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While the United States now leads the world with the number of reported cases of COVID-19, the Coronavirus Aid, Relief, and Economic Security (CARES) Act (or “the Act”) takes major, though perhaps still incomplete, steps toward supporting the nation’s health care system as it responds to this unprecedented health and financial crisis. In sum, and as described further below, the Act includes provisions to expand access to diagnostic testing and telehealth; bolster the stockpile of personal protective equipment and other needed supplies; mitigate drug and device shortages; and provide financial support and flexibilities for providers to respond to the outbreak. The package contains additional appropriations for the Department of Health and Human Services (HHS), including $100 billion to reimburse hospitals and other providers for expenditures and lost revenues related to COVID-19, among billions of dollars in other supplemental funding for HHS agencies.
Health Care Workforce and Provider Relief
In light of the burdens COVID-19 is placing on the health care system, the CARES Act includes provisions meant to support and enhance the health industry workforce. The Act reauthorizes through 2025 several workforce programs designed to support clinician training and education, including training for practitioners in family medicine, general internal medicine, pediatrics and other specialties (Section 3401). These programs are administered by the Health Resources and Services Administration (HRSA). The legislation also requires the HHS Secretary to develop a coordinated plan for assessing these programs and enhances programs designed to meet the needs of older individuals who are at the highest risk during the outbreak (Sections 3402-3403). The Act reauthorizes the nursing workforce development programs, which are also administered by HRSA (Section 3404).
The legislation creates a Ready Reserve Corps to ensure that there are enough doctors and nurses ready to respond to public health emergencies like COVID-19 (Section 3214). The Secretary may also assign members of the National Health Services Corps, with the individual member’s agreement, to provide COVID-19-related care as needed (Section 3216). Notably, the Act limits liability for health care professionals who volunteer to provide care during the COVID-19 public health emergency. While this limitation is narrowly drawn, it is nevertheless written to preempt state law and will be effective at the time of enactment (Section 3215).
Provider Payment and Flexibility
The Act contains a number of Medicare provisions that aim to expand the use of telehealth services during the public health emergency. Notably, the Act eliminates a provision from the “Phase 1” package (P.L. 116-123), which requires providers to have treated a patient within the last three years in order to furnish telehealth services to that person during the emergency period (Section 3703). Federally qualified health centers (FQHCs) and rural health clinics (RHCs) will be permitted to serve as distant sites and provide telehealth services to patients during the public health emergency. This provision directs the HHS Secretary to reimburse FQHCs and RHCs at rates “similar” to the national average rates for comparable telehealth services under the Medicare physician fee schedule, but will exclude costs associated with services already reimbursed under the FQHC prospective payment system and the RHC all-inclusive rate calculation (Section 3704). The package also allows the HHS Secretary to waive certain face-to-face requirements for home dialysis and hospice and directs the Secretary to issue guidance encouraging the use of remote patient monitoring and other telehealth services in home health (Sections 3705-3707). Notably, it is unclear whether the Act allows for other licensed health professionals, such as respiratory, physical, and occupational therapists, to provide and get paid for telehealth services to Medicare beneficiaries during the emergency. This may be something clarified by CMS in the coming days or by Congress in any “Phase 4” package.
The CARES Act temporarily suspends sequestration-mandated reductions to Medicare claims from May 1, 2020, through December 31, 2020, which will have the effect of increasing Medicare payments to providers (Section 3709). The sequester reduced most Medicare payments by two percent starting in 2013. In addition, the legislation creates a new 20 percent add-on to the Hospital Inpatient Prospective Payment System (IPPS) rate for patients with COVID-19 under the Medicare hospital inpatient prospective payment system (Section 3710). Notably, where the sequestration suspension will help Medicare providers broadly, the COVID-19 add-on payment applies only to hospitals reimbursed under the IPPS. The Act expands the existing Medicare Hospital Accelerated Payment Program during the emergency period to encompass additional hospitals and allow hospitals to receive advance payments of up to 100 percent of the prior period payments. Currently acute care hospitals, known as “subsection (d),” and Puerto Rico hospitals with demonstrated cash flow problems are eligible. The Act expands eligibility for accelerated payments to qualifying children’s hospitals, dedicated cancer centers and critical access hospitals (CAHs) with cash flow problems. CAHs will be eligible for up to 125 percent (Section 3719).
