadequate when applied to the realm of public health.

One reason for this is that discretionary programs in the United States “switch off” not when the crisis is over, but when Congress designs them to. Many emergency aid programs constructed over the last few years contained sunset dates keyed not to public-health metrics but to arbitrary time horizons written into the legislation. The COVID-19 Uninsured Relief Fund — which supports access to testing, treatment, and vaccination without cost-sharing — expired this past spring because of congressional inaction. Even as thousands of Americans continued to die from COVID, the Health Resources and Services Administration stopped accepting claims submitted under this program.

Second, while short-duration programs may assist in the immediate aftermath of a crisis, they do not allow for capacity building. Limited time horizons blunt the impact of local health departments, where — given fiscal constraints in states and cities — the majority of operating revenue often comes from categorical federal grants. As Louisiana’s State Health Officer recently testified before the House Select Subcommittee on the Coronavirus Crisis, “a couple years is a common duration [for program funding]…And it’s just very challenging to do anything substantial, anything long-term, anything that builds capacity when you’re hamstrung like that.”

Even programs with longer time horizons inhibit meaningful investments. Consider, for example, the Coronavirus State and Local Fiscal Recovery Funds Program (SLFRF) — enacted as part of the American Rescue Plan Act — which provided $350 billion in flexible aid to state, local, tribal, and territorial governments. While this program represented the largest intergovernmental transfer of multipurpose funds in over 40 years, one-time funds discourage elected officials from making investments that will need to be sustained beyond the program’s 2026 expiration date. This precludes rebuilding the decimated public health workforce. As my research with Amanda Kass shows, recipient governments have obligated only 7 percent of the dollars received under this program to new public-health projects. By contrast, 52 percent of those dollars have gone to replacing lost revenues.

Cumulative state and local spending as share of first tranche SLFRF payment (Q1, 2022)

State and local governments’ reluctance to use one-time funds to support sustaining investments is reflected in workforce data. According to the Bureau of Labor Statistics, overall state and local employment figures still hover below their pre-pandemic baselines.

This brings us to a third problem with applying the countercyclical model to public-health crises. If the point of “building back better” — to use the Biden administration’s preferred phrase — is enhancing the public health system’s resilience to future crises, using January 2020 as a benchmark is wholly inappropriate. Consider that between 2008 and 2020, U.S. public health expenditures fell by 30 percent. Over the same time period, local and state health departments lost more than 20% of their workforce, slashing roughly 50,000 jobs. Compounding these trends, the public health workforce was rapidly aging; nationwide, 1 in 4 local health department staff members is eligible for retirement.

Reversing the trend of policy drift at the state and local level will require — at minimum — mandatory programs to support state and local health departments’ infrastructure needs and full student loan repayment for public health professionals.

To focus narrowly on the formal public health workforce, however, would be to ignore the significant role that the fragmented system of American health financing has played in exacerbating the toll of COVID-19. As Alison Galvani and her coauthors have shown, the loss of employer-sponsored insurance during the pandemic, as well as background gaps in insurance coverage that existed before COVID-19, accounted for hundreds of thousands of deaths over the last several years. Despite the patching together of emergency expansions of Medicaid financing and subsidies for the purchase of individual-market coverage, the burdens of the coverage gap on the public health system are everywhere apparent — from weakening the rollout of vaccination campaigns to further straining rural hospital capacity.

Digging deeper into the data on the ARPA SLFRF program, one finds that the largest share of “Public Health” spending thus far falls under the reporting category of “medical expenses,” which includes expenses for rising health insurance premiums. In Clay County, Florida, for example, health insurance premium increases account for roughly half of the government’s total obligations under the SLFRF program as of the first quarter of 2022.

Pathologies like these cannot be solved with one-time funds or even a reorganization of federal agencies. They demand, instead, a thoroughgoing reconstruction of health finance itself.

Philip Rocco is an associate professor of political science at Marquette University and coauthor of Obamacare Wars: Federalism, State Politics, and the Affordable Care Act.

The Petrie-Flom Center Staff

The Petrie-Flom Center staff often posts updates, announcements, and guests posts on behalf of others.

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