The COVID-19 inflation episode: Lessons from emerging markets


The COVID-19 inflation episode: Lessons from emerging markets



Is the safety net ready for the next public health emergency?

Person in hazemat suit sterilizing room.
Editor's note:

A version of this article was originally published by The Hill on July 12, 2023.

The COVID-19 pandemic revealed tragic shortcomings in the American public health system, but it also posed a major challenge to our social safety net programs, from Medicare and Medicaid to Unemployment Insurance to Social Security, and more.

new report by a working group that we co-chaired at the National Academy of Social Insurance indicates that the safety net was surprisingly resilient in some areas, but that the pandemic also reinforced existing inequalities and revealed system shortcomings. To be ready for the next crisis, America should act now to streamline program administration, increase responsiveness, and reduce disparities.

Despite the closing of many government offices, dedicated workers ensured that programs remained operational, albeit with disruptions and delays. Social Security and Unemployment Insurance benefits continued to be paid, and Medicare and Medicaid continued to finance health care.

Surprisingly, COVID did only limited financial damage to Social Security and Medicare. Because the economic recovery was unexpectedly fast, the dip in payroll taxes to fund these programs was briefer and shallower—and program spending was lower—than projected. COVID reinforced the downward trend in claims for Social Security Disability Insurance benefits, as office closures hindered new applications. Medicare spending also fell, as patients delayed non-urgent care. Despite the spike in COVID-related admissions, overall hospital admissions dropped 30%.

Beyond the existing safety net programs, Congress took further actions to mitigate the financial and health calamity. It increased and extended unemployment benefits and provided sizable lump-sum benefits to most Americans. Together with the Child Tax Credit (now expired) and increases in Supplemental Nutritional Assistance Program benefits, these changes helped cut poverty in 2021 by 15% overall and by 46% for children. Changes in Workers’ Compensation provided income assistance and health insurance coverage. Eviction moratoriums mitigated the risk of homelessness for many. Fears that such generous assistance would undermine workers’ incentive to seek new jobs proved largely unfounded, as employment rebounded faster than anticipated.

Congress also extended health care coverage, increasing the share of Medicaid costs borne by the federal government for states that maintained enrollment and liberalizing refundable tax credits for health insurance exchange plans. Between these provisions and the faster-than-expected rebounding of employment-based health insurance, the proportion of non-elderly Americans without insurance in 2021 fell to 10.3%, a historic low. Because Medicare and Medicaid typically pay providers less than private insurers, Congress shored up hospital finances by creating a fund to offset the influx of COVID patients covered by these programs (though the fund was not particularly well targeted to struggling hospitals).

Overall, our social insurance programs did what they were supposed to—though, without congressionally enacted changes, there would have been much greater financial distress. Although the targeting of benefits to those most in need was imperfect, enough cash and in-kind assistance went out to sustain consumer demand, supporting a U.S. economic recovery that was faster than that of many other countries.

Despite these successes, serious failures meant that millions of people suffered much more dire financial as well as health consequences than they might have. The failures of our public health system—from lack of sophisticated monitoring, data, and infrastructure supporting rapid deployment of resources to shortages of supplies addressing foreseeable needs—are well documented, and were major contributors to the shocking 1.3 million deaths due to COVID in the U.S. The death rate of Medicare beneficiaries in nursing homes was thirteen times that of Medicare beneficiaries living elsewhere, and disproportionately higher for African Americans and Hispanics than for whites.

Our social insurance infrastructure was also woefully lacking—particularly the management of unemployment benefits. Archaic computer systems, lack of data and overworked staffs resulted in delays in the delivery of aid to the tsunami of new applicants. Confusion about eligibility rules and lack of information (such as for those not filing tax claims) led to many not receiving benefits for which they were eligible. Insufficient data also meant that aid could not be targeted based on past earnings or economic hardship. Thus, while congressional actions helped mitigate financial hardship, they were often poorly timed and poorly targeted.

The pandemic illustrated once again that those who are least well protected against adverse events in normal times suffer the most during emergencies. Those from low-income or underserved areas suffered disproportionately, as did those from racial and ethnic minority groups. There were not only unconscionable disparities in mortality and adverse health outcomes, but also in access to financial support.

The National Academy of Social Insurance report not only documents the performance of the system under COVID but presents practical and practicable ways to prepare for future health (or economic, environmental or geopolitical) emergencies.

Many of the crucial steps undertaken by Congress could be implemented in a more streamlined and effective way if automatic triggers were enacted now, such as additional Medicaid financing for states that maintain enrollment during emergencies or extended unemployment insurance benefits. Other temporary measures could be made permanent, such as changing regulations about telemedicine or scope-of-practice restrictions.

All of these options could be better supported by modernized infrastructure to allow efficient program administration and the collection of data to allow better benefit targeting. The digital divide further amplified health and access disparities during shut-downs. Adequate internet communication is an essential element of both health and safety net systems.

Our social insurance programs provide a vital safety net at all times but never more crucially than during national emergencies. COVID revealed how very important these programs are to health and economic survival—and also ways that we can shore them up before the next emergency arrives. It behooves us to do so.


  • Acknowledgements and disclosures

    The authors are co-chairs of the National Academy of Social Insurance’s COVID-19 Task Force Policy Translation Working Group. Baicker is on the board of directors of Eli Lilly, a trustee of the Mayo Clinic and University of Chicago Medical Center, and an advisory board member of the Congressional Budget Office and National Institute for Health Care Management. The author did not receive financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article. The author is not currently an officer, director, or board member of any organization with a financial or political interest in this article.

    The Brookings Institution is financed through the support of a diverse array of foundations, corporations, governments, individuals, as well as an endowment. A list of donors can be found in our annual reports published online here. The findings, interpretations, and conclusions in this report are solely those of its author(s) and are not influenced by any donation.