Update (Jan. 13, 2021):Certain of the provisions discussed below that were never enacted, were enacted in a bipartisan massive year-end spending bill. To review more about the massive spending bill, our Jan. 13 alert summarizes 15 key healthcare provisions included in H.R. 133.
On May 15, 2020, the U.S. House of Representatives narrowly passed, by a 208 to 199 vote, H.R. 6800, the Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act). House Democratic leadership introduced the HEROES Act as their “phase four” 2019 novel coronavirus (COVID-19) stimulus and relief package. The HEROES Act would provide $3 trillion in tax cuts and spending to address the negative health and financial impacts of the COVID-19 pandemic, including financial relief to state, local and tribal governments; extensions to enhanced unemployment benefits; debt collection relief; and direct cash payments to households.
The legislation is unlikely to pass in the Republican-controlled Senate, however, and the White House issued a statement opposing the legislation. Although the HEROES Act probably will not become law in its current form, certain provisions from the HEROES Act will likely reappear in future legislation, potentially as part of a bipartisan stimulus and relief bill late this summer. House Democratic leadership probably will reference these provisions as its priorities in such negotiations. Below are 12 of the House’s priorities contained in the HEROES Act that healthcare providers should understand.
- Waive Cost-Sharing Obligations for COVID-19 Treatment. Three of the four prior COVID-19-related legislative packages included cost or cost-sharing obligation waivers or reductions for COVID-19 testing: the Families First Coronavirus Response Act, Pub. L. 116-127 (Families First), signed into law on March 18, 2020; the Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 116-136 (CARES Act), signed into law on March 27, 2020; and the Paycheck Protection Program and Health Care Enhancement Act, Pub. L. 116-139 (Enhancement Act), signed into law on April 24, 2020. However, the cost-sharing provisions in the previous legislative packages did not address preventing and treating COVID-19, just testing for the virus. The HEROES Act would close this gap by eliminating certain out-of-pocket costs for COVID-19 treatment and vaccines during the public health emergency. Separate provisions of the HEROES Act address the waiver of cost-sharing obligations under Medicaid state plans, Medicare Parts A and B, Medicare Advantage, TRICARE, Department of Veterans Affairs (VA) health plans, Federal Employee Health Benefit Program, and commercial payor policies. The HEROES Act would also require coverage for drugs intended to treat COVID-19 under Medicare Part D Prescription Drug Plans and Medicare Advantage-Prescription Drug plans, without any cost-sharing obligations. Patients treated at VA medical facilities would also not face cost-sharing obligations in connection with preventative treatment or services related to COVID-19, including vaccinations.
- Revise and Fund Additional Healthcare Provider Relief Grants. The HEROES Act would provide an additional $100 billion to reimburse hospitals and other eligible healthcare providers for eligible expenses and lost revenue to prevent, prepare for and respond to COVID-19. The bill would formalize and modify the provider relief fund that the U.S. Department of Health and Human Services (HHS) established (most recently described in a May 7 alert) from funds in the CARES Act ($100 billion as discussed in a March 27 alert) and the Enhancement Act ($75 billion as discussed in an April 23 alert) by:
- requiring unobligated balances from the CARES Act and the Enhancement Act to be expended consistent with this modified relief fund;
- limiting eligible providers to those that provide diagnostic or testing services or treatment to individuals with a confirmed or presumptive COVID-19 diagnosis (the current relief fund general distributions effectively paid all Medicare providers);
- requiring applications at the end of each calendar quarter (beginning with the already completed first quarter of 2020) to HHS to receive relief fund payments;
- calculating such quarterly payments based on the sum of 100 percent of eligible expenses plus 60 percent of lost revenue less funds already received by the provider that will not need to be repaid from past COVID-19-related legislation (e.g., received HHS provider relief fund payments);
- limiting eligible expenses to 10 specific COVID-19-related costs (including building or constructing temporary structures, leasing properties, purchasing medical supplies and equipment, COVID-19 tests, increased workforce and training, emergency operation centers, retrofitting facilities and managing the surge in capacity) plus those items and services HHS determines appropriate;
- providing a methodology for calculating lost revenue, which would be paid through the quarterly payments only if a provider had at least a 10 percent revenue decrease; and
- prohibiting the use of funds to compensate certain high-income individuals, described differently than the current HHS terms and conditions (discussed in alerts on April 17 and April 27).
