Overview of U.S. Health Policy Responses to COVID-19

COVID-19 is a test of the U.S. healthcare system that has highlighted its weaknesses and fragmentation, necessitating quick and decisive action from policymakers. One key reason for government intervention during an infectious disease pandemic is externalities, a phenomenon that occurs when individual decision-makers do not face the full social consequences of their actions. Which government intervenes is rooted in another key theme: federalism, or the constitutional distribution of powers among federal, state, tribal, and local (city/county) governments. This section will provide an overarching framework of COVID-19 responses at each level of government, and later sections will dive into specifics.

Health Policy Stakeholders & Levers

President: The president has many executive powers and large discretion over how to use them. The president has the authority to declare a national emergency, as President Trump did on March 13. This emergency declaration permits the use of designated emergency funds to aid state and local governments and allows the Federal Emergency Management Agency (FEMA) to coordinate a response. The president can also issue executive orders, as was done March 18, 23, and 27, to allow the Department of Health and Human Services to prioritize and allocate health and medical resources, regulate hoarding and price gouging, and activate the Defense Production Act (DPA) to increase production of essential supplies. On April 22, President Trump also issued an executive order limiting most legal immigration into the U.S. for 60 days for anyone currently outside the U.S., including green card holders but exempting healthcare workers or other temporary workers on nonimmigrant visas. On April 27, President Trump issued more details on a federal plan to increase diagnostic COVID-19 testing. See Module 1 for more details on testing.

Department of Health and Human Services: This is the executive branch’s cabinet-level department that houses many of the agencies responsible for policy related to COVID-19.

1. Centers for Disease Control and Prevention (CDC): The CDC issues public health guidance, such as travel warnings and recommendations to wear cloth face coverings outdoors. Importantly, it also tracks COVID-19 cases and releases data to the public.

2. Center for Medicare and Medicaid Services (CMS): CMS is responsible for setting reimbursement rates and rules for hospitals and physicians, including what telehealth visits are reimbursable and what qualifies as a hospital. More discussion below under “Insurance.”

3. Food and Drug Administration (FDA): regulates COVID-19 tests and approves any drugs or vaccines before public use.

4. National Institutes of Health (NIH): funds COVID-19 research and clinical trials. Dr. Anthony Fauci is the director of the National Institute of Allergy and Infectious Diseases (NIAID), an NIH division.

5. Strategic National Stockpile: limited inventory of essential medical supplies and equipment to be used during disease outbreaks or bioterrorism attacks.

Congress: Congress is broadly in charge of federal spending. As was done, Congress can pass stimulus bills that provide direct funding to low/middle-income Americans, funding for hospitals, expand unemployment benefits, increase testing capacity, and provide loans for small businesses, among other policy actions. More detail below on the stimulus bill.

State governments

Governors: Governors have become a large part of the policy response to the pandemic in the U.S., as states have been differentially affected. They can also declare state emergencies and state orders, including stay-at-home policies, mandatory quarantine for travelers, non-essential business closures, and bans on large gatherings. Here is a useful map of what states have done.

Budgets: States have to balance their budget at the end of each fiscal year. Unlike the federal government, they cannot run a deficit. This means that states can have limited capacities to pay large amounts of money to secure personal protective equipment (PPE), fund contact tracing, or support local businesses.

Medicaid: As a joint federal-state program, states have much control over their own Medicaid program. Some states have paused any Medicaid disenrollments or cost-sharing for beneficiaries (details here). Importantly, some states’ Medicaid programs are less suited to respond to a recession, such as in states that have not expanded Medicaid. Medicaid eligibility is determined on a monthly basis, so if someone’s income in April dropped to $0, then he or she would be eligible in all expansion states. Medicaid often has increased enrollment during recessions, which is also when funding for Medicaid is lowest due to decreased tax revenue. The pandemic also highlights that some states’ proposals to reform Medicaid, such as block grants (moving from the federal government paying a set percentage of states’ Medicaid costs to a set amount) or per capita caps (moving to a set amount per beneficiary), may reduce states’ Medicaid funding, and thus the number of enrollees or benefits per enrollee, which may not be flexible enough to account for increased enrollment during a recession (Sommers and Gruber, 2020).

Insurance

Cost-sharing: Federal and state regulations can require insurers to eliminate cost-sharing (e.g. copayments) for COVID-19 testing and/or care. Note that state regulations do not apply to self-insured employers, who are responsible for all their employees’ health costs and employ over half of all private employees nationwide. While we typically worry about moral hazard, or the increased use of care when consumers face a subsidized price, that is less important in the setting of care for a pandemic.

Reimbursement for testing: CMS announced on April 15 that it would increase how much it would pay for COVID-19 tests to $100/test.

Reimbursement for telehealth: CMS has significantly eased restrictions on reimbursements for telehealth to promote its use and to fund providers.

Employer-sponsored insurance: The U.S. healthcare system is unique in that half of the population has employer-sponsored insurance. This is especially problematic now that many individuals are losing their jobs and, thus, their insurance coverage. If a worker is furloughed, his or her salary is withheld, but benefits like health insurance may continue for a limited duration, depending on the details of the insurance plan (which vary greatly between states and insurers).

Individual marketplaces: Typically, open enrollment for plans on the marketplaces is only in the fall. A special enrollment period would allow individuals who have newly lost their jobs, and thus their health insurance, to sign up for new coverage on the marketplaces. While losing one’s insurance is a “qualifying event” that permits you to enroll, significant paperwork is required to demonstrate your case; thus, advocates argue that a special enrollment period would still be preferable and would also allow those who didn’t sign up earlier to enroll. Of note, some states use state-based exchanges, and some of those exchanges have opened enrollment (map here). One policy tool to combat adverse selection, where only the sickest and highest-cost individuals sign up for coverage, is to establish a federal reinsurance program that helps to cover some of the high costs that individual insurers may struggle to pay on their own (Glied and Swartz, 2020).