The American Rescue Plan Act and Healthcare Providers – A First Look

March 16, 2021

The American Rescue Plan Act of 2021 (ARPA) provides $1.9 trillion in relief funding to address the COVID-19 pandemic, support the US economy, and provide relief for impacted Americans. Signed into law by President Joseph R. Biden on March 11, 2021, ARPA includes provisions affecting healthcare providers, who remain on the frontlines of the pandemic as the new law takes effect.

The $1.9 trillion package reinforces the nation’s healthcare safety net with funding for rural health providers, community health centers, and skilled nursing facilities. It also makes modifications to the Medicare and Medicaid programs, boosts funding for behavioral health needs and resources, and expands access to individual health insurance coverage.

With respect to COVID-19-related activities, ARPA directs substantial resources to the US Department of Health and Human Services (HHS) for testing, contact tracing, vaccines, treatment, and supplies, and for developing, expanding, and sustaining the public health system and associated workforce.

The new law also appropriates $5 million to the HHS Office of Inspector General for oversight of activities supported with funds appropriated to HHS to prevent, prepare for, and respond to COVID-19, domestically or internationally.

Notably, ARPA did not provide more overall funding for the Provider Relief Fund or loan forgiveness for accelerated payments under Medicare. It also did not extend the moratorium on the Medicare 2% across-the-board payment reduction under budget sequestration. Unless Congress acts to avert it, the moratorium will expire on March 31, 2021.

The following highlights ARPA’s key provisions affecting healthcare providers. For insights regarding the new law’s impact on business, workers and government, we invite you to read our March 11, 2021 LawFlash.


Rural Healthcare - Appropriates $8.5 billion in payments to eligible rural Medicare and Medicaid providers (hospitals, clinics, home health, hospice, and long-term care services and supports) for COVID-19-related expenses and lost revenue. The new law requires rural health providers to justify the need for funding when applying for payment including documenting their healthcare-related expenses and lost revenues attributable to COVID-19. Similar to the Provider Relief Fund, ARPA prohibits rural health providers from “double dipping” into multiple sources to pay for the same cost.

An additional $500 million is allocated to the US Department of Agriculture for emergency grants. Eligible applicants (defined under 7 CFR § 3570.61) for whom a grant is awarded may use the funds for lost revenue incurred during the COVID-19 pandemic including the costs associated with increasing telehealth capabilities and for testing, vaccine distribution and administration, and medical supplies to increase surge capacity.

Community Health Centers - Authorizes $7.6 billion for grants, contracts, and cooperative agreements by HHS for expenses used to distribute/administer COVID-19 vaccines; diagnose, monitor, and mitigate COVID-19 infections; establish mobile testing for vaccinations; and enhance COVID-19 healthcare services, workforce supply, infrastructure development, community outreach, and education.

Skilled Nursing Facilities - Allocates $200 million for infection control and vaccination uptake support to skilled nursing facilities (SNFs) for the prevention or mitigation of COVID-19, as determined by HHS. Also provides $250 million for states to establish and implement "strike teams" that may be deployed to SNFs with diagnosed or suspected cases of COVID-19 among residents or staff to assist with clinical care, infection control, or staffing. The strike teams may be deployed by the states for up to one year immediately following the end of the nation’s public health emergency (PHE).



Wage Index - Directs HHS to establish a minimum area wage index for Medicare hospitals in “all-urban” states (i.e., a state in which there are no rural areas) beginning Oct. 1, 2021.

Graduate Medical Education - Appropriates $330 million (to remain available until Sept. 30, 2023) for teaching health centers that operate graduate medical education for the following activities:

  • Establishing new approved graduate medical residency training programs
  • Increasing the per resident amount
  • Maintaining filled positions at existing approved graduate medical residency training programs
  • Expanding existing approved graduated medical residency training programs
  • Establishing new accredited or expanded primary residency training programs

Ambulance Services - Permits HHS to temporarily waive the requirement that limits reimbursement for ground ambulance services to transporting patients to healthcare facilities, thus making treatment-in-place care by ambulance service providers eligible for Medicare payment during the PHE.


COVID-19 Vaccination and Treatment - Mandates COVID-19 vaccine coverage (including administration and treatment) without cost-sharing for Medicaid and CHIP beneficiaries at 100% of the federal medical assistance percentage (FMAP) rate for Medicaid through the end of the first calendar quarter that begins one year after the PHE ends, or for CHIP through the end of one year after the PHE ends. States may opt to provide this same coverage for the uninsured without cost-sharing and at the enhanced FMAP rate.

Drug Rebate Cap - Clarifies that outpatient drugs and biological products used in connection with COVID-19 treatment for Medicaid beneficiaries are subject to the Medicaid Drug Rebate Program. Also eliminates the drug rebate cap effective January 1, 2024.

