How did the CARES Act change Medicare and Medicaid reimbursement for COVID-19 hospitalizations?
Executive summary
The CARES Act redirected at least $100 billion to hospitals and gave CMS new authorities that increased payments and flexibility for Medicare and Medicaid during the COVID-19 emergency, including expanded advance Medicare payments, temporary increases in certain Medicare payments for COVID-19 treatment, and relaxed telehealth and regulatory requirements [1] [2] [3]. Congress also tied other funding and policy changes — such as coverage rules and telehealth waivers — to prior statutes (Families First/FFCRA) and administrative waivers that CMS and HHS issued during the public health emergency [4] [5].
1. CARES’ big-money lifeline to hospitals: $100 billion, broad rules, few strings
Congress set aside roughly $100 billion in the CARES Act to reimburse hospitals and other health care entities for COVID‑19-related expenses and lost revenue; that pool was distributed without specific formulas or geographic allocation rules, meaning funds flowed to providers based largely on existing Medicare-reimbursement relationships and reporting, not strictly on COVID caseload or charity-care burden [1] [6] [2].
2. Advance Medicare payments to shore up cash flow
CARES expanded CMS’s Accelerated and Advance Payment Program so Medicare contractors could quickly make advance payments to providers and suppliers during the emergency; CMS instructed Medicare Administrative Contractors to base the maximum advance on a provider’s prior 3‑month Medicare claims (Oct–Dec 2019) and allowed physicians to request up to 100% of that amount to address immediate liquidity needs [7] [3].
3. Increased Medicare payments tied to treating COVID‑19 inpatients
CARES and subsequent CMS policy changes increased certain Medicare payments for treatment of COVID‑19 patients — for example, higher inpatient-related payments and relief from some scheduled cuts — so hospitals would receive larger fixed inpatient amounts that could cover therapeutics and other costs bundled into inpatient payments [1] [5]. CMS also issued interim rules that reinterpreted payment- and site‑of‑service rules for the duration of the public health emergency [8].
4. Telehealth and regulatory waivers reshaped reimbursement and access
Using waiver authority referenced in CARES and earlier statutes, HHS and CMS temporarily removed geographic and originating-site restrictions so Medicare would reimburse telehealth visits provided to beneficiaries in their homes, broadened eligible technologies (including smartphone-enabled visits), and relaxed past requirements that a provider have treated a beneficiary within three years — changes that both increased reimbursable telehealth encounters and changed where and how Medicare dollars flowed [5] [9].
5. Medicaid and testing/treatment coverage: interaction with Families First and ARPA
The Families First Coronavirus Response Act and CARES together clarified that COVID-19 testing must be covered without cost‑sharing in Medicaid and Medicare contexts; CARES added funds and flexibility for Medicaid and helped integrate testing and vaccine coverage rules later reinforced by ARPA for vaccine administration under Medicaid [4] [1] [10].
6. Provider relief vs. reimbursement: overlapping pots and reporting rules
CARES-funded grants and the $100 billion hospital allocation were distinct from existing Medicare/Medicaid payment rules; CMS and HHS stressed that CARES payments could not duplicate other reimbursements and that providers needed to report CARES and other federal relief on cost reports and S‑10 worksheets — a rule meant to prevent double‑dipping but which required hospitals to reconcile relief with standard payer reimbursements [6] [10].
7. Distribution effects: who gained and who was left out
KFF and RAND‑based analyses flagged that the CARES hospital fund flowed disproportionately to providers with higher Medicare revenue or greater overall hospital revenue; providers with little or no Medicare billing (for instance many pediatric or Medicaid‑heavy providers) were less likely to receive these allocations because eligibility tied to Medicare reimbursement skewed distributions [2] [6].
8. Limits, oversight and remaining questions
CMS issued interim final rules and guidance during the PHE to implement payment and regulatory changes but left many operational details and later oversight questions unresolved — for example, how FEMA and HHS would review hospital billing for FEMA reimbursement, and how HHS would ensure CARES funds did not supplant other payers. HFMA’s summaries emphasize CMS’s reinterpretation of numerous rules for the duration of the emergency, noting continued evolution of policies [8] [11].
Limitations: available sources in this packet do not provide full statutory text or all CMS notices and do not detail every numeric payment increase or the exact formula used for inpatient COVID‑19 add‑ons; for those specifics, CMS rule documents and later audits would need to be consulted (not found in current reporting).