In March 2020, Congress passed a series of bills to respond to the COVID-19 public health emergency, including the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Included in the $2 trillion-dollar spending package were sweeping changes made to the Unemployment Insurance (UI) program. To get dollars into the hands of Americans who are suddenly out of work, the law massively expanded the program’s eligibility and increased the amount and duration of benefits. But a hidden provision buried in the new law will lead to a massive expansion of the welfare state as Medicaid forces its way into the middle class.
UI benefits are generally designed to provide temporary assistance to covered workers who become unemployed through no fault of their own. The average UI benefit in January 2020 was $370 per week, reflecting the program’s intent to partially replace previous wages. This amounts to more than $1,600 per month, or an annualized benefit of more than $19,000, enough to raise a family of two out of poverty.
But the CARES Act expanded eligibility for UI benefits, extended benefit duration, and authorized a “pandemic” add on. Selfemployed individuals and independent contractors are now eligible for UI benefits and benefit duration was extended by 13 additional weeks. Further, benefits were boosted by a staggering $600 per week.
A hidden provision in the CARES Act expanded Medicaid welfare eligibility to the middle class, forcing states to ignore roughly $2,600 per month in UI benefits that would otherwise be countable. This expansion will lead to millions of new Medicaid enrollees and financial calamity for states at a time when they can least afford it, siphoning away resources from the truly needy. Worse yet, the CARES Act will force millions of individuals out of private coverage and into Medicaid, pushing massive financial losses onto hospitals. Congress should immediately fix the problem and treat the additional UI benefit the same as all other UI benefits.