The Act and subsequent CMS Guidance expand the existing Medicare Hospital Accelerated Payment Program during the emergency period to encompass virtually all Part A providers and Part B suppliers that bill Medicare directly. Qualified providers and suppliers are able to receive advance payments of up to 100 percent of the Medicare payment amount during a three-month period. Inpatient acute care hospitals, children’s hospitals, and PPS-exempt cancer hospitals are eligible for advance payments up to 100 percent of the Medicare payment amount during a six-month period. Critical access hospitals are eligible for up to 125 percent of their payment amount during a six-month period. MACs are expected to issue payments in 7 business days and repayment will begin in 120 days after the issuance of the payment (Section 3719).
The Act aims to increase access to post-acute care during the emergency period through additional flexibilities for post-acute care providers (Section 3711). Specifically, the Act waives the requirement that inpatient rehabilitation facilities (IRFs) patients attend three hours of therapy per day or 15 hours per week. The measure waives the requirement that long-term care hospitals (LTCHs) have no more than 50 percent of Medicare cases paid at the “site-neutral” (or IPPS) rate, along with the application of the lower, site-neutral rate to qualifying LTCH cases during the emergency period. The legislation also allows nurse practitioners and physician assistants to order home health services during the six months following enactment (Section 3708). Another provision would permit state Medicaid programs to pay for direct support professionals to assist hospitalized individuals in transitioning to home care and community-based care, thereby reducing length of stay and freeing up hospital beds (Section 3715).
The final agreement provides different blended payment rates to increase Medicare reimbursement for durable medical equipment (DME) suppliers in both rural and non-rural non-competitive bidding areas for the duration of 2020 and the end of the public health emergency, respectively. DME furnished in rural and noncontiguous areas will be paid a 50/50 blended rate that is one-half based on the current fee-schedule and one-half based on the pre-adjusted rates; non-rural areas will be paid a slightly less generous blended rate that is 75 percent the current fee schedule and 25 percent the pre-adjusted rates. (Section 3712). Another provision delays scheduled payment reductions to clinical laboratories and postpones the upcoming reporting period during which clinical labs are required to report private payer information (Section 3718). The Act provides a clarification to ensure that states can access the enhanced Medicaid Federal Medical Assistance Percentage (FMAP) under the Families First Coronavirus Response Act (Section 3720).
The Act sets aside an additional $1.32 billion for supplemental awards for the treatment, detection and diagnosis of COVID-19 in community health centers. Requirements for these awards can be found in Public Law 116-94 with regard to funds for programs authorized under sections 330 through 340 of the Public Health Service Act (Section 3211). The Act reauthorizes HRSA’s Rural Health Care Services Outreach, Rural Health Network Development and Small Health Care Provider Quality Improvement grant programs, as well as the Telehealth Network and Telehealth Resource Center grant programs (Sections 3212-3213). Both extensions require that the HHS Secretary prepare and submit reports on the activities and outcomes of the grant programs to the Senate Health, Education, Labor and Pensions (HELP) and House Energy and Commerce Committees.
The Act also attempts to address some of the administrative- and privacy-related hurdles to providing care during a public health emergency of this scale (Sections 3221, 3224). It directs HHS to issue guidance on restrictions on protected health information, which the agency has already taken steps towards loosening. However, this provision allows the agency to lift additional restrictions as it sees fit (Section 3224). Notably, a separate provision in the Act makes permanent changes regarding patient records related to substance use disorders. Among these changes is a loosening of restrictions on sharing 42 C.F.R. Part 2-protected information for treatment, payment and health care operations (Section 3221). It also extends the breach notification rule to Part 2 programs (Section 3221).
Coverage and Access to Care
The CARES Act attempts to mitigate patients’ out-of-pocket costs for in vitro diagnostic tests for COVID-19. The Act clarifies that the testing covered under the Families First Coronavirus Response Act (P.L. 116-127) includes all approved or cleared tests for COVID-19, including those that have been authorized by the Food and Drug Administration (FDA) under an emergency use authorization (EUA), those authorized by a state, reviewed under a more traditional pathway (i.e., 510(k), 515 and other sections under the FDCA, or any “other test that the Secretary determines appropriate in guidance”) (Section 3201).
