I am growing a bit weary of all of the doom and gloom associated with the coronavirus outbreak. And I bet many of you are as well. Unfortunately, it is what is dominating both headlines and people’s minds because it activates deep-seated emotions, mostly fear. So, we just can’t avoid discussing it.
I am going to take a slightly different tack today though and talk about it in the context of healthcare. And that’s because the Covid-19 pandemic is mostly a health crisis.
My mother had a fall a couple of weeks ago. And even though she lives with my sister, because she’s ninety years old, I am extremely worried about her. So I have been spending a lot more time with her recently, taking her to the doctor and the like.
As a retired US federal government employee and the widow of another long-term US federal government employee, she has both a really good defined benefit pension and really good healthcare. And my understanding is that she can use both her private Blue Cross/Blue Shield healthcare plan and Medicare, depending on the circumstances. Personally, I hate Blue Cross/Blue Shield. My wife uses them and they are always trying to deny coverage for spurious and bureaucratic reasons. It’s almost as if they deny coverage in the hopes you will just pay the cost to avoid the rigamarole and hassle of re-submitting paperwork to get them to pay.
But, when I talked to my mom about healthcare last week, her comments about her healthcare plan were interesting. I asked her what she thought about the concept of Medicare for All. And her response was that she thought it was interesting. I probed her though, asking her what she thought about the concept of Medicare for All as the only option for all Americans. And that’s when her tone changed. I don’t remember exactly what she said, but it was something like “Hell no, Edward! (She calls me Edward, not Ed). No way am I giving up my Blue Cross/Blue Shield.”
I was stunned by the vigour she put into her response. She’s a pretty mild-mannered PhD career scientist. But when I told her that she had to give up her healthcare plan, she acted like she practically wanted to rip somebody’s eyeballs out – hopefully not mine.
Medicare for All
I think the Bernie Sanders version of Medicare for All – where everyone loses private healthcare – is dead on arrival. And my mother’s reaction is exactly why.
Why would you campaign on taking something away from people? I get the fact that the American healthcare system is screwed up, inefficient, and high cost. Almost everyone in America hates their healthcare plan. I certainly hate mine since it is a NY-based plan and I live in the Washington DC area where there are nearly no doctors on the plan. But, it’s simply not politically astute to campaign on taking a basic need of voters into an unknown, unfamiliar territory and trying to convince them not to be afraid. It won’t work.
I think that now that everyone but Sanders and Joe Biden (forget Tulsi Gabbard. She has no chance) has dropped out of the Democratic presidential nomination race, this is going to be a big issue – especially in the face of a health crisis like the coronavirus outbreak.
South Korea’s response
I saw a good article on Bloomberg about how South Korea was dealing with the coronavirus. Here’s what they said:
South Korea is experiencing the largest virus epidemic outside of China, where the pneumonia-causing pathogen first took root late last year. But unlike China, which locked down a province of more than 60 million people to try and stop the illness spreading, Korea hasn’t put any curbs on internal movement in place, instead testing hundreds of thousands of people everywhere from clinics to drive-through stations.
It appears to be paying off in a lower-than-average mortality rate. The outbreak is also showing signs of being largely contained in Daegu, the city about 150 miles south of Seoul where most of the country’s more than 5,700 infections have emerged. South Korea reported the rate of new cases dropped three days in a row.
In a short space of time, South Korea has managed to test more than 140,000 people for the novel coronavirus, using kits with sensitivity rates of over 95%, according to the director of the Korean Society for Laboratory Medicine.
That’s in stark contrast to countries like its neighbor Japan and the U.S., where the issues China experienced early on — with unreliable and inadequate testing resulting in thousands of infected patients not being quarantined until it was too late — are now threatening to play out.
The US System
Why would you get tested for the coronavirus when it’s going to mean lost pay if you’re living practically paycheck to paycheck? Forget about the cost of testing for a second – and that is a concern. I’m talking about the concept that you take time off work, test yourself and face the prospect of being quarantined with your whole family, everyone missing school and work – and not getting paid for weeks. How is that going to work? It won’t. And you know it. So you simply won’t get the test. That’s how people act.
And that’s why this is a health crisis which will show the deficits of the American system – both the healthcare system and the economic system. I think we will eventually see epidemic levels of infection in the US, because we have simply been caught unprepared. And when this epidemic takes form, the weaknesses of our economic and healthcare system will be made plain for all to see.
That will galvanize voters I reckon. But will it galvanize them in a way that helps Bernie Sanders or Joe Biden or Donald Trump? Think of Trump as representing the status quo, Biden as representing the public option and Sanders as representing Medicare for All. That’s a stark contrast. And if this health crisis is as stark as I think it is, that contrast will drive votes.
In terms of coronavirus responses, I see that Greece has followed Italy in shutting down its schools. Italian professional cycling races are being cancelled and the Guardian is reporting that English Premier League football matches are ‘likely’ to go behind closed doors because of coronavirus.
This is what I have called the lockdown and quarantine approach. It’s not as all-encompassing as it was in China. Nevertheless, these are draconian measures. And governments are forced to take them because not doing so would open them up to charges of negligence – or even murder. Lockdown and quarantine measures will last for weeks to come. The V-shaped recovery is not going to happen. The most we can hope for is a U-shaped recovery. And even that is questionable.
As I have said repeatedly, the US was in the best place pre-coronavirus of all advanced economies. Bloomberg reported yesterday that “America’s service industries in February enjoyed the fastest growth in a year as orders surged, showing momentum in the biggest part of the economy just as coronavirus concerns started to become more widespread”. The ISM Services number that came out yesterday was 57.3. That’s up from 55.5, instead of down to 54.8 as markets had expected. And it tells you that the US was in a full-blown recovery from a mid-cycle slowdown as the virus hit.
That’s out the window now though. The questions now are whether we can avoid recession and what measures policy makers can take to help the economy respond well. I think the US can still avoid recession. But will it? We will have to wait and see. But I am no longer representing the “cautiously optimistic” view you saw me touting in January. The new cautiously optimistic Credit Writedowns in 2020 is now the old ‘prepare for the worst case outcome’ Credit Writedowns you have come to love.
Don’t expect a litany of doom and gloom though. I just think the risks are mostly to the downside and anticipate my posts will reflect this.