The $1.7 trillion “social infrastructure” legislation passed by the House and now before the Senate would spur growth, expand employment and boost productivity with limited inflationary impact, according to Moody’s Investors Service.
The spending “would occur over 10 years, include significant revenue-raising offsets and would likely only start to flow into the economy later in 2022 at a time when inflationary pressures from disruptions to global supply chains and U.S. labor supply will likely have diminished,” Moody’s Vice President-Senior Analyst Rebecca Karnovitz said.
“Investments in childcare, education and workforce development have the potential to boost labor force participation and increase productivity over the medium and longer term,” she said. While the Senate will likely insist on amendments, the Build Back Better (BBB) bill currently would invest $555 billion in clean energy and “climate resilience” and $585 billion in childcare, universal prekindergarten and paid family leave.
CFOs concerned about rising prices and the risk of a wage-price spiral have found sympathy from some lawmakers who warn that the $5.7 trillion in spending Congress has already approved during the pandemic will further stoke inflation.
“Inflation is hammering working families across America,” Senate Minority Leader Mitch McConnell told the chamber last week. The Kentucky Republican called BBB a “socialist wish list” and an inflationary “taxing and spending spree.”
Some Democrats — including Sens. Kyrsten Sinema of Arizona and Joe Manchin of West Virginia — have cautioned that excessive spending could push up prices and worsen the fiscal outlook.
Sinema and Manchin have said that they want less costly legislation. With Democrats holding the smallest possible Senate majority, support from the two senators is essential for final passage of the bill.
“I have been concerned about high levels of spending that are not targeted or are not efficient and effective,” Sinema told the Washington Post on Nov. 18 while noting rising inflation.
“The threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse,” Manchin said on Twitter this month after the Labor Department reported that consumer prices rose 6.2% in October on an annual basis.
CFOs face even higher price gains for wholesale goods. The producer price index for final demand, a measure of what suppliers charge, soared 8.6% in October from the prior year, according to the Labor Department. That was a record jump in a series of data first published in 2010.
The Moody’s analysis suggests that concerns about the impact of BBB on inflation and the U.S. fiscal outlook may be overblown.
“We expect the spending package to have a limited impact on inflation,” Moody’s said.
Referring to the U.S. credit outlook, Moody’s said, “we expect the legislation to have only a small effect on the sovereign’s fiscal position, given that the spending would be spread over a decade and the revenue-raising measures would help offset the impact on federal budget deficits.”
The Congressional Budget Office estimates that the House version of BBB would push up fiscal deficits by $367 billion over a 10-year period.
Yet the estimate excludes about $200 billion in revenue that would come from a provision in the bill funding tougher tax enforcement and collection, Moody’s said.
“Estimates of the bill’s impact on the deficit are likely to shift in accordance with provisions that may be stripped from the Senate’s final version of the legislation,” according to Moody’s.
Unemployment claims jumped last week, as the delta variant of the coronavirus sparked rising caseloads around the country and renewed fears about the potential for more restrictions and business closures.
The number of new claims grew to 419,000 from 368,000, the third time in six weeks that they had ticked up, according to data from the Department of Labor.
Economists said the uptick was concerning but cautioned that it was too early to tell whether it was a one week aberration or telegraphed a more concerning turn for the labor market.
“The unexpected bump in claims could be noise in the system, but it’s also not hard to see how the rise of the covid-19 delta variant could add thousands of layoffs to numbers that already are double what they were pre-Covid,” said Robert Frick, corporate economist at Navy Federal Credit Union.
Overall, unemployment numbers have been falling gradually from the peaks at other stages of the pandemic, but they are still well above pre-pandemic averages.
The jobless numbers have provided a jarring catalogue about the economic devastation wrought by the pandemic — spiking to records as the pandemic unfolded in March 2020, and remaining at historic high levels throughout most of 2020.
The coronavirus surge last fall helped precipitate a rise in claims that saw the labor market, as seen in the monthly jobs report, slide backward too.
But until recently, the last few months been marked by strong jobs growth and a sense of optimism as vaccinations picked up, giving economists hope that the country was back on track to recovering the nearly 7 million jobs it is still down from before the pandemic.
