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Patient Protection and Affordable Care Act on Trial

Posted in Healthcare Services Investing

 

From March 26 through 28, 2012, the U.S. Supreme Court heard oral arguments in the multi-state challenge to the 2010 healthcare reform law known as Patient Protection and Affordable Care Act (PPACA).  Our McGuireWoods colleagues published a very insightful discussion of the arguments heard each day that week and an overview of the key substantive issues under debate, which can be found here

On March 30, the justices met to deliberate and select an opinion writer.  The opinion is now being written pursuant to the Court’s internal process, and the outcome of the Court’s decision on the case may change depending on the course of the opinion-writing process.

In the interim, the Centers for Medicare & Medicaid Services (CMS) continue to release information in support of the law. CMS expects the 2010 healthcare-reform law to generate over $200 billion in savings through 2016 by ending disproportionate payments to private insurers that offer Medicare Advantage plans, as well as by implementing anti-fraud policies. The estimate, from the CMS Office of the Actuary, also said that senior citizens and others in the traditional Medicare program should see about $59.4 billion in savings during that same period through lower cost-sharing and premiums.

CMS states in the report, "The Affordable Care Act: Lowering Medicare Costs by Improving Care", that reducing disproportionate Medicare payments to private insurers in Medicare Advantage could save some $68 billion.  Changing provider payments to improve productivity could save another approximately $85 billion, while anti-fraud efforts should realize savings of approximately $7.8 billion; these savings to occur over the next four years.  This could mean a costs savings of about 20%-30% of our National Healthcare Expenditure, which, as of 2009, was $2.5 trillion.

According to CMS acting Administrator Marilyn Tavenner, “The Affordable Care Act is the key to lowering healthcare costs in a way that improves care for beneficiaries, instead of cutting services. In the short term, both taxpayers and beneficiaries will save billions thanks to the healthcare law. Over the long run, the Affordable Care Act will allow us to invest in new models of providing care that will save money and deliver higher-quality care.”

In a proposed rule, CMS said it expects operating payments to acute-care hospitals will increase by about 0.9% in 2013. That figure includes a 2.3% net payment update, which accounts for inflation, productivity improvements, coding changes and other adjustments and policies in the rule. Overall, CMS said that total Medicare spending on inpatient hospital services could increase by about $175 million in fiscal 2013.  Under the proposed rule, payments to long-term acute-care hospitals are expected to increase by about 1.9% or about $100 million in 2013. That projection is based on a 2.1% payment increase to those facilities that is then reduced by 1.3% to account for one-time budget-neutrality adjustment, which brings the actual payment-rate increase for long-term-care hospitals to 0.8% for next year. These figures are from an article by Jessica Zigmond writing forwww.modernhealthcare.com.

Of course opponents of the law, including the 26 states that consolidated to challenge the law in the case that ultimately made it to the U.S. Supreme Court, claim otherwise.  In addition to concerns regarding constitutionality of the law, opponents express concerns regarding a variety of economic factors, including a negative impact on state budgets and what they ultimately believe will be minimal impact on federal spending.

For now, the nation will wait to hear the fate of the law from the highest court in the land and whether the scenarios of financial doom and financial salvation will have a chance to play out. 

 

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