Medicare, Hospitals at Odds Over Payment for Sicker Patients

The problem, Steinberg says, is that the Centers for Medicare & Medicaid Services "doesn't want to pay more for the rising severity that has been uncovered by their new, more accurate payment system."

"This is an issue that we have been going back and forth with CMS on for at least five years," she says. "They developed a payment system to better capture the severity of illness and it is working as far as we can tell. But now they are going back and saying ‘Gee we don't want to pay more because this system is picking up more and sicker patients. We want to pay you as if you were under the old system.'"

The data shows that even as Medicare patients contend with more and more chronic illnesses, they are also living longer thanks to effective medical care. In 2009 American life expectancy was 78.2 years, an increase of 1.8%, or 17 months, since 2000.

It is projected that the number of Medicare beneficiaries will more than double over the next 40 years. By 2020, the over age 85 population will reach 6.6 million people, up from 5.5 million in 2010, AHA says.

"The technology has allowed people to live longer with a whole host of chronic diseases which a generation before they might have died from," Steinberg says. "It improves quality of life, but that makes healthcare more expensive."