$2 Trillion CARES Act Attempts To Keep Health System Afloat

By John McManus, president and founder, The McManus Group

Just weeks ago, America had the lowest unemployment rate in history, the stock market was setting record highs, and the political system had become so poisoned that the speaker of the House and the president, fresh off the Senate acquittal of impeachment articles, were not speaking to each other. That seems like a  dream that was eons ago.

Since then, the geometric spread of the coronavirus across the world and in the U.S. so alarmed state and federal officials that entire sectors were shut down and most Americans were told to stay home indefinitely. The Trump administration and more than half the states, focused on both husbanding resources for the expected surge and limiting the spread of the disease, recommended that all elective procedures be delayed, with discretion provided on a case-by-case basis for ambiguously defined “urgent care cases.”

The halting of elective procedures has had a devastating impact on the medical community that is not widely appreciated by policymakers, who are more focused on procuring resources to diagnose COVID-19 patients and treat an expected surge of the worst cases in hospitals. Physician practices, ambulatory surgery centers, and the medical device manufacturers and other vendors that supply them are in free fall. Within a span of a week, the volume of procedures dropped by more than 75 percent, with no end in sight.

Dr. Gary Kirsh, president of the Urology Group, a major independent practice in Cincinnati, said, “Unlike other businesses, physician practices cannot shutter their doors to maximize savings. They must stay open to serve patients with urgent healthcare needs. This double whammy — the need to stay open without sufficient revenue — is driving physicians to insolvency. If physician practices and other outpatient providers collapse and cannot ramp up when the COVID-19 crisis passes, patients will have little access for the procedures they delayed and will
desperately need.”

Similarly, hospitals are feeling the financial squeeze. Mary Dale Peterson, president of the American Society of Anesthesiologists, said, “Let’s be clear: elective surgeries are the lifeblood of many, if not all, hospitals.”

Enactment of $2 Trillion CARES Act

The Trump administration and Congress have responded forcefully, and in record time, with a whopping $2 trillion package called the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). It is the third COVID-19 package passed this year, and the most far-reaching economic stimulus bill enacted in the history of the country. Two weeks of intense negotiations between Treasury Secretary Steven Mnuchin and bipartisan Senate leaders preceded several days of partisan bickering that finally gave way to a historic, unanimous 95-0 Senate vote and a voice vote in the House.

CARES throws a critical lifeline to America’s small businesses, including the independent practices and outpatient facilities that are a vital part of the country’s healthcare infrastructure through the $349 billion Paycheck Protection Program. That provision provides loans that convert into grants for businesses with up to 500 employees that are adversely impacted by the COVID-19 crisis.

Each business is eligible for up to 2.5 months of its payroll for employees with annual salary up to $100,000 (prorated) with a maximum of $10 million. For loan forgiveness, the business must use the resources for payroll and other overhead expenses including rent, contractors, and health benefits. To encourage businesses to retain or hire back laid off employees, loan forgiveness is proportional to the number of employees the business had before the crisis as compared to the Q3 time period. Pay cuts for employees that exceed 25 percent per employee also result in reduced loan forgiveness.

The bill also establishes a $100 billion Public Health Emergency Fund to prepare for and respond to the coronavirus and to reimburse providers for healthcare-related expenses and lost revenue attributable to the coronavirus. The funds are earmarked mostly for infrastructure and medical supply procurement related to retrofitting facilities and preparing for surge capacity.

The funds should start flowing soon, and government employees are working around the clock to crank out implementing regulations, understanding that lives literally hang in the balance. But no one knows whether these funds will be sufficient as the healthcare system is pushed to the brink with the paradoxical problems of being both underutilized and overwhelmed with severe COVID-19 cases in certain areas, simultaneously.

Congress has adjourned for a month as the Trump administration has extended social distancing guidelines through the end of April. But congressional staff and healthcare stakeholders are already working on a COVID-19 package that could fill in gaps (and provide other unrelated pork), depending on the success of the CARES Act in addressing
the crisis.

Pharma Innovation: Our Only Real Hope

As the coronavirus crisis grinds the world’s economy to a halt and stretches the nation’s healthcare infrastructure to its limit, it’s become clear to all but the lunatic left that our best hope for both health and economic salvation are treatments and vaccines from the pharmaceutical industry that politicians had spent the better part of two years vilifying.

The research and development capabilities that companies have built over decades are being called on as never before. Companies are undertaking around-the-clock efforts to screen global libraries of medicines to identify potential treatments and have numerous clinical trials underway to test existing and new therapies. Others are developing and testing vaccines with the potential to eradicate coronavirus in the same fashion as polio and measles were defeated in the previous century.

But until that innovation comes online, the country walks a tightrope between protecting public health, particularly of the vulnerable, and restarting the economy that makes modern life possible. Jobless claims spiked more than tenfold to 3.3 million last week, a record high in the history of the country. The previous record was less than 700,000 in 1982. The country can be shut down for a few weeks, but a few months is not sustainable. Businesses are not built for zero revenue for months at a time.

The number of identified COVID-19 cases will continue to escalate, mostly because the testing will get better and more ubiquitous. The more relevant metrics are the number of COVID-related hospitalizations and deaths, yet that trajectory remains unclear at this time (i.e., 3/30/2020).

Geoff Davis, an international lawyer who focuses on business transactions and also has a health condition whose treatment makes him immunocompromised, summed up the dilemma: “We are reaching a tipping point where the government is going to be faced with a choice between saving lives or the economy. There is no clear methodology for weighing the two, but a compassionate balance will be necessary, and messaging will be key.”

John McManus is president and founder of The McManus Group, a consulting firm specializing in strategic policy and political counsel and advocacy for healthcare clients with issues before Congress and the administration. Prior to founding his firm, McManus served Chairman Bill Thomas as the staff director of the Ways and Means Health Subcommittee, where he led the policy development, negotiations, and drafting of the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Before working for Chairman Thomas, McManus worked for Eli Lilly & Company as a senior associate and for the Maryland House of Delegates as a research analyst. He earned his Master of Public Policy from Duke University and Bachelor of Arts from Washington and Lee University.