Section 3709 of the Coronavirus Aid, Relief, and Economic Security Act of 2020 (“CARES Act”) temporarily suspends Medicare sequestration for the period of May 1 through December 31, 2020. As a result, health care providers can expect to receive an increase in fee-for-service Medicare payments by approximately 2% as compared to what they would have otherwise received during this period. However, in exchange for this temporary suspension, the CARES Act also extends the mandatory sequestration policy by an additional one year, i.e., through 2030.

Additionally, Section 3710 of the CARES Act provides for a 20% increase in the weighting factor that would otherwise apply to the diagnosis-related group (“DRG”) for Medicare patients discharged with a diagnosis of COVID-19.

Medicare Advantage plans will benefit from both the temporary suspension and the increased DRG payment. Depending on the specific contractual arrangement, some Medicare Advantage plans may pass these short-term reimbursement increases through to contracted hospitals and providers. However, CMS does not mandate specific reimbursement provisions between Medicare Advantage plans and providers, and thus, any increase in payments for services to Medicare Advantage beneficiaries will be contract specific.

Therefore, we recommend that hospitals and other health care providers review their Medicare Advantage agreements to see if they might have a contractual right to these rate increases. Look for language that says, for example, “In the event CMS changes compensation to Plan as a result of a CMS directive, Act of Congress, Executive Order, or change in regulatory requirements, the amount payable to Provider will be automatically adjusted in the amount specified by CMS.” In that case, the provider may be able to argue successfully that the plan needs to pass these favorable Medicare reimbursement provisions on to the provider.