American Rescue Plan – Key Provisions for Healthcare Providers and Manufacturers

Last week, President Joe Biden signed the American Rescue Plan Act of 2021 (American Rescue Plan), a $1.9 trillion COVID-19 relief package. The law includes a number of key provisions relevant to healthcare providers and manufacturers, including (1) funding for rural healthcare providers and facilities; (2) enhanced infection control support for skilled nursing facilities and nursing homes; (3) changes to the reimbursement methodology for hospitals in all-urban states; (4) expanded Medicaid coverage for COVID-19 testing, treatment, and vaccination; (5) funding of federal entities for COVID-19-related oversight activities; (6) eliminating the Medicaid Drug Rebate Program (MDRP) unit rebate amount (URA) cap; and (7) allocating funding to the supply chain for COVID-related vaccines, therapeutics, and medical supplies. The law also includes several provisions related to premium tax credits that assist consumers who purchase health insurance on the Affordable Care Act (ACA) marketplaces and a provision that offers an incentive to expand Medicaid coverage for states that have not yet done so, among other provisions related to health coverage.

In light of the significant levels of funding and support offered to the healthcare industry through this law and other relief packages enacted during the COVID-19 public health emergency, healthcare provider owners and investors, as well as suppliers of COVID-19 tests, vaccines, and therapeutics, should expect continued oversight and enforcement scrutiny with respect to funds offered as part of the American Rescue Plan and other COVID-19 relief packages.

Certain key provisions of the American Rescue Plan relevant to healthcare providers and manufacturers are as follows:

Healthcare Providers:

• Federal Oversight of COVID-19 Funds and Activities. The American Rescue Plan bolsters oversight of COVID-19 relief funds and activities through appropriations to key agencies. This funding supplements similar grants in prior COVID-19 relief laws. Specifically, the law appropriates $5 million to the Department of Health and Human Services (HHS) Office of Inspector General for broadly defined oversight activities related to HHS’s pandemic response. Additionally, the law provides the Pandemic Response Accountability Committee, an independent oversight committee within the Council of the Inspectors General on Integrity and Efficiency, an additional $40 million for fraud, waste, abuse, and mismanagement oversight of federal COVID-19 funding. 

• Supplemental Provider Relief Fund Money for Rural Providers. The law adds $8.5 billion to the $178 billion Congress previously provided to the program that HHS refers to as the CARES Act Provider Relief Fund. The language mirrors appropriations language in prior funding legislation, except that under the American Rescue Plan provision, eligible healthcare providers are limited to Medicare, Medicaid, or Children’s Health Insurance Program (CHIP) “rural providers or suppliers” as defined in the law or as may be defined by the Secretary. The language of this provision suggests that Congress expects recipients of such funds to be subject to the same operational and reporting requirements that apply to prior recipients of Provider Relief Fund distributions. In particular, the legislation specifically authorizes providers to use the broader definition of permissible “lost revenue” that was implemented in December 2020 through the Consolidated Appropriations Act, 2021.
  
  The law also provides funding for the Department of Agriculture to establish a pilot program under which grants will be available to essential community facilities that primarily serve rural and low-income areas to increase medical surge and vaccine distribution capacity, increase telehealth capabilities, and engage in broader actions to support efforts determined to be critical to address the COVID-19 pandemic.

• Support for Skilled Nursing Facilities. The law expands support for skilled nursing facilities (SNFs) that have been significantly affected by the pandemic. For example, the law provides $200 million to quality improvement organizations to provide infection control and vaccination uptake support to SNFs. In addition, the law offers states funds to form “strike teams” to deploy to SNFs and nursing homes to assist with clinical care, infection control, and staffing.

• Change in Hospital Wage Index for All-Urban States. The Centers for Medicare & Medicaid Services adjusts Medicare payments using a wage index that reflects variations in labor costs in different areas of the country. The American Rescue Plan directs HHS to calculate a minimum wage index for hospitals in each all-urban state (i.e., Delaware, New Jersey, and Rhode Island), and the effect of this change will be to increase reimbursement for these hospitals. 

