Update: On March 27, 2020, the Senate passed this bill and President Trump signed it into law.
Following days of protracted negotiations, Congress is heading toward enacting a $2 trillion measure to respond to the coronavirus pandemic. Anticipated to clear the House of Representatives on Friday and be promptly signed into law by President Trump, the latest package would be the third COVID-19 response bill passed in just three weeks, speaking to the urgency of the problem.
Following some further delays, the Senate passed the package late Wednesday night on a 96-0 vote. House Speaker Nancy Pelosi is hoping to pass the bill via a unanimous consent process which would prevent the members of the House, which is currently adjourned, from having to return to Washington to cast their ballots, but it remains unclear at present if that path will prevail.
The third supplemental package contains scores of provisions providing relief to large segments of the United States economy decimated by the crisis, including assistance to individual taxpayers. It is important to note that congressional enactment of this legislation is only the first step in the process. After passage, departments and agencies across the federal government will be responsible for implementation, a process that could be challenging for newly created or significantly expanded programs. Faegre Drinker will be monitoring new guidance and regulations issued by federal agencies and will report more specifics that will dictate client action needed.
Key provisions of phase 3 include:
- Authorizations necessary to provide support for particularly hard-hit industries, flexibility for banks and financial institutions to deal with a rapidly evolving environment, and tools for the federal government to ensure the supply of critical materials. This includes $500 billion in financial support to struggling industries, including the passenger and cargo air industries, as well as those 'critical to national security'. In addition to financial support, the airline industry would see relief from certain taxes, but be required to maintain regular flight schedules and access to the extent practical.
- Waivers for the FDIC, Federal Reserve Board, Comptroller of Currency and National Credit Union Administration to help alleviate credit concerns.
- Expansion of the administration's authority to use the Defense Powers Act to help bolster supplies of resources critical to battling the pandemic.
- Additional oversight requirements surrounding the financial instruments authorized by the law, as well as consumer mortgage and eviction protections.
- Nearly $130 billion for a Public Health Emergency Fund to support health care providers, strengthen the National Stockpile, support COVID-19 vaccine and therapeutic development, and other measures.
- Tax credits for companies that keep employees on their payrolls and other business tax relief. Employers that need to fully or partially cease operations, or experience substantial decreases in revenue due to the pandemic, can recoup up to 50% of eligible wages paid to workers through refundable payroll tax credits. The bill would also defer payment of employer payroll taxes over a two-year period, relax limitations on a company's use of net operating losses, and increase the business interest expense limitation.
- Numerous employer-sponsored benefit plan provisions, including provisions to allow for special hardship withdrawals and loans to pay expenses and losses related to the coronavirus epidemic, single-employer pension funding relief, and a new tax exclusion for certain employer payments of employees' student loans.
The rest of this alert outlines key economic relief provisions for individuals and workers, small businesses and nonprofits, health care providers, and state and local governments. It also summarizes a variety of provisions intended to bolster the health care system and health care workforce to address the pandemic.
Key Economic Relief Provisions
Individuals and Workers
One of the provisions much talked about by President Trump and the media is direct cash to taxpayers to help them through these tough times. The bill establishes a direct rebate program (based on income) to provide as much as $1,200 per individual or $2,400 for a couple filing jointly, with an additional rebate per child.
As many employers are shutting down operations, they are faced with tough decisions to lay off employees who are no longer needed. Congress addresses this issue by expanding unemployment compensation benefits for individual workers and eliminating waiting periods to receive benefits. Affected employees can receive up to 39 weeks of unemployment assistance equal to their state entitlement plus an additional $600 per week.
The bill includes funding for states that use 'short-time compensation' models instead of laying off workers and provides states without such programs the technical assistance and funding necessary to establish them.
For individuals who have employer-sponsored retirement plans and individual retirement annuities (IRAs), the bill would make it easier to access money in those plans without early withdrawal penalties during this time.
