COVID-19 Pandemic: 3. Federal Government Response. Families First Coronavirus Response Act (“FFCRA”)

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Around the world, 127 countries require employers to provide paid sick leave for one week or more.  The United States is not one of these countries.   This is a big problem in a pandemic:  sick employees are likely to work as long as possible to feed their families, thereby spreading the disease further.

Around the world, some 120 countries also require some form of paid family leave for maternity and/or childcare.  The United States is not one of these countries. This becomes a big problem when all the schools are shut and someone has to care for children at home.

Many of the other key components of America’s “safety net” are tied to work and the need to search for work, all under the assumption that a job can be found in a reasonably short period of time.  In normal conditions, this works more or less OK.  These ties to work don’t function in a pandemic when everything is ordered shut or the out-of-work employee is sick.

The Families First Coronavirus Response Act (FFCRA), which began as a Democratic initiative in the US House of Representatives, was put in place to address the holes in the US safety net.  It basically addressed five key needs, as follows:

  1. Emergency paid sick leave and family medical leave
  2. Medicaid funding for states
  3. Food Stamp program shortfalls
  4. The cost of coronavirus testing, and
  5. Expanded unemployment insurance benefits

Emergency Paid Sick Leave and Family Leave

 The FFCRA requires employers of 500 or fewer employees to 1) provide two weeks of paid sick leave at the full pay rate for any employee legitimately in quarantine or experiencing COVID-19 symptoms awaiting final diagnosis, 2) provide two weeks paid family leave at two thirds the full pay rate to any employee legitimately caring for a family member in quarantine or a child shut out of school, and 3) provide up to 10 additional weeks of paid family leave at two thirds the full pay rate for any employee legitimately caring for a child shut out of school.

There are employee pay caps in this emergency program.  Paid sick leave is capped at $511/day or $5,110 in the aggregate.  In the first two weeks of paid family leave, pay is capped at $200/day and $2,000 in total and, if extended for the remaining 10 weeks, the aggregate cap is $12,000.

Employers are not being required to actually pay for this.  Instead, the taxpayers will pay.  The employers get a full, dollar-for-dollar refundable tax credit against their share of the Social Security payroll tax.

The cost of this program is expected to exceed $100 billion.  So, sometime in the future, either Social Security taxes will need to go up to make up the shortfall or the Social Security deficit will simply be permanently increased, thereby bringing forward the date when the program runs out of money.

Medicaid Funding

The cost of Medicaid is shared on a formula basis by the federal government and the states.  For most states, Medicaid represents the single largest annual outlay.

In Vermont, the total cost of Medicaid was $1.68 billion in fiscal year 2018 with the federal government paying 59% and the state 41%.

The FFCRA increases the federal government’s share of Medicaid expenditures by 6.2% from January 1, 2020 until the COVID-19 national emergency is declared over by the US Department of Health and Human Services.

This increase in federal funding is a very important component of the FFCRA.  First, it will greatly help to cushion the sharp decrease in state tax revenues that will surely be the result of the shutdown. In the case of Vermont, the annualized value of a 6.2% increase in federal funding, based on 2018 total Medicaid expense, is about $104 million.  Should the emergency remain in place through the end of June or September, the state could get something ranging from $50 million to $75 million in increased federal Medicaid funding.

The emergency funding program was also designed to preserve the Medicaid program in states where it is under political pressure by preventing 1) the imposition of any more restrictive standards, methodologies and procedures for Medicaid enrollment and access, 2) any increases in Medicaid premiums, 3) dis-enrolling anyone and 4) failure to pay 100% of testing costs.

SNAP Provisions (Food Stamp Program)

The FFCRA provided additional emergency funding to a variety of federal nutritional programs including the core Supplemental Nutrition Assistance Program, the Supplemental Nutrition Assistance Program for Women, Children and Infants and the Temporary Emergency Food Assistance Program.

The FFCRA also waived various restrictions related to the school and adult care food programs. It also allows states to waive or modify the 3-month over three- year limit for able-bodied adults with no dependents.

The Cost of Coronavirus Testing

 Absent any form of government intervention, it is likely that the US healthcare system would have attempted to make a bundle on coronavirus testing.  They probably still will, but not at individuals’ near term expense.

The FFCRA requires all employer group health plans, Medicare, Medicaid, CHIP, TRICARE, Veterans Affairs, Federal Workers Health Plans and Indian Health Services to cover 100% of the cost of COVID-19 testing with no co-payment of any kind.

The FFCRA does not require coverage for the actual treatment of COVID-19 illness.  While the vast bulk of the insurance programs operating in the USA cover COVID-19 medical costs, the amount charged is not addressed and co-pays and deductibles will likely apply.

Expansion of Unemployment Benefits

The FFCRA provided $1 billion of emergency funding to state unemployment trust funds.  These additional funds are intended to help states meet the cost of 1) reduced eligibility requirements, 2) increased access to unemployment benefits, 3) waiving the search of work requirements, and 4) waiving the one week wait period.

Other Provisions

 The Act provided a number of smaller COVID-19 related appropriations to various government entities, including the Department of Defense, Veterans Affairs and Health and Human Services.

Interestingly, the Act provided a full legal immunity from law suits to manufacturers of ventilators.

Cost

 The Congressional Budget Office estimates that FFCRA will increase the federal government budget deficit by $192 billion, with the vast bulk of expenditures coming in 2020 and 2021.  The Act provided for new and increased expenditures but did not address any offsetting revenue measures.  A summary of the expected expenditures is provided below.

Expenditure Amount ($ billions)
Paid Sick Leave/Family Leave 105.0
Increase Federal Medicaid Funding by 6.2% 50.0
SNAP (Food Stamp) Provisions 21.2
Free COVID-19 Testing Under Medicare/Medicaid 8.6
Expanded Unemployment Benefits 4.7
Other 3.4
TOTAL 192.9

Source: Congressional Budget Office

Summary

There was strong bipartisan support for the Act, although negotiations on the final provisions were quite intense.  In the House, the vote was 363-40-1, with all 40 Nay votes coming from Republicans.  In the Senate, the vote was 90-8, with all 8 Nay votes also from Republican Senators.

By the time this Act was signed into law on March 18, 2020, the scale of the economic calamity unfolding was becoming clear.  Puerto Rico was in lock-down and within a week some 20 states would join. Passage of the Act did nothing to slow the crash occurring in the stock markets.

Before the ink was dry on FFCRA, work on the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was already underway.  The Phase 1 CPRS was $8.7 billion and the Phase 2 FFCRA grew to $192 billion.  The Coronavirus Aid, Relief and Economic Security Act would be coming with a much bigger price tag:  over $2 trillion.

The next article will cover the CARES Act.  Here, the good, the bad and the ugly of Washington are on clear display.

 

 

 

 

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