In April, Congress appropriated $25 billion for coronavirus testing. Where did the money go?

To successfully suppress the coronavirus, the nation will need millions of tests every day. Over the past months, it has become clear This can only be achieved with significant financial support from the federal government. While Congress is deliberating what form that support should take, it is important to in inquire into how the previous appropriation for testing ($25 billion in the Paycheck Protection Program and Health Care Enhancement Act, passed in April) was spent, or not spent, by HHS. There is some uncertainty about this, and the purpose of this post is to describe that uncertainty in the hope that it can be resolved.  

By David J. Balan, economist and member of the Edmond J. Safra Center Pandemic Resilience working group

Suppressing the coronavirus is a public health imperative of the first order. We do so by reducing its prevalence to a very low level, and maintaining it at a very low level, ideally when only a small fraction of the overall population has been infected. If the virus is not suppressed, it will grow explosively and a very large fraction of the population will eventually become infected. This would cause massive, intolerable harm in terms of deaths, suffering, and long-term health damage, as well as economic crisis. Failure to suppress the virus would be a catastrophe, one that simply cannot be allowed to happen.

Broadly speaking, there are two ways to achieve suppression. One is through behavioral restrictions like lockdowns and closures of schools, among others. These are not only logistically difficult, but very economically damaging as well.

The other, far superior way to achieve suppression is through widespread testing. While a number of different plans have been developed for achieving widespread testing, they all have the same basic idea in common. With widespread testing we can identify infected individuals and isolate them before they have an opportunity to infect others. We can also identify anyone who these individuals may have already infected, and test them as well, breaking the chain of transmission.

The key point is this: The more testing we do, the less behavioral restriction we will need to achieve and maintain suppression.

In fact, based on both theoretical models and the experience of other countries, it is very likely that a sufficiently well-developed testing regime would allow suppression to be achieved and maintained even while lifting most behavioral restrictions, including all of the most painful and costly ones.

Moreover, building up a first-rate testing capability will pay major dividends in preparedness for future outbreaks of other diseases, and even for protection against bioterrorism.

For these reasons, a massive allocation of federal government resources for testing is urgently needed.

$25 billion were allocated for testing in April

On April 24th of this year, the Paycheck Protection Program and Health Care Enhancement Act (PPPHCEA) appropriated $25B for testing. (Here’s a summary.)

While much more than $25B will certainly be needed, this was a very welcome development.

However, there is considerable uncertainty about whether and how that $25b has been spent. In the hope that it can be resolved, describing the sources of that uncertainty is the primary purpose of this blog post.

The law allocates “not less than” $11 billion to be sent to states, localities, territories, and tribes

The PPPHCEA says that, of the $25B total, “not less than $11,000,000,000 shall be for States, localities, territories, tribes, tribal organizations, urban Indian health organizations, or health service providers to tribes…” Here is the relevant proviso from the law, in its entirety:

“Provided, That of the amount appropriated under this paragraph in this Act, not less than $11,000,000,000 shall be for States, localities, territories, tribes, tribal organizations, urban Indian health organizations, or health service providers to tribes for necessary expenses to develop, purchase, administer, process, and analyze COVID–19 tests, including support for workforce, epidemiology, use by employers or in other settings, scale up of testing by public health, academic, commercial, and hospital laboratories, and community-based testing sites, health care facilities, and other entities engaged in COVID–19 testing, conduct surveillance, trace contacts, and other related activities related to COVID–19 testing: Provided further, That of the amount identified in the preceding proviso, not less than $2,000,000,000 shall be allocated to States, localities, and territories according to the formula that applied to the Public Health Emergency Preparedness cooperative agreement in fiscal year 2019, not less than $4,250,000,000 shall be allocated to States, localities, and territories according to a formula methodology that is based on relative number of cases of COVID– 19, and not less than $750,000,000 shall be allocated in coordination with the Director of the Indian Health Service, to tribes, tribal organizations, urban Indian health organizations, or health service providers to tribes: Provided further, That the Secretary of Health and Human Services (referred to in this paragraph as the ‘‘Secretary’’) may satisfy the funding thresholds outlined in the first and second provisos under this paragraph in this Act by making awards through other grant or cooperative agreement mechanisms:”

The text indicates some discretion for the Department of Health and Human Services (HHS) in how this “not less than” $11B earmarked for states, localities, territories, and tribes is to be allocated. There are several categories of funding, each of which is to receive “not less than” a certain sum. These sums add up to $7B, which means that HHS has discretion over how at least $4B in funding is allocated across these categories. In addition, HHS has discretion over the division of the funds across recipients within the categories.

