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D.C. Report: Skyrocketing Government Healthcare Spending, Improper Medicare Payments, ACA Challenge Reaches Supreme Court

August 2, 2011
by Sharon Canner, Sr. Director of Advocacy Programs, CHIME
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CMS Report: Government Projected to Pay 50 Percent of Total Healthcare Spending by 2020
By 2020 federal healthcare programs will account for one-fifth of the U.S. economy, according to economists and actuaries from the Centers for Medicare and Medicaid Services (CMS). In a report published by Health Affairs, “National Health Spending Projections Through 2020: Economic Recovery and Reform Drive Faster Spending Growth,” CMS officials said U.S. healthcare spending will be $4.6 trillion in 2020 and is expected to grow an average of 5.8 percent per year – 1.1 percent above expected gross domestic product growth.

During the period between 2009 to 2020, “we expect that the Affordable Care Act of 2010 will reduce the number of uninsured people by nearly thirty million, lead to prescription drugs and physician services accounting for a greater share of health spending than would have been the case otherwise, and contribute to an increase in the government-sponsored (federal, state, and local) share of health spending to just under 50 percent by 2020,” the authors wrote. Spending by federal, state and local governments is expected to account for 49 percent of all health spending, or $2.28 trillion, in 2020, up from 45 percent in 2010. Private businesses are expected to account for 18% of all health spending, or $820.5 billion, down from 20 percent in 2010. Overall, the Medicare actuary indicated that healthcare will average $13,710 per person.

For hospitals and other providers, the Affordable Care Act “is expected to exert varying effects,” the report said. Spending growth is projected to spike in 2014 due to coverage expansion made possible through the ACA, which will lead overall hospital spending growth to 7.2 percent – a full percentage point and $8.6 billion higher than would be without ACA. However, the growth rate is partially offset by lower Medicare payment rate increases mandated by ACA, the report indicated.

House Oversight Panel Reviews GAO Report; $48 billion Medicare Payments were ‘improper’ in 2010
According to a Government Accountability Office report, nearly $50 billion in Medicare improper payments were made in 2010, representing about 38 percent of estimated government-wide improper payments. The report says that improper payment estimates include both overpayments and underpayments due to inadequate documentation, medically unnecessary services, coding errors and payment calculation errors. The GAO points out that the nearly $50 billion estimate is not meant to be a measure of willful fraud, but the report suggests CMS could do more to prevent the fraction of improper payments that is due to fraudulent activity. The GAO has identified Medicare as a high-risk program "because of its size, complexity and susceptibility to improper payments." The GAO report concludes, "Despite progress made by CMS, reducing improper payments in the program is a continuing challenge for CMS due to the size and scope of Medicare.”

First Legal Challenge to ACA Reaches Supreme Court
As many observers and politicians have expected, an appeal was filed with the Supreme Court over the constitutionality of the Patient Protection and Affordable Care Act this week. Attacking the insurance mandate provision, the Thomas More Law Center of Ann Arbor, Michigan, claims that if the law is allowed to stay on the books, "the federal government will have absolute and unfettered power to create complex regulatory schemes to fix every perceived problem imaginable and to do so by ordering private citizens to engage in affirmative acts, under penalty of law." The petition submitted Wednesday stems from a decision made by the United States Court of Appeals Sixth Circuit, in Cincinnati, that affirmed the constitutionality of the ACA in a two-to-one decision last month. As reported previously, Federal appeals courts in Atlanta and Richmond, Va., also have heard arguments against the law, but have yet to issue decisions. The federal appeals court in Washington is scheduled to hear arguments in yet another healthcare case in September, but most observers note the Supreme Court will not meet again until early fall, and the earliest a healthcare [healthcare] case would be heard is early in 2012.

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