Time is up! An important federal program that provided a vital financial lifeline to hospitals and health care providers, allowing them to provide access to critical patient care, could now have devastating effects.
The Medicare Accelerated and Advance Payment Programs’ loans saved hospitals during the COVID-19 shutdown, but now the shortsighted, rigid repayment terms are colliding with the on-going impact of the pandemic.
Frontline facilities and care providers coast to coast have passed the point of no return. Many must soon pay off the loans or have their Medicare fee-for-service payments zeroed out.
The problem: with new COVID hotspots emerging across the country and patients reluctant to return for regular care, most hospitals simply don’t have the resources to immediately pay back the loans in full.
And losing all Medicare fee-for-service payments is, for many, a potentially crippling blow that could put patient care in jeopardy. It means an average of approximately 20 – 25 percent of a hospital’s expected payments just disappear until the loan is repaid. This crisis is only magnified in rural areas, where patients are more dependent on Medicare and hospitals need these payments to keep their doors open. And if the loans are not repaid in full within a year, hospitals face a daunting near 10 percent interest on the remaining balance!
There is a better way that respects the purpose of the program without weakening hospitals at the very time they should be supported and strengthened by federal policy. Both the House and Senate have put forward proposals to address some of the loan repayment terms – and we very much welcome their action but neither of those proposals have become law and more needs to be done as caregivers face a myriad of issues as the pandemic worsens.
Hospitals and health care providers – our nation’s first responders – are now on borrowed time. Every day of inaction creates more uncertainty for our patients and our caregivers – jeopardizing our recovery and patient access to care.
The terms of the Medicare Accelerated and Advance Payment Programs must be adjusted NOW!
Pandemic Plunges Health Care System in Chaos
COVID-19 charged through every facet of our society like a tornado, shuttering schools, restaurants, large and small businesses, and throwing the entire health care system into chaos.
Hospitals have been hit particularly hard by an unprecedented triple whammy:
Instructions from federal, state and local officials to shut down all but the most essential services. Facilities had to stop all non-emergency scheduled services and procedures – like cancer treatments, placement of cardiac stents and joint replacements.
Preparations for a surge (and now resurgence) in COVID-19 cases, including increased costs for supplies to protect frontline caregivers and building additional and alternative ICUs.
Facilities in hotspot areas experiencing an overwhelming number of COVID-19 patients – straining resources and stressing staff.
These factors combined have already resulted in $200 billion in hospital losses (approximately $50 billion per month) through June 2020 alone, fueled by dramatic and devastating declines in patient volumes. Further analysis shows that losses could hit $323 billion by the end of the year. Hospital volumes declined by as much as 62% compared to pre-COVID levels. This includes a whopping 42% drop in emergency department visits, and screenings for many common cancers, such as cervical, colon, and breast cancer, were down between 86% and 94%.
Medicare Accelerated and Advance Payment Programs Save Hospitals – Temporarily
Congress and the Trump administration didn’t waste any time jumping into action, working together they quickly passed and signed into law the largest series of relief packages in the history of our nation, including the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The CARES Act established two vital policies for health care providers – the Provider Relief Fund and the Medicare Accelerated and Advance Payment Programs, the latter of which was expanded by Congress and the administration to meet this extraordinary crisis.
The Medicare Accelerated and Advance Payments Program has been around for years. It was established as a small-scale program to assist distressed hospitals and providers for a very short time. No one ever thought it would be used the way it is now – providing a critical infusion of operating capital to hospitals coast to coast to help them care for patients during a crippling pandemic.
Under the CARES Act, and the administration’s implementation, the terms for the accelerated or advance payments include:
- Providers can receive either three or six months of their typical Medicare fee-for-service payments, similar to a cash advance, and most health care providers that applied received these funds in March and April.
- Repayment is happening now – a mere 120 days from receipt of the funds – in the form of zero percent Medicare reimbursement until the loan is repaid.
- Repayment of the loans in full within 12 months for acute care hospitals and within seven months for clinicians and other health care providers.
- If a provider is unable to complete the repayment by the deadline, interest begins to accrue on the balance at a rate of approximately 10 percent – an astonishing rate that is totally disconnected from fiscal reality and is at odds with low rates Congress specified in the CARES Act for other industries.
The timeline and terms of repayment have essentially just delayed the crisis for hospitals as the COVID case count increases in many areas.
Think about it this way – withholding 100 percent of Medicare payments is similar to garnishing all of a worker’s wages, rather than a regular, modest payment more typical of a conventional loan. For most hospitals, it will result in a complete loss of Medicare fee-for-service payment – approximately 25 percent of a hospital’s total payments on average – until the loan, and any interest that accrues is repaid. This is simply not tenable for already struggling hospitals. The continued financial impact caused by the pandemic, which is nowhere near over, may make it difficult for some hospitals to afford to ever pay back the full amount of the loans, let alone do so right now.
Healing Hospitals Requires Urgent Action from Policymakers
Policymakers at both ends of Pennsylvania Avenue acknowledge that further action is needed to stop this Medicare health care provider payment crisis before it has a devastating lasting effect on access to patient care.
After the passage of the interim emergency package in April, Speaker Pelosi and Minority Leader Schumer publicly said they had reached an agreement with the Trump administration to make important adjustments to the program. According to their statement, this included significantly lowering the interest rate and lengthening the repayment schedule.
Since then both the House and Senate have put forward proposals to address some the loan repayment terms, but there has been no legislative action and time has run out!
Many hospitals and health care providers have passed the deadline – meaning they are no longer receiving Medicare fee-for-service payments until they completely pay back their loans. Plus they face a crippling 10 percent interest rates if the money isn’t paid within a year.
Lawmakers must fix this immediately before it has a massive impact on access to patient care.
FAH is calling on Congress and the administration to immediately make the following changes to the Medicare Accelerated and Advance Payment Programs:
- Stop the current repayments and extend the start of repayment to at least 12 months from receipt of the loan (i.e., no earlier than April 2021)
- Reduce the amount of repayment taken from each Medicare claim during repayment from 100 percent to 25 percent
- Extend the repayment period from 12 months for hospitals (or 210 days for other providers) to a minimum of 36 months before providers must pay the outstanding balance and before interest begins to accrue
- Waive the interest rate or at least limit it to no more than 1 percent
- Resume the Program, which was paused on April 27th
- Increase the amount that can be advanced to hospitals from three or six months of Medicare payments to 12 months of Medicare payments
- Allocate the funds from general Treasury revenues rather than from the Medicare Hospital Insurance Trust Fund
- Authorize loan forgiveness in cases of hardship.
We appreciate the administration and Congress for their work thus far to protect patients and assist the health care providers that care for them, but the job isn’t finished, and it will be much harder with caregivers now losing their Medicare payments. COVID-19 continues to wreak havoc on patients, their communities and the health care providers that serve them. These changes to the Medicare Accelerated and Advance Payment Programs must be made quickly so we can continue to move forward in the fight against COVID. Delays in action are now jeopardizing our progress and threatening to put hospitals, clinicians, and other health care providers right back where they started – on the brink.