- Provide Significant Aid to Certain Healthcare Providers. The HEROES Act would appropriate funds to various governmental agencies, but specifically with respect to the healthcare industry, the HEROES Act would aid healthcare providers, address underserved populations, fund mental health support and expand access to telehealth and analytics infrastructure. Specifically, the HEROES Act would provide:
- $7.6 billion to the Health Resources and Services Administration to expand healthcare services for underserved populations, specifically by providing funds to health centers and Ryan White HIV/AIDS clinics to increase triage, care and mobile testing for patients who suffer from, or who are at a greater risk of developing complications from, COVID-19;
- $2.1 billion to the Indian Health Service to benefit Native Americans in preventing and responding to COVID-19, including, but not limited to, supporting the provision of telehealth services and the expansion of broadband infrastructure and technology;
- $3 billion to the Substance Abuse and Mental Health Services Administration to prevent and treat substance abuse and to provide resources to support individuals who experience negative mental health impacts from the COVID-19 pandemic;
- $2.1 billion to the Centers for Disease Control and Prevention (CDC) to provide funds and support federal, state and local public health agencies as they continue to prevent and respond to COVID-19, specifically addressing public health data surveillance and modern analytics infrastructure; and
- $150 million to the Centers for Medicare & Medicaid Services (CMS) to deploy reactive infection-control “strike teams” to support skilled nursing facilities or nursing facilities promptly after such a facility experiences three or more residents or employees being diagnosed with or suspected of having COVID-19.
- Make Medicaid and Medicare Reimbursement Changes for Hospitals. The HEROES Act would temporarily increase Medicaid disproportionate share hospital (DSH) allotments by 2.5 percent for fiscal years 2020 and 2021. This DSH increase would be in addition to the CARES Act delaying a scheduled $4 billion in Medicaid DSH reductions for fiscal year 2020 and additional reductions in fiscal year 2021 described further in a March 27 legal alert. Congress suggested states prioritize DSH hospitals that have a higher share of COVID-19 patients with these increased allotments. The HEROES Act would also add a temporary Medicare outlier payment for inpatient hospital COVID-19 discharges. Outlier payments are made to Medicare-participating hospitals for cases with extraordinarily high costs. This COVID-19 outlier payment would be in addition to the CARES Act 20 percent add-on payment for Medicare COVID-19 inpatients. In addition, the HEROES Act would require CMS to re-establish the “rural floor” in connection with the Medicare wage index for hospitals (a portion of a hospital’s Medicare reimbursement payment rates) in an all-urban state (i.e., a state where there are no rural areas or where there are no hospitals classified as rural), which would apply for discharges occurring on or after Oct. 1, 2021. Under the HEROES Act, if passed, the Medicare wage index for hospitals in an all-urban state could not be less than the minimum area wage index for the fiscal year for hospitals in that same state. This would increase certain urban state hospital payments, as under the “rural floor” rule, a hospital in an urban area of a state cannot have a Medicare wage index value that is lower than a hospital in a rural area of that same state and this would provide such floor in such all-urban states.
- Increase Public and Nonprofit Hospitals’ Access to High-Speed Internet. In response to the COVID-19 pandemic, the HEROES Act would increase public and nonprofit hospitals’ access to broadband service. The HEROES Act would appropriate $2 billion to expand the Federal Communications Commission’s Rural Health Care Program to partially subsidize nonprofit and public hospitals’ broadband service and extend the subsidies beyond rural hospitals.
