ACAP Letter to Secretary Azar on CARES Act Distribution

May 1, 2020

The Honorable Alex M. Azar, III
Secretary U.S. Department of Health and Human Services
Hubert H. Humphrey Building
200 Independence Avenue, SW
Washington, D.C. 20201

Dear Secretary Azar,

As the United States enters our fourth month of the COVID-19 crisis, the pandemic continues to put tremendous strain on all health care stakeholders, especially providers of Medicaid services. We call on the Department of Health and Human Services (HHS) immediately to use funding enacted in the Coronavirus Aid, Relief, and Economic Security (CARES) and Paycheck Protection Program and Health Care Enhancement (PPHCE) Acts to provide one month of revenue to all Medicaid providers to ensure their solvency as Medicaid enrollment skyrockets due to the surge in unemployment. To assure that all Medicaid providers receive the relief they need, HHS could either make use of state and managed care plan data or pass funds through states to Medicaid providers in both the fee-for service and managed care delivery systems.

The Association for Community Affiliated Plans (ACAP) is a national trade association representing 75 not-for-profit Safety Net Health Plans (SNHP). Collectively, ACAP plans serve more than 20 million people through Medicaid, Medicare, the individual Marketplaces, and other publicly-supported coverage programs, including nearly one-third of all individuals covered in Medicaid managed care. Our mission is to support our member plans’ efforts to improve the health and well-being of people with low incomes and with significant health care needs.

Since you first declared a public health emergency, 54 ACAP Safety Net Health Plans have signed a commitment to waive all deductibles, coinsurance, and copayments for diagnosis and medically necessary acute treatment of COVID-19 consistent with CDC guidance; waive prior authorization requirements for diagnostic tests and medically-necessary acute covered services related to COVID19; waive early medication refill limits on prescriptions; and protect health care providers and patients by supporting efforts to move provider visits to a telehealth setting. Individual Safety Net Health Plans have also made numerous contributions to the health and well-being of their communities:

  • Giving support to providers: Plans have provided direct financial support, secured personal protective equipment, provided accelerated payments and helped transition providers to capitation payments.
  • Easing access to care: ACAP plans have expanded telemedicine offerings, installed 24/7 hotlines to connect patients to medical professionals for advice, and provided basic information to help consumers make informed decisions.
  • Supporting their communities: ACAP-member plans have, to date, donated tens of millions in funding to area food banks, charities and others to support the fight against COVID.

ACAP Proposal to Distribute One Month of Medicaid Funding

Under our proposal, the federal government would provide a month’s worth of revenues to all Medicaid providers through a distribution through states and/or Medicaid managed care plans. This $47 billion distribution would be part of the current $175 billion Public Health and Social Services Emergency Fund (PHSSEF) made available by the CARES and the PPHCE Acts. On April 10, an initial $30 billion was distributed to providers based only on Medicare fee-for-service experience, leaving many providers who serve primarily or only Medicaid, such as home health agencies, NEMT providers, behavioral health providers, pediatrician practices, OB/GYNs, dentists, children’s and safety net hospitals, and small independent physician practices, with no or disproportionally small support. The $20 billion disbursement announced on April 22 was allocated proportionally based on providers’ share of 2018 net patient revenue. While Medicaid providers will receive some funding pursuant to this announcement, it does not adequately address the needs of most Medicaid providers.

ACAP proposes that one month of Medicaid revenue equal to approximately $47 billion in PHSSEF funds be distributed to all Medicaid providers through the states and/or through the Medicaid managed care plans at state option. In either case, 100 percent of the funds would pass through the states and/or plans to providers and other health professionals. Alternatively, HHS could call on states and plans to provide data on Medicaid expenditures by provider so that HHS can make the financial transfers to all Medicaid providers.

This funding will increase the likelihood that Medicaid providers will remain solvent to provide much needed services to the up to 23 million additional people who are expected to enroll in Medicaid over the next year due to the surge in unemployment. As we collectively look forward to the end of the pandemic, it will be critical that Medicaid provider networks remain strong to ensure ongoing access to care into the future.
Options for Efficient Distribution of the PHSSEF to Medicaid Providers

To distribute PHSSEF funding in the “most efficient payment system practicable,” as required by the enacted statute, CMS should distribute the funds to states on a pro rata basis based on each state’s share of total Medicaid spending in 2018 (or 2019 or 2020, if available). Total Medicaid spending would include both the managed care delivery system and the fee-for-service system as well as DSH/GME/supplemental payments. The attached tables show the current distribution by state and delivery system for 2018 Medicaid spending.