Now, the delta variant is driving an alarming increase in covid-19 cases around the country, according to public health officials: the number of new cases increased more than 40 percent in the last week, sending jitters through the stock market, and is raising questions about whether state and local health authorities will reinstitute restrictions to slow the virus’ spread.
Frick said that the report showed the potential for unemployment claims to start trending upward after months of steady declines.
“There’s definitely a correlation, however loose, that the rise in covid does cause a rise in claims,” he said. “My fear is that the rise in the delta variant could cause claims to go back up…Certainly one week doesn’t show that. But I wouldn’t be surprised if we start to see claims rise.”
However, there are also lots of signs that the economy continues to rebound despite rising caseloads.
The more than 2.2 million people that the Transportation Security Administration said it screened at airports on Sunday was the most since late February 2020 — and nearly three times the amount it was on the same day last year.
Restaurant dining has largely rebounded in recent months, at times surpassing the levels from before the pandemic — on Saturday the number of diners was 1 percent higher than the same day in 2019, according to data from Open Table.
Last week, some 12.5 million claims were filed for unemployment insurance overall, according to the most recent numbers — down from 32.9 million filed at the same point last year.
Nevada, Rhode Island and California topped the list of states with the highest number of people on unemployment, the Labor Department said.
Economic concerns in recent months have been more focused on the ways that workers are still held back from filling some of the more than 9 million job openings in the country, than unemployment, with high hopes that school re-openings in the fall will help many parents get back into the labor force.
Not including federal relief aid, hospital operating margins remained narrow in March at just 1.4 percent, according to a recent report from healthcare consulting firm Kaufman Hall. Including federal relief aid, the median hospital operating margin was 2 percent.
Although margins remained narrow in March, hospitals saw year-over-year margins starkly increase. In particular, operating margin increased 14.5 percentage points year-over-year in March, without federal relief aid.
The sharp increase was attributed to measuring March 2021 performance against the same period last year, when hospitals faced losses amid national shutdowns of elective procedures.
Kaufman Hall noted that the median operating earnings before interest, taxes, depreciation and amortization margin also rose 13.3 percentage points in March, compared to March of 2020.
“We expect to see additional margin gains in the months ahead, especially in comparison to record-poor performance in the early months of the pandemic,” said Jim Blake, managing director at Kaufman Hall. “Over the course of 2021, however, we project hospital margins could be down as much as 80 percent, and revenues down as much as $122 billion compared to pre-pandemic levels, as hospitals continue to feel the dire repercussions of COVID-19.”
Hospitals also saw their adjusted discharges, emergency room visits, adjusted patient days and average length of stay increase year over year in March, Kaufman Hall noted.
As health systems look to address the “social determinants of health”, one obvious but often overlooked place to start is with their own employees. The left side of the graphic below shows forecasted employment growth and salaries across a range of healthcare occupations. Many of the fastest-growing healthcare jobs—including home health and personal aides, medical assistants, and phlebotomists—are among the lowest-paid.
Case in point: home health and personal care aides are among the top 20 fastest-growing occupations in the US, and median wage for these jobs is only about $12 per hour, or around 200 percent of the federal poverty level—well below the living wage in many parts of the nation. (Note that this analysis does not include support staff who are not healthcare specific, like custodial or dietary workers, so the number of low-wage workers at health systems is likely higher.)
Among of the many struggles lower-income healthcare employees face is finding affordable housing. Using fair market rent data from the US Department of Housing and Urban Development, the right side of the graphic shows that healthcare support workers, even at the 90th percentile salary level, struggle to afford rent in the majority of the 50 largest US metros areas. In particular, home health aides in the top decile of earners can only afford rent in 14 percent of major cities.
These disparities have caught the attention of lawmakers. The $400B in President Biden’s proposed infrastructure plan devoted to home healthcare for seniors includes tactics to increase the wages and quality of life for these caregivers. But as we await policy solutions, health systems should pay careful attention to issues of housing insecurity and other structural challenges facing their workers and look to increase wages and provide targeted support to these critical team members.
There’s widespread agreement that it’s important to help older adults and people with disabilities remain independent as long as possible. But are we prepared to do what’s necessary, as a nation, to make this possible?
That’s the challenge President Joe Biden has put forward with his bold proposal to spend $400 billion over eight years on home and community-based services, a major part of his $2 trillion infrastructure plan.
