A Day-After Look at Supreme Court Ruling on Affordable Healthcare Act

So here is what happened, in case you missed it –

The individual mandate was upheld. The provision penalizing states that refuse to expand Medicaid was invalidated, leaving the federal incentive to states that do agree to expand Medicaid in place. All other provisions, such as requirements that insurers cover individuals with pre-existing conditions and that employers with over 50 employees offer health insurance coverage, are left in place as well.

The individual mandate was upheld, not under Commerce clause, but under Congress’s taxing powers. Five justices (Chief Justice Roberts plus the 4 more conservative justices) would have struck the mandate under the Commerce clause.

But what counts is that 5 justices (the Chief plus the 4 more liberal justices) upheld the mandate as a permissible tax: individuals have the choice – get coverage or pay the tax. Individuals are therefore subject to a new tax for lack of coverage.

As to choosing to rule the mandate as a tax rather than a mandate or penalty: “[T]he rule is settled that as between two possible interpretations of a statute, by one of which it would be unconstitutional and by the other valid, our plain duty is to adopt that which will save the Act.”

Chief Justice Roberts wrote:

Under the mandate, if an individual does not maintain health insurance, the only consequence is that he must make an additional payment to the IRS when he pays his taxes. … That, according to the Government, means the mandate can be regarded as establishing a condition—not owning health insurance—that triggers a tax—the required payment to the IRS. Under that theory, the mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the Government taxes, like buying gasoline or earn-ing income. And if the mandate is in effect just a tax hike on certain taxpayers who do not have health insurance, it may be within Congress’s constitutional power to tax.

As to the law’s provision to get states to expand Medicaid coverage, the Court ruled (the Chief and 6 others agreeing) that Congress can’t take away existing federal funding as a way to penalize states that do not agree to expand Medicaid, but Congress can (as the law also does) offer additional federal funds as incentive to states who agree to expand coverage.

In a three part analysis, the Chief wrote that Congress does not have the authority to require states to regulate; however it can establish “cooperative” spending programs with states, i.e., Medicaid

He said:

Nothing in our opinion precludes Congress from offering funds under the Affordable Care Act to expand the availa¬bility of health care, and requiring that States accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding.

Here is the Court's short version on the Medicaid provision:

The threatened loss of over 10 percent of a State’s overall budget is economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion. The Government claims that the expansion is properly viewed as only a modification of the existing program, and that this modification is permissible… But the expansion accomplishes a shift in kind, not merely degree. The original program was designed to cover medical services for particular categories of vulnerable individuals. Under the Affordable Care Act, Medicaid is transformed into a program to meet the health care needs of the entire nonelderly population with income below 133 percent of the poverty level. A State could hardly anticipate that Congress’s reservation of the right to “alter” or “amend” the Medicaid program included the power to transform it so dramatically. The Medicaid expansion thus violates the Constitution by threatening States with the loss of their existing Medicaid funding if they decline to comply with the expansion.

The Chief lays out the choices now before the states –

The Court today limits the financial pres¬sure the Secretary may apply to induce States to accept the terms of the Medicaid expansion. As a practical mat¬ter, that means States may now choose to reject the ex¬pansion; that is the whole point. But that does not mean all or even any will. Some States may indeed decline to participate, either because they are unsure they will be able to afford their share of the new funding obligations, or because they are unwilling to commit the administra¬tive resources necessary to support the expansion. Other States, however, may voluntarily sign up, finding the idea of expanding Medicaid coverage attractive, particularly given the level of federal funding the Act offers at the outset.

Here is how Jordan Rau and Julie Appleby writing for Kaiser Health News reported it:

The U.S. Supreme Court Thursday upheld nearly all of the landmark federal health law, affirming its requirement that most everyone carry insurance, but complicating the government’s plan to extend coverage to the poorest Americans.

Chief Justice John Roberts Jr. joined the court's four liberals in upholding the mandate, the best-known and least popular part of the law. The court also upheld hundreds of other rules embedded in the law designed to help millions more Americans obtain insurance and to refashion the health care industry.

But a majority of the justices voted that the government could not compel states to expand Medicaid, the federal and state program for the poor, by threatening to withhold federal money to existing Medicaid programs.

That change creates unexpected challenges for the Obama administration's plan to extend insurance to 30 million more Americans. More than half of those—mostly childless adults in poverty or slightly above it -- were to be covered by expanding Medicaid, but now states can opt out.

