Covid-19’s economic devastation has revealed gaping holes in our safety net, as decades-old structures for Medicaid and unemployment insurance are compounding the pain caused by disease and job loss. Let’s be honest, we would not today design them as they were created. The CARES Act took steps to fix these programs, but they need permanent institutional reform and modernization.
As the next stimulus package focuses on state and local aid, nothing would give greater assistance to state and local budgets than to be relieved of their share of funding for Medicaid and unemployment insurance. They should then be required to use that savings to boost their investment in infrastructure and education, invigorating states’ fiscal health and their economies.
This federal-state Grand Bargain would solve festering problems in health care and unemployment assistance by creating uniform national standards.
Years of political experience show that no matter how imperative and sensible, a policy’s chances of success are diminished unless it delivers political benefits. This bargain would create a victory for both parties. It gives Democrats their dream of securing a solid social safety net for all Americans. It gives state Republicans the opportunity to shed their deteriorating image among suburban swing voters by becoming champions of increasing investments in education and transportation without increasing taxes.
Here are the four parts of the bargain.
Achieve Universal Coverage With National Medicaid
Over 50 years ago, Medicaid was created as a federal-state program as part of President Lyndon Johnson’s Great Society. It was the right model when implemented, but it has led to benefits varying greatly from state to state. And to save money, states often cut payment to physicians and hospitals, leading to subpar health care for the working poor. In many states the eligibility procedures are so onerous that they discourage enrollment rather than ensure needed care.
Before Covid-19, 28 million Americans were uninsured. With Covid-19, nearly 30 million additional Americans have lost employer sponsored health insurance. Under the Affordable Care Act, unemployed and low-income Americans were supposed to be covered by the expanded, state-based Medicaid program. But a decade after the A.C.A., 14 states remain implacably opposed to expanding Medicaid. As long as this continues, the United States has no way to achieve universal coverage.
As it does for Medicare, the federal government could assume the costs of Medicaid. The bargain, which we call American Modernization Initiative, would provide health coverage for every person who lacks employer-sponsored insurance, Medicare, veterans benefits, or some specialized plan. There would be uniform eligibility requirements, uniform benefits and Medicare-level payments to health care providers. All Americans will feel secure in the knowledge that they will be covered regardless of income, employment, or ZIP code.
Modernize Unemployment Insurance to Cover All Americans
Unemployment insurance was developed in the 1930s as part of the New Deal. Even then it excluded farm, domestic and other workers, who were often black. With the advent of the gig economy and an increase in self-employment it covers fewer than half of all workers today. Like Medicaid, unemployment insurance coverage and benefits vary state-by-state and are unrelated to workers’ needs or today’s economy. State laws typically aim to provide about 50 percent of a worker’s previous earnings. The assistance is short term, often as short as 12 weeks, even if a recession persists for years.
During Covid-19, over 40 million more Americans have filed for unemployment insurance. States’ overwhelmed systems have left 44 percent of unemployed Americans in the lurch, with denied and delayed claims and byzantine coverage rules.
The CARES Act has gone a long way toward addressing some of these issues temporarily. It uses federal funds to add 13 extra weeks of coverage, adds $600 per month in benefits, and extends cash assistance to freelancers, contractors and the self-employed. Unfortunately, these improvements will start to phase out in July.
Our initiative would make the CARES Act reforms permanent. A national unemployment assistance program would cover all workers who lose jobs, regardless of the type of contract they have, provide funds to employers to keep workers on the job and extend cash assistance until an economic downturn ends. National unemployment insurance would finally provide security to all workers.
For the federal government to assume the costs and administration of Medicaid and unemployment insurance, the states would have to agree to use freed up resources — a quarter of a trillion dollars per year — to invest in education and infrastructure. As our grandmother would say “Such a Bargain!” (It sounds better with an Eastern European accent.)
Increase State Investment in Education
Twenty-first century economies require students to start learning earlier than kindergarten and later than high school. States would be required to provide early childhood programs to every child born into poverty, as well as full-day pre-K education to every 3- and 4-year-old, which many cities have already instituted. In a few years, these types of programs become fiscally self-sustaining by reducing medical, educational, and criminal justice costs. Over the long term, it’s been found, they can return as much as $7 to $15 for every dollar invested, and ensure higher incomes for children when they become adults.
In the 21st century three-quarters of jobs require more than a high school education. The primary way states will have to improve funding for higher education is copying what was pioneered by Chicago and Tennessee and replicated in numerous states and cities with free community college: increase funding for public colleges and universities. Since 2000, funding for public colleges and universities has dropped, causing the average tuition for in-state students to more than triple. The American Modernization Initiative would lower or cap future tuition increases, and at a minimum would provide the first two years free.
Modernize State Investment in Infrastructure
We all know the dire straits of American transportation systems, school buildings, water treatment facilities, and utilities. The broken dams in Midland, Mich., remind us we don’t have a day to waste to make these investments.
Under the initiative, states would have to increase their funding for infrastructure, a strategic investment. With millions of unemployed construction workers, it would generate millions of needed jobs. Every dollar spent generates from $1.50 to $2.50 in short-term economic returns and increases business productivity.
The goal is to make politics and policy complementary to ensure successful implementation. The Grand Bargain is not only good policy, but good politics. Governors and legislators can pay for Medicaid and unemployment programs or be able to attend shovel shots, ribbon cuttings and graduation ceremonies. Numerous Republican governors have passed gas tax increases and the expansion of free community college, showing the political appeal of increased investment in these areas. If you were a governor, wouldn’t you like to be able to announce tuition free pre-K and community colleges?
Governors would no longer be responsible for large programs whose costs have grown faster than their tax receipts and cannot be sustained in tough economic times. By 2021, an estimated 17 million additional Americans will need Medicaid.
With the American Modernization Initiative, the constant, bitter battles over cutting state programs to fund growing Medicaid costs will disappear. Similarly, states will save on cost and administration of unemployment insurance. And the direct beneficiaries will be America’s students and commuters.
Americans are suffering severely from Covid-19. We should use the pandemic to modernize programs that support Americans in hard times and invest in the nation’s future. We should not let this crisis go to waste.
Rahm Emanuel is a former member of Congress, chief of staff to President Barack Obama and Mayor of Chicago. Ezekiel J Emanuel, @ZekeEmanuel, is vice provost of global initiatives and professor of medical ethics and health policy at the University of Pennsylvania and author of “Which Country Has the World’s Best Health Care?”
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