Coronavirus healthcare hit looms large for Cook County, Illinois

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Cook County, Illinois, is bracing for hits to its operating and healthcare system budgets as COVID-19 cases ramp up in the nation’s second-most- populous county.

While the county's finance team believes improved budgetary stability will help weather the economic turmoil on operations, the healthcare burden looms most prominently.

"This will have a profound impact on our bottom line,” board President Toni Preckwinkle said of the healthcare tab at a news conference this week with health system officials. “I can't tell you how much of a financial impact” because it’s not yet known “how long the pandemic will prohibit us from doing elective surgeries" and the focus remains on treating patients who require care.

"This will have a profound impact on our bottom line,” Cook County Board President Toni Preckwinkle warned of COVID-19's impact on the county's healthcare system.

The county is abiding by federal directives to put off elective procedures, preserving space and personnel to treat rising levels of those suffering from the disease caused by the novel coronavirus. The loss of revenue from well-compensated elective surgeries and diagnostic tests and the rising tab for equipment and personnel poses a double blow nationally for the not-for-profit healthcare sector’s fiscal health.

The situation is all the more acute for a public hospital system. Cook County’s bottom line has benefitted from expanded Medicaid under the Affordable Care Act but the system is still weighed down by rising uncompensated care costs that in turn threaten the county’s fiscal stability.

The state reported more than 6,980 positive cases of COVID-19 Wednesday, with more than 5,000 in Cook County; 141 people have died in Illinois.

The county can expect some help to cover both its own operating expenses — but not tax losses — to deal with the disease and the hospital expenses and losses in the Coronavirus Aid, Relief, and Economic Security Act signed by President Trump last week.

Illinois is expected to receive about $5 billion with roughly $2 billion going to local governments with populations of more than 500,000 which includes Cook. The hospital piece of the legislation provides about $100 billion to reimburse eligible providers such as the county’s hospital system for expenses or lost revenues directly related to COVID-19. It also eliminates $8 billion in planned Medicaid 2020 and 2021 cuts and expands state options for providing Medicaid coverage.

Hospitals may also be eligible for a $454 billion low cost emergency loan fund under the legislation if they employ between 500 and 10,000 employees but details are still being worked out by the Department of Treasury.

County health officials at the news conference said they were carefully tracking all costs and lost revenue to apply for federal reimbursements.
The county’s budget picture includes a longer-term financial forecast that casts a shadow over its current stability with a $110 million gap in the general fund and health fund projected for next year. It grows to $307 million in 2024 with $197 million due to rising healthcare costs.

Pressures were already mounting on uncompensated health care costs which were projected to rise by $46 million to $590 million this year due in part to unaffordable, high-deductible health insurance plans offered on the insurance marketplace created by the ACA.

The Chicago Civic Federation called the county’s 2020 spending plan the “calm-before-the-storm budget” as the “trend in uncompensated care is alarming.”

A Fitch Ratings report underscored the impact of the healthcare system on the county’s fiscal health. “Indications that weakened health system operations will make a greater claim on general fund resources would be a negative credit consideration,” Fitch said.

While the county stands to recoup non healthcare-related expenses too, the federal package doesn’t cover tax losses and it’s unclear whether future stimulus/rescue packages will do so. Most economists now warn of negative growth in the first and second quarters which puts the country into recession.

“Data is beginning to come in on the early financial impact of the coronavirus and we are in the process of analyzing it. With that said, we expect a downturn in revenues in this quarter and will be building it into the preliminary budget released in June,” finance spokesman Edward Nelson said in an email. “We are building several models including a worst case scenario for a recession and will be prepared to manage our costs effectively.”

The county believes spending cuts and debt reduction measures taken in recent years put it in a better position “to weather this crisis and the potential corresponding recession.”

The county can draw on a $100 million credit line if needed for liquidity to deal with costs or lost revenue in the near-term and longer term holds more than $300 million in reserves which covers more than two months of operations.

Preckwinkle late last month announced the county would waive fines and fees, and defer local home rule taxes for local businesses which carries a $35 million price tag.

The county operates on a $6.2 billion budget with its fiscal year beginning Dec. 1. Several economically sensitive revenue streams in the budget include sales taxes which account for $849 million and motor fuel taxes, at $160 million. Fees generate $200 million.

To keep the books balanced, pressures will mount to cut expenses or raise taxes or ease off its supplemental pension payments. The county this year is making a $327 million supplemental payment on top of its $200 million statutory payment. The unfunded actuarial accrued liabilities are $6.8 billion for a funded ratio 60.9%.

S&P Global Ratings lowered the county’s general obligation rating on $2.8 billion of debt to A-plus from AA-minus in January. The outlook is stable.

"The downgrade reflects the county's large and underfunded pension obligation and although the county has made steps to address its pension funding levels--specifically with a new sales tax revenue stream beginning in fiscal 2016 that significantly increased its annual contributions--its ability to meets its planned additional payments over the long term will remain an ongoing challenge, in our view,” said S&P analyst Blake Yocom.

Fitch rates Cook County A-plus with a stable outlook. Moody’s Investors Service rates the county A2 with a stable outlook. The county has about $400 million of sales tax bonds that are rated AAA and stable by Kroll Bond Rating Agency and AA-minus and stable by S&P.

The story was updated with Wednesday's state data on cases and deaths.

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Coronavirus State and local finance Cook County Illinois Budgets