As the Supreme Court considers the testimony presented at the recent hearings over the constitutionality of certain provisions of the Patient Protection and Accountable Care Act, the debate continues to escalate over the role that individuals, business and the government should play in the “commerce of health care.”
Most industry experts agree that PPACA is first about insurance reform and the expansion of coverage to some 30m Americans; yet, detractors have criticized the legislation for failing to incorporate any elements that would serve as a catalyst for reducing costs, improving quality and restructuring a misaligned system that has been paid to treat illness rather than prevent it.
In the last two years, hundreds of millions of private and public dollars have been invested as stakeholders adjust to an uncertain but radically changing delivery system. States are in various stages of constructing purchasing exchanges. Physicians and specialists are choosing to consolidate, often with hospitals leading the process to create integrated delivery systems and restore the role of coordinated care through Patient Centered Medical Homes and Accountable Care Organizations. Employers are waiting and watching — seeking greater regulatory clarity while slowly complying with a chronological time-line of new rules and expanded coverage requirements.
Municipal, state and national budget deficits continue to loom large. As Europe battles over mounting sovereign debt and the suffocating burden of generous public pension and healthcare entitlements, flash points are erupting across the USA as municipal, government and collectively bargained workers brace to defend retiree benefits in the face of legislative efforts to more aggressively reduce public spending. The Federal government is at a tipping point. Facing a $38T net present deficit in its funding for Medicare and $15T of public debt, PPACA was scored by the CBO as reducing $140B of public debt by 2020. To achieve this, the government needed to drive $940B of taxes, assessments and spending cuts and fall within estimates of the number of newly insureds likely to qualify for Federal subsidies offered through public exchanges. The promise of PPACA was to reduce the deficit, not further contribute to it.Continue reading…
If the Court throws out both the “individual mandate” (the rule requiring that virtually all Americans buy insurance, or pay a fine), and the provision that insurers must cover all applicants, and cannot charge higher premiums, even if a new customer has just been diagnosed with cancer? This might sound like the end of reform, but in fact, many of the most valuable reforms in the legislation would almost certainly still stand–including those that will change the way we pay for care, reducing costs, while lifting quality. Under the Affordable Care Act (ACA), hospitals will continue to find ways to reduce preventable errors–or face financial penaltie.. Doctors who succeed in managing chronic diseases, keeping their patients out of the hospital, will receive rewards. Medical students willing to practice in underserved areas “Where No One Else Will Go” will receive scholarships, and their ranks will grow. New funding will double the capacity of Community Health Centers that can provide medical homes for many who now receive their care in an ER. Reform will go forward.
There is, of course, the possibility that the court could declare the entire Affordable Care Act unconstitutional, but this seems extraordinarily unlikely. Too many planks in the law already are being implemented, and patients are benefiting. As Henry J. Aaron pointed out in an earlier post on this blog, overturning the law would be an “Rx for Chaos.”
Still, even if the judges “only” throw out the mandate and the requirement that insurers cover everyone, the results will be, as former Obama administration adviser Ezekiel Emanuel recently put it in a New York Times opinion piece “less than optimal.” (Unlike Rahm Emanuel, Zeke is known for understatement.)
Under this scenario, premiums for those who do buy insurance would climb because, without the mandate, insurers could no longer count on millions of new, healthy customers. Instead of “the 32 million Americans predicted to gain coverage under the health insurance reform act, only around 16 million Americans would gain coverage,” observes Emanuel.
This morning’s post by Matt Yglesias notes a fairly obvious but important issue that bears attention.
The comportment of conservative Supreme Court justices in oral argument leads many people to seriously consider what would happen if ACA is crippled or struck down. (Like Jonathan Cohn, Henry Aaron, David Cutler, Charles Fried, and Jonathan Chait, I was appalled by the oral argument. You can read my column at healthinsurance.org for more on that subject.)
