MIDDLE CLASS LOSSES FROM KATRINA UNDERESTIMATED

By Diane M. Grassi

The media has been both praised and admonished for its Hurricane Katrina coverage over the past weeks, and particularly during the first week of the crisis in New Orleans, LA. And media coverage was largely criticized by political appointees and lawmakers who felt the wrath of scrutiny concerning the lack of coordination of relief efforts by local, state and federal governments. The dust continues to settle concerning the costs of relief efforts and the entire toll of human life and life as it once was in southern Louisiana southern Mississippi, as well as parts of Texas, which suffered from Hurricane Rita some four weeks after Hurricane Katrina. But missing from most government assessments and coverage of myriad problems the disaster wrought, is the affect on middle class survivors.

Homeowners who lost their homes and had jobs with employer provided healthcare have predominantly been left on their own and prevented from getting funds and ongoing assistance during these weeks after Hurricane Katrina. They suffer from a web of problems and there appears to be no end in sight to their dilemmas.

First there is the issue of insurance companies assessing damage from homes and whether or not their homeowners’ policies will be honored. There is a continuing problem of getting enough insurance assessors into the disaster areas, many of which were not accessible for the first couple of weeks. Then there is the issue of whether damage resulted from wind or floodwaters. In Mississippi there is a pending lawsuit filed by Attorney General, Jim Hood, who has sued major insurers on behalf of Mississippi residents. He said that “A standard homeowner’s policy should cover hurricane damage, whether the loss came from wind or wind-driven water such as a storm surge.” It will be hard for insurers to deny that all damage was caused by floods, especially in the areas not in the flood plain, and for that reason as well, Hood believes that those without flood insurance are still entitled to coverage. Unfortunately, the onus is on the plaintiff to prove otherwise.

But home loss is not the only problem for these individuals and their families. Many have permanently lost their livelihoods in southern Louisiana and southern Mississippi due to businesses being destroyed. Along with their job loss is loss of their healthcare benefits. While some companies were able to extend some benefits a month or two, those employees who have any kind of chronic health condition, such as asthma, are in danger of losing all their benefits indefinitely as there is a waiting period for those enrolling in new plans with preexisting conditions. In addition, there is a probationary period for joining a healthcare plan with any new employer, provided they are able to find a job with healthcare benefits.

And while homeowners wait for insurance assessments with the possibility of not being covered at all if they had not previously purchased flood insurance from the federal government, the ability to declare bankruptcy is no simple option either. First, the mortgage payments on destroyed homes do not simply disappear even though the house may have. Various lending institutions and banks have given some hurricane victims some leniency by way of 30 or 60-day extensions to pay. That however will not go very far for those who have had to pay for their own living accommodations over the past six weeks and may be short on their mortgage payments.

With the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 to become effective October 17, 2005, while it would make sense for some to declare bankruptcy prior to then when the law becomes much more restrictive for filers, most homeowners cannot yet assess their damages or evaluate their assets. But the U.S. Department of Justice through its U.S. Trustee Program has temporarily waived for one year one of the provisions necessary to declare bankruptcy in the new law, specifically for residents in the disaster areas of southern Louisiana and southern Mississippi.

However, the waived provision just eliminates the need to undergo credit counseling prior to filing. All other provisions remain which makes it far more difficult to declare Chapter 7 bankruptcy or liquidation. Unfortunately, the bankruptcy law will require repayment or re-organization based on the prior year’s income. For those who have permanently lost income, this new measure is hardly consoling. And in order to file bankruptcy the filer must retain an attorney, and given that many have temporarily re-located out of state with little paperwork at their disposal, that task alone is now far more complicated than it would have ordinarily been.

It is not only bankruptcy court which may discriminate against those most in need at this time. Most homeowners who have had regular incomes are not eligible for housing assistance or Medicaid benefits which would cover their healthcare. It is primarily those people in New Orleans proper who have enjoyed the federal benefits such as housing vouchers and Medicaid benefits, as many were already receiving such benefits from the federal government. Such was another matter which the media failed to mention time and again in their reports. For those who have credit and paid their bills in 2004, there will not be much help from the federal government, if any, as again the prior year’s tax return and assets are used in qualifying for benefits. Adults without children will be the hardest hit, especially with personal savings only taking them so far.

On September 15, 2005, Senator Charles Grassley (R-IA) and Chairman of the Senate Finance Committee introduced a bi-partisan measure, the Grassley-Baucus bill, which would have opened up Medicaid services for single, childless adults who have been displaced and have lost their health insurance from employers, for up to 10 months. Medicaid does not cover working adults without children. But the White House has raised objections to the Grassley bill stating it is too expensive.

Many lessons are still being learned after Hurricanes Katrina and Rita with respect to distribution of services. And while emergency funding is in place for those usually taken care of by public assistance, there clearly is no support system in place for working and middle class people who are hit with immediate devastation. Responsible, law abiding, and tax paying individuals who also may have good educations, need not apply.

The story being logged has not been complete in its depiction of victims from the storms and subsequent malfunctioning levees in southern Louisiana. All residents need food, shelter and healthcare. Yet the government and media alike would like us to believe that there are the poor and the rich in the U.S. Unfortunately, casting a blind eye does not make a problem go away, but rather usually makes it worse.

We have been subject to picture after picture of shelters for the people of New Orleans proper, but perhaps the most disenfranchised of all in this disastrous situation is the middle class. It will be nearly impossible to recover from the sudden and simultaneous loss of home, job and healthcare without help. Most of these people who would never have entertained a thought about turning to public assistance may however eventually wind up on it. Giving people no option but to apply for public assistance once their assets are completely depleted may prove shortsighted, and in the long run may ultimately prove one which the federal government can ill afford.