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Tag: Individual mandate

Scenario Planning in a Post-ACO and Post-ACA World


In a prior post, I provocatively suggested that providers, hospital boards and policymakers should hedge their bets and prepare for the possibility of a “post-ACO world.”  If the Group Practice Demo’s disappointing results are any guide, the likelihood of a happy ending for accountable care organizations is on numerical par with Congress’ approval rating. While I like the mutual “win-win” theoretical construct that underlies ACO gain sharing, it also recalls a life-lesson: want you want and what you get are usually two different things.

So, if the Feds have to eventually retreat on the non-success of ACOs, what will be left in its wake?  More on that in future posts.

And while the uncertainty surrounding ACOs isn’t bad enough, I have also been astonished by the battered Euro, the appearance of hospital-employed cardiologists and the absence of a Lady Gaga Christmas album.  Accordingly, I have learned my lesson and assume nothing.

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Congress Passes Socialized Medicine and Mandates Health Insurance – In 1798

The ink was barely dry on the PPACA when the first of many lawsuits to block the mandated health insurance provisions of the law was filed in a Florida District Court.

The pleadings, in part, read:

The Constitution nowhere authorizes the United States to mandate, either directly or under threat of penalty, that all citizens and legal residents have qualifying health care coverage.

State of Florida, et al. vs. HHS

It turns out, the Founding Fathers would beg to disagree.

In July of 1798, Congress passed – and President John Adams signed – “An Act for the Relief of Sick and Disabled Seamen.” The law authorized the creation of a government operated marine hospital service and mandated that privately employed sailors be required to purchase health care insurance.

Keep in mind that the 5th Congress did not really need to struggle over the intentions of the drafters of the Constitutions in creating this Act as many of its members were the drafters of the Constitution.

And when the Bill came to the desk of President John Adams for signature, I think it’s safe to assume that the man in that chair had a pretty good grasp on what the framers had in mind.

Here’s how it happened.

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Understanding the Supreme Court’s Health Law Review

By agreeing today to hear challenges to President Obama’s 2010 health care law, the Supreme Court set the stage for a decision — probably in late June and in the midst of the presidential campaign — that could be among its most important in decades.

The case, which will probably be argued in March on a date still to be announced, is especially momentous because it not only will determine the fate of President Barack Obama’s biggest legislative achievement but also will cast important light on the Supreme Court’s future course under Chief Justice John Roberts on issues of federal government power.

The central issue — but not the only important one — is whether Congress exceeded its constitutional powers to regulate interstate commerce and to levy taxes when it adopted the so-called “individual mandate” at the heart of the health care law.

That provision would require millions of people starting in 2014 to buy commercial health insurance policies or pay financial penalties for failing to do so.

The court also agreed to decide a challenge to the Affordable Care Act’s provision essentially requiring states greatly to expand their Medicaid spending.

The court made clear that if it decides to strike down the individual mandate or Medicaid provision, it will also decide which of the 975-page law’s hundreds of other provisions should go down too, by divining whether Congress would have wanted some or all of them to be effective even without the voided provision or provisions.

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What if the Supreme Court Strikes Down the Individual Mandate?


Any ruling by the Supreme Court on the constitutionality of the Affordable Care Act’s controversial individual mandate isn’t likely for at least another several months, but it’s worth thinking about what might happen after the case is decided. The first scenario is easy: If the Court upholds the mandate, the ACA goes forward as planned to the continued objections of many conservative Americans and politicians. The second scenario is less clear: If the Court finds the mandate unconstitutional, do they find it severable from the rest of the law? If not, they’ll strike the whole ACA down. This seems like the least likely outcome. If, on the other hand, they do invoke severability, the ball is back in the White House’s court. The decision at that point would be whether or not health reform can be successful without the individual mandate.