Several commentators assert, or at least have mused, that overturning ACA might improve the prospects for a single-payer system. It’s easy to see why one might think so. Single-payer is less vulnerable to the commerce-clause challenge that bedevils the mandate. Outright failure of ACA would discredit bipartisan, market-based strategies within many core Democratic groups. The political and organizational simplicity of single-payer is appealing, too. Killing ACA heightens the contradictions of our fragmented and costly health care financing system, while taking off the political table some of the most workable strategies for incremental reform. Absent a serious and workable alternative, Medicare for all might look surprisingly attractive some years from now.
Still… I just don’t see it.
In the first place, I am confident that a smart and determined conservative judiciary would entertain new constitutional challenges to a single-payer system. Such a system would end or would damage much of the private insurance industry. It would reorder relations between the states and the federal government. It would upend self-insurance arrangements under ERISA, and more. If you believe ACA’s 2,700 pages was long and complicated, wait until you see the junk DNA that would accompany a politically and administratively viable single-payer bill. That’s fertile legal ground for opponents, even absent the current political polarization of the federal judiciary.
Consider these two scenarios.
What if the Supreme Court:
1). Strikes down the requirement that everyone buy insurance, or pay a penalty (a.k.a. “the individual mandate”), but leaves in place the rule that insurers are required to insure everyone — including those who are suffering from a preexisting condition?
or 2). Throws out both the individual mandate and the provision which says that insurers cannot either deny coverage , or charge higher premiums, if someone is already sick?
Begin with the first scenario: you are not forced to buy insurance, but when you get sick, insurers will be forced to cover you, charging the same rates they charge healthy people in your community (a.k.a. “community rating”).
What would happen?
What would individual health insurance cost if the court strikes the mandate down and still requires insurers to cover everyone?
With the Supreme Court justices sounding like they might strike the mandate down, this is a question I’ve been getting a lot lately.
I have pointed to New Jersey as a real life example of what can happen when insurance reforms take place but there is no incentive for consumers to buy it until the day they need it.
In 1992, New Jersey passed health insurance reform that required insurance carriers to either offer individual health insurance on a guaranteed issue basis or pay an assessment to carriers that did. Other elements of the legislation were:
- Guaranteed coverage and renewability for all eligible people regardless of their health status. A pre-existing condition exclusion does allow insurers to limit coverage during the first 12 months (a limitation which is not contained in the Affordable Care Act).
- Guaranteed renewal of policies, provided (1) the insured does not become eligible for coverage under a group plan; (2) premiums are paid in a timely fashion; and (3) no fraud is committed by the insured.
- Community rating of the premiums, with variation allowed only for family status (single, adult plus child, husband and wife, and family). (The Affordable Care Act allows rate variations of up to three times from young to old.)
- Standardized insurance plans, referred to as Plans A, B, C, and D (indemnity options) and a single HMO plan.
There is no doubt that a state can constitutionally require citizens to have health insurance. Why, then, is the Supreme Court fussing over the constitutionality of the individual mandate provision of the Affordable Care Act?
The answer is simple. States have plenary authority to legislate on matters of public policy. The national government, however, is a government of limited powers. It cannot constitutionally act unless the Constitution authorizes it to do so. The central question in the case now pending before the Supreme Court is whether the Constitution grants Congress the authority to require individuals to have health insurance. Opponents of the law argue that it exceeds the legitimate authority of the national government.
The government defends the constitutionality of the individual mandate on the basis of the Commerce Clause of the Constitution, which provides in Article I, Section 8, that Congress shall have the power “to regulate Commerce … among the several States.”
Over time, the Supreme Court has held that under this provision Congress can constitutionally regulate activity if, in the aggregate, it has “a substantial economic effect on interstate commerce.” Moreover, as Justice Rehnquist explained in 1995, the Court’s role in determining the constitutionality of federal legislation under the Commerce Clause is limited to deciding whether Congress “had a rational basis … for concluding that a regulated activity sufficiently affected interstate commerce” to merit federal action.
Sharp questioning in oral arguments before the Supreme Court raised serious questions about whether the “individual mandate” — the requirement that people carry health insurance — will survive.
At issue is Obamacare’s central requirement that every American buy health insurance or pay a penalty. Critics say this is an unprecedented expansion of federal power — that if the government can force people to buy insurance, it can force them to buy anything.