According to the final text, should a health plan or issuer have a negotiated rate with respect to COVID-19 testing, the rates in the contract must be adhered to. However, if there is no existing contract, the plan or insurance issuer is required to reimburse the provider in the amount specified (“cash price”) as listed by the provider online or the plan or issuer may negotiate a lower price with the provider (Section 3202). Furthermore, the legislation requires group health plans and issuers to cover “any qualifying coronavirus preventive service” without cost-sharing 15 days after the date it is recommended. The contemplated measures include an item, service or immunization that receives a rating of A or B in the current U.S. Preventative Services Task Force or receives a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention (CDC) for the individual involved (Section 3203).
The CARES Act also provides a clarification to ensure uninsured individuals may be covered for COVID-19 testing costs with no cost sharing under the state Medicaid program, if the state elects to offer it (Section 3716).
The final agreement guarantees that a COVID-19 vaccine, when it is developed, is covered under Medicare Part B without any beneficiary cost-sharing (Section 3713). The Act allows Part D beneficiaries to receive up to a 90-day supply of a covered prescription drug during the public health emergency (Section 3714). Another provision allows high deductible health plans (HDHPs) to cover telehealth services before a patient has reached their annual deductible (Section 3701).
The final legislation allows health savings accounts (HSAs), Archer medical savings accounts (MSAs), flexible spending arrangements (FSAs) and health reimbursement arrangements (HRAs) to be used to pay for certain items that were previously ineligible, including over-the-counter medications (without a prescription) and menstrual care products retroactive to the beginning of 2020 (Section 3702).
Drug and Device Shortages
The CARES Act features several measures to address drug and device supply shortages. One such measure directs the HHS Secretary to enter into an agreement with the National Academies of Science, Engineering and Medicine (“National Academies”) to examine and report on the security of the domestic medical supply chain including potential public health or national security risks posed by the country’s reliance on foreign suppliers (Section 3101). There is particular interest with regard to the reliance of both private industry and state and federal governments on critical drugs and devices manufactured outside of the United States. With input from various federal departments, the report will also include the National Academies’ recommendations with regard to “improv[ing] the resiliency of the supply chain for critical drugs and devices.”
Other measures focused on drug shortages include a mandate that the Secretary prioritize and expedite reviews and inspections for drug applications that have the potential to prevent or lessen an existing drug shortage (Section 3111). Requirements in a variety of sections are focused on improving the flow of knowledge between the Secretary of HHS and Congress. For example, no later than 180 days after the enactment of this Act, and every 90 days thereafter, the Secretary must submit a report regarding drugs on the current drug shortage list to the Centers for Medicare and Medicaid Services (CMS) (Section 3112).
One such measure requires drug manufacturers to provide an annual report to the Secretary detailing total production of a particular drug for commercial distribution. Notably, the Secretary has the ability to exempt certain biologics from these reporting requirements (Section 3112).
The Act also requires critical drug and device manufacturers to notify the Secretary in advance of a permanent discontinuation or interruption of manufacturing that would lead to a meaningful disruption in supply (Sections 3112, 3121). Drug manufacturers must also notify the Secretary if there is an interruption or discontinuance of an active pharmaceutical ingredient (API) used to manufacture a “critical drug” (Section 3112). This notification must include the reason for the cited discontinuation or interruption, whether there are alternative sources, if there is a problem with an associated device and the expected duration of the interruption. The Secretary is empowered to request additional information as required. While FDA is authorized to make certain device shortage information public via a newly established device shortage list, the agency will have discretion to determine whether providing such information would be detrimental to the public health, namely by leading to over-purchasing of a certain product (Section 3121).
In addition to these expanded reporting requirements, the Act requires critical drug manufacturers (i.e., those producing drugs that are life sustaining, life supporting or intended for use or prevention of a debilitating disease or condition) to develop, maintain and implement redundancy risk management plans (Section 3112). The Act further allows the Secretary to inspect and request copies of these plans.