Small Businesses and Nonprofits
The bill creates an expanded loan guaranty program (the Paycheck Protection Program) for small businesses and nonprofits struggling to keep people on the payroll. Businesses and nonprofits with 500 or fewer employees can apply through their lender for a loan which can be used for payroll costs, utility payments, and mortgage or rent obligations. Repayment of these loans is guaranteed by the US Small Business Administration (SBA). Borrowers are eligible for loan forgiveness of actual payroll costs after the loan compared to the previous 12 months. To encourage rehiring employees who have already been laid off due to the COVID-19 crisis, borrowers that rehire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period. The borrower applies to its normal lender, and the lender applies to the SBA.
To incentivize additional charitable giving to nonprofits that have suffered financially due to COVID-19, the bill allows a one-time $300 above-the-line deduction for donations to charitable organizations even for taxpayers who do not itemize. It also suspends the 50% adjusted gross income (AGI) limit for contributions by individuals and increases the ceiling on corporations to 25%.
State and Local Governments
The legislation makes available $150 billion in a Coronavirus Relief Fund money to state, tribal and local governments dealing with the impacts of the COVID-19 crisis in their communities. $3 billion is reserved for the District of Columbia, the Commonwealth of Puerto Rico and other non-state U.S. territories. Another $8 billion is reserved for tribal governments. Funds are to be allocated on a relative population basis, but no state will receive less than $1.25 billion. Local governments — cities and counties with populations exceeding 500,000 — may apply for direct payments to cover the previously unbudgeted expenses incurred due to COVID-19.
Another $1.5 billion in grants is available to those state, local and tribal health organizations to carry out public health surveillance, lab and other preparedness functions. Further targeted amounts are available, for example, for survey and certification of nursing homes in localities with community transmission of coronavirus.
Of interest to communities will be the $5 billion committed to the Community Development Block Grant (CDBG) program. Within 30 days of the enactment of the legislation, communities that directly receive funds are going to see an infusion of dollars, likely about 60% of their fiscal year 2020 funding amount. Additionally, states will share an additional $1 billion of new CDBG funding. Finally, the Department of Housing and Urban Development will distribute an additional $2 billion via the CDBG program to communities and states based on the direct impact for the COVID-19 crisis. Helpfully for grant recipients, the legislation also removes some of the administrative requirements usually in place in order to speed up the process to expend the funds.
Health Care Providers
The legislation establishes a $100 billion fund to support health care providers for costs associated with responding to the pandemic as well as lost revenues because of COVID-19. Providers are defined broadly in the legislation, to be further defined and qualified by the Secretary of Health and Human Services. The funds can be used for an array of purposes, including to purchase medical supplies and create surge capacity related to the pandemic. The bill also includes more than $1 billion to support community health centers responding to the pandemic.
The $100 billion is a win for the hospital community, which pushed back on the previous $75 billion in previous drafts. The bill also allows for accelerated payments to hospitals during the public health emergency, and recipients would have four months before they have to start paying down the loan and would have a calendar year to make payments without any interest payments.
Additional Health Policy Provisions
The legislation includes several health policy provisions, most of which are tied to the COVID-19 response. These include provisions that:
- Further expand telehealth access by removing a requirement that Medicare beneficiaries need to have had a face-to-face encounter with a provider during the past three years to be eligible for telehealth, allowing high-deductible health plans to cover telehealth services pre-deductible and allowing Federally Qualified Health Centers and Rural Health Centers to be originating sites. It also allows for the use of telehealth to meet some hospice benefit requirements.
- Reduce face-to-face monitoring requirements of the in-home dialysis benefit.
- Temporarily eliminate the Medicare payment reduction (sequester) from May until the end of 2020 while adding an additional year to sequestration on the out-years.
- Establish a 20% Medicare add-on payment for treating COVID-19 patients during the emergency.
- Eliminate any Medicare Part B beneficiary cost-sharing for eventual COVID-19 vaccinations.
- Require Medicare Prescription Drug (Part D) plans to furnish beneficiaries with 90-day refills if requested during the emergency.