It’s a “historic and profound” opportunity to build a stronger framework of services surrounding vulnerable people who need considerable ongoing assistance, said Ai-jen Poo, director of Caring Across Generations, a national group advocating for older adults, individuals with disabilities, families and caregivers.
It comes as the coronavirus pandemic has wreaked havoc in nursing homes, assisted living facilities and group homes, killing more than 174,000 people and triggering awareness of the need for more long-term care options.
“There’s a much greater understanding now that it is not a good thing to be stuck in long-term care institutions” and that community-based care is an “essential alternative, which the vast majority of people would prefer,” said Ari Ne’eman, senior research associate at Harvard Law School’s Project on Disability.
“The systems we do have are crumbling” due to underfunding and understaffing, and “there has never been a greater opportunity for change than now,” said Katie Smith Sloan, president of LeadingAge, at a recent press conference where the president’s proposal was discussed. LeadingAge is a national association of more than 5,000 nonprofit nursing homes, assisted living centers, senior living communities and home care providers.
“Though this [proposal] is a necessary step to strengthen our long-term care system, politically it will be a challenge,” suggested Joseph Gaugler, a professor at the University of Minnesota’s School of Public Health, who studies long-term care.
Even advocates acknowledge the proposal doesn’t address the full extent of care needed by the nation’s rapidly growing older population. In particular, middle-income seniors won’t qualify directly for programs that would be expanded. They would, however, benefit from a larger, better paid, better trained workforce of aides that help people in their homes — one of the plan’s objectives.
“This [plan] isn’t everything that’s needed, not by any step of the imagination,” Poo said. “What we really want to get to is universal access to long-term care. But that will be a multistep process.”
Understanding what’s at stake is essential as communities across the country and Congress begin discussing Biden’s proposal.
The services in question.Home and community-based services help people who need significant assistance live at home as opposed to nursing homes or group homes.
Services can include home visits from nurses or occupational therapists; assistance with personal care such as eating or bathing; help from case managers; attendance at adult day centers; help with cooking, cleaning and other chores; transportation; and home repairs and modifications. It can also help pay for durable medical equipment such as wheelchairs or oxygen tanks.
The need. At some point, 70% of older adults will require help with dressing, hygiene, moving around, managing finances, taking medications, cooking, housekeeping and other daily needs, usually for two to four years. As the nation’s aging population expands to 74 million in 2030 (the year all baby boomers will have entered older age), that need will expand exponentially.
Younger adults and children with conditions such as cerebral palsy, blindness or intellectual disabilities can similarly require significant assistance.
The burden on families. Currently, 53 million family members provide most of the care that vulnerable seniors and people with disabilities require — without being paid and often at significant financial and emotional cost. According to AARP, family caregivers on average devote about 24 hours a week, to helping loved ones and spend around $7,000 out-of-pocket.
This reflects a sobering reality: Long-term care services are simply too expensive for most individuals and families. According to a survey last year by Genworth, a financial services firm, the hourly cost for a home health aide averages $24. Annually, assisted living centers charge an average $51,600, while a semiprivate room in a nursing home goes for $93,075.
Medicare limitations. Many people assume that Medicare — the nation’s health program for 61 million older adults and people with severe disabilities — will pay for long-term care, including home-based services. But Medicare coverage is extremely limited.
In the community, Medicare covers home health only for older adults and people with severe disabilities who are homebound and need skilled services from nurses and therapists. It does not pay for 24-hour care or care for personal aides or homemakers. In 2018, about 3.4 million Medicare members received home health services.
In nursing homes, Medicare pays only for rehabilitation services for a maximum of 100 days. It does not provide support for long-term stays in nursing homes or assisted living facilities.
Medicaid options. Medicaid — the federal-state health program for 72 million children and adults in low-income households — can be an alternative, but financial eligibility standards are strict and only people with meager incomes and assets qualify.
Medicaid supports two types of long-term care: home and community-based services and those provided in institutions such as nursing homes. But only care in institutions is mandated by the federal government. Home and community-based services are provided at the discretion of the states.
Although all states offer home and community-based services of some kind, there’s enormous variation in the types of services offered, who is served (states can set caps on enrollment) and state spending. Generally, people need to be frail enough to need nursing home care to qualify.
