Incentives for COVID-19 Vaccination: Regulatory Considerations and Potential Federal Funding

Health Highlights

As the COVID-19 pandemic approaches the two-year mark, the United States leads the world in new COVID-19 cases and deaths. These tragic numbers reflect both the rise of the highly contagious Delta variant, as well as persistent vaccine hesitancy among many Americans. Although COVID-19 vaccines have long been available, free of charge, to people age 12 and up, the CDC reports that approximately one in four eligible individuals has yet to receive a single dose. President Biden’s COVID‑19 Action Plan, announced in September, includes a number of measures aimed at increasing vaccine uptake, including new COVID-19 vaccination mandates for the employees of large businesses and many types of health care providers. (See here for Manatt’s analysis of these workplace mandates.)

In addition to mandates, many public and private entities have considered offering incentives to individuals who receive a COVID-19 vaccine, such as cash, a gift card or an in-kind gift like food or tickets to an event. (Some states garnered news attention by offering more unusual incentives like a chance at a $1 million lottery prize (Colorado) or the opportunity to drive on a professional racetrack (Alabama).) However, vaccine incentives present a number of questions pertaining to both legal compliance and financing, potentially implicating regulations that fall under the jurisdiction of several different federal agencies.

This newsletter outlines two sets of key issues for consideration by stakeholders—including state governments, health care providers, health plans and employers—when designing and implementing vaccine incentives:

1. Could offering vaccine incentives create regulatory risk under federal law? Although certain health care and employment laws create potential regulatory risks, federal agencies have issued guidance clarifying the parameters for permissible vaccine incentives and offering additional temporary flexibilities during the COVID-19 Public Health Emergency (PHE) period.

2. Is federal funding available to help defray the cost of vaccine incentives? There are potential opportunities for vaccine incentives to be funded, at least in part, by:
- Federal match payments through Medicaid and the Children’s Health Insurance Program (CHIP) for state vaccine uptake strategies that target Medicaid and CHIP enrollees
- Pandemic relief funding for state and local governments that was appropriated under the American Rescue Plan Act of 2021 (ARP) and the Coronavirus Aid, Relief and Economic Security Act of 2020 (CARES)
- Provider Relief Fund (PRF) dollars made available to certain health care providers under the CARES Act and other COVID-19 relief statutes

Note: This newsletter focuses on regulatory considerations and funding at the federal level. Entities interested in pursuing a vaccine incentive program may also wish to consider the implications of any applicable laws or funding sources at the state and local levels.

1. Federal Guidance Clarifies the Regulatory Parameters for Offering Vaccine Incentives

Avoiding Risk Under Health Care Laws Governing Fraud and Abuse

In general, a person or entity may incur regulatory risk under federal law by offering incentives for an individual to receive a healthcare service from a specific health care provider, especially if that service will be reimbursed under a federal health care program such as Medicare or Medicaid. In a May 2021 FAQ, the Office of Inspector General (OIG) for the U.S. Department of Health & Human Services (HHS) acknowledged that incentives for COVID-19 vaccination may “implicate[] the Federal anti-kickback statute and the Beneficiary Inducements” provision of the federal Civil Monetary Penalties Law. Recognizing, however, that “incentives and rewards may promote broader access to and uptake of COVID-19 vaccinations,” OIG outlined the following guidance regarding permissible incentive programs.

  • First, because the relevant fraud and abuse laws focus on services reimbursed under federal health care programs, “it is unlikely that these statutes would be implicated by incentives and rewards furnished to commercially insured or uninsured individuals.”
  • Second, even for individuals who are covered under a federal health care program, OIG deems it “minimal risk” when COVID-19 vaccine incentives are offered by “entities that are not affiliated or connected with any health care industry stakeholder (e.g., restaurants) or by governmental entities (e.g., local or State Departments of Health).”
  • Third, OIG declared a policy of temporary enforcement discretion with respect to incentives offered to federal healthcare program beneficiaries by a health care provider or managed care organization (a term that appears intended to capture both Medicaid managed care organizations as well as Medicare Advantage plans). During the federally declared COVID-19 PHE, OIG will not pursue enforcement actions against these entities as long as their vaccine incentive programs comply with certain safeguards, including the following:
    - The incentive applies only for COVID-19 vaccines administered in accordance with federal and state regulations and guidelines;
    - The incentive is not connected with any other arrangement between the offeror and the recipient, and is not conditioned on the recipient’s past or future use of other health care services (e.g., limiting the incentive to only those patients who also get a wellness visit from the provider); and
    - The incentive is offered without reference to the recipient’s source of health coverage (or lack of health coverage), except in cases where a managed care organization offers an incentive that is limited to its own enrollees.

