April 22, 2020

Congress Closer to Expanding Popular CARES Act Programs

On Tuesday the United States Senate passed by unanimous consent a $484 billion expansion of the Coronavirus Aid, Relief and Economic Security (CARES) Act, including $310 billion for the popular Paycheck Protection Program and a $75 billion infusion of funds to support health care providers.

The House of Representatives is now preparing to take to the House floor for the second time in four weeks to pass a massive economic stimulus package after intense negotiations among Congressional leaders and the Trump Administration that often played out over cable news airwaves and social media channels.

Once enacted, the bill will become the fourth COVID-19 response piece enacted since early March. While only a quarter of the size of CARES, the bill is substantial by most every other standard and exemplifies the scope of the response.

$250 billion is earmarked to replenish the Paycheck Protection Program (PPP) as passed in the CARES Act just a month ago. This new Small Business Administration (SBA) program was so popular that banks were overwhelmed with applications, and the initial $349 billion in loans was committed within two weeks of its launch. The U.S. government guarantees the loans and will forgive amounts that are used for payroll and other essential business costs like rent and utilities. It was designed to direct cash into struggling small businesses quickly in order to maintain employment and liquidity via the established network of Small Business Administration (SBA) lenders.

The new legislation creates two tiers of financial institutions that also can apply for PPP relief with $30 billion allocated to those managing less than $10 billion and $30 billion for those managing between $10 billion and $50 billion. Many smaller financial services companies have argued the PPP was benefiting larger national lenders and there needed to be broader access to liquidity. Now, insured depository institutions, credit unions and community financial institutions will qualify for loans under the program. Community financial institutions are defined as minority depository institutions, certified development companies, microloan intermediaries and State or Federal Credit Unions.

Beyond the PPP, the bill also adds to the existing SBA Economic Injury Disaster Loan program (EIDL) $30 billion for loans and $10 billion in grants to qualifying small businesses. As the farm economy continues to be under significant stress in the U.S., the bill clarifies that agriculture enterprises with fewer than 500 workers are eligible for the EIDL program. The SBA is emerging as one of the most important tools for fighting the damaging effects pandemic response is having on the U.S. economy, and the bill adds $2.1 billion to assist with the agency’s unforeseen administrative expenses.

Health Care Relief

The second major component of the bill focuses on health care and adds an additional $75 billion to the public health emergency (PHE) fund created in CARES. That money is for hospitals and other health care providers that have been hit with costs associated with preparing for and responding to the pandemic while shuttering most other operations, creating a perfect storm of increasing emergency costs with limited revenue.

The first $30 million tranche of the PHE funds was released earlier in April, but a number of institutions, including Medicaid-dependent providers like children’s hospitals and rural hospitals, were largely left out. Even while the Administration works to dish out the remaining funds from the CARES Act, health care providers pushed for more money given the pandemic’s impact on operations.

In addition to the PHE money, an additional $25 billion was included to drive development and deployment of COVID-19 tests, including to confirm active infection and prior exposure. Widespread use of such tests is increasingly being seen as a must to reopen the nation’s economy. This money includes $11 billion to states and local governments and an additional $4 billion for distribution based on level of COVID activity. Other health provisions include:

  • $1 billion to support CDC surveillance, epidemiology, lab capacity, public health surveillance and other needs.
  • More than $1.8 billion to the National Institutes of Health (NIH) with more than $300 million going to the National Cancer Center (NCI) and a half-billion to the National Institute of Biomedical Imaging and Bioengineering.
  • $1 billion to BARDA to develop COVID-19 tests.
  • More than $800 million to support community health centers and rural health centers.

In Washington, the package is being referred to as COVID Relief 3.5, and discussions about a subsequent 4.0 package are ongoing. Congress is currently not scheduled to return until May 4, but that timeline may slip further based on the persistence of state stay-at-home orders. The fourth relief package is likely to become an even more contentious and expensive undertaking for the U.S. government. We anticipate a broad range of interests that have not yet received relief to actively petition for assistance in what may be the last package before Congress returns to something resembling regular order.

Faegre Drinker continues to engage with our clients across the economy to help them navigate these unprecedented times with the assistance of our COVID-19 Task Force. Our Washington-based advocacy team continuously engages with Congress and the Administration on a wide variety of issues across the efforts to address both the health and economic crises presented by COVID-19 and the response to the pandemic.

 

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.

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