The American Recovery and Reinvestment Act (ARRA) of 2009

The American Recovery and Reinvestment Act of 2009 (ARRA) provides funding for Medicare and Medicaid physicians for the adoption and use of certified electronic health records (EHR). The law does not provide an accurate definition with respect to what constitutes a certified EHR and the criteria by which the physician can demonstrate Meaningful Use. However, the law requires compliance with the following three key elements of Meaningful Use.

  • Use of certified EHR software, including ePrescribing.
  • Interface and exchange health information among providers to improve and promote quality of care.
  • Provide EHR reports on selected measures as defined by Health and Human Services (HHS).

Stimulus Funding

Under the 2009 federal economic stimulus package, the HITECH Act summary allows physicians who demonstrate Meaningful Use of certified EHR to receive incentive payments through Medicare and Medicaid. The incentive payments ranging from $44,000 to $63,750 will be paid over 5 years. If these same physicians do not utilize software that meets the Federal requirement by 2015, they will be faced with increasing penalties of up to 5% to further promote the use of certified EHR.


  • Incentives start in 2011
  • Available to non-hospital providers caring for Medicare patients
  • Providers receive up to $44K, over a five-year period
  • Providers must bill 125% of the total incentive received over the five-year period
  • Must prove that is using HER which meets the requirements for Meaningful Use
  • Providers will be penalized if they have not adopted an EHR by January 1, 2015

Using Medicare, the provider is eligible for incentives up to $44,000 (see Medicare table below) over five years. In addition to this, the rural health physicians are eligible for a 25% increase over and above the base incentive and up to $55,000.

Medicare Funding Schedule

YEAR 2011 2012 2013 2014 2015 2016 2017 TOTAL
  $18,000 $12,000 $8,000 $4,000 $2,000     $44,000
    $18,000 $12,000 $8,000 $4,000 $2,000   $44,000
      $15,000 $12,000 $8,000 $4,000   $39,000
        $15,000 $12,000 $8,000   $35,000
Penalties         -1% -2% -3%  


  • Available to non-hospital based providers
  • Incentives range to $65K over a five-year period
  • Pediatricians patients must be made up of 20% Medicaid
  • All other providers patients must be made up of 30% Medicaid
  • Startup incentive up to $25,000 in state loan funds available (first year) toward the purchase a certified EHR
  • After receiving startup funds, providers who prove using EHR that meets all requirements for Meaningful Use, can receive up to $10,000 annually for an additional four years
  • No penalties have been defined by Medicaid for lack of adoption

If these requirements are met, up to 85% of what the government deems are "net average allowable costs," will be received, according to the Medicaid schedule (see table below). While it is unclear at this time what net average allowable costs are, it is widely believed that the maximum total payment over five years could be $64,000.

Medicaid Funding Schedule:

First Year of Use 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total
2011 $24k $10k $10k $10k $10k           $64k
2012   $24k $10k $10k $10k $10k         $64k
2013     $24k $10k $10k $10k $10k       $64k
2014       $24k $10k $10k $10k $10k     $64k
2015         $24k $10k $10k $10k $10k   $64k
2016           $24k $10k $10k $10k $10k $64k
Penalties         -1% -2% -3%