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Governor Takes First Step to Ensure Accountability in How Hospitals Use Federal Relief Funds

Billions of federal dollars have begun to flow to the nation’s hospitals to help them treat COVID-19 patients and withstand revenue losses due to delayed elective surgeries and other procedures. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act):

  • Increases Medicare payments to hospitals for COVID-19 admissions by 20 percent;
  • Permits the Centers for Medicare & Medicaid Services (CMS) to begin advancing three months of Medicare payments to applicant hospitals; and
  • Makes $100 billion in emergency relief funds available to hospitals and providers to compensate them for COVID-19-related costs and losses.

The federal government began dispersing $30 billion of the $100 billion earmarked for hospitals on April 9, 2020.

The first order of business in this crisis is to make sure hospitals have the capacity to respond to the crisis, but accountability for the use of these dollars is important as well. Recently, Connecticut became one of the first states to put guardrails in place to guide how hospitals will use these federal relief funds. Among the questions raised about how the relief funds will be used are:

  • Will the federal government set the rate to compensate hospitals to care for uninsured COVID-19 patients at Medicare levels?
  • If so, will balance billing (the difference between the provider’s charge and the allowed amount) or requiring cost sharing from uninsured COVID-19 inpatient admissions be allowed?
  • What will be the impact of these policies on hospital uncompensated care?

While the Families First Coronavirus Response Act prohibits cost sharing for COVID-19 testing and testing-related services by Medicare, Medicaid, and commercial insurers, it does not outright prohibit cost sharing for the treatment and management of COVID 19 for the uninsured or those covered by Medicare or commercial insurance. The nation’s insurers have largely waived cost sharing for the treatment of COVID19, which was not prohibited by the Families First Act, but the federal relief funds do not cover any losses these insurers may incur by waiving those costs. What impact will all of these expenses have on future insurance rates?

The early April dispersement of the CARES Act’s $30 billion in emergency funding to hospitals did not address all these questions. However, the terms and conditions accompanying the emergency funds stipulate that:

  • Providers can use the emergency funds to pay for health care-related expenses and lost revenue attributable to COVID-19;
  • Providers cannot use emergency funds to reimburse expenses or losses reimbursed by other sources, or that other sources are obligated to pay; and
  • Providers must certify that they will not charge COVID-19 patients at out-of-network medical care.

The CARES Act language does not address whether hospitals will receive Medicare rates for treating uninsured COVID-19 patients or whether recipient providers will be permitted to balance bill or apply cost sharing to uninsured COVID-19 patients. While the Department of Health and Human Services has publicly stated that emergency relief funds will compensate hospitals for uninsured COVID-19 patients at Medicare rates and prohibit balance billing those patients, those specific funds together with their terms and conditions have not yet been formally issued.

On April 5, 2020, Connecticut Gov. Ned Lamont issued an Executive Order that provides guardrails for how the federal relief funds will be used by Connecticut hospitals. The order enacts a number of financial protections for patients, including:

  • Prohibiting surprise billing for any emergency services rendered to any insured patient and requiring carriers to pay out-of-network providers an in-network rate;
  • Prohibiting providers from billing an uninsured COVID-19 patient for treatment and management services at more than the Medicare rate;
  • Prohibiting providers from collecting facility fees from uninsured COVID-19 patients for treatment and management of COVID-19;
  • Prohibiting hospitals from billing any individual not otherwise covered by any public or private health plan for COVID-19 treatment and management unless clarified by a future executive order regulating distribution of federal funding that may be made available to cover such services; and
  • Requiring each hospital, health system, or hospital-based facility to maintain records to identify services provided to uninsured patients for COVID-19 treatment and management and make the records available for claiming federal reimbursement.

These actions will permit Connecticut to provide additional financial protections for the uninsured as well as to monitor use of federal emergency relief dollars received by hospitals.

The National Academy for State Health Policy will be monitoring these activities and providing additional analysis. States are benefitting from crucial federal investment in the nation’s hospitals and health care providers, but knowing how those dollars are spent in each hospital will be important to payers and policymakers as they review hospital costs and insurance rates in the future.

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