• Expanded Medicaid and CHIP Coverage for COVID-19 Services. The law extends the period in which COVID-19 testing, treatment, and vaccines must be covered for Medicaid and CHIP beneficiaries. The cost of vaccine administration is now fully covered by the federal government through a year and one quarter after the COVID-19 public health emergency ends. The law also expands the state option to cover uninsured individuals for not only testing but also vaccines and treatment of COVID-19 as well as any condition that could seriously complicate the treatment thereof. 

Manufacturers 

• Changes to the MDRP. The law eliminates the statutory cap on MDRP rebates by terminating Section 1927(c)(2)(D) of the Social Security Act, which the ACA added. Under this provision of the American Rescue Plan, which is characterized as a “sunset” provision in the law, MDRP rebates on covered outpatient drugs would no longer be capped at 100% of Average Manufacturer Price, and drug manufacturers’ MDRP rebate liability on certain covered outpatient drugs may rise. This change is scheduled to take effect on January 1, 2024. The Congressional Budget Office estimates that eliminating this statutory cap would save the federal government approximately $15.9 billion over the 10-year period from 2021 to 2030.
  
  Additionally, under the law, certain outpatient drugs used for COVID-19 prevention or treatment must be covered under the MDRP. 

• Funding for Manufacturing and Purchasing of COVID-19 Vaccines, Therapeutics, and Related Medical Supplies. The law allocates approximately $6 billion to HHS to support research, development, manufacturing, production, and purchases of vaccines, therapeutics, and medical products and supplies for purposes of responding to COVID-19, including emerging viral variant mutations “or any disease with potential for creating a pandemic.”
  
  In addition, the law allocates $10 billion under the Defense Production Act to increase domestic production of COVID-related medical supplies and equipment, including diagnostic tests, personal protective equipment, and vaccines. 

• Funding to the Food and Drug Administration (FDA) for Evaluation and Manufacturing of COVID-19 Vaccines, Devices, and Therapeutics, Managing the Supply Chain, and Resuming Inspections. The law allocates $500 million to FDA for the agency to (1) review the performance, safety, and effectiveness of COVID-19 vaccines, therapeutics, and diagnostics, including for emerging variants; (2) facilitate advanced continuous manufacturing activities for vaccines and related materials; (3) conduct inspections related to the manufacturing of vaccines, therapeutics, and devices that have been delayed or cancelled for reasons related to COVID-19; (4) review devices authorized for the treatment, prevention, or diagnosis of COVID-19; and (5) conduct oversight of the supply chain and address shortages of COVID-19 vaccines, therapeutics, and devices. 

• Funding for COVID-19 Testing, Contact Tracing, and Mitigation Activities. The law allocates approximately $48 billion to HHS to advance its work to detect, diagnose, and trace COVID-19 infections. The law specifically directs HHS to implement a national testing and contact tracing strategy and to support the development, manufacturing, purchasing, and distribution of diagnostic tests. 

Health Coverage Support

• Premium Tax Credits. The law includes several provisions related to premium tax credits that assist consumers who purchase health insurance on the ACA marketplaces. For example, for 2021 and 2022, the law provides for increased amounts of premium tax credit assistance for those eligible for subsidies and (for the same two-year period) also removes the 400% federal poverty level (FPL) limit that otherwise applies for purposes of eligibility to receive premium tax credits. The law also provides a temporary modification (limited to tax year 2020) that forgives certain payments that otherwise would be owed by those whose 2020 advanced premium tax credits did not match their income level for the year. Additionally, the law permits individuals who receive (or have been approved to receive) unemployment compensation during any week that begins during 2021 to receive premium tax credits for ACA marketplace coverage at a level equivalent to that of a person earning up to 133% of FPL.

• Incentives for Medicaid Expansion. For states that have not expanded their Medicaid programs pursuant to the ACA, the law offers a 5% increase on their base Federal Medical Assistance Percentage rate under Medicaid for two years if they expand coverage. In addition, the law includes additional support for state home-and-community-based services and mobile crisis intervention services as well as an option for states to provide one year of postpartum Medicaid coverage.

• COBRA Subsidies. The law includes additional premium support for a temporary period of time under the Consolidated Omnibus Budget Reconciliation Act (COBRA) for certain individuals who have experienced unemployment or work-hours reductions during the COVID-19 public health emergency.