Additional Supplemental Health Funding for COVID-19 Response
In addition to funds for health care providers noted above, the agreement contains $4.3 billion for the Centers for Disease Control and Prevention (CDC) with $1.5 billion of that going to state and local governments, $500 million for global health, $500 million to improve public health data surveillance and $300 million for the Infectious Disease Fund.
It also includes nearly $1 billion in new funding for the National Institutes of Health (NIH) to support COVID-19-related research. More than $700 million of the total goes to the National Institute of Allergy and Infectious Diseases (NIAID) and slightly more than $100 million for the National Heart, Lung and Blood Institute (NHLBI). Other institutes or centers receiving funding include the National Institute on Biomedical Imaging and Bioengineering (NIBIB), the National Center for Advancing Translational Sciences (NCATS) and the National Library of Medicine (NLM).
The Substance Abuse and Mental Health Services Administration (SAMHSA) receives more than $400 million with $250 million going to Certified Community Behavioral Health Centers, $50 million to suicide prevention efforts and $100 million for emergency grants. The Centers for Medicare and Medicaid Services (CMS) would receive $200 million, with at least half of that targeted toward surveys and certifications of institutions, like nursing homes, vulnerable to COVID-19.
To support greater deployment of telehealth, which has seen significant expansion as part of the COVID-19 relief effort, the bill includes funds to support telehealth resource centers.
The package also includes more than $6 billion for an array of Administration for Children and Families (ACF) programs and nearly $1 billion to support programs at the Administration for Community Living (ACL).
The agreement extends through the end of November, with a number of health programs set to expire in late May unless acted upon by Congress. The list of programs includes the extension of:
- Medicaid's money follows the person and community mental health services demonstration project
- Medicaid spousal impoverishments
- Delay of Medicaid disproportionate share or DSH cuts
- Community health centers, the National Health Services Corps and teaching health centers
- The Health Resources and Services Administration (HRSA)'s diabetes program
The previous Senate bill released on Sunday would have extended the programs through the end of Fiscal Year 2021, removing a legislative vehicle other health stakeholders have been eyeing for action this spring. The shift to November 30 extends the programs but requires additional congressional action — during the lame-duck session if not sooner — providing a legislative vehicle for later in the year. This will most likely delay action on the two big health care topics that Congress was intending to address before COVID-19: surprise medical billing and drug pricing.
Finally, the package creates a Food and Drug Administration (FDA) User Fee Program for over-the-counter drugs — a policy long worked on by Congress and the FDA to update the way that over-the-counter drugs are regulated.
Even as Congress passes this third phase of legislative relief for the coronavirus pandemic, legislators have already been talking about subsequent rounds of legislation. House Speaker Pelosi on Thursday reiterated this call for a fourth package that she would like to see focus on topics including provisions focused on supporting state and local governments and infrastructure.
The Senate has adjourned until April 20, though both chambers can return to session relatively quickly as needed. Even if it may be several weeks before additional legislation is acted on, lawmakers are expected to continue engaging fully on the crisis, including considering and preparing for future legislation.
The White House, and its agencies, have already taken many actions under its emergency authorities and new authorities given by Congress in the previous rounds of legislation. With the passage of this third massage package, federal agencies will have their hands full to flesh out the details of these policies, including specifying how the money will be doled out. Agencies stand at the ready, but will face challenges digesting and implementing this $2 trillion package while employees are largely working remotely. This will require stakeholders to focus attention and energies on the regulatory side in addition to continued congressional engagement, and Faegre Drinker professionals stand ready to assist with that.
With the pandemic anticipated to continue for the days and weeks to come, the looming enactment of this massive relief package is a significant but far from final next step. Stakeholders should be seeking to pursue opportunities and supports created by provisions in this and the two previous relief packages while also focusing on addressing further gaps in one or more bills to come.
As the number of cases around the world grows, Faegre Drinker’s Coronavirus Resource Center is available to help you understand and assess the legal, regulatory and commercial implications of COVID-19.