Personal Protective Equipment and Other Supplies
The Act also attempts to address areas in the national supply that have been highlighted as lacking in the face of the public health emergency. The Act contains a provision to include “personal protective equipment, ancillary medical supplies, and other applicable supplies required for the administration of drugs, vaccines and other biological products, medical devices, and diagnostic tests” in the Strategic National Stockpile (Sections 3102-3103). This particular section is intended to clarify that such equipment, which is particularly of use with respect to COVID-19, can be stockpiled along with other medical supplies already in the stockpile. Additionally, the Act extends liability protection for pandemic countermeasures during a public health emergency to manufacturers of respiratory protective devices (Section 3103).
The CARES Act further instructs the Secretary to begin a national awareness campaign to the public and health care providers about the need for blood donations during the COVID-19 public health emergency. The Secretary may partner with public or private nonprofit organizations to carry out the campaign and must report to Congress on the activities undertaken, the impact of those efforts and overall trends in blood supply donations (Section 3226).
The CARES Act includes a subtitle to reform the regulatory framework for over-the-counter drugs. The subtitle incorporates all provisions from the bipartisan Over-the-Counter (OTC) Monograph Safety, Innovation, and Reform Act of 2019 (S. 2740), which was overwhelmingly passed by the Senate on December 10, 2019, but remained pending in the House (Sections 3851-3862).
The legislation updates the Federal Food, Drug and Cosmetic Act (FDCA) by transitioning FDA’s establishment of OTC drug standards (drug monographs) to FDA-issued administrative orders, replacing the existing notice-and-comment rulemaking system. This is intended to streamline the monograph proposal, approval and revision process. The Act additionally addresses how currently marketed OTC drugs would be treated under the newly proposed system, with existing monograph status and active ingredients generally recognized as safe and effective (GRASE) category considered as factors. Notably, the Act also provides a new 18-month marketing exclusivity period under certain circumstances, for some novel OTC drugs or new drug conditions of use (Section 3851). It also includes a process for final administrative order dispute resolution, hearings and judicial review. The new OTC review regime excludes homeopathic medicines (Section 3853). Sponsors of nonprescription sunscreen active ingredients with pending submissions under the Sunscreen Innovation Act framework (21 U.S.C. § 360fff-3) are permitted to transition review to the new OTC framework. Additionally, the Act expands certain provisions within the Sunscreen Innovation Act framework, enhancing sponsor meeting opportunities and establishing an 18-month period of market exclusivity under certain circumstances (Section 3854).
Lastly, the Act provides the Secretary with new authority to assess and use OTC drug user fees beginning in fiscal year 2021. The first facility fees would be due in June 2020 or following publication of the Federal Register notice establishing the fees, if later, while monograph request fees would be due upon submission. FDA is also required to submit annual performance and fiscal reports to Congress related to fees and a recommendation for reauthorization. (Section 3862).
Social Support Programs
The Act includes language to address problems that have arisen with respect to social programs put in place to support the elderly (Sections 3222-3223). This includes provisions allowing individuals who are practicing social distancing in order to avoid infection by the coronavirus to receive home-delivered nutrition services under the Older Americans Act (OAA) meal programs (Section 3222). The Act waives OAA nutritional guidelines in case of shortages so that meals can continue to be provided to the elderly. The CARES Act also permits the Secretary of Labor to extend the participation of individuals involved in projects under the OAA and to increase the average participation cap (Section 3223). Both of these measures are under the Secretary of Labor’s discretion with regard to what is “appropriate” due to the public health emergency caused by COVID-19.
Similarly, lawmakers have also reauthorized the Healthy Start Program. This initiative is meant to provide resources for the improvement of birth outcomes for infants and their mothers. The CARES Act includes adjustments to certain definitions within the law and appropriates $125,500,000 for each fiscal year 2021 through 2025. It also requires that the Comptroller General of the United States conduct an independent evaluation of the program to be submitted to the appropriate congressional committees (Section 3225).
The CARES Act removes the limit on other transaction authority (OTA) with respect to public health emergencies. The Biomedical Advanced Research and Development Authority (BARDA) uses OTAs to collaborate with members of industry to identify and develop new medical countermeasures for infectious diseases and other threats. Under this provision, the Secretary is able to “use competitive procedures when entering into transactions” associated with a public health emergency. The agreements would not be required to terminate when the public health emergency ends, but rather when they are contracted to do so. The HHS Secretary is required to submit a report to the appropriate congressional committees, including, but not limited to, any findings or outcomes associated with these expenditures (Section 3301).
