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.
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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.
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
Republicans and Democrats in Congress have expressed willingness to restructure the Medicare hospital loans but not to forgive the loans outright.
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.
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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.
Christian Worstell is a licensed insurance agent and a Senior Staff Writer for MedicareAdvantage.com. He is passionate about helping people navigate the complexities of Medicare and understand their coverage options.
His work has been featured in outlets such as Vox, MSN, and The Washington Post, and he is a frequent contributor to health care and finance blogs.
Christian is a graduate of Shippensburg University with a bachelor’s degree in journalism. He currently lives in Raleigh, NC.
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