- Provide Temporary Medicaid Support to States, Tribes and Providers. The HEROES Act would further relieve the financial burden on states by increasing the Federal Medical Assistance Percentage (FMAP) payments (i.e., the federal share of certain medical and social service programs) to state Medicaid programs by a total of 14 percentage points from July 1, 2020, through June 30, 2021. Families First (described in a March 25 alert), as amended by the CARES Act (described in an April 29 alert), increased the FMAP payments, starting Jan. 1, 2020, to state Medicaid programs by a total of 6.2 percentage points. Under the HEROES Act, the FMAP payments to state Medicaid programs would return to 6.2 percentage points starting July 1, 2021, through the last day of the emergency period. The HEROES Act would also include clarifying language providing that for services received through an “Urban Indian organization” the FMAP would be 100 percent for July 1, 2020, through June 30, 2021.
For Medicaid providers and state governments, the HEROES Act would also provide temporary protection from additional regulatory burden. As a way to combat Medicaid spending, CMS issued a proposed rule titled Medicaid Fiscal Accountability Regulation (MFAR) in November 2019, which would reform provider reimbursements and establish more provider and state reporting requirements. Many providers and states oppose the complex MFAR proposal. Given the already mounting financial stress on healthcare providers, especially those treating patients in underserved areas, the HEROES Act would prevent HHS from finalizing MFAR or finalizing any similar regulation until the end of the current public health emergency.
- Revise the Medicare Accelerated and Advanced Payment Program. The HEROES Act would revise CMS’ Medicare accelerated and advanced payment program, described in a March 30 legal alert. The program, now suspended by CMS for new requests from Medicare Part B providers and suppliers (as discussed in this April 28 alert), allowed most Medicare Part A and Part B providers and suppliers to request up to 100 percent (or more for certain hospitals) of anticipated Medicare payment amounts for a three- or six-month period as a repayable advance. Such advances provided necessary liquidity for many providers. CMS intends to recoup accelerated and advanced funds under this program by offsetting Medicare claims beginning 120 days after the payment was made to the provider or supplier, with interest charged as soon as 210 days after the payment date. The bill would (a) give providers a full year before offsetting claims, (b) limit recoupment to no more than 25 percent of the future Medicare reimbursement claim, (c) give providers two years from the first advance payment to repay the balance in full, and (d) reduce the interest rate for remaining balances at the end of such period to 1 percent (instead of an interest rate above 10 percent).
- Expand Access to Health Insurance. The HEROES Act would allow individuals eligible for COBRA coverage to maintain their employer-sponsored coverage after a layoff, reduction in hours or furlough without having to pay premiums through January 2021. The bill also would provide two special enrollment opportunities for individuals to obtain health insurance — (a) during the emergency period for Medicare-eligible individuals residing in an emergency area who have not previously enrolled in Medicare and (b) during an eight-week enrollment period for an Affordable Care Act exchange for individuals who are uninsured for whatever reason. The bill would authorize veterans without a disability or health insurance to qualify for special enrollment in the VA healthcare system for a 12-month period. Finally, the bill would expand the Medicaid expansion pathway provided for in Families First, which covered 100 percent of testing costs, as discussed in a March 19 legal alert. The bill would expand this pathway to include full federal coverage for COVID-19 treatment and vaccines without cost sharing for certain Medicaid enrollees.
- Expand Federal, State and Local COVID-19 Testing and Tracing Efforts. The HEROES Act would provide financial support, as well as increased mandates, in connection with testing for and tracing the COVID-19 virus. Economically, the HEROES Act would:
- provide $75 billion to support testing and tracing efforts to detect and reduce the spread COVID-19 through a national contact tracing initiative;
- provide grants to states and localities to increase COVID-19 testing capacities;
- authorize $6 billion for public health departments to test for and reduce the spread of COVID-19; and
- authorize $1 billion to the CDC to expand and improve its infrastructure and activities to address public health needs.