The Act also amends the FDCA to permit expediting the review of a new animal drug if there is preliminary clinical evidence that the drug may have an impact on treating a zoonotic disease in animals that could have a serious impact on human health. Such clinical indications would allow the Secretary to designate the animal drug as a “priority zoonotic animal drug” at the request of the sponsor (Section 3302).
The CARES Act extends on a short-term basis a number of health care programs and provisions that were set to expire on May 22, 2020. Specifically, it provides funding through November 30, 2020, for community health centers, the National Health Service Corps, the Teaching Health Center Graduate Medical Education (THCGME) program, the Special Diabetes Program and the Special Diabetes Program for Indians (Sections 3831-3832). It also extends several expiring Medicaid programs through November 30, including the Money Follows the Person demonstration and Medicaid spousal impoverishment protections, and expands the Community Mental Health Services demonstration to two additional states (Sections 3811-3812, 3814). The Act delays scheduled Medicaid disproportionate share hospital (DSH) payment reductions until December 1, 2020 (Section 3813). The legislation also provides funding through November 30 for Medicare quality measure endorsement, input and selection, and for outreach and assistance for Medicare low-income programs (Sections 3802-3803).
Notably, a health “extenders” package was previously seen as a possible vehicle for advancing surprise medical billing legislation and other health care priorities this spring. With a new deadline of November 30 for many of the extenders, it is likely that a larger health vehicle will not move until the fall.
HHS Supplemental Appropriations
Division B of the CARES Act includes supplemental appropriations for a number of health-related programs and activities under HHS. The measure provides $127 billion for medical response efforts under the Assistant Secretary for Preparedness and Response (ASPR). This funding includes $100 billion for the Public Health and Social Services Emergency Fund to reimburse, through grants or other mechanisms, providers for coronavirus-related expenses or lost revenues attributable to the outbreak. Eligible providers include public entities, Medicare or Medicaid enrolled providers and suppliers, and other for-profit and not-for-profit entities as determined by the Secretary that provide diagnoses, testing or care for individuals with COVID-19. The Act specifies that this funding be available for building or construction of temporary structures, leasing of properties, medical supplies and equipment, increased workforce and training costs, emergency operation centers, repurposing facilities and surge capacity. According to the provision, HHS will review applications for payments on a rolling basis and will make pre-payments, prospective payments or retrospective payments as determined appropriate by the Secretary.
The Act also includes $3.5 billion for the development and purchasing of vaccines and therapeutics for COVID-19 and $16 billion for the Strategic National Stockpile to procure personal protective equipment and other supplies. $250 million is provided for grantees and sub-grantees of the Hospital Preparedness Program.
The measure also adds $4.3 billion in funding for the CDC, including $1.5 billion for grants or cooperative agreements with states, localities, territories and tribes to carry out public health activities; $300 million for the Infectious Diseases Rapid Response Reserve Fund; $500 million for global disease detection and response; and $500 million for public health data surveillance and analytics modernization.
Additional funding includes $945 million for the National Institutes of Health (NIH) for research activities related to COVID-19 and $185 million for HRSA to support rural critical access hospitals, rural tribal health and telehealth programs and poison control centers. The Act also provides $955 million for the Administration for Community Living to support nutrition programs, home and community-based services, family caregivers and other programs for seniors and individuals with disabilities. The Act includes an additional $200 million to CMS for program support, including additional infection control surveys for facilities with vulnerable populations.
The supplemental appropriations includes an additional $1.03 billion for the Indian Health Service to respond to the outbreak.
The implementation of many of the CARES Act’s provisions will now require new processes and procedures from the Administration, and we expect instruction and more detailed information in the very near future.
Moreover, there is already talk in Congress about the need for a “Phase 4” relief package to address both further financial assistance across the country and additional targeted relief within the health care sector. Whether and when such a package materializes will depend upon how this crisis unfolds over the coming weeks, but discussions and activity regarding “Phase 4” have already begun.