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Hospitals Ask Medicare for Loan Forgiveness During COVID Crisis

Published August 12, 2020

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The federal government doled out Medicare loans totaling $100 billion to U.S. hospitals this spring to help combat financial strain caused by the COVID-19 pandemic. 

With the loans set to be repaid beginning in August, those hospitals are now asking for loan forgiveness, which would release them from the expectation to repay their loan amount.

These Medicare hospital loans were part of the $2.5 trillion in coronavirus relief funds disbursed by Congress to governments, businesses, workers, hospitals, schools and individuals since March 2020.

Medicare Accelerated and Advance Payment Program expansion

The Centers for Medicare & Medicaid Services (CMS) provided the $100 billion to health care providers by expanding the Medicare Accelerated and Advance Payment Program (AAP Programs).

Under the original conditions of the extended funding, new Medicare payments to a hospital would be withheld beginning Aug. 1 until the loans are paid back. If the loans aren’t fully repaid within a year, providers would face a hefty 10% interest charge on top of the principal. 

The American Hospital Association claims that without additional assistance, half of all U.S. hospitals will be operating at a loss for the remainder of 2020, with a median operating margin of -7%.1

Congressional Republicans and Democrats negotiate further coronavirus relief for hospitals

Republicans and Democrats in Congress have expressed willingness to restructure the Medicare hospital loans but not to forgive the loans outright.

  • House Democrats have proposed granting hospitals more time to pay back the loans with an interest rate of 1%.

  • Republicans in Congress have proposed pushing back the date to begin paying back the loans to January and extending the overall time to pay them back. 

Hospitals previously received $100 billion in grants that do not have to be repaid under the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed in March. Republicans have proposed an additional $25 billion in grants for hospitals. 

By the end of July, the number of hospitalizations in the U.S. due to COVID-19 had reached nearly 300,000, averaging more than 2,000 new hospitalizations per day since the beginning of April.

Learn more about Medicare news and how the COVID-19 pandemic affects beneficiaries.

 

1 KaufmanHall. (July 2020). The Effect of COVID-19 on Hospital Financial Health. Retrieved from https://www.aha.org/system/files/media/file/2020/07/KH-COVID-Hospital-Financial-Health_FINAL.pdf.