Supporters, including me, say the mandate is just a logical extension of federal authority to regulate this market — a market that everyone eventually participates in at one time or another. We also know that if the mandate is struck down chaos is inescapable.
Under one scenario, the court would invalidate the requirement while leaving the law’s many other rules and regulations in place.
In that event, insurance companies would have to insure anyone who asked for coverage — but they would be barred from charging premiums equal to a best guess of what the new customers will cost.
Limiting how much insurers charge can work, but only if the mandate is in place — if everyone, the healthy as well as the sick, has to have insurance. It can’t work if people can go without insurance until they get sick and only then call up their friendly insurance broker and say “Cover me.”
So, Congress would have to do something. But what? One option would be to repeal the parts of the law that the Supreme Court left standing. Finding the votes to repeal the health reform is unlikely, as the next Congress is almost certain to be closely divided.
In politics, a month is a lifetime, and 7 months is an eternity. It’s four months from now to late June when the Supreme Court issues its ruling on the health law, and it’s several months until the election.
No one knows what will happen between now and the election. But whatever occurs, it will be a psychological and political time.
Democrats will put on a brave face. They will say it’s not over until it’s over, that the individual mandate was originally a Republican and Romney idea, that the justices will come to their senses, that this is a moral not a constitutional issue.
Republicans will say that the health law is a train wreck, that it was rooted in ego and arrogance of an overly ambitious president, that Democrats poisoned the whole politics process by completely ignoring the other party and the American public, and that the whole idea of individual and Medicaid mandates is toast.
If they are smart, and there is no guarantee of that, the GOP will issue a detailed alternative plan resting on incremental market reforms with proper government oversight.
“Inaction “ on Massive Scale
Over the next seven months, we are likely to have “inaction,” if I may borrow a term from the hearings, on a massive scale.
In 2009, when someone asked Nancy Pelosi a question implying that health reform legislation might be unconstitutional, she replied: “Are you serious?”
Pelosi wasn’t alone. At the outset, many legal scholars considered the challenge to the Affordable Care Act (ACA) both “implausible” and “frivolous.”
But over the next two years, the notion that state courts might strike down the ACA took on a life of its own. Most people had only a hazy idea of what was actually in the legislation; nevertheless the idea of “health reform” inspired heated rhetoric. Soon, state attorneys general and governors responded to the political opportunities, banding together to make what Slate Senior Editor Dahlia Lithwick calls, “novel arguments in the form of what was always a constitutional Hail Mary pass … It’s no accident that until the lower district courts started striking down the act, none of the challengers really believed that they could succeed.”
Yet somehow, this week, the highest court in the land is hearing oral arguments in a case that even supporters viewed as a long shot. How did this happen?
The media played a major role, fanning political passions by quoting every challenge – including the absurd claim that the bill called for “death panels.” As Rachel Maddow observed Monday night: this case was “built up as the Super Bowl of American partisan politics.” Thus, the Supreme Court was left with little choice: it had to hear “The Case of the Century.”
First, trying to predict how the Court will rule is at best just speculation. I know what Justice Kennedy said both today and yesterday and it certainly doesn’t look good for the Obama administration and upholding at least the mandate.
But I will remind everyone, based upon oral arguments, most Court watchers expected a ruling in favor of the biotech industry on a recent case involving health care patents. “Surprisingly,” the Court ruled against the industry.
Whatever the justices are now thinking, there isn’t a lot anyone could do differently until we actually get a ruling and know exactly what gets thrown out, if anything, in the 2,800-page law.
But if the mandate is overthrown, then what?
First, exactly how the Court rules on severability will be critical. What could go out with the mandate?
The Obama administration has smartly tried to build a firewall around the rest of the Affordable Care Act (ACA) by arguing before the Court that only the insurance reform elements of the bill should fall if the mandate goes down—that the mandate is only the quid pro quo for the insurance industry in exchange for taking all comers. That looks to me like the most logical outcome of overturning the mandate—but my perspective is one of an insurance veteran not a Court expert.