COVID-19: US Developments – Implementation and Oversight of CARES Act – June 1, 2020
The Federal Reserve is set to begin providing emergency loans to midsize businesses as soon as this week through the US$600 billion Main Street Lending Program (MSLP) established by the March 27 Coronavirus Aid, Relief and Economic Security (CARES) Act. The US Senate is preparing to return to Washington, DC to resume legislative activity, including possible changes to the CARES Act’s Paycheck Protection Program (PPP), as America is rocked by an eruption of mass protests and urban violence that is triggering fears of a resurgence in US coronavirus cases.
Health experts fear that silent carriers of the virus could unwittingly infect others at protests where people are packed [together], many without masks, many chanting, singing or shouting,” the Associated Press reports. “The virus is dispersed by microscopic droplets in the air when people cough, sneeze, sing or talk.”
The turbulence has otherwise pushed COVID-19 from the forefront of the national policy debate for the moment, demanding the attention of the White House and Congress as the nation’s economy struggles to emerge from the pandemic-driven lockdown.
The Senate will resume business this week after having been adjourned last week for its Memorial Day state work period. “Senators will continue to monitor the pandemic response and discuss ways to help the nation pivot toward re-opening and economic recovery,” Senate Majority Leader Mitch McConnell (R-KY) said in previewing his chamber’s June session. COVID-19 hearings will be held in four Senate committees: Banking, Finance, HELP(Health, Education, Labor & Pensions) and Judiciary. A spokesman for the Senate Majority Leader’s office adds: “[W]e do expect action regarding technical changes to PPP to lengthen the loan forgiveness window for borrowers, if an agreement can be reached.”
The House of Representatives, under the leadership of Speaker Nancy Pelosi (D-CA), last week passed its own measure to revise the PPP with overwhelming bipartisan support. House Majority Leader Steny Hoyer (D-MD) last Friday released a revamped legislative calendar for the House that places a heavy emphasis on committee work during the month of June, culminating in a late-month stretch in which major legislation will be considered on the House floor. Among the “must-pass” measures to be voted upon by the full House at that time, Hoyer said, is “an infrastructure package that includes reauthorization of expiring surface transportation provisions.”
Medium-sized US businesses will soon be eligible to secure emergency loans through the Federal Reserve’s MSLP, which Forbes describes as “an emergency lifeline for cash-strapped businesses that are too big for new emergency programs like the [PPP] but too small to access capital markets by issuing bonds or equity.” Jay Powell, the chairman of the Board of Governors of the Federal Reserve, in an appearance last Friday at Princeton University said the MSLP is “days away” from coming online.
Tax and Economic Development Updates
As we enter June, several key financial assistance programs are facing critical deadlines. First, as noted above, we expect that the Federal Reserve this week will officially launch two of its highly anticipated 13(3) liquidity facilities established by using funds appropriated to the Exchange Stabilization Fund under section 4027 of the CARES Act. The Federal Reserve Bank of Boston last week released additional information about the MSLP in anticipation of the program going live this week. By way of reminder, US businesses with 15,000 employees or fewer and 2019 revenues of US$5 billion or less are eligible for loans through the MSLP that have a four-year maturity and principal and interest payments that are deferred for one year. Additionally, the Federal Reserve Bank of New York is expected soon to begin providing financial assistance through the Municipal Liquidity Facility (MLF). The MLF will support lending to US states (including the District of Columbia), US counties with a population of more than 500,000 residents, US cities with a population of more than 250,000 residents and Multi-State Entities.