Find Kaiser Health News reporting here:

http://www.kaiserhealthnews.org/Stories/2012/June/28/supreme-court-upholds-individual-mandate.aspx

http://www.kaiserhealthnews.org/Stories/2012/June/28/pressure-on-states-to-act-after-supreme-court-ruling.aspx

On the mandate –

Kaiser Health News reported:

Creating an unusual majority coalition, Roberts joined the four liberals on the court in upholding the mandate, which had been viewed as the most legally tenuous part of the law. Roberts concluded the penalty for not carrying insurance fell within Congress' taxing power, even though the court’s liberal wing had justified the mandate as a reasonable regulation of interstate commerce.

Under the mandate, people who refuse to buy insurance will face a tax penalty. By the year 2016, that will amount to either $695 a year or 2.5 percent of income, whichever is greater. Roberts wrote that while the penalties were "plainly designed to ex¬pand health insurance coverage… taxes that seek to influence conduct are nothing new."

The decision leaves intact other major parts of the law that require insurers to accept all customers regardless of their health status and provide tax credits to those who need help to buy coverage. Those provisions go into effect in 2014.

The ruling eliminates one of the main justifications states have used to delay setting up new, online insurance markets called exchanges, where small businesses and individuals can shop for coverage.

While 14 states and the District of Columbia have authorized creation of these exchanges, another 33 have taken only initial steps or none at all, and three states have declared they won’t do it at all. The law requires the federal government to run the exchanges if state officials are unwilling or unable to do so.

Congressional Quarterly reported:

The majority agreed that the law does not pass muster under the Commerce Clause. But the justices noted that failure to have health insurance is not made a crime. The majority found the mandate and the penalty fee constitutional under Congress’ power to levy taxes. The penalty would be collected by the IRS through individual tax returns.

“The federal government does not have the power to order people to buy health insurance,” Roberts wrote for the majority. “Section 5000A would therefore be unconstitutional if read as a command. The federal government does have the power to impose a tax on those without health insurance. Section 5000A is therefore constitutional because it can reasonably be read as a tax.”

On expansion of Medicaid –

Kaiser Health News reported:

The court's ruling on Medicaid took away one of the federal government's primary inducements to get states to participate in its expanded health coverage for the very poor. The law would have allowed the government to withhold all Medicaid money to states that didn’t go along with its expansion to cover people who earned up to 133 percent of the federal poverty level, or about $31,000 for a family of four.

Today, about 60 million people are enrolled in the program, mostly children, pregnant women and the elderly, and the expansion would have added another 17 million. Roberts said that Congress had not revised an existing program, but essentially created a whole new one, and therefore was not entitled to yank longstanding funding for states that wouldn’t go along with the changes.

"The financial 'inducement' Congress has chosen is much more than ‘relatively mild encourage-ment'—it is a gun to the head," Roberts wrote. "The threatened loss of over 10 percent of a State’s overall budget … is economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion."

The law calls for the federal government to pick up all the costs of the Medicaid expansion from 2014 to 2016. After that, states would gradually start having to pay a portion, but the federal government’s share would not fall below 90 percent.

Congressional Quarterly reported:

The states — which filed suit immediately after the law was enacted — challenged as unduly coercive the expansion of the state-federal Medicaid program to adults younger than 65 who have not previously been eligible.

Roberts agreed, writing in the 7-2 majority on the Medicaid question that it would be “economic dragooning” to penalize states that do not participate in the expansion by taking away their existing Medicaid funding, which makes up a significant portion of state budgets. “A state could hardly anticipate that Congress’ reservation of the right to ‘alter’ or ‘amend’ the Medicaid program included the power to transform it so dramatically,” Roberts wrote.

But the chief justice also wrote that the problem could be “fully remedied” by barring the Department of Health and Human Services from taking away Medicaid funding.

And what of other parts of the law (after all, the legislation was over 1,000 pages) –

The decision leaves intact other major parts of the law that require insurers to accept all customers regardless of their health status and provide tax credits to those who need help to buy coverage. Those provisions go into effect in 2014.

As reported Jane Norman of Congressional Quarterly, who also offered an early and succinct analysis of the Supreme Court Decision that upheld the health care law:

The decision also means the law’s complex framework remains intact. Employers with 50 workers or more will be required to provide health insurance or pay penalties. Insurers will be unable to discriminate against sick people. Subsidies to help pay for insurance will be extended to people earning up to 400 percent of the federal poverty level. Insurance companies will be forced to meet standards for how much money they spend on health care as opposed to administrative costs. Young adults up to age 26 will be able to remain on their parents’ health insurance policies. And the Medicare prescription drug coverage gap known as the doughnut hole will eventually disappear.

