Supreme Court Review of Healthcare Reform Legislation

The U.S. Supreme Court will begin hearing arguments this week on four questions under consideration in relation to the Affordable Care Act (ACA) legislation:

  • Whether damages can be incurred (and therefore prosecuted) based on the minimum essential coverage provision before it is implemented in 2014.
  • Whether it is within Congress’ authority to enact the individual mandate for healthcare insurance coverage (also referred to as the minimum essential coverage provision).
  • Whether the minimum coverage provision can be removed from the remainder of the ACA if it is found to be unconstitutional.
  • Whether the Medicaid expansions amount to unconstitutional coercion, since the expansions are mandatory if states elect to continue to participate in the program.  The Medicaid expansion will also be evaluated for severability from the ACA if it is found to be unconstitutional.

If it is deemed that the first question, which relates to the Tax Anti-Injunction Act (AIA), is not relevant to this case, the Supreme Court will move forward with a review of the other three questions as scheduled.  If the Supreme Court finds that the AIA is relevant (or essentially that damages can be incurred and prosecuted prior to being assessed), then the court may wait until after the individual mandate and Medicaid expansion go into effect in 2014 before ruling on the other three questions.  At that time, additional cases would have to be established based on damages incurred by these two issues.

The government will argue that the individual mandate is within Congress’ constitutional rights based on the following:

  • Healthcare falls within the definition of interstate commerce (Americans spend almost $2.5 trillion annually on healthcare[1]), which is within the jurisdiction of Congress.
  • Congress has the power to make laws that are “necessary and proper” for executing other laws, which the government will argue provides authority to issue the individual mandate.

Opponents will argue that the individual mandate is outside of Congress’ constitutional authority because:

  • Congress cannot force citizens to purchase services from private entities (commercial payors), and doing so violates personal freedom.
  • Inactivity (or, in this case, individuals choosing to not purchase healthcare insurance) is outside of the scope of Congress’ authority and cannot be