June also marks the current end date (June 30) for the PPP, unless Congress takes action to extend the program. As discussed in last week’s report, the House has passed H.R. 7010, the Paycheck Protection Program Flexibility Act of 2020, which would extend the program through the end of the calendar year, as well as make other changes to provide businesses with flexibility in using their loan proceeds in an attempt to incentivize more businesses to participate in the program. The Senate this week is expected to take up legislation to extend the program, but likely will make changes to some of the provisions included in the House bill. From our understanding, there are concerns by some Senate Republicans about a provision in the House bill that would lower the threshold from 75% to 60% with regard to the percentage of a recipient’s PPP loan that must be spent on payroll expenses in order to be eligible for loan forgiveness. Specifically, it appears that, unlike current law, which provides for partial loan forgiveness for loan recipients failing to meet the threshold, if a loan recipient were to fail to meet the proposed 60% threshold in the House bill, they would not be eligible for any loan forgiveness.
The Department of Health and Human Services (HHS) has updated its data on the Provider Relief Fund. The datasetnow includes a list of providers that received a payment from the General Allocation, High Impact Targeted Allocation and/or the Rural Targeted Allocation as of May 29, 2020. The updated Frequently Asked Questions (FAQs) document notes, “HHS has posted a list of providers and their payments once they attest to receiving the money and agree to the Terms and Conditions. All providers that received a payment from the Provider Relief Fund and retain the payment for at least 90 days without rejecting the funds are deemed to have accepted the Terms and Conditions. Providers that affirmatively attest through the provider portal or that retain the funds past 90 days, but do not attest, will be included in the public release of providers and payments.” The FAQs include an added question on how HHS will recoup funds from providers that are required to repay all or part of a Fund payment. HHS states it “has not yet detailed how recoupment or repayment will work,” but “[n]on-compliance with any Term or Condition is grounds for the Secretary to direct recoupment of some or all of the payments made. HHS will have significant anti-fraud monitoring of the funds distributed, and the Office of Inspector General will provider oversight as required in the CARES Act to ensure the Federal dollars are used appropriately.” Last week, the New York Times called additional attention to the Fund, reporting that hospitals with larger financial reserves received more federal aid than smaller, poorer hospitals. HHS states it will update the Fund dataset biweekly.
HHS also released data on “Claims Reimbursement to Health Care Providers and Facilities for Testing and Treatment of the Uninsured.” This dataset – published for the first time on Friday and expected to be updated weekly – includes funding from the Families First Coronavirus Response Act Relief Fund and the Provider Relief Fund. HHS explains, “This dataset represents the list of health care entities who have agreed to the Terms and Conditions and received claims reimbursements for COVID-19 testing of uninsured individuals and/or treatment for uninsured individuals with a COVID-19 diagnosis, as of May 26, 2020.” HHS quietly released this dataset as lawmakers continue to discuss how individuals can access and afford COVID-19 treatment – which some feel is necessary not only for individual patient well-being, but also to prevent widespread virus transmission in communities. As we previously reported, the administration chose not to relaunch HealthCare.gov for a special enrollment period during the pandemic, which would have allowed uninsured individuals to obtain insurance coverage. Reports indicated the decision was made on political grounds, as the President did not want to confuse the public on his position against the Affordable Care Act. Instead, the administration announced the Provider Relief Fund would have an allocation for COVID-19 care for the uninsured. Last night, Inside Health Policy reported, “The nation’s largest health insurer, UnitedHealthcare, will extend its policy of providing treatment for COVID-19 without cost-sharing through July 24.” The article notes, “Congress has also required most issuers cover testing, but lawmakers have yet to expand that coverage policy for COVID-19 treatment.”
