In an effort to modernize the federal payment infrastructure, President Trump recently issued an Executive Order mandating the transition from paper checks to electronic payments for all federal disbursements. With an effective date of September 30, 2025, this initiative is intended to significantly enhance efficiency, security and cost-effectiveness across federal transactions, potentially marking a significant shift in payments across the economy including in healthcare.
Understanding the Executive Order
The “Modernizing Payments To and From America’s Bank Account” Executive Order (EO) is an initiative aimed at addressing the inefficiencies and vulnerabilities inherent in the current federal payment system by eliminating paper checks disbursements from the Federal Government. The EO details how this action will streamline processes, reduce operational costs, and combat fraud on an unprecedented scale.
To put the impacts of this EO in perspective, the U.S. Fiscal Service disbursed nearly 1.4 billion payments for federal agencies in fiscal year 2022, amounting to $5.27 trillion. (J.P. Morgan) These transactions include payments for Social Security, Medicare, unemployment insurance, and tax refunds. Moving to strictly electronic transactions for such a large amount of payments on that scale will have far-reaching impacts.
Impacts of Eliminating Paper Checks
- Enhancing Efficiency: Electronic payments offer a faster and more reliable alternative to paper checks, ensuring timely disbursements for federal programs. As the global economy increasingly leans towards digital solutions, the shift to electronic payments aligns with broader technological advancements and consumer preferences for convenient payment methods.
- Reducing Costs: The maintenance of physical infrastructure and specialized technology necessary for processing paper records costs American taxpayers over $657 million annually, as outlined in the EO. Transitioning to electronic payments is projected to significantly reduce these expenditures, offering potential savings from fully moving away from paper checks.
- Minimizing Fraud: Paper checks are highly susceptible to fraud. According to the EO, paper checks are 16 times more likely to be reported lost, stolen or altered compared to electronic funds transfers (EFTs). The U.S. Government Accountability Office estimates that fraud costs the federal government between $233 billion and $521 billion each year. (GAO.gov) Electronic payments – which incorporate encryption, tokenization, and real-time monitoring – can mitigate these risks and enhance the security of financial transactions.
What Does the EO Mean for Healthcare?
The healthcare industry stands to be greatly impacted by this “modernizing payments” EO. The Centers for Medicare & Medicaid Services (CMS) provides health coverage to over 160 million Americans through Medicare, Medicaid, the Children’s Health Insurance Program, and the Health Insurance Marketplace. (CMS.gov) This represents a significant portion of the healthcare economy.
Paper and manual processes typically dominate payments transactions in healthcare, especially paper checks. According to the Trends in Healthcare Payments Annual Report, nearly 70% of payers reimburse providers with paper checks. However, the healthcare industry could save up to $20 billion in costs with a fully electronic administrative workflow. (CAQH) Any move towards eliminating paper checks and moving to electronic transactions, as outlined in the EO, would greatly benefit the healthcare industry.
Economic and Technological Implications
Beyond healthcare, the Executive Order is expected to have far-reaching economic impacts. The shift from paper checks may accelerate the adoption of advanced technologies, including artificial intelligence (AI). AI can monitor electronic transactions in real-time and give insights into potential fraud, significantly improving the accuracy and effectiveness of payment account validation.
The availability of rich transactional data from electronic payments will empower AI systems to identify patterns and anomalies, leading to improved risk assessment and fraud detection. For instance, AI algorithms can analyze transaction histories to generate risk scores, enhancing the government’s ability to detect and respond to suspicious activities.
Conclusion
The EO to modernize America’s payment systems represents a potential move towards more efficient and secure financial transactions. By eliminating paper checks and embracing electronic payments, the federal government is not only reducing costs and enhancing security but also paving the way for technological advancements that will benefit industries and individuals alike. As the impacts of the EO unfold, healthcare stakeholders must prepare and adapt from the predominant use of paper checks to electronic transactions. The modernization of payment systems is long overdue in the healthcare economy and will help the industry become more secure and efficient.