To ensure that Medicaid providers receive emergency funding equal to one month’s payment, CMS should distribute total funds equal to 1/12 (8.3 percent) of $562 billion, or $ $47 billion. Because we propose that states and plans involved in distributing funds should pass all funding to providers, the FFY 18 spending estimate is net of health plan and state administrative costs. The funds would be distributed to the states based on their total share of Medicaid spending in 2018 (or preferably 2019 or 2020 data, if available), equaling 8.3 percent for each state’s total 2018 spending.

We propose three options for how funds could be distributed by states to providers.

Option A – Hybrid of State Payments to Medicaid FFS Providers and Funding Passed Through Medicaid Managed Care Organizations

States would provide a pro rata share of total PHSSEF funding to each managed care plan based on 2018 capitation payments less MCO administrative costs (estimated to be 13%). Plans would then distribute 100 percent of PHSSEF funds to network providers on a pro rata basis based on each provider’s share of total in-network spending by the health plans during a recent full year (e.g., CY 2019 or FFY 19). Each provider would receive funds equal to 8.3 percent of their annual revenues from each plan in whose network the provider participates.

States would also pay fee-for-service providers on a pro rata basis of each provider’s share of the total fee-for-service program spending in 2018

Option B – State Payments to Medicaid FFS and Medicaid Managed Care Providers

All payments would flow directly from states to providers. To ensure that providers participating in managed care networks as well as FFS are included, each managed care plan would be required to give a file to states listing each provider, their TINs, provider numbers and total annual revenues received from the plan. States would identify the same information for fee-for-service providers. States would then tally total revenue for each provider from the fee-for-service program and from each managed care plan, and distribute one payment to each provider based on the provider’s total expenditures from the state Medicaid program regardless of delivery system.

Option C – Federal Payments to Medicaid Providers Based on FFS and Medicaid Managed Care Payments

The CARES Act states that PHSSEF funds must be distributed in the most efficient way possible, which given their capacity to identify and pay Medicaid providers is most likely to be directly by the states and/or plans. However, given that HHS has built a mechanism for paying providers based on release of the first $47 billion of the PHSSEF, HHS could alternatively call on states and plans to provide data and then calculate and disburse funding to all Medicaid providers based on this information.

Requirement for Health Plans to Pass Through Funds

In states selecting Option A, participating health plans must attest that 100 percent of funding will pass through to providers. Health plans should be prohibited from retaining any of the PHSSEF funds dedicated to providers.
Pass-through funds should not be subject to state taxes, including premium, maintenance, or any other taxes, and should be excluded from premium revenue for the purposes of calculating health plans’ risk-based capital requirements and establishing net worth reserves. These funds should also be excluded from medical loss calculations.

Requirement for Providers to Receive the Funds

Providers receiving funding from the PHSSEF Medicaid disbursements must follow all the requirements described by HHS for the disbursement of the original $50 billion.

State-by-State Analysis of Funds to Providers

Attached to this letter is a state-by-state analysis of potential distributions to each of the major provider groups, including inpatient hospitals, physicians and clinics, residential facilities, pharmacies, and all other providers

Thank you for giving us the opportunity to provide input on these critical policy changes. Please contact me (, 202-204-7509) or Jennifer McGuigan Babcock for Medicaid policy (, if you would like to discuss these issues in greater depth.


Margaret A. Murray
Chief Executive Officer

Cc: Seema Verma, Administrator, Centers for Medicare and Medicaid Services
Thomas J. Engels, Administrator, HRSA
Calder Lynch, Deputy Administrator and Director, Center for Medicaid and CHIP Services
Lee Stevens, Senior Policy Advisory, Office of the Secretary, IEA
Gary Beck, Advisor for External Affairs, Office of the Secretary, IEA
Erin Reilly, External Affairs Specialist, Office of the Secretary, IEA
Michael Baker, Policy Advisor, Office of the Secretary, IEA
Caryn Marks, Office of the Secretary, IEA
Chris Palmieri, President & CEO, Commonwealth Care Alliance

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