For a copy of the Court’s opinion, go here: http://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf

For an interactive version posted by NPR, go here: http://www.npr.org/2012/06/28/155907705/interactive-inside-the-health-care-ruling

And check out a resource page posted by Kaiser Health News here: http://www.kaiserhealthnews.org/Judging-The-Health-Law.aspx?utm_source=khn&utm_medium=internal&utm_campaign=skybox

More later from NAHAM News.

Pros and Cons of Healthcare Reform for Hospitals

Bloggers Jams Ellis and Aaron Razavi offer a “run down” of the pros and cons of healthcare reform for hospitals. These pending the Supreme Court’s ruling on the constitutionality of the Affordable Care Act, and noting that the health care system “is improving in real time, independent of the final outcome”.

Find their article here: http://www.healthcarefinancenews.com/blog/pros-and-cons-healthcare-reform-hospitals

Benefitting hospitals, they offer these Pros:

1. Becoming more efficient: Healthcare reform and all its provisions are already making hospitals find new ways to increase facility efficiency, better manage care and streamline costs. One item is renovating hospitals to cut down on operating expenses. Hospital executives allocated 21% of their budget to renovations compared to 16% for new construction in 2012 according to an ASHE 2012 survey. Another method is implementing new programs such as Seton Family of Hospitals did when they enacted a nurse call center which on a monthly average dropped emergency room trips by 12.1%.

2. New model of care: Hospitals are moving away from the contemporary fee-for-service model, a contributing factor for our excessive healthcare spending, and are switching to value based models of care. Before, the more services hospitals performed, the more money they would make. Now, that is changing with hospitals being held accountable for their patients. Patient treatment outcomes versus cost are compared and hospitals who meet the requirements receive a bump in federal payments.

3. Helps the bottom line: Though there will be substantial cuts to Medicare, should healthcare reform pass, the vast majority of uninsured costs would be covered, giving some money back for what was previously written off. This suggests more money will be available to healthcare providers and, if the theory holds, a healthier population that needs less care over time. Alhough, it also depends on the specific hospital’s surrounding community and amount of care performed for indigent patients compared to Medicare patients.

On the negative for hospitals, they offer these Cons:

1. Administrative costs: Hospitals and health systems will have more to do on their own as they take care of the influx of new patients. That is much more paper work, disease and care management, over-seeing and time dealing with Medicare for the millions of newly insured patients.

2. Coverage: The sheer act of providing coverage to more people would produce a new order of challenges. If access can’t be improved then there is still a problem of providing care. Medicare and Medicaid patients already indicate it difficult to find a physician, and coupled with the high attrition rate of doctors, finding healthcare providers to treat these new patients will be in increasingly short supply.

3. Cut in payments: Yes, there will be excessive decreases to Medicare reimbursements, around $112 billion in the ensuing years according to the Congressional Budge Office. There will also be a loss in tax breaks. These are viable methods the government issues to help hospitals meet their costs.

Why the Supreme Court Decision on Health Care Reform “Doesn’t Really Matter”.

At Forbes online, Dr. Bob Kocher and Dr. Mohit Kaushal argue why the Supreme Court decision on health care reform “doesn’t really matter”.

Find this article here: http://www.forbes.com/sites/kerryadolan/2012/06/20/why-the-supreme-court-decision-on-health-care-reform-doesnt-really-matter/

Here’s where things stand as we hear it from the many media sources: If the Court upholds the Affordable Care Act in its entirety, this will be seen as a positive for the President. If the Court strikes down some or all of law down could be a boon for the Republicans and Governor Romney’s campaign. Whatever the outcome, much punditry will follow.

The doctors write that the current and likely subsequent debate misses one essential fact: “the Supreme Court’s decision does not matter as much as political pundits think.”

Here’s why:

The American healthcare system is in the midst of intense experimentation and change that cannot, and will not be stalled by the whims of the judicial system.

The major forces behind the changes in our healthcare system are “rising costs, an older, sicker population and technological innovation,” and these show no signs of abating and do not depend on Federal legislation. Instead, they are fuelled by private sector demand, not “policy preferences” coming out of Washington.

So, according to the doctors, “while coverage may not come as soon as hoped for the uninsured, the systemic efforts to make our health system more affordable and higher quality will continue.”