Was the required $11 billion sent to states, localities, territories, and tribes?

It appears that HHS has sent out most or all of the required $11B. A document from the Centers for Disease Control and Prevention (CDC) indicates that $10.25B was sent to states, localities, and territories (in the document, you can see this in the second column from the right). The document is not clear about whether the required $750M was sent to tribes and tribal organizations. But if it was, then the full $11B required by the PPPHCEA was in fact sent out. There is no indication that anything more was sent, though the “not less than” language in the law would have permitted HHS to do so (more on this below).

Though the required funds appear to have been sent, it is not clear how HHS exercised its discretion in allocating money across the categories, or what formula HHS used to determine the division of the funds within the categories. The PPPHCEA says:

“Provided further, That the Secretary shall submit such formula methodology identified in the first proviso under this paragraph in this Act to the Committees on Appropriations of the House of Representatives and the Senate one day prior to awarding such funds:”

I do not know if this submission to Congress was made. To the best of my knowledge, that formula methodology has not been made is available to the public.

The text of the law specifies a number of entities that are to receive a portion of the $25B, including CDC, NIH, BARDA, FDA, HRSA, and rural health clinics, as well as funding to cover the cost of testing for the uninsured. These allocations sum to $5.653B. I have seen no public information on whether any of this money was sent out. (Note that, like the $11B discussed above, these allocations also have “not less than” language attached to them, so HHS could have sent more than the specified allocation to any or all of these recipients.)

Over $8 billion at the discretion of HHS

The sums discussed above (“not less than” $11B for states, localities, territories, and tribes, plus “not less than” $5.653B for CDC, NIH, BARDA, FDA, HRSA, rural health clinics, and testing for the uninsured) mean that the PPPHCEA only specifies how $16.653B out of the appropriated $25B is to be spent, leaving $8.347B with no clear instructions, to be distributed at the discretion of HHS. As noted above, it appears that none of these discretionary funds have been sent to states, localities, territories, and tribes. So, for the full $25B to have been sent out, HHS would have had to send $14B (not just the specified $5.653B) to those recipients. As noted above, I have found no information about whether the $5.653B was sent out, much less any additional discretionary sums. Further, whatever discretionary funding may have been sent out, I have seen no information on how it was allocated, or how those allocations were determined.

The only public evidence on this that I have found involves a letter that Senators Schumer and Murray sent to HHS on June 21, 2020. That letter reads:

“Regarding funding for ramping up testing and contact tracing capacity, the Administration has full discretion to spend, as it sees fit, more than $8 billion of the $25 billion provided by Congress. With COVID-19 cases spiking in numerous states, the Administration has not released a plan to distribute this funding. It is critical that the Administration disburse the $8 billion immediately with an emphasis on addressing two major unmet needs: contact tracing and collecting data on COVID-19 racial and ethnic disparities.”

This “more than $8 billion” seems to correspond to the $8.347B discussed above. This may mean that everything but the discretionary $8.347B has in fact been sent out, but it is not clear from the language of the letter. Moreover, according to a recent article, the HHS secretary indicated that only $14B had been spent, which would mean that $11B was unspent as of late June, almost two full months after the PPPHCEA was passed. I have found no additional information on what has happened between then and now.

Understanding what happened to these $25 billion is important for testing policy going forward

As of this writing, the public faces considerable uncertainty regarding what portion of the $25B has been spent, and on how the allocation decisions were made. The purpose of this post is to highlight and publicize this uncertainty in the hope that it will be resolved. This is important in its own right as a basic matter of good government. But it is especially important in light of the urgent need for massive additional testing resources needed from the federal government to suppress the virus. Clarifying how past appropriations have been spent (or not spent) will enable us to structure future appropriations more wisely. In light of the situation, nothing is more important.

 

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