OIG’s guidance does not expressly limit the type or value or incentives that may be offered. Particularly large incentives may, however, prompt federal scrutiny, particularly if the incentive is offered by a health care entity, and particularly if OIG identifies other indications of fraud or other improper conduct. Health care entities are advised to maintain appropriate documentation of their incentive programs so that, in the event of an audit, they can demonstrate their compliance with OIG’s guidance and other applicable law.

Avoiding Risk Under Federal Employment Laws

Also in May 2021, the Equal Opportunity Employment Commission (EEOC) released guidance advising employers that “under certain circumstances employers may offer incentives to employees who receive COVID-19 vaccines.” See here for Manatt’s analysis of this EEOC guidance, which notes that, among other requirements, any vaccination information that an employer obtains from its workers must be kept confidential pursuant to the Americans with Disabilities Act (ADA).

Shortly thereafter, in July 2021, the U.S. Department of Justice issued a memorandum advising employers that vaccine mandates may apply with respect to vaccines that have received an Emergency Use Authorization (EUA) from the Food & Drug Administration (FDA), as well as vaccines that have received full FDA approval.

Most recently, HHS—together with the Departments of Labor and the Treasury—issued October 4, 2021 FAQs clarifying that, although group health plans may not condition eligibility for benefits on receiving a COVID-19 vaccination, plans may offer discounted premiums to vaccinated individuals, subject to compliance with applicable federal standards for health-contingent wellness programs. Among other requirements:

  • The aggregate incentives across all wellness programs must not exceed 30 percent of the total cost of employee-only coverage. (Note that a separate standard applies to wellness programs that specifically relate to tobacco use.)
  • The benefit must be uniformly available to all similarly situated individuals.
  • Employers must offer a reasonable alternative for employees to qualify for the reward, such as a waiver, or the right to attest to following other COVID-19-related safety guidelines, for individuals with a medical contraindication to vaccination.

Finally, with respect to assessing the “affordability” of coverage (as required under the Affordable Care Act), the FAQs advise that premium discounts are disregarded in assessing affordability, while premium surcharges are included in the relevant premium amount.

2. Federal Funding May Be Available to Defray the Cost of COVID-19 Vaccine Incentives

Public entities and health care providers have access to certain federal funding sources that could potentially be used to support COVID-19 vaccine incentive programs, as described below. In all cases, the entity offering the vaccine incentive should plan to:

  • Implement safeguards to ensure that incentives are offered only to eligible individuals who receive a qualifying COVID-19 vaccine in accordance with federal guidelines; and
  • Maintain documentation to demonstrate that these safeguards were implemented and adhered to, and that the entity complied with all applicable conditions of funding. 

The Medicaid and CHIP Programs

In August 2021 guidance, the Centers for Medicare & Medicaid Services (CMS) advised states that they may claim federal funding for “incentives for Medicaid and CHIP beneficiaries, such as gift cards, to encourage the uptake of the COVID-19 and influenza vaccines.” CMS offers the following additional guidance to states:

  • Incentive-related claims are considered “administrative expenses,” which means that: (1) in the Medicaid program, these claims will be funded at a 50 percent match rate (rather than the 100 percent match rate that currently applies to COVID-19 vaccine expenditures); and (2) in CHIP, incentive claims are matched at the state’s regular match rate, and are subject to the overall 10 percent cap on administrative expenditures.
  • In states that have implemented a managed care delivery system, payments to managed care plans for vaccine incentives must be carved out of the plan’s capitation rate and “paid separately on an administrative cost basis.” 

In addition, CMS’ guidance outlines additional steps that states can pursue to promote vaccine uptake through Medicaid/CHIP, which collectively enrolled more than 82 million people as of April 2021. These strategies include:

Strategy to Increase Vaccine Uptake for Medicaid and CHIP Enrollees

Federal Funding Available?

