Ebola Scare Highlights the Uncertain Costs of a Pandemic

Questions loom about who will pay for the fallout of a national health crisis and what kind of impact it could have on credit ratings.
January 2015
Associated Press
By Frank Shafroth  |  Columnist
Director of the Center for State and Local Government Leadership at George Mason University

With the arrival of Ebola in the U.S. came public fear, widespread misinformation, and the ever-present danger of contamination and contagion. While the cases have been isolated, the threat of the virus required state and local leaders to assume unprecedented leadership and extreme diplomacy in dealing with the public, the medical community, and even medical suppliers and contractors, who balked at handling blood samples, soiled linens and hospital waste out of fear of the virus.

But when a virus like Ebola hits a jurisdiction, there is a hefty fiscal price as well. In Texas, Dallas County was the first U.S. locality to deal with the sudden challenge of an outbreak. The impact on the budget was not inconsequential. It cost the county a quarter of a million dollars to gut and decontaminate the one small apartment of the nation’s first Ebola victim, Thomas Eric Duncan -- part of the approximately $1 million the county expended in the first weeks of the crisis.

Unlike with some contagions, the un-knowns with Ebola could constitute the gravest challenge. There are surprising gaps in scientists’ knowledge about the virus, including the time it can survive in different environments outside the body. That is information vital to EMTs, solid waste departments, hospitals and clinics, and public and private water and wastewater systems -- as well as public transportation agencies.

Given the breadth of the challenge, it should come as no surprise that two of the nation’s credit rating agencies have begun to look at the near-term fiscal impact of Ebola on various aspects of health infrastructure. Standard & Poor’s notes that “preparedness will be an added financial expense for many providers and it is already affecting senior management time and energy.” Moody’s reduced Texas Health Resources to its “developing” watch list from its previous “positive” outlook. (Texas Health Resources operates Texas Health Presbyterian Hospital in Dallas, where Duncan was treated and died, and where two nurses who treated him contracted the disease.) Presbyterian saw its revenue decline by more than 25 percent in the first 20 days of October, according to financial disclosure statements. Emergency room visits fell by 53 percent, and operating surgeries declined by about 25 percent.

The rating agencies have, to date, struggled to assess the potential credit rating impacts on state and local governments and agencies if the virus does reappear in this country, raising issues with regard to who will pay for what. For instance, will Ebola-related costs be borne by each individual hospital -- public or private -- by the local government, volunteer fire and rescue departments and water and sewer agencies, or will federal dollars be available? Similarly, if hazardous waste disposal problems emerge, who pays for dealing with that?

While the apparent success of state and local efforts to eradicate Ebola in the U.S. provides hope for limiting or even preventing future outbreaks, the task of paying for those millions of dollars of unbudgeted costs looms. So does the core responsibility of financing and managing the quarantines of people who may have been exposed to the virus. Those expenses range from additional police protection to transporting individuals to food delivery. Each traveler to the U.S. from a West African country where Ebola is rampant -- about 150 such people still arrive daily -- will have to be monitored in some fashion for 21 days. For the localities where those travelers arrive or settle, that is, in effect, an unfunded mandate.

Nothing about dealing with the Ebola scare in U.S. jurisdictions is cheap or easy. Everything about it is fraught with danger -- and potential expenses.