On Friday, the Centers for Disease Control and Prevention (CDC) updated its guidance titled “Considerations for Preventing Spread of COVID-19 in Assisted Living Facilities.” The document includes updated recommendations on visitor restrictions and group activities should facilities begin to relax restrictions. The guidance also provides information on the National Healthcare Safety Network Long-Term Care Facility COVID-19 module, which CDC states “can assist with tracking infections and prevention process measures in a systemic way.” As we previously reported, a group of eight Democratic senators wrote to Centers for Medicare & Medicaid Services Administrator Seema Verma and CDC Director Robert Redfield last week, requesting CDC issue guidance with “clear, measurable benchmarks that . . . [long-term care] facilities must meet to safely reopen their doors to visitors, and steps that visitors must take to ensure the safety and residents and family members when in-person visitation resumes.” Separately, a group of 250 national, state and local organizations wrote to Senate Majority Leader McConnell and Senate Minority Leader Chuck Schumer (D-NY), strongly opposing granting immunity to nursing homes during the pandemic. The groups explained, “Due to lockdowns, residents are living and dying in nursing homes isolated from their families and absent outside oversight.” This Thursday, CDC Director Redfield will testify on “COVID-19 Response” before the House Committee on Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies.
Following President Trump’s announcement that the United States will terminate its relationship with the World Health Organization (WHO), Senate HELP Committee Chairman Lamar Alexander (R-TN) released a statement expressing his disagreement with the decision. He noted, “Withdrawing U.S. membership could, among other things, interfere with clinical trials that are essential to the development of vaccines, which citizens of the United States as well as others in the world need. And withdrawing could make it harder to work with other countries to stop viruses before they get to the United States.” The American Medical Association also spoke out against the President’s decision, explaining, “This senseless action will have significant, harmful repercussions now and far beyond this perilous moment, particularly as the WHO is leading worldwide vaccine development and drug trials to combat the pandemic. COVID-19 affects us all and does not respect borders; defeating it requires the entire world working together. In the strongest possible terms, the American Medical Association urges the president to reverse course and not abandon our country’s leadership position in the global fight against COVID-19.” POLITICO and others reported it is unclear how quickly the President can withdraw the United States from WHO and/or if he needs congressional approval. House Majority Leader Hoyer released a statement calling the President’s decision “short-sighted, ill-advised, and wrong.”
On Friday afternoon, President Trump announced several actions related to China and Hong Kong, in response to a new national security law affecting the city. Most notably, he announced the United States would be “terminating” its relationship with the WHO and redirecting those funds to “other worldwide and deserving urgent global public health needs.” As previously reported, President Trump sent a letter to WHO leaders in May voicing continued concern with the global health body’s response to the COVID-19 pandemic. Administration officials have accused the WHO of improperly relying on statements issued by the Chinese government early in the pandemic that may have slowed the global response. President Trump stated that he is directing his administration to also begin the process of eliminating policy exemptions that give Hong Kong its current special status, noting his action would affect “the full range of agreements [the United States has] with Hong Kong, from our extradition treaty to our export controls…with few exceptions.” It will include action to revoke Hong Kong’s preferential treatment as a separate customs and travel territory.
Notably, President Trump did not mention the Phase One trade deal he signed with China in January or discuss China’s compliance with the deal. Earlier today, Bloombergreported that Chinese government officials have directed major state-run agricultural companies to pause their purchases of some US farm products, as the government awaits the United States’ next actions and decides on its own response. Heightened tensions on both sides could threaten the deal, and increase the risk of escalating tariffs that were rolled back or put on hold after the January agreement.
On Friday, the Department of Defense announced two new contracts signed under the Defense Production Act (DPA) aimed at supporting the Space Defense Industrial Base. The contracts were signed with domestic producers of certain semiconductors and solar array panels used in space satellites. Notably, the Defense Department announced that the contract signed with SolAero Technologies is aimed at ensuring the solar array manufacturer can “retain critical workforce capabilities throughout the disruption caused by COVID-19 and to restore some jobs lost because of the pandemic.” The contracts use funds authorized and appropriated for DPA programs under the CARES Act.
Today, Representative Gerry Connolly (D-VA), chairman of the House Committee on Oversight and Reform’s Government Operations Subcommittee, will hold a member briefing at which the Department of Labor’s (DOL) Inspector General (IG), Scott Dahl, will testify by video. Under the CARES Act, the DOL IG’s office received over US$25 million to oversee the expansion of Unemployment Insurance (UI) programs. Per the DOL IG, the potential for UI fraud and abuse is greater because the US$600 per week payments under the CARES Act are higher than typical UI payments.