Nationally, 57% of Medicaid’s long-term care budget goes to home and community-based services — $92 billion in the 2018 federal budget year. But half of states still spend twice as much on institutional care as they do on community-based care. And 41 states have waiting lists, totaling nearly 820,000 people, with an average wait of 39 months.
Based on the best information available, between 4 million and 5 million people receive Medicaid-funded home and community-based services — a fraction of those who need care.
Workforce issues. Biden’s proposal doesn’t specify how $400 billion in additional funding would be spent, beyond stating that access to home and community-based care would be expanded and caregivers would receive “a long-overdue raise, stronger benefits, and an opportunity to organize or join a union.”
Caregivers, including nursing assistants and home health and personal care aides, earn $12 an hour, on average. Most are women of color; about one-third of those working for agencies don’t receive health insurance from their employers.
By the end of this decade, an extra 1 million workers will be needed for home-based care — a number of experts believe will be difficult, if not impossible, to reach given poor pay and working conditions.
“We have a choice to keep these poverty-wage jobs or make them good jobs that allow people to take pride in their work while taking care of their families,” said Poo of Caring Across Generations.
Next steps.Biden’s plan leaves out many details. For example: What portion of funding should go to strengthening the workforce? What portion should be devoted to eliminating waiting lists? What amount should be spent on expanding services?
How will inequities of the current system — for instance, the lack of accessible services in rural counties or for people with dementia — be addressed? “We want to see funding to states tied to addressing those inequities,” said Amber Christ, directing attorney of the health team at Justice in Aging, an advocacy organization.
Meanwhile, supporters of the plan suggest it could be just the opening of a major effort to shore up other parts of the safety net. “There are huge gaps in the system for middle-income families that need to be addressed,” said David Certner, AARP’s legislative counsel.
Reforms that should be considered include tax credits for caregivers, expanding Medicare’s home health benefit and removing the requirement that people receiving Medicare home health be homebound, said Christ of Justice in Aging.
”We should be looking more broadly at potential solutions that reach people who have some resources but not enough to pay for these services as well,” she said.
“For the most part providers were dependent on that CARES funding. I think they would have been in the red or break even without it,” Suzie Desai, a senior director at S&P Global Ratings, said.
The pandemic weighed heavily on the financial performance of not-for-profit hospitals in 2020, but some of the larger health systems remained profitable despite the upheaval — in large part thanks to substantial federal funding earmarked to prop up providers during the global health crisis.
Industry observers have been closely watching to see how health systems ultimately fared in 2020. Now, with the fiscal-year ended and accounted for, analysts say the $175 billion in federal funds was crucial for providers’ bottom lines.
“Without the stimulus funding, it is very likely we would have seen more issuers [hospitals/health] systems experience either lower profitable margins, or outright losses from operations,” Kevin Holloran, senior director of U.S. public finance for Fitch Ratings, said.
Still, the pandemic put a squeeze on nonprofit hospital margins last year, according to a recent Moody’s report that showed the median operating margin was 0.5% in 2020 compared to 2.4% in 2019.
The first half of the year hit providers especially hard as volumes fell drastically, seemingly overnight. Revenue plummeted alongside the volume declines as the nation paused lucrative elective procedures to preserve medical resources.
But as the year wore on, the outlook improved as some volumes returned closer to pre-pandemic levels. At the same time, health systems worked to cut expenses to mitigate the financial strain.
Still, some health systems did post operational losses even with the federal funds meant to help them. Moody’s found that 42% of 130 hospitals surveyed posted an operating loss, an increase from 23% the year prior. Yet, the 2019 survey included more hospitals, a total of 282.
Sutter Health, the Northern California giant, reported an operating loss for 2020 and said it was launching a “sweeping review” of its finances as the pandemic exacerbated existing challenges for the provider. Washington-based Providence also reported an operating loss for 2020. However, both Sutter and Providence were able to post positive net income thanks in large part to investment gains.
Investment income can aid nonprofit operators even when core operations are stunted like during 2020. Though, initially, the pandemic put stress on the stock market as uncertainty around the virus and its duration ballooned. The stock market took a dive and it was reflected in some six-month financials as both operations and investments took a hit.
“COVID and the stimulus is (hopefully) a once in a lifetime disruption of operations,” Holloran said, who noted analysts have been trying to assess whether the top line losses can be placed squarely on COVID-19. If that’s the case, analysts are typically more apt to keep the provider’s existing rating.