Here are the things to look for:

Some changes, like the widespread replacement of paper records by electronic medical records, are visible from a patient’s-eye-view.

Other changes, such as changes in the relationship between insurers and hospitals are not immediately visible, but are “potentially even more profound.”

Some of the most important changes involve the financing of health care.

In the traditional way of doing business, insurers pay hospitals and physicians under a “fee for service” system – where providers are paid for the quantity of medical services provided, regardless of the outcome. HMOs grew in the 1990s in an attempt to fix these incentives, but patients hated their HMOs because they restricted choice without proving that they were delivering better care.

The current wave of experimentation, such as bundled payments for “episodes” of care, accountable care organizations (ACOs), and new penalties for excessive hospital readmissions are all tactics to try to fix these misaligned incentives and aim to cut costs and improve care for the patient, while preserving choice.

And here is what we don’t hear: Insurers such as United Healthcare, the nation’s largest private insurer, as well as Aetna and Humana, have pledged to follow many of the regulations anticipated under the ACA even if the law is repealed.

The doctors also note that even with congressional gridlock, CMS is driving innovation at the federal level, using its authority to experiment with a variety of demonstration projects that do not require congressional approval. Example: the current project to award bonus payments to Medicare Advantage plans which score well on the program’s Star rating system for providing better and more cost effective care.

There is also experimentation at the state level. Eighteen states representing 42% of the US population are in the process or have already laid the legislative groundwork to establish health insurance exchanges – creating a marketplace for individuals to purchase health insurance.

Again, here’s what we don’t often hear: “Many of these states, including California, have indicated that they plan to continue with the exchanges regardless of the Supreme Court’s decision.”

Finally, the doctors report that patient attitudes are also changing. Patients are increasingly worried about the costs of their care and taking steps to control it. “This means that they are more likely to scrutinize their health insurance benefits and opt for high-deductible health plans (HDHP). While attitudes can be slow to change, the inexorable force of the millions of patients choosing health plans that reward shopping for lower cost and better quality care will not be stymied by the Supreme Court’s ruling.”

The doctors conclude: “So while it is uncertain how the Supreme Court will rule, or how the ruling will impact November’s results, it is a certainty that our health system will continue on the path of more affordability, more integrated care, and more focus on patients because consumers are demanding these changes. These unassailable trends are led by the private sector and, if anything, will accelerate regardless of the Supreme Court’s views of the meaning of the Commerce Clause. Moreover, since the private sector contributes virtually all the profitability in the health system, it is a force far more powerful than politicians.”

New Website Offers Resources on State and Federal Privacy Laws

Check this out:

As described on the website: the George Washington University’s Hirsh Health Law and Policy Program, Health Information and the Law (HealthInfoLaw.org), with support from the Robert Wood Johnson Foundation, has developed a HealthInfoLaw.org to serve as a practical online resource to federal and state laws governing access, use, release, and publication of health information.

Find HealthInfoLaw.org here: http://www.healthinfolaw.org/home.

It is expected to be “constantly” updated, and the site will address “the current legal and regulatory framework of health information law and changes in the legal and policy landscape impacting health information law and its implementation with commentary and key documents.”

Here’s why:

“Health information law exists at the intersection of many crucial and interrelated fields: law, health care, consumer protection, information technology, public health, insurance. Each small change can trigger a daunting set of issues and challenges.”

The developers of the website offer a strong rationale for HealthInfoLaw.org:

“We are in an information revolution in health care, rapidly approaching an age in which all patient records and related information will be maintained electronically. Data on a scale only recently imaginable will pass between individuals and institutions and be used in ways we cannot yet predict as the current healthcare delivery system undergoes a major transformation towards a more robust, evidence-based endeavor highly reliant on health care data for purposes ranging from research to improved real-time care coordination. At the same time, access to, use and release of health information, particularly individually identifiable data, is highly regulated at both the federal and state levels."

“Although the move to electronic data raises new legal issues, it’s important to remember that many of the questions above have existed in some form for a long time. Some of the most pressing legal issues related to health information, such as privacy considerations and liability for health care quality stretch back hundreds of years, to the origins of modern medicine. However, several things make today’s landscape different. Our legal system is addressing the role of information in these age-old relationships in new ways, from the Health Insurance Portability and Accountability Act (HIPAA, 1996), the American Recovery and Reinvestment Act’s Health Information Technology for Economic and Clinical Health Act (ARRA HITECH, 2009), and the Affordable Care Act (ACA, 2010) to state regulations on health insurance exchanges.”