Incentivize managed care plans and participating providers to reach COVID-19 vaccination targets through the use of payment incentives Yes, at the state’s regular match rate
Support vaccination among direct service professionals by implementing temporary rate increases for home and community-based services (HCBS), thereby accounting for the extra time off these professionals may need to receive the COVID-19 vaccine Yes, at the state’s regular match rate, plus ARP’s 10-percentage-point increase for HCBS services (see here for Manatt’s analysis of this HCBS funding increase, including the conditions that apply)
Engage in community outreach to Medicaid and CHIP enrollees through community health workers, peer workers and other trusted local providers or community members Yes, under the parameters for administrative services
Expand “no wrong door” options for enrollees (e.g., allowing enrollees to book a vaccine appointment and arrange transportation during a single phone call) Yes, under the parameters for administrative services
Join the “Connecting Kids to Coverage” National Back to School Campaign, which will include messaging about the importance of catching up on missed childhood vaccines and administering the COVID-19 vaccine for the adolescent population Yes, to the extent that related outreach activities qualify for federal match as administrative services

See CMS’ guidance for additional details on the steps needed to implement these vaccine uptake strategies. Notably, although CMS’ guidance does not expressly cap the amount of vaccine incentives or other areas of vaccine-related expenditures, many of the avenues outlined above require the state to submit a request or notification to CMS, potentially creating opportunities for CMS to push back on any areas of proposed spending that are deemed excessive.

Pandemic Relief Funding for State and Local Governments

The State and Local Fiscal Recovery Fund (SLFRF)
In ARP, Congress established the $350 billion SLFRF to help public entities respond to the pandemic and mitigate its negative economic impacts. Guidance from the U.S. Department of the Treasury clarifies that SLFRF “recipients may use funds to pay for vaccine incentive programs (e.g., cash or in-kind transfers, lottery programs, or other incentives for individuals who get vaccinated).” The guidance notes, moreover, that “the President is calling on state, territorial, and local governments to provide $100 payments for every newly vaccinated American, as an extra incentive to boost vaccination rates, protect communities, and save lives.” (For additional details on the SLFRF and related Treasury rules and guidance, see Manatt’s analysis here.)

CDC-Administered Supplemental Funding for COVID-19 Vaccination
In the CARES Act, Congress appropriated funds for state and local government activities to support broad-based COVID-19 vaccine distribution and access, including strategies to address vaccine hesitancy. July 2021 guidance from the Centers for Disease Control & Prevention (CDC) declares that, under most applicable funding agreements, recipients may use these funds to support “incentives, up to $100 per person, for COVID-19 vaccine recipients.”

Interested public entities should consult the CDC’s guidance and related FAQs for details on the submission of a vaccine incentive plan, as well as parameters governing the scope of permissible incentives. Notably, these funds may not be used to support incentives that take the form of a raffle or other “game of chance,” nor may they be directed toward incentives for providers to increase vaccine uptake.

The Provider Relief Fund (PRF)
The PRF was created under the CARES Act (and supplemented under subsequent legislation) to support health care providers in preventing, preparing for and responding to the effects of the COVID-19 pandemic. The PRF is administered by HHS’ Health Resources & Services Administration (HRSA), which does not appear to have issued guidance on the specific question of a provider using the PRF to support COVID-19 vaccine incentives. However, HRSA has generally declined to articulate lists of expressly permitted or prohibited uses of PRF funding. Instead, providers are afforded discretion in using their PRF funds, but must be prepared to demonstrate in future audits that all funds were used for eligible pandemic-related purposes, and were spent and reported in accordance with PRF program parameters. (See here for Manatt’s analysis of HRSA’s July 2021 guidance on PRF reporting requirements.) Given that vaccines are directly related to the pandemic, providers likely could use their PRF funding to support vaccine incentives. Of course, any such incentives should comply with the OIG guidance referenced above.


Incentive programs represent an evidence-based approach to overcoming vaccine hesitancy and increasing vaccine uptake. Interested stakeholders should be mindful of the regulatory implications of offering vaccine incentives, however, and should also consider their opportunities to leverage federal funding in support of these incentives.



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