The concern here is the death spiral first described by Nobel Prize-winning economist Joseph Stiglitz. In essence, if we don’t require everyone to buy insurance, then insurance will be disproportionately purchased by the sick, making it more expensive and leading many to discontinue coverage in a continuous cycle that drives the price higher and higher until no one can afford insurance any more and the system collapses. By contrast, getting everyone into the pool is seen as the only way to keep costs down and maintain the insurance system. So the question is: What happens if the Supreme Court strikes down the individual mandate? Does the Obama adminsitration wash its hands of health reform, proclaiming that it can’t be done without the individual mandate because costs will rise too rapidly and the insurance system will collapse, or does it forge onward and see what happens?

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Constitutional Serendipity

Serendipity is not a word one usually associates with the present raucous debate over the “individual mandate” of the Patient Protection and Affordable Care Act. Democrats tend to support both the mandate and the PPACA, while Republicans tend to oppose both. However, this “between the devil and the deep blue sea” approach, whereby one makes a Hobson’s choice between being tyrannized by a government command to buy health insurance, or seeing no comprehensive health reform enacted in a country that needs it, is a false dichotomy, serendipitously enough.

The PPACA offers comprehensive reform, including welcoming features such as guaranteed issue of insurance regardless of preexisting medical conditions. However, the fact that the PPACA has valuable features doesn’t automatically legalize any possible measure designed to fund the Act, including coerced health insurance purchase. As former Vermont governor Howard Dean noted in August 2010 on MSNBC’s The Daily Rundown, Vermont enacted a successful state health care program without an individual mandate; Dean emphasized, “And people don’t like to be told what to do.” This latter factor is not negligible in a country with a statue in New York Harbor dedicated to liberty. (Perhaps this is why a June 9, 2011 CNN poll shows 54% of Americans opposed to the mandate, and other polls report similarly.)

Our American liberty has various constitutional and legal underpinnings which can defend people from the federal individual mandate, and maybe even from state individual mandates. As for Congress’ power to tax for the general welfare: taxes and penalties, such as the “Shared Responsibility Payment”, the PPACA financial penalty for refusal to buy health insurance, are not just interchangeable “economic incentives”.

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The Untimely Death of Long-Term Health Insurance

The Administration’s decision to pull the plug on long-term health insurance in the new healthcare law (so-called Community Living Assistance Services and Support or, as it was known by healthcare insiders, CLASS) offers an important lesson.

As written, the law had three incompatible parts.

First, it required beneficiaries to receive at least $50 a day if they had a long-term illness or disability (to pay a caregiver or provide other forms of maintenance). That $50 was an absolute minimum. No flexibility on the downside.

Second, insurance premiums had to fully cover these costs. In budget-speak, the program was to be self-financing. Given the minimum benefit, that meant fairly hefty premiums.

Third, unlike the rest of the healthcare law, enrollment was to be voluntary. But given the fairly hefty premiums, the only people likely to sign up would know they’d need the benefit because they had or were prone to certain long-term illnesses or disabilities. Healthier people probably wouldn’t enroll.

Yet if the healthier didn’t enroll, the program would have to be financed entirely by the relatively unhealthy — which meant premiums would have to be even higher. So high, in fact, that even the relatively unhealthy wouldn’t be able to afford it.

End of story. End of program.

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The Health Care Reform Law: What’s the Big Deal?

I’m not an attorney, so I cannot help the federal judges struggling to figure out whether the individual insurance mandate in President Obama’s healthcare law violates the interstate commerce clause of the U.S. Constitution. But as a taxpayer (and formerly a professor of public policy), it’s hard for me to understand what all the fuss is about.

The Patient Protection and Affordable Care Act created a monetary incentive for all taxpayers to obtain health insurance. Beginning in 2014, people without insurance will pay more to the IRS than people with insurance. Like the tax code as a whole, the rules for calculating the size of the penalty are incredibly complex. But once the penalty is fully activated in 2016, a single individual with no dependents will pay an extra $695, or 2.5% of his or her applicable income, whichever is higher. An uninsured family of four with annual income of less than $110,000 will typically pay $2,085 more than it would if insured.

This tax penalty is known as “the individual mandate.” It’s an important part of the new law because starting in 2014, insurers are prohibited from denying coverage or charging higher rates based on preexisting conditions. Without the mandate, people might wait to buy insurance until they needed medical care. To keep insurance affordable for patients and profitable for insurers, healthy people need to pay for coverage before they get sick.

