What's The Effect Of Recession On The Health Care Safety Net?

That's a question worth mulling over. We know the safety net, though poorly understood, appears stable. Yet we know that even before the recession hits (or hit, as we might be there already) the net is threatened, and we know everyone, including the voters, are talking about the economy. But is there anything out there that helps us get a better feel for what's likely to happen?

We can guess that recessions trigger unemployment, which makes it hard to keep health insurance, but do we go back to the way it was afterwards? How long does it take? And what happens to the safety net in the meantime? In other words, is there any data or are we just guessing?

Perhaps not surprisingly, there's more data available on the effect of of recession on the industry of health care than on the effect on the consumer or on safety net itself. For example (and not the focus of this post), it's CW that if you invest in stocks, you should buy big pharma or hospital chain stocks because health care is 'recession proof'. And, as often seen in cases of CW, it's not so clear cut:

A macroeconomic forecasting model developed at the Temple University Center for Health Finance indicates that from 1960 to 1990 the health care industry, although growing faster than the economy as a whole, did show reductions in growth following each recession. Some of the effect is felt immediately as consumers cut back on discretionary primary care, over-the-counter medications, and dental work, but most of the spending reductions unfold over the subsequent four years, and the lag between recession (or recovery) and hospital construction can be as long as seven years.

That doesn't sound 'recession proof'. And for the consumer, we can see indirect results, in that when consumers cut back on OTC meds it might not matter to their health, but cutting back on primary care and dental care may well matter, depending on how long care is cut back. And one can only assume delayed hospital construction is not a boon to local communities or the local economy.

Of more import than which stocks you pick is the effect recessions have on health insurance. From Tulane:

In this [1998] paper, we estimate the influence of economic, demographic and health care cost variables on the likelihood of having insurance coverage during the 1990s. During the recent economic recovery, the economy has returned to pre-recession levels of employment, but the percentage of adults with employer-sponsered insurance (ESI) has not returned to pre-recession levels, and the percentage of adults without health insurance coverage continues to climb.

Losing health insurance through losing a job is one of the most important effects of recession, and recovery afterwards is prolonged and incomplete. When the uninsured grow, how will they pay for their health care? For those who are already uninsured, when food and fuel costs rise, out-of-pocket health care becomes all the more unaffordable. More data:

New research [April 2004] conducted byCornell University researchers John Cawley and Kosali Simon, funded by the Economic Research Initiative on the Uninsured (ERIU) at the University of Michigan, shows that the economy's effect on coverage is best measured by looking at unemployment rates, which continue to increase well after a recession ends. The most recent recession ended in November 2001, but unemployment continued to rise through June 2003. The economic downturn led to more than one million Americans losing coverage during the recession, and the economy has yet to make up for these losses more than two years into the recovery.

Here we are talking about 47 million people uncovered in this country as it is.

What about the safety net? One thing we don't have any data on is the effect of recession on (relatively new concept) private walk-in clinics (featured at Wal-Mart and elsewhere).

Walk-in clinics help to cure US healthcare ills

The explosion of walk-in clinics is one of several significant moves to reform US healthcare by business and other groups outside the traditional medical industry. They range from clinics in retail stores to internet social networking for doctors, retailers' rethinking pricing policies for prescription drugs, widening support for cost-effectiveness studies of medicines, and financial service industry help for hospitals.

These seemingly unrelated examples could change the system at some of its weakest points. They are tackling problems including inexpensive access to basic healthcare for everyone, transparency in medical information, and personal accountability for one's own health.

None of the 'cures' listed above are recession-proof and none have been vetted in an actual recession. For example, if people substitute walk-in clinics for traditional doctors as a medical home, it's tough to count on the for-profit sector for stability because their job isn't to function as a safety net (it's to turn a profit).

A CheckUps clinic inside a Tampa Wal-Mart is among the 23 CheckUPs clinics in four states that have closed.

CheckUps is conducting an evaluation of which of its operations in retail stores should remain open, according to William Armstrong Jr., a spokesman who said he was speaking on behalf of Jack Tawil, chief executive of New York-based CheckUps. The company is conducting a restructuring and working with investors to determine its future direction, Tawil said.

There's no sense of 'but you can't close' here, the way communities react to hospital or public clinic closures. And let's put those findings in perspective with recent SCHIP discussions (again, from Tulane):

Our results indicate that the most important factor affecting changes in health insurance coverage was an increase in the percentage of families with income below 200 percent of the poverty line.

The most vulnerable remain the most vulnerable. And, here's where SCHIP can help (.pdf) by mitigating the effects on children of lost health insurance.

SCHIP also served as a safety net for low-income children during the 2000 recession and beyond, when many families lost employer-sponsored coverage. Although children and nonelderly adults experienced similar losses of private coverage between 2000 and 2003, earlier gains in children’s coverage were sustained through continued growth in public coverage, largely attributable to SCHIP. In contrast, nonelderly adults, including parents and childless adults, lacked access to much of this public coverage, and their uninsured rates increased significantly (Figure 2).

The Tulane authors add:

It is important to recognize that the major factors contributing to the decline in health insurance coverage are broad economic changes that cannot be directly addressed by health policy makers. Therefore, policy interventions, such as Kassebaum-Kennedy portability law [aka The Health Insurance Portability and Accountability Act (HIPAA)], or the narrowly targeted expansions of government health insurance that have been recently proposed, may have a limited effect in increasing the percentage of adults without health insurance.

Via SCHIP, there's a more firm safety net for children when compared to adults, but one that George Bush and House Republicans have refused to expand. These are the kinds of 'narrowly expanded' programs referred to. Even if expanded, it doesn't help adults.

From another angle (philanthropy, from a 1996 speech, via the Commonwealth Fund):

Safety-net health care providers are also under stresses that include cutbacks in state and local government funding, the diversion of Medicaid revenues to managed care organizations, proposed reductions in disproportionate share funding under Medicare and Medicaid, and the pressures of a competitive market that are eliminating cross-subsidies for charity care. These stresses jeopardize the system of safety-net payments and services and offer major challenges for health philanthropy...

States, unlike the federal government, are constrained by balanced budget requirements that limit their ability to respond to business cycle slumps. In times of economic recession, sales tax revenues decline, unemployment compensation increases, jobs are lost, poverty increases, and the need for publicly funded health insurance coverage increases.

So, loss of employment begats loss of insurance which begats loss of health care, in an environment which makes the states less able to pay for the safety net. Those state funds that help fund local safety nets become ever more threatened by recession. Local clinics, local hospitals and local public health services are all at risk when state funds dry up.There's nothing about the data review that suggests good news; if anything, the recession effects appear likely to be felt for years after the Bush recession is over. In addition, for-profit safety net additions like walk-in clinics are untested and uncertain to survive recession.

Since health care is a Democratic issue (the latest NBC/WSJ poll (.pdf, p. 27) gives the Dems a 51-15 advantage over the GOP on "doing a better job on health care"), guess which party is more likely to bring it up and keep talking about it? And given the above, expect to continue to hear on this topic as we get deeper into election season.