Hospitals push Congress to forgive $100 billion in Medicare loans

U.S. hospitals are lobbying Congress to forgive $100 billion in Medicare loans that were paid out last spring to help keep the health system afloat as part of more than $2.5 trillion in coronavirus relief aid passed by Congress so far. 

Under the loan program, the administration will start withholding new Medicare payments Aug. 1, until the loans made last spring are repaid.  If the loans aren’t fully paid within a year, providers face a 10{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} interest charge on top of the balance of the loan. The American Hospital Association says health systems just can’t pay that back now. 

“Of all the financial issues that providers face regarding the federal assistance this is the most critical … that could be crippling for hospitals in the midst of new Covid surges,” said Charles Kahn, CEO of the Federation of American Hospitals, which has a countdown clock warning of the repayment deadline.

American Hospital Association CEO Rick Pollack said the group is asking for full forgiveness of the accelerated Medicare payments. “It’s a mechanically easy way to provide instant relief to people on the ground,” he said.

The AHA says hospitals remain under financial pressure with new Covid outbreaks, even after Congress authorized $100 billion in grants under the Coronavirus Aid, Relief, and Economic Security Act last spring, which do not have to be repaid.  The group contends that without more funding, half of all U.S. Hospitals will be operating in the red the rest of the year, at a median loss of 7 percent, based on an analysis performed by consulting firm Kaufman, Hall & Associates.

“In a good year at Harrison Memorial Hospital, we’re going to be happy with a 0.6{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} margin … because we’ve been able to pay employees, take care of the community,” explained Sheila Currans, CEO of Harrison Memorial in rural Kentucky on an AHA call with reporters. “Today as we sit here, we’re at about a negative 25{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} margin.”   

The House has proposed restructuring the Medicare loans, giving hospitals more time to pay at an interest rate of 1{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}. Analysts say the Senate is considering similar measures.

“Congress is more likely to delay the repayments or restructure the repayments, rather than flat out eliminate them,” said Chris Meekins, health care policy analyst at Raymond James.

Analysts at Raymond James say there appears to be bipartisan support for giving hospitals and physicians more time to pay back the Medicare advanced payments in the current relief bill discussions. Republicans have proposed pushing the deadline to start repayment until January and extending the overall time to pay back the loans.   

Ipsita Smolinski, managing director at consulting firm Capitol Street, says republicans have also proposed an additional $25 billion in grants for hospitals. But outright loan forgiveness is off the table, she says, adding that the GOP “is starting to get fiscally conservative” about relief packages.

Senate Majority leader Mitch McConnell pledged the bill will include “more resources for hospitals and healthcare workers. More help to keep sprinting towards diagnostics, treatments, and vaccines,” in a statement last week.  

Harrison Memorial’s Currans is hoping that the troubles of her hospital in his home state will persuade McConnell to back restructuring the Medicare loans.

“He did agree … that they would certainly take it under strong consideration,” said Currans.