Coronavirus: Overview of healthcare funding stimulus and policy provisions in the CARES Act (United States)

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which is the $2 trillion legislative response to the coronavirus disease 2019 (COVID-19) pandemic and its impact on the economy, public health, state and local governments, individuals, and businesses, discussed generally here.

The new law  − Phase 3 in an anticipated series of federal initiatives to address the COVID-19 pandemic − contains numerous health policy provisions, including $140.4 billion in supplemental appropriations for the Department of Health and Human Services (HHS), and a provision allowing the Biomedical Advanced Research and Development Authority (BARDA) to partner with private sector companies on research and development by removing the cap on BARDA’s “other transaction authority” (OTA) during a public health emergency.  The CARES Act  also allocates $3.5 billion to BARDA to support the manufacturing, production, and purchase of vaccines, therapeutics, diagnostics, and other similar initiatives.

New funding for health-related services to HHS includes $100 billion for the Public Health and Social Services Emergency Fund to support hospitals and healthcare providers for costs associated with testing, prevention, diagnosis and treatment of COVID-19, as well as reimbursement for lost revenue resulting from the cancellation of as non-essential and elective procedures. In addition to these direct appropriations, hospitals will receive additional financial support through increased funding under Medicare and Medicaid.

On April 10, HHS announced that it is beginning the delivery of an initial $30 billion in immediate relief funding to providers, which the agency said will go to hospitals and other providers across the US that are enrolled in Medicare. Facilities and providers are allotted a portion of the $30 billion based on their share of 2019 Medicare fee-for-service (FFS) reimbursements. HHS stressed that “these are payments, not loans, to healthcare providers, and will not need to be repaid.” The Department and other Administration agencies are working on additional targeted distributions to providers focusing on those areas particularly impacted by the COVID-19 outbreak, as well as rural providers and providers of services with lower shares of Medicare FFS reimbursement or who predominantly serve the Medicaid population. This supplemental funding will also be used to reimburse providers for COVID-19 care for uninsured Americans.

HHS is partnering with UnitedHealth Group (UHG) – which will donate all fees for the administration of the relief fund – to deliver the initial $30 billion distribution, and payments will be made via Automated Clearing House account information on file with UHG, UnitedHealthcare, or Optum Bank, or used for reimbursements from the Centers for Medicare & Medicaid Services (CMS). Within 30 days of receiving the payment, providers must sign an attestation confirming receipt of the funds and agreeing to the terms and conditions of payment. The portal for signing the attestation will be open the week of April 13, 2020 and will be linked from hhs.gov/providerrelief.

Provisions to rectify personal protective equipment (PPE) shortages and medical devices include expanding the National Strategic Stockpile list. Current liability protections will be extended for manufacturers of PPE and other supplies for administering drugs, vaccines and diagnostic tests, whose equipment meets National Institute for Occupational Safety and Health (NIOSH) standards, rather than Food and Drug Administration (FDA) standards, to incentivize production and distribution of these items to healthcare providers. In addition, the CARES Act appropriates $16 billion  for the Strategic National Stockpile to procure PPE, ventilators and other medical supplies for federal and state response efforts.

The CARES Act directs the FDA to prioritize and expedite reviewing drug applications and inspections that are necessary to prevent or mitigate a drug shortage. Expanded reporting requirements for drug manufacturers include submitting to the FDA additional information about active pharmaceutical ingredients in the event of supply chain interruption for a critical medication, and providing information on any drug registered with the FDA in terms of how much was manufactured for commercial distribution each year. Manufacturers must have contingency plans to ensure a backup supply of products.

Under the CARES Act, the National Academies of Sciences, Engineering and Medicine must report to Congress on recommendations to strengthen the US manufacturing supply chain and an assessment of US dependence on critical drugs and devices sourced or manufactured outside the US.

The CARES Act allocates $4.3 billion in additional funding to the Centers for Disease Control and Prevention (CDC) to support preparedness and response, including $1.5 billion for state and local preparedness and response activities, $500 million for global health programs, $500 million for public health data surveillance and infrastructure, and $300 million for the infectious disease fund. The CARES Act also allocates $946 million to the National Institutes of Health (NIH) for vaccine, therapeutic, and diagnostic research.

All testing for COVID-19 is to be covered by private insurance plans and patients cannot be charged a copay or a deductible for the test under the CARES Act. The CARES act requires that health insurance companies pay healthcare providers for the COVID-19 tests at the rate specified in a contract between the insurer and the provider, or the insurance company pays the provider’s posted cash price if there is no contract, and providers must publicly post online their cash prices for testing. Preventive services with a Grade A or B recommendation from the United States Preventive Services Task Force (USPSTF) must be covered without cost sharing.

The CARES Act allocates $3.5 billion to BARDA to support the manufacturing, production, and purchase of vaccines, therapeutics, diagnostics, and small molecule active pharmaceutical ingredients.  These funds also may be used for constructing or renovating US-based next-generation manufacturing facilities that are not owned by the government.

Under section 3301 of the CARES Act, the OTA is removed during public health emergencies, allowing BARDA to more easily partner with the private sector on research and development, including helping to scale up manufacturing.

BARDA, which is under HHS’s Office of the Assistant Secretary for Preparedness and Response, works with pharmaceutical companies to finance and accelerate the market entrance of necessary vaccines and treatments. BARDA has announced partnerships with several major pharma companies to identify and mass-produce a viable COVID-19 vaccine.

If you have questions or need assistance with the funding and policy provisions described above, please reach out to your DLA Piper relationship partner or a member of the DLA Piper Federal Law and Policy team.

Please also visit our Coronavirus Resource Center and subscribe to our mailing list to receive alerts, webinar invitations and other publications to help you navigate this challenging time.

This information does not, and is not intended to, constitute legal advice. All information, content, and materials are for general informational purposes only. No reader should act, or refrain from acting, with respect to any particular legal matter on the basis of this information without first seeking legal advice from counsel in the relevant jurisdiction.