Questions surround health care reform after ruling

The following is a memo which discusses the implications for the Supreme Court’s ruling on health care reform, written by Paul Keckley, Executive Director, Deloitte Center for Health Solutions. In it, he discusses the full ruling including the Medicaid expansion exception – a key provision for state governments.

I waded through the U.S. Supreme Court’s opinions twice this weekend—59 pages of the majority opinion scribed by Chief Justice John Roberts, Justice Ruth Bader Ginsburg’s 61-page concurring opinion co-signed by Justices Sonia Sotomayor, Stephen Breyer, and Elena Kagan; the 65-page dissenting opinion by Justices Antonin Scalia, Anthony Kennedy, Clarence Thomas, and Samuel Alito; and the two-page post script by Justice Thomas punctuating his view of the applicability of the Commerce Clause in the proceedings.

For the moment, the uncertainty about the fate of the law is settled: its implementation is now the focus. And no doubt, it will be a featured topic in the remaining 17 weeks of campaign 2012.

By a 5:4 vote, in National Federation of Independent Business, et al. v. Sebelius, the Court settled, for the time being, the four issues it reviewed:

  • The Court held that the mandate violates the Commerce Clause. However, the individual mandate was upheld as within Congress’ power to lay and collect taxes.
  • The Anti-Injunction Act of 1867 (AIA) is not applicable because Congress intended the “shared responsibility” requirement as a penalty.
  • Since the mandate was upheld by the majority, the issue of its severability from the rest of the law is moot.
  • The federal government is limited in its power over the states as it pertains to the Affordable Care Act’s (ACA) expansion of Medicaid coverage: states must be allowed to opt into expansion, and the federal government cannot withhold funds for other Medicaid programs as a way of coercing states to expand.

When passed in March 2010, my reviews of ACA led me to conclude its impact boils down to four big bets:

  • Will the mandate successfully attract individuals into the insurance market in sufficient numbers to stabilize the market and reduce costs overall?
  • Will the employer “pay or play” provision lead employers to jettison employee benefits coverage once state health insurance exchanges (HIX) offer viable options for affordable coverage?
  • Will states be able to comply with the law’s numerous requirements, especially management of HIXs, expanded Medicaid enrollment, and the costs of their employee health coverage?
  • And will the consolidation of physicians, hospitals, and post-acute providers vis-à-vis clinically integrated systems of care capable of assuming performance risk with government and private payers result in lower overall costs?

Since most of the provisions of the law have yet to be implemented, it’s too soon to know these answers. But with the Court’s ruling Thursday, I’ve added three others:

  1. If the “shared responsibility payment,” aka individual mandate, was upheld based on the majority opinion that it fell within Congressional authority to impose taxes, might the AIA be applied in 2014 to seek its dismissal? Might it be a basis for repeal under reconciliation if a Republican majority in the Senate and the House pass legislation that is not vetoed by the president? Will we see a do-over? The AIA precludes any court from considering the imposition of a federal tax prior to its enforcement: it applies only to taxes and not to other sanctions/penalties in the federal tax code. Justices Roberts, Ginsburg, Sotomayor, Breyer, and Kagan concluded the mandate was not intended by Congress to be treated as a tax and therefore the AIA did not bar consideration of the case. In the dissenting opinion, Justices Scalia, Kennedy, Thomas, and Alito referenced the AIA in characterizing the inconsistency of the government’s case—that the mandate was a penalty, not a tax for purposes of the law but upheld based on Congress taxing authority in the majority opinion. So the majority opinion that the penalty “may” be treated as a tax opens possibilities it will be revisited in future debate. If treated as a tax, under reconciliation, a 51 vote in the Senate could result in changes to the penalties and taxes in ACA. So this could get more complicated down the line.
  2. What happens to the Medicaid expansion? How will the states play? In many ways, the most significant of the Court’s rulings was its determination that the ACA’s Medicaid expansion provision violated the principle of federalism in the Constitution and was coercive. Prior to ACA, states were required to provide Medicaid coverage to pregnant women, children, the elderly, families with dependent children, and individuals with disabilities. ACA expanded the eligibility to include childless adults under 65 years of age with household incomes up to 133 percent of the federal poverty level (FPL, $30,657 for a family of four). And, it funded 100 percent of the states’ expanded coverage costs for the first three years, then incrementally less ending at 90 percent in 2020. In the majority opinion, states are given the option of expanding their Medicaid program and the U.S. Department of Health and Human Services (HHS) is precluded from penalizing non-participants by withholding funding for other programs. And ironically, the possibility exists that an individual with income under 100 percent of FPL and eligible for a subsidy to buy insurance might find themselves ineligible because their state had passed on expansion.
  3. Is the health care market unique? The majority dismissed the applicability of the Commerce and Necessary and Proper Clauses based on the premise that the decision not to buy insurance impacted the entire health care market and the legal surmise that use of the market was universal regardless of a person’s insurance status. The dissenting view was that the mandate exceeds the limits of government power and concluded the mandate was a penalty, not a tax and therefore subject to the Commerce Clause. The “hanging chad” issue: is health care unique? The court decided that the individual mandate exceeded Congress authority to regulate inactivity as commerce. Do individuals who choose not to purchase health insurance do so willfully? Is inactivity governed by the Commerce Clause—the basis for its dismissal in the courts deliberation—or is it a willful act? Heady questions that will no doubt be revisited by policymakers and health services researchers in coming months.

The turtles that guard the entrances to the Supreme Court were intended by architect Cass Gilbert to convey the gravity of the high court’s decision-making. In many cultures, the turtle is a symbol of wisdom. I am not inclined to speculate on the motivations of the court: political pundits are already filtering their rulings through partisan lenses.

After studying the opinions on both sides, I am inclined to respect the respective views and consider their legal and constitutional deliberation a reflection of sober judgment. It’s also clear there’s a wide gap between sound-bite political discourse about health reform, and the depth and complexity of the fundamental issues the court considered.

Democracy is still a work in progress. This week, our process of government was on display. My list of questions is now longer: seven questions that frame the impact intended or otherwise of the ACA. Stay tuned.

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