STATE OF NORTH CAROLINA
DEPARTMENT OF HEALTH AND HUMAN SERVICES
ROY COOPER

MANDY COHEN, MD, MPH

GOVERNOR

SECRETARY

April 28, 2020

The Honorable Alex Azar
Secretary
U.S. Department of Health and Human Services
200 Independence Avenue SW
Washington, DC 20201
The Honorable Seema Verma
Administrator
Centers for Medicare & Medicaid Services
Department of Health and Human Services
200 Independence Avenue SW
Washington, DC 20201
Re: Urgent Need to Ensure At-Risk Providers for Medicaid and Uninsured Receive An Appropriate Share of CARES ACT
Provider Funding
Dear Secretary Azar and Administrator Verma:
Thank you again for the ongoing work to respond to the effects of the 2019 Novel Coronavirus (2019-nCoV). I am writing
in follow up to my letter of April 14, 2020 to express my urgent concern about the crisis already underway among the
essential providers disproportionately serving Medicaid beneficiaries and the uninsured. I urge you to take immediate
action to ensure that these essential providers who serve Medicaid and uninsured patients are equitably included in the
distribution of federal support. Specifically, I request that you act quickly to dedicate fifty billion dollars from the total
CARES Act Provider Relief Fund to support safety net providers. Second, I ask that your agency work with states to
provide the same kinds of flexibilities through the 1115 process as it has in other national disasters.
Healthcare providers who serve the low-income seniors, people with disabilities, and the individuals and families with
children hardest hit by COVID were grossly disadvantaged in the distribution methodology recently described by the
Department of Health and Human Services (HHS) for the CARES Act Provider Relief Fund. According to that guidance,
$50 billion of the $100 billion fund will be distributed to Medicare-enrolled providers based on net patient revenue. A
net patient revenue formula inevitably favors providers that rely more heavily on higher reimbursing commercial payers.
Medicaid pays at best half what commercial insurers pay for each equivalent discharge or encounter, meaning that
under this formula every patient a provider sees with commercial insurance counts twice as much as a Medicaid
patient.

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 Secretary Azar and Administrator Verma
April 28, 2020
Page 2 of 3
Medicaid providers and the communities that they serve are the most in need, but they will be the least supported.
Providers who disproportionately care for Medicaid are also those with the thinnest margins, and thus are the providers
who are most at risk of closure as a result of lost revenue and new costs related to COVID. The collapse of safety-net
providers would disproportionately affect communities of color—the very communities most hard hit by COVID. The
demands on the systems serving these communities are higher, and they are more likely to be subject to social
distancing requirements longer—all increasing the strain on these already vulnerable providers at a time when they will
face an uptick in demand with increased numbers of Medicaid and uninsured patients. Finally, under the current
methodology, providers who do not participate in Medicare will receive no dollars from this allocation and will be
eligible only to receive a portion of an unspecified “additional allocation.”
There is a better way.
First, Congress has allocated an additional $75 billion to the provider fund, bringing the total fund to $175 billion. Thirty
percent of these funds—or about $50 billion—should be targeted to safety net health care providers who
disproportionately serve Medicaid and the uninsured, consistent with their share of the U.S. patient population. The
simplest approach would be through a distribution targeted to providers for whom Medicaid and uninsured people
make up at least 25 percent of their patient population. The funds could then be distributed based on each provider’s
proportion of Medicaid revenue, adjusted to account for uninsured care. The portion of the previous distribution linked
to net patient revenue that is attributable to Medicaid revenue can offset the distribution under this new allocation to
ensure that providers are not paid twice for the same Medicaid revenue. North Carolina, and other states stand ready
to partner with HHS and these providers to the extent necessary to ensure that HHS can distribute the funds to
providers quickly and fairly.
Second, CMS should work with states to provide the same kinds of flexibilities through the 1115 process as it has in
other national disasters. Even if HHS were to allocate dollars more equitably to Medicaid providers, the provider fund
will not be sufficient to sustain the most vulnerable providers. The losses our providers are reporting to us are
staggering—upwards of 50% in reduced utilization each month since mid-March for most provider types. Although $175
B is a significant sum, it is not sufficient to address losses of that magnitude. By CMS’s own calculations, providers
receive roughly $2.5 T in payments annually or $625 B a quarter. The provider fund, therefore, would cover just over
25% of payments for a three-month period, while early reports indicate losses could be double that.
Some providers may be able to survive such a steep drop in revenue, but many essential Medicaid providers will not. In
a recent letter to Congress, America’s Essential Hospitals paints a bleak portrait of the financial health of safety-net
hospitals, noting that safety-net hospitals have an average margin of 1.6%— just one-fifth of that of other hospitals and
have cash reserves “typically measured in days rather than weeks or months.” Eighty percent of primary care physicians
across North Carolina report that their practices are facing significant or extreme financial pressure due to COVID-19.
Substance use disorder providers, pediatricians, OBGYN providers, safety net and children’s hospitals, and long-term
care providers, too, are under financial strain. Each of these provider types tends to rely heavily on Medicaid, and are
experiencing immediate increased clinical, administrative and financial burdens that threatens their continued
existence. And, as noted above, the failure of these providers would threaten access to care for low-income and
minority communities at the same time these communities are at greater risk due to COVID-19.
Medicaid must support and sustain its essential providers to ensure that Medicaid beneficiaries have providers to care
for them in the months and years ahead. In the 1115 waiver application submitted on March 27, 2020, North Carolina
requested a disaster relief fund that would enable the State to do just that. The fund would supplement, but not
duplicate, what is available through the CARES Act Provider Relief Fund. Waiver support would be conditioned on states
ensuring that Medicaid be the payer of last resort, a condition states will embrace given matching requirements and the
shared goal of avoiding duplication of resources. CMS has repeatedly used—including in other disasters—expenditure

 Secretary Azar and Administrator Verma
April 28, 2020
Page 3 of 3
authority under Section 1115 of the Social Security Act to enable states to support Medicaid providers in order to ensure
access to quality care. I urge you to exercise your authority to do so here.
Dedicating disaster relief funds authorized through the 1115 waiver process would bring immediate, short-term relief to
providers who are at high risk of closure, jeopardizing states’ disaster response as well as the long-term safety net for
Medicaid and the uninsured. It can and should complement an equitable distribution of the COVID Provider Relief Funds
appropriated by Congress.
Similarly, we request that HHS approve North Carolina’s other waiver requests, including, among other things, the
request to establish a time-limited Medicaid eligibility category to cover prevention, testing, and treatment related to
COVID-19 for individuals with incomes up to 200% FPL. Granting North Carolina authority to implement these changes
will strengthen the State’s ability to fight COVID-19 by encouraging individuals with illness to proactively seek
appropriate treatment and by ensuring that providers have more time and resources to treat patients, rather than
wrangle with new billing processes.
We appreciate your consideration of these recommendations and the ongoing partnership and willingness to work with
states during this national emergency.
Sincerely,

Mandy K. Cohen, MD, MPH
Secretary
North Carolina Department of Health and Human Services