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Published March 12, 2021

The American Rescue Plan — How It “Rescues” Healthcare

On March 11, 2021—a year to the day after the World Health Organization declared COVID-19 a global pandemic—President Biden signed the $1.9 trillion American Rescue Plan Act of 2021 (ARP) into law. Unlike last year’s $2.2 trillion CARES Act, the ARP does not include significant direct payments to healthcare providers. The new law, however, funds several major initiatives intended to shore up the healthcare system, directly benefiting providers. 

The following summarizes key provisions of the ARP. It’s not an exhaustive list of every item impacting the healthcare industry, but it’s a good start as we begin to understand the far-reaching impact of the new law. 

Health Insurance Coverage

While patient volumes have mostly recovered since last spring’s mass quarantine, those who lost health insurance coverage or who cannot afford to pay their co-insurance, still are delaying or foregoing care. Hospitals continue to report higher rates of bad debt and uncompensated care as compared to 2019. 

The ARP will drive the biggest expansion in health insurance coverage since the Affordable Care Act (ACA). Like the ACA, the ARP accomplishes this expansion by pulling on multiple levers:

First, the ARP boosts subsidies for private coverage through the marketplace by:

  • Making them available to higher-income, middle-class people for 2021 and 2022.
  • Increasing the amount of these subsidies for those already eligible based on income for 2021 and 2022.
  • Allowing individuals who receive unemployment at any point during 2021 to receive the maximum subsidies available, making them eligible for silver-tier plans without owing any premium, in addition to the cost-sharing reductions and subsidies offered by the silver-tier plans.

(See ARP Sections 9661 – 9663)  

Second, the ARP will reimburse employers for their cost of providing health insurance for COBRA-eligible individuals for the period March 1 through September 30,  2021, rather than requiring these individuals to bear that expense to maintain coverage following termination of employment. (Section 9501) 

Third, for the 12 states that have not yet expanded Medicaid, the ARP provides new incentives by having the federal government pay for an additional 5 percentage points of Medicaid costs for two years after the state expands coverage. This boost is in addition to the 6.2 percentage point increase for the traditional Medicare program in place for the duration of the public health emergency. (Section 9814) 

Note, these expanded benefits are for a limited duration. Although healthcare is always a top issue in federal elections, this likely means it will be front and center for the 2022 mid-term elections, as Congress will be faced with extending this expanded coverage. 

COVID Testing and Vaccine Distribution

Like prior COVID-relief legislation, the ARP includes lots of money for testing and vaccine distribution, including: 

  • $47.8 billion to the Department of Health and Human Services (HHS) for continued implementation of an evidence-based national testing strategy. (Section 2401)
  • $10 billion for activities under the Defense Production Act, including manufacturing and procurement of medical supplies and equipment. (Section 3101)
  • Funds to support Centers for Disease Control and Prevention (CDC) initiatives, including $7.5 billion for vaccine distribution and administration, $1.75 billion to sequence genomes and identify mutations, $1 billion for vaccine confidence activities, $750 million for global health initiatives, and $500 million to enhance CDC’s surveillance and analytics capabilities. (Sections 2301 – 2302, 2402 – 2404)
  • $500 million to the Food and Drug Administration for its continuing COVID-related work. (Section 2304)

Looking forward, the ARP commits $6 billion to HHS to harden the supply chain for vaccines, therapeutics, and medical supplies to respond to COVID “or any other disease with potential for creating a pandemic.” (Section 2303)

The ARP also ensures greater access to vaccines by requiring Medicaid and CHIP coverage of vaccines without beneficiary cost sharing. The federal government will pay 100% of these costs until one year after the end of the public health emergency. Also, the federal government will pay 100% of the costs for states that make the vaccine available to uninsured individuals without cost sharing. (Section 9811) 

Rural Healthcare

ARP includes $8.5 billion for rural providers to reimburse lost revenue and healthcare-related expenses attributable to the coronavirus. Those seeking funds must submit an application demonstrating the need for funds and providing documentation of lost revenue and healthcare-related expenses. (Section 9911) 

Congress appropriated $500 million to the Department of Agriculture for emergency rural development grants for rural healthcare. This new grant program is intended to support rural development determined to be critical to address the COVID–19 pandemic. (Section 1002)

Public Health

The ARP makes a substantial investment in the public health workforce, including $7.6 billion to state and local health departments to recruit, hire, and train staff; $7.6 billion for grants to federally qualified health centers for COVID-related activities and to “modify, enhance, and expand health care services and infrastructure;” $330 million to teaching health centers that operate graduate medical education; and $800 million for the National Health Services Corps, $200 million for the Nurse Corps, and $100 million for the Medical Reserve Corps. (Sections 2501, 2601 – 2604)

Mental Health and Substance Use Disorders

The ARP includes a $3.9 billion investment in mental health and prevention and treatment of substance use disorders. This includes $140 million to address suicide, burnout, mental health conditions, and substance use disorders among healthcare professionals. (Sections 2701 – 2713)

Skilled Nursing Facilities (SNFs)

The new law includes a total of $900 million to help SNFs protect against COVID-19, to fund SNFs’ implementation of COVID-19 prevention protocols in conjunction with quality improvement organizations, and to support the deployment of strike teams to assist SNFs with COVID-19 outbreaks. (Sections 9401 and 9402) 

DSH Fix

The ARP directs the Centers for Medicare & Medicaid Services to re-calculate annual disproportionate share hospital (DSH) allotments made to states to account for the temporary pandemic-related increase in the federal share of Medicaid spending. This will ensure that a state’s total DSH payments (including federal and state shares) are equal to the amount the state would have made without the increase. (Section 9819)

Paycheck Protection Program

The ARP adds another $7.25 billion to the PPP. It also makes 501(c)(3) organizations that employ not more than 500 employees per physical location eligible for the program. (Section 5001)

Coronavirus Capital Projects Fund 

ARP appropriates $10 billion to the states for capital projects directly relating to work, education, and health monitoring, including remote options, in response to the pandemic. This is part of the $350 billion for state and local governments to mitigate the pandemic’s fiscal impact. (Section 604)

Several provisions healthcare providers would have liked to have seen included in the ARP—e.g., forgiveness of Medicare Advanced Payments, more money in the Provider Relief Fund, clarification to the Provider Relief Fund reporting requirements—were not included in this fifth COVID-relief package approved by Congress. Stay tuned to see if there will be a sixth round.   

If you have questions about the American Rescue Plan and how it affects your organization, or for more guidance related to COVID-19, visit PYA’s COVID-19 information hub, or contact a PYA executive below at (800) 270-9629.

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