Some Patients Can Choose To Be Hospitalized At Home

The Kaiser Health News reports: Some Patients Can Choose To Be Hospitalized At Home.

Find the article, produced in collaboration with USA Today, written by Judith Graham (May 29), at http://www.kaiserhealthnews.org/Stories/2012/May/30/Graham-Hospital-At-Home.aspx.

KHN reports that "Hospital at home" programs fundamentally refashion care for chronically ill patients who have acute medical problems -- testing traditional notions of how services should be delivered when people become seriously ill.

There are a small number of these initiatives in place in the US: an Albuquerque, NM program, run by Presbyterian Healthcare Services (and highlighted by the KHN report), and programs in Portland, Ore., Honolulu, Boise, Idaho, and New Orleans offered through the Veterans Health Administration.

The concept has been adopted in Australia, England, Israel and Canada.

KHN says that “hospital at home” programs are getting attention in the US “with increased pressure from the national health overhaul to improve the quality of medical care and lower costs.”

According to research led by Dr, Bruce Leff, the director of geriatric health services research at Johns Hopkins School of Medicine in Baltimore who pioneered the concept, “hospital at home” programs can do both: improve care and lower costs.

In a study of 3 experimental “hospital at home” programs published in 2005 in the Annals of Internal Medicine, Leff demonstrated that patient outcomes were similar or better, satisfaction was higher and costs were 32 percent less than for traditional hospitalizations.

Go here to find Dr. Leff's study: http://www.annals.org/content/143/11/798.abstract.

KHN predicts that the model will become more common. Last year, the Cochrane Collaboration, an international organization that evaluates the evidence supporting health care interventions, published a review of 10 randomized controlled studies on hospital at home programs. That report reportedly “found that 38 percent fewer patients in these programs had died after six months, compared to those who underwent traditional hospitalizations.” 

Go here to find the Cochrane report: http://onlinelibrary.wiley.com/doi/10.1002/14651858.CD007491/abstract.

So what’s the problem? KHN reports that “Resistance from Medicare and private insurers is the biggest problem these programs face. Traditional fee-for-service Medicare does not pay for hospital at home services, although individual private Medicare Advantage plans may do so.” And then, for physicians, “doing hospital-level services at home sounds scary… and a big jump.”

But, according to KHN: “That may change” as hospitals and doctors form accountable care organizations (ACOs) that are promoted in the health care overhaul and call for providers to restructure how medical care is delivered.”

IT could be healthcare reform's highest hurdle

Politico reports that “IT could be reform's highest hurdle.”


Find the article, by J. Lester Feder, May 29, here: http://www.politico.com/news/stories/0512/76825.html.

While most followers of healthcare are awaiting the next big event – the Supreme Court ruling on the constitutionality of the Affordable Care Act, and in particular the survivability of the health insurance exchanges, Politico points out that even if they do survive the constitutional challenge, HIEs “could still be brought down by a much more mundane problem: information technology.”

It reports: “Even states that are solidly committed to pursuing an exchange are facing major logistical challenges in building the computer systems that will be able to handle enrollment when exchanges open for business in 2014.”

Here’s why: “the system that will actually connect people to the right coverage will have to “talk” to many other systems, and the systems don’t use a common language. This interoperability challenge extends to the federal level, where the US Department of Health and Human Services is responsible for a yet-to-be built federal “data hub,” that will combine tax information from HHS with the other information needed to establish that people are eligible for coverage. “Hardest of all” among the technology challenges is reportedly the Medicaid enrollment systems, remarkably: “many of which are not yet fully computerized.”

The report says that fewer than 20 states are moving forward to launch their own exchanges and that even for these, there is a concern “that the technology piece” will not be in place in time for them to open in 2014. The report cites experts who predict that “fewer than a dozen” states will be running full bore.

That shifts focus of the federal Department of Health and Human Services that is supposed to be in position to offer a “partnership” exchange for those states not ready or not willing to launch their own. “The need for real-time information creates a second problem for the exchanges. They have to build a way to integrate their system with the feds’ data repository — and that hasn’t even been built yet.”

HHS is overseeing the construction of its “data hub,” but technical specifications for transmitting data on the hub have not been worked out.

The report also cites a problem that there is “no standard format for private health insurers to give details on plan benefits and in-network providers to the exchange — key information an individual is going to want to know about a plan when enrolling in an exchange.”