Postpartum Coverage - Provides for a state option to extend Medicaid and CHIP eligibility to pregnant women for 12 months postpartum for a five-year period. States that opt to include this coverage must provide the beneficiary with full benefits during pregnancy and throughout the postpartum period.

Program Expansion Incentive - Authorizes a temporary two-year 5% FMAP increase for non-expansion states that opt to expand their Medicaid programs. Notably excludes Medicaid Disproportionate Share Hospital (DSH) payments from the application of the FMAP increase.

Disproportionate Share Hospitals - Clarifies that the Secretary of HHS will recalculate the annual DSH allotment in any fiscal year for which the FMAP percentage increase applicable to the Families First Coronavirus Response Act (FFCRA) remains in effect. Congress added this technical fix to ensure that total DSH payments remain at the level that a state would have paid without the FFCRA increase.

Home and Community-Based Services - Increases the FMAP for home and community-based services (including services under the Program of All-Inclusive Care for the Elderly, or PACE) by 10% beginning April 1, 2021 and ending on March 31, 2022. As a condition for receiving the FMAP increase, states must enhance, expand, or strengthen their Medicaid home-and community-based services during this period.

Mobile Crisis Intervention Services - Creates a five-year Medicaid coverage option with an enhanced FMAP (85%) for the development of community-based mobile mental health and substance use disorders (SUD) crisis intervention services and appropriates $15 million for planning grants to assist states with developing a state plan amendment or waiver request.


ARPA provides for a litany of funding for state and local grants and services. Highlights include $3 billion in state block grant assistance, $1.5 billion each for Substance Abuse Prevention and Treatment and Community Mental Health Services. The new law also allocates $420 million for community behavioral health clinics, $100 million for behavioral health workforce education and training, and $80 million for pediatric mental health services.


Affordable Care Act (ACA) Premium Subsidies - Expands and/or increases health insurance premium assistance for individual coverage on the ACA Marketplace for taxable years 2021 and 2022 as follows:

Household Income

Expressed as a percent of the federal poverty level (FPL)

Initial Premium Percentage

Applies to taxable years 2021 and 2022

Up to 150% FPL


150% up to 200% FPL


200% up to 250% FPL


200% up to 300% FPL


300% up to 400% FPL


400% FPL and higher


Source: The American Rescue Plan (HR 1319)

Therefore, coverage will be provided on the exchange for $0 and is capped even for those whose income is above 400% of the FPL when their premium exceeds 8.5% of their overall household income. For those who receive unemployment benefits, their premiums shall also be $0 when accessing Marketplace health insurance coverage. According to a recent announcement by the Centers for Medicare and Medicaid Services, the new health insurance premium assistance will start April 1, 2021.

COBRA Premium Assistance - Provides a 100% COBRA premium subsidy for any employee or dependent who is a COBRA qualified beneficiary resulting from an involuntary termination of employment, or a reduction of hours. (For a discussion of this provision, see our American Rescue Plan Act’s Health and Welfare Benefit Provisions: COBRA & DCFSA Action Items LawFlash.)


Testing Capacity - Appropriates $47.8 billion to HHS for expanding the nation’s capacity to detect, diagnose, trace, and monitor the spread of COVID-19; and $1.75 billion to the Centers for Disease Control and Prevention (CDC) to increase the capacity for sequencing genomes and developing effective disease surveillance and response strategies at the local level.

Vaccines and Therapeutics - Allocates the following to the CDC: $7.5 billion to carry out activities to plan, prepare, promote, distribute, administer, monitor, and track COVID-19 vaccines; $1 billion to strengthen vaccine confidence through information and education activities; and $750 million to combat COVID-19 and other emerging infectious diseases globally. Also provides $500 million to the Food and Drug Administration for evaluating the performance, safety and effectiveness of vaccines, therapeutics, diagnostics, and devices related to COVID-19 and for overseeing the supply chain and mitigating any shortages.

Supply Chain - Appropriates $10 billion to carry out activities under the Defense Production Act with respect to COVID-19-related medical supplies and equipment. (For a discussion of this provision, see our March 11, 2021 LawFlash.) The new law also provides $6.05 billion in supply chain funding to the HHS for COVID-19 vaccines, therapeutics and medical supplies to prevent, prepare for, or respond to COVID-19, or any viral variant, or to any disease “with potential for creating a pandemic.”

Workforce - Provides $7.66 billion to HHS for establishing, expanding, and sustaining the public health workforce, including making awards to state and local public health departments.


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If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Washington, DC
Michele L. Buenafe
Kathleen McDermott
Scott A. Memmott
Albert W. Shay
Howard J. Young
Jacob J. Harper
Ariel Landa-Seiersen
Tesch Leigh West

Gregory N. Etzel
B. Scott McBride
Banee Pachuca
Sydney Reed

Mark B. Stein

San Francisco
W. Reece Hirsch