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Key Health Care Provisions of the American Rescue Plan Act

On March 11, 2021, President Joseph R. Biden, Jr. signed the American Rescue Plan Act of 2021 (ARPA) into law. While ARPA is a broad piece of legislation, its key health care provisions evince the desire to tackle two public health challenges.

First, to address the immediate challenges presented by COVID-19, ARPA allocates funding to state, local and territorial governments as well as to certain health care providers for needs, such as COVID-19 testing and treatment, and financial assistance for entities impacted most severely by the pandemic.

Second, in an effort to strengthen the public health infrastructure and to improve preparedness for handling future public health emergencies, ARPA contains funding for health care providers and public health organizations to grow their workforces, increase vaccine distribution capability and otherwise improve their ability to deliver health care in times of crisis.

In addition to ARPA’s primary goals, the law directs funding toward specific health concerns, such as mental health issues and substance abuse, and makes technical changes to Medicare and Medicaid, while offering new, temporary incentives for Medicaid expansion under the Affordable Care Act (ACA).

COVID-19 Funding

ARPA contains $8.5 billion in funding specifically for rural health care providers intended to reimburse expenses and lost profits attributable to COVID-19. The payments may not be used to reimburse expenses that are reimbursed by another source. Rural health care providers that receive funding to make up for lost profits attributable to COVID-19 may calculate their lost profits by comparing actual patient care revenue to budgeted patient care revenue.

Entities eligible to apply for reimbursement include providers and suppliers in rural areas, providers and suppliers in non-rural areas that serve rural patients, rural health clinics, and providers and suppliers that furnish home health, hospice or long-term care services in the residences of individuals in rural areas.

As additional aid for rural health care providers, ARPA creates a $500 million grant program for rural health care providers that can be used for various purposes, including increasing capacity for vaccine distribution, increasing telehealth capabilities, increasing staffing for vaccine administration or testing, and providing medical supplies to increase surge capacity.

While the grant program allows for multiple permissible uses of the funding, many of the uses serve to modernize health care in rural communities and to improve preparedness for future public health emergencies.

The law also includes $450 million in funding to assist states and territories in deploying strike teams to Skilled Nursing Facilities to respond to COVID-19 outbreaks. To assist the vulnerable populations that reside in Skilled Nursing Facilities with preparedness for responding to COVID-19 and future public health emergencies, $200 million of the total funding is specifically allocated for the development of COVID-19 prevention protocols.

In an attempt to reach populations underserved by traditional health care resources, ARPA provides $7.6 billion in funding to award grants to, and enter into agreements with, Federally Qualified Health Centers (FQHCs) and other community health organizations. These funds may be used to promote, to administer and to track COVID-19 vaccines as well as for COVID-19 testing.

Infrastructure Funding 

Consistent with the dual goals of ARPA, the funding may also be used to build out the health care infrastructure of FQHCs and other community health organizations, including by expanding and sustaining the health care workforce and by diversifying and enhancing the services provided.

Perhaps the largest investment toward the infrastructure and preparedness goal is the $7.6 billion allocated to the U.S. Department of Health and Human Services (HHS) for establishing, expanding and maintaining a public health workforce. Since state and local public health officials are often the first to respond to public health emergencies within their respective jurisdictions, this provision empowers HHS to make awards to these agencies to increase wages and to hire additional staff, such as investigators, epidemiologists, community health workers and disease intervention specialists.

In addition to state, local and territorial public health departments, nonprofit private and public entities with expertise in public health are also eligible for this funding.

To combat the medical staffing shortages that presented challenges in diagnosing and treating COVID-19, ARPA adds $800 million for National Health Service Corps loan repayment and scholarships, $100 million for Medical Reserve Corps, and $330 million for Teaching Health Centers that operate graduate medical residency programs for establishing new training programs and increasing the per-resident amount by $10,000.

Mental Health and Substance Abuse 

In response to the increase in self-reported mental health issues and substance abuse during the COVID-19 pandemic, ARPA seeks to build up resources aimed at addressing those issues. The funding increases include $3 billion to be split between the Substance Abuse Prevention and Treatment and Community Mental Health block grant programs, $30 million to support community-based overdose prevention and syringe services, $100 million for behavioral health workforce education, and $80 million for pediatric mental health access.


For the 12 states that have not expanded Medicaid under the ACA, ARPA provides a 5% increase in the Federal Medical Assistance Percentage (FMAP) for two years should the states decide to expand Medicaid.

ARPA also requires state Medicaid programs and the Children’s Health Insurance Program (CHIP) to provide coverage, with no cost sharing, for treatment of COVID-19 until one year following the end of the public health emergency. This requirement also includes COVID-19 vaccines at no cost to individuals enrolled in Medicaid or CHIP.

States also have the option to provide coverage to uninsured individuals for COVID-19 vaccines and treatment without cost sharing at 100% FMAP.

Other Medicaid changes include a new option to extend health coverage to women enrolled in Medicaid for up to 12 months following the birth of a child and a one-year temporary FMAP increase to improve home and community-based services. These changes are designed to facilitate vaccine distribution and administration, as well as provide health care to a broader base of individuals.

Other changes to Medicaid include the elimination of the cap on the maximum rebate amount for certain drugs and a technical fix to the Disproportionate Share Hospital (DSH) allotment.

As for the first change, drug manufacturers are required to pay Medicaid a rebate on all covered outpatient drugs. Statutory formulas determine the rebate amounts, but, in any case, the rebate is capped at 100% of the average manufacturer price. ARPA removes the cap on the rebate amount beginning January 1, 2024.

The second change is a technical fix for an unintended consequence of the Families First Coronavirus Response Act. That law provided states with a temporary 6.2% increase to the states’ Medicaid programs’ FMAP through the last calendar quarter of the public health emergency. ARPA allows HHS to recalculate DSH allotments when the states received the FMAP increase to ensure that the total DSH payments a state makes are equal to the payment the state might have made without the FMAP increase.

Expanded Commercial Coverage 

To address gaps in health care coverage caused by COVID-19-related job losses, ARPA makes Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage more affordable by subsidizing 100% of COBRA premiums through September 30, 2021.

To boost the percentage of Americans with health insurance generally, APRA expands the availability of advanced premium tax credits (APTCs) through 2022.

Prior to ARPA, APTCs were only available to individuals who obtained insurance through insurance exchange marketplaces and whose income fell between 100% and 400% of the federal poverty line. ARPA makes APTCs available to individuals with income greater than 400% of the federal poverty line based on a sliding scale. For instance, individuals with income greater than 400% of the federal poverty line will have premiums capped at 8.5% of income.


Finally, ARPA makes two notable changes to Medicare. First, it restores the imputed “rural floor” protection for states designated by the Centers for Medicare and Medicaid Services (CMS) as “all urban.” This change benefits rural hospitals in the all urban-designated states of New Jersey, Delaware and Rhode Island. Because ARPA spends new money instead of reallocating money, the benefit to certain hospitals in those states does not come at the expense of funding to other hospitals.

Second, ARPA allows CMS to waive the requirement that Medicare will only cover ambulance services to the nearest appropriate medical facility. This requirement presented a problem during COVID-19 when many hospitals and other medical facilities were at capacity. Thus, transport to the nearest facility was impossible, imposing a significant cost burden upon Medicare beneficiaries. CMS has the authority to waive this requirement during any declaration of a public health emergency.


Barry F. Rosen
410-576-4224 • brosen@gfrlaw.com

A version of this article appeared in The Daily Record on March 30, 2022.


September 21, 2021




Rosen, Barry F.


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