In addition to providing economic support to the public health sector, the legislation seeks to implement requirements and standards to combat the spread of COVID-19. Specifically, the HEROES Act would:
- retroactively require free coverage of COVID-19 testing to the start of the declared public health emergency (i.e., earlier than the retroactive date set forth in previous legislation);
- require HHS to update the COVID-19 strategic testing plan to address deficiencies in the availability of testing, testing materials, supplies and personnel;
- require HHS to establish and maintain a centralized testing information website;
- require in vitro diagnostic test manufacturers to notify HHS with information regarding the status of the test distributions;
- require states to report to HHS on a weekly basis with relevant information on testing capacities and other testing-related information;
- require states to create and implement a searchable website listing the location and contact information for COVID-19 testing sites;
- require laboratories to submit daily reports to HHS with respect to processed COVID-19 tests;
- require the Government Accountability Office (GAO) to report on the nation’s response with respect to the development and deployment of COVID-19 tests; and
- require HHS to expand, enhance and improve public health data systems used by the CDC.
- Provide $500 Tax Deduction for First Responders and Front-Line Employees for COVID-19-Related Expenses. The HEROES Act would create numerous tax deductions (most are temporary) for individual and corporate expenses in connection with preventing, preparing for and treating COVID-19. Specifically, the HEROES Act would allow first responders and COVID-19 front-line employees who performed at least 1,000 hours of essential work during the applicable taxable year to utilize a $500 above-the-line tax deduction on their 2020 tax returns for uniforms, supplies, equipment and training courses. Various states, including New York and Illinois, have introduced similar state legislation that would allow tax credits and deductions to first responders and front-line workers in light of the COVID-19 outbreak in their respective states.
- Increase Workplace Safety for Healthcare and Other Workers Through Emergency OSHA Standards. The HEROES Act would require the Occupational Safety and Health Administration (OSHA) to issue emergency temporary standards for employers within seven days of the enactment of the bill to protect paramedics, emergency medical service workers, employees in the healthcare sector and any other worker at “occupational risk of exposure” to COVID-19. These emergency OSHA standards would require the development and implementation of a comprehensive infectious disease exposure control plan to protect healthcare workers from exposure to the pathogens that cause COVID-19. In addition, the secretary of the Department of Labor would be required to promulgate permanent standards to protect workers from infectious pathogens within two years. As drafted, the bill would also prohibit employers from retaliating against employees who report publicizing health and safety hazards. A similar effort was included in the initial House passage of the Families First bill (as described in a March 17 alert) but was removed before final enactment.
- Provide Funds for Government Oversight Efforts and to Combat Fraud and Abuse. With the significant amount of grants, loans and payments to various healthcare providers during the COVID-19 pandemic, specifically through the CARES Act and proposed in the HEROES Act, providers should expect targeted audits and stringent governmental oversight in connection with these funds to fight fraud, waste and abuse. The HEROES Act re-emphasizes the government’s agenda to combat fraud and abuse and the inappropriate use of COVID-19-directed relief funding as it would provide $75 million to the HHS Office of Inspector General. Funding would also be appropriated to the GAO, the Department of Justice and other agencies to conduct audits, investigate and generally oversee the funds associated with the COVID-19 response and recovery efforts.
Next Steps. The Senate’s Republican leadership has stated that the Senate will not vote on the HEROES Act in its current form and has questioned the timing of additional legislation related to COVID-19, preferring to “wait and see” how the U.S. economy reacts to previous stimulus packages. At the same time, the White House has indicated that President Trump would veto the legislation. Consequently and as noted above, the HEROES Act likely represents a starting point for negotiations with the House’s Democratic leadership using the bill to indicate its members’ priorities. Past COVID-19-related legislation has passed with bipartisan support after negotiations between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin, among others.
McGuireWoods will continue to monitor these legislative efforts and how any future negotiations may incorporate some of the healthcare provider-focused provisions discussed above in a future COVID-19 stimulus and relief bill. Please contact the authors for additional guidance on how the provisions in this legislation could affect the delivery of patient care and the operation of healthcare providers.
McGuireWoods has published additional thought leadership related to how companies across various industries can address crucial COVID-19-related business and legal issues, and the firm’s COVID-19 response team stands ready to help clients navigate urgent and evolving legal and business issues arising from the COVID-19 pandemic.