Various courts have viewed the tax penalty in different ways. But some have concluded that it is a huge encroachment on individual rights. As a ruling from the U.S. 11th Circuit Court of Appeals put it, “This economic mandate represents a wholly novel and potentially unbounded assertion of congressional authority: the ability to compel Americans to purchase an expensive health insurance product they have elected not to buy.”

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Why Do You Care Whether I’m Insured?

If you care a great deal, I’ll give you an account number you can use to make a deposit.

[Note to Self: Send this Alert to the folks at Commonwealth. Also to Nancy Pelosi and Harry Reid. CC Uwe Reinhardt as well. You never know what they might do. They certainly talk about this topic a lot.]

While you’re thinking about the initial question, here are a few follow-up questions:

Do you care whether I have life insurance?

What about disability insurance?

Homeowner’s insurance?

Auto casualty?

Auto liability?

What about retirement insurance? (A pension or savings plan.)

Do you care whether I keep my money at an FDIC-insured institution?

Or whether I bought an extended warranty on my car?

Or whether I bought travel insurance before taking my scuba diving trip to Palau?  (It pays off if you get sick and can’t go.)

I’m sure there are busybodies who would like to run everyone else’s life. But society as a whole has taken a more rational approach. We basically don’t care whether people insure to protect their own assets (at least we don’t care enough to make them do so). But we do care about events that could create external costs for other people.

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The Anti-Injunction Act Complications

The big news from [last Friday’s] two decisions was not that Virginia lacks standing; that was a problem lurking in that case from the beginning, a nettlesome issue going all the way back to Judge Hudson’s first opinion (in August 2010) rejecting the United States’s motion to dismiss on 12(b)(1) grounds. Virginia would have stood on much stronger ground had it also alleged an injury in fact from the effect of the minimum essential coverage provision’s necessarily pushing more Virginia residents onto the state’s Medicaid rolls, and thus imposing a significant financial cost on the state. But the Commonwealth failed to do this, instead resting on the claim that it had standing based on the alleged “conflict” between its Virginia Health Care Freedom Act and the individual mandate. This was a weak argument from the beginning, and the Fourth Circuit’s holding was entirely unsurprising.

What is surprising–perhaps not on the merits, but in relation to the attention the issue has received to date, from the courts and the parties–is the court’s holding in Liberty Universityv. Geithner that federal courts lack any subject matter jurisdiction over a suit seeking to enjoin enforcement of the individual mandate because such jurisdiction is precluded by the Anti-Injunction Act. In this respect, there are some important points worth noting:

* This is a potential problem in every lawsuit currently challenging the individual mandate. That is, if the Fourth Circuit’s analysis is correct, then the Supreme Court would lack jurisdiction to hear any private plaintiff’s claim that the minimum coverage provision exceeds Congress’s enumerated powers until after a taxpayer was assessed a penalty under ACA 1501, paid the penalty, and sued the federal government for a refund. The case thus would not reach the Supreme Court until somewhere in the neighborhood of 2015 or 2016.

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And What Happens if the Individual Mandate is Struck Down?

An alarming article in Politico.com looks at what could happen if the Supreme Court determines that the Affordable Care Act’s individual mandate provision is unconstitutional—something that the current conservative leaning of the Court seems to indicate is somewhat more likely than not.

Assuming that such a possible decision by the Court follows that of the Eleventh Circuit Court of Appeals in ruling that the mandate is unconstitutional but the remainder of the ACA may stand, the Politico.com article anticipates some potentially disastrous consequences.

The provisions of the ACA—some of them already in force—include guaranteed issue, elimination of annual and lifetime limits, and a ban on basing premiums on health status, essentially decoupling coverage and premiums from insurance risk. Without the requirement for almost everyone to have coverage, there will be nothing to ensure that the risk pool contains a large percentage of individuals in good health as well as those with medical problems, and nothing to stop anyone from waiting until they’re sick or injured to demand coverage.

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