Last Friday, Representative Eliot Engel (D-NY), chairman of the House Committee on Foreign Affairs; Representative Carolyn Maloney (D-NY), chair of the House Oversight and Reform Committee; and Senator Bob Menendez (D-NJ), ranking member of the Senate Committee on Foreign Relations, announced an expansion of their respective committees’ probes into the firing of State Department IG Steve Linick. Promising that the truth “will come out,” the lawmakers said that they intend to interview key officials with knowledge of the firing. According to some reports, Linick himself will be interviewed as part of the probe. The concerns over Linick’s firing and the appointment of Ambassador Stephen Akard, a trusted ally of Vice President Mike Pence, as the acting IG, have increased in the last several days. Per POLITICO, the concerns include fears that Akard will halt or otherwise interfere with investigations Linick had initiated that had angered Secretary Pompeo, including those into the Secretary himself.
Last week, NPR reported that Marc Short, chief of staff to Vice President Pence, owns up to US$1.64 million worth of stock in companies doing work related to the Trump Administration’s coronavirus response, which could run afoul of conflict of interest laws and trigger scrutiny by congressional oversight bodies and other watchdogs.
Additionally, last Friday:
The House Select Subcommittee on the Coronavirus Crisis held a member briefing, at which several Democratic and Republican mayors warned of “massive cuts” to essential services without federal aid and stressed the urgent need for such aid.
The House Oversight and Reform Committee’s National Security Subcommittee held a member briefingwith representatives from the Department of Justice, the Federal Bureau of Investigation (FBI) and the Department of Homeland Security Cybersecurity and Infrastructure Security Agency (CISA) on the growing number of cyber-related incidents during the pandemic. Key takeaways from the briefing are that: (1) malicious actors are taking advantage of cyber vulnerabilities in the federal government and private sector; (2) CISA is working with federal, local and private entities to address cyber vulnerabilities; and (3) the FBI has received nearly 10,000 complaints about coronavirus-related online scams, triple the pre-pandemic number of online scam complaints.
Senator Elizabeth Warren (D-MA) and several other senators sent a letter to Education Secretary Betsy DeVos raising concerns about reports that one of the agency’s federal student loan servicers, Great Lakes Educational Loan Services, Inc., provided incorrect payment information to credit reporting agencies regarding millions of federal student loan borrowers eligible for relief under the CARES Act.
Attorney General Josh Shapiro (D) of Pennsylvania has been under increasing pressure since he announced last week that a Pennsylvania state representative that failed to publicly disclose he had COVID-19 was not criminally negligent. This issue is fueling the larger debate over liability protections, the scope of the Health Insurance Portability and Accountability Act and causation related to COVID-19 in the workplace. Shapiro’s decision highlights how reliant society is during this crisis on individuals to self-identify and worse, when they do not, how problematic accountability can be.
Vermont Governor Phil Scott (R) late last week announced the approval of a premium relief plan submitted by Northeast Delta Dental, Vermont’s largest provider of dental benefits. In total, US$2.89 million will be provided to approximately 70,000 Vermonters after the suspension of most dental services due to the pandemic.
The premium relief will generally be equal to one month’s premium and will be reflected as a credit on a customer’s July premium bill.
Michigan Governor Gretchen Whitmer (D) is set to testify this week before a House of Representatives panel about the state’s response to the novel coronavirus pandemic. Whitmer is scheduled to appear virtually for a remote hearing of the House Committee on Energy and Commerce Oversight and Investigations Subcommittee. It will be the panel’s first fully remote hearing. Also on the witness panel are Colorado Governor Jared Polis (D) and Arkansas Governor Asa Hutchinson (R). The hearing, titled “On the Front Lines: How Governors are Battling the COVID-19 Pandemic,” is scheduled to take place Tuesday morning.