The Paycheck Protection Program and Healthcare Enhancement Act Fails to Fund the Nation’s Frontline Health Insurer

Today, the Paycheck Protection Program and Health Care Enhancement Act became law.This is the fourth piece of legislation addressing the COVID-19 pandemic and the nation’s economic downturn.  It provides additional funding for programs created by the CARES Act, (P.L. 116- 123), including  another $380 billion to support small businesses and another $75 billion to help hospitals and other providers defray the costs and lost revenues attributable to the pandemic.  It also appropriates $25 billion for the development and deployment of COVID-19 testing.

Like the CARES Act, the Paycheck Protection Act is another missed opportunity to build upon the foundation of the Families First Act and further improve the ability of state Medicaid and CHIP programs to respond to the pandemic.  Among other things, the Families First Act increased the federal Medicaid matching rate (FMAP) for all states by 6.2 percentage points during the public health emergency period, subject to compliance with maintenance of effort (MOE) requirements, including a freeze on disenrollments.  Yet despite a forceful, bipartisan request from the National Governor’s Association for an increase in the FMAP from 6.2 to 12 percentage points, the Act does not include any additional federal funding for Medicaid.  Nor does the Act include any other state fiscal relief, which is particularly problematic given the deep recession now upon us. Senate Majority Leader Mitch McConnell has so far refused to provide any more financial assistance to Governors on the frontlines of the pandemic and has even suggested that states file for bankruptcy.

As my colleague Edwin Park has pointed out, increasing the Medicaid FMAP during economic downturns is an effective counter-cyclical policy tool, helping states maintain their Medicaid programs when unemployment increases, the need for coverage grows, and state revenues fall.  Maintaining Medicaid in these circumstances means hospitals, nursing facilities, and other providers can continue to be paid for furnishing services, beneficiaries can continue to access the care that they need, and providers can continue to pay their employees.  This is particularly important in the current economic free-fall.

There’s also an important structural advantage to flowing federal funds to states through Medicaid in the form of a higher FMAP.  The federal government does not have to stand up and run a new program.  Instead, it can use the existing Medicaid administrative infrastructure (with safeguards already in place) for distributing federal funds quickly and effectively to the states and providers that need them.  The 6.2 percentage point FMAP increase was enacted on March 18; on March 24, CMS announced that the additional funds would be available to states by the next day.  The states, in turn, routinely make payments to providers for furnishing services to beneficiaries, either directly on a fee-for-service basis, or indirectly through managed care organizations.  These payment arrangements are accompanied by program integrity controls and have clear audit trails.  And the dollar flows are already scaled up; even before the pandemic began the federal government was projected to send $423 billion to states to help fund their Medicaid programs on behalf of 70 million beneficiaries.

The Paycheck Protection Act takes a much different approach.  Buried among the numerous “Provided furthers” is an appropriation of up to $1 billion “to cover the cost of testing for the uninsured.”  For this provision, the uninsured are individuals who are not enrolled in Medicare, Medicaid, or CHIP, or employer group or individual coverage. This appropriation is in addition to a $1 billion appropriation included in the Families First Act “to pay the claims of providers for reimbursement” for COVID-19 testing of uninsured individuals.  In 2018, 28.5 million were uninsured; eliminating financial barriers to testing for these individuals will be essential to a public health strategy for reopening the country.

There was another testing provision in the Families First Act, this one involving Medicaid.  The Act gave states the option to cover COVID-19 testing for uninsured individuals through Medicaid at 100 percent federal match.  Within a week of enactment, CMS had issued a template for expedited approval of State Plan Amendments (SPAs) enabling states to take up this option.  To date, three states (Arizona, Louisiana, and Rhode Island) have done so.  In contrast, the Health Resources and Services Administration (HRSA) did not launch the $1 billion Families First reimbursement program until this week; the procedure for submitting claims has yet to be explained, and providers will not begin receiving reimbursement until mid-May at the earliest.  Presumably, the additional $1 billion for testing in the Paycheck Protection Act will also be distributed in this way.

Perhaps there is a method to this bifurcated approach to payment for testing for COVID-19; in states that elect not to cover the costs of testing the uninsured through Medicaid, providers will be able to bill the HRSA program directly.  But this approach is far less efficient and effective than building upon what is already in place: a state-administered program that has decades of experience reaching families who become poor and lose coverage due to unemployment and paying for a range of public health services, including screenings and vaccinations.  The Paycheck Protection Act could have extended Medicaid coverage for the uninsured to treatment of COVID-19 as well as for testing.  Instead, it doubles down on standing up a new federally-administered reimbursement program, requiring providers that are struggling to treat the uninsured in the midst of a pandemic to put in place new systems to submit claims to yet another payor.

This makes no sense.  Medicaid is the Nation’s Frontline Health Insurer. We should use it to take on COVID-19, not leave it hidden in plain sight.

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