“For the most part providers were dependent on that CARES funding. I think they would have been in the red or break even without it,” Suzie Desai, a senior director at S&P Global Ratings, said.
For example, Arizona’s Banner Health would have posted an operating loss without federal relief, according to their financial reports. Banner Health was able to work its way back to black after it reported a loss through the first six months of the year. The same was true for Midwest behemoth Advocate Aurora.
The providers that were able to weather the storm of the pandemic tended to be integrated systems that had a health plan under their umbrella.
Kaiser Permanente ended the year with both positive operating and net income and returned relief funds it received.
“The integrated providers, yeah, were one group that just had a natural hedge with the insurance premiums still coming in,” Desai said.
Still, the hospital lobby is hoping to secure more funding for its members as the threat of the virus is still present even amid large scale efforts to vaccinate a majority of Americans to reach a blanket of protection from the novel coronavirus and its variants.
The Democratic bill has $410 billion in stimulus checks and $360 billion in aid to state and local governments.
Expanded unemployment benefits cost $242 billion.
School spending is nearly $170 billion spread out over 10 years.
There are a few big chunks of money in the American Rescue Plan Act that have generated a lot of news coverage and are pretty well known. In response to a reader’s request, we present the whopping $1.86 trillion spending plan in pie chart form.
There are the $1,400 checks (or more likely deposits) to many citizens or permanent legal residents and their dependents. That comes to about $410 billion.
Aid to state, local, territorial and tribal governments costs about $360 billion.
The bill boosts and extends unemployment benefits. Add another $242 billion.
Over the next 10 years, the law spends nearly $170 billion on education. That includes $129 billion for K-12 schools — both public and private — and about $40 billion for higher education.
The money for vaccines and corralling the coronavirus became a political talking point. Democrats touted the $20-25 billion they included for vaccine supplies and research. Republicans argued that the bill spent less than 10% of its total cost on COVID-19.
People will parse the numbers in different ways. Some only count money spent directly on vaccine production. Some look more broadly at the economic damage wrought by the virus. We looked for money that went towards health care, whether that meant improving treatment on tribal lands, adding health care workers at clinics, or anything that reduced the health impacts of the pandemic.
We put the bill’s total public health spending at $143 billion.
Within that, the single biggest line item is $47.8 billion for mitigating the disease, a broad description that includes testing and surveillance. There is also $15 billion for COVID-related health care for veterans, $7.6 billion to help community health centers distribute vaccines, and about the same amount to the Centers for Disease Control and Prevention for roughly the same purpose.
The chart above lays out how the money breaks down.
All of the amounts so far come to $1.3 trillion over 10 years.The bill’s total cost is $1.86 trillion, which leaves about $500 billion dollars to flesh out.
The law has over $40 billion for child care. Money to keep people in their homes and to house the homeless comes to about $44 billion. There is $10 billion to put food on people’s tables. The expected cost of temporarily boosting the child tax credit is $109 billion.
In our chart, we fold all of that, plus subsidies for pensions and health insurance premiums, into the category of support for families. Our total is $352 billion.
Our last distinct category is transportation. Under that umbrella, we put $30 billion for mass transit, $15 billion for the airline industry, $8 billion for airports, and other related activities. That came to $58 billion.
The catch-all bucket of other spending includes items such as $66 billion for businesses, $50 billion for disaster relief at the Federal Emergency Management Agency, and $7 billion to expand broadband internet.
The likelihood that U.S. hospitals will default on debt within the next year fell significantly since the 2020 peak amid the early days of the pandemic, according to a March 10 report from S&P Global Market Intelligence.
In 2020, the median default odds jumped to 8.1 percent. However, as of March 8, the probability of default rate fell to 0.9 percent.
Samuel Maizel, a partner from law firm Dentons, told S&P Global that many hospitals operate on razor-thin margins, and they are seeing less cash flow amid the pandemic as patients shy away from receiving care, but stimulus funds should help avert a tidal wave of hospital bankruptcies in the next year.
“They’re sitting on a lot of cash, which gives them a cushion, even though they’re continuing to lose money,” Mr. Maizel told S&P Global.
S&P said that as stimulus funds dry up other pressures may challenge healthcare facilities.