By Susan Murphy, PhD
Kentucky’s health care providers have been put to the test throughout the COVID-19 pandemic. Despite facing massive losses due to suspending everything but the most essential services while preparing for a surge of COVID-19 cases, providers continued to serve our most vulnerable citizens. Now, however, overly stringent federal loan repayment terms threaten their very existence.
When Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), they smartly expanded access to loans available through the Medicare Accelerated and Advance Payment Programs (MAAPP). These vital loans provided an economic lifeline for hospitals and other health care providers, allowing them to borrow three- or six-months’ worth of their average Medicare fee-for-service payments.
Unfortunately, Congress has not updated MAAPP loan repayment terms. The loan repayment deadline has now arrived, and hospitals must begin repayment. If they fail to repay the MAAPP loan in full within in one year, the loans begin accruing a massive 10 percent interest, a far higher rate than what has been applied to other industries receiving government support as a result of the pandemic.
Perhaps worse for Kentucky’s hospitals is a provision within MAAPP’s terms that calls for 100 percent of Medicare payments to be withheld at the onset of repayment until the loan has been fully repaid. On average, Medicare fee-for-service payments are roughly a quarter of a hospital’s total payments. That figure can be much higher for rural hospitals, which often treat a larger proportion of Medicare patients.
Rural communities in Kentucky, and throughout the country, already face enough barriers to access to care, with already thinly stretched local hospitals and emergency room resources. More than 350 rural hospitals—about one quarter—across 40 states are at a high risk of closure unless their financial situation improves. That includes right here in Kentucky.
Unless the repayment terms of MAAPP loans are adjusted, these facilities could be forced to close their doors for good. Not only would that make it harder for rural Kentuckians to access the health care they need, but it would decimate local economies. These hospitals are not only major sources of local employment, but they also help support other businesses, spurring economic activity throughout rural communities.
Kentucky’s hospitals help support and advance innovations in health care technology that improve patient outcomes. The Kentucky Life Sciences Council strives to advance biomedical sciences, biotechnology, and medical device innovation throughout the state and beyond. However, the medical advancements we support are meaningless without hospitals for patients to access these new technologies.
Senator Mitch McConnell should use his influence as Senate Majority Leader to push for critical updates to MAAPP loan repayment guidelines to help protect our nation’s hospitals, particularly vulnerable rural ones serving at-risk patients.
These updates should include providing hospitals at least 12 months to begin repayment and 36 months to fully repay loans. Additionally, the 10 percent interest rate should be waived or capped at one percent. Rather than withholding 100 percent of Medicare fee-for-service payments, the amount of repayment taken from Medicare claims should be reduced to no more than 25 percent.
By making these and a handful of other fixes, Congress can protect Kentucky’s hospitals and preserve the access to vital, lifesaving technology they provide our communities. Senator McConnell should act now to implement these changes and protect access to health care for all Kentuckians.
Susan Murphy is a biotech consultant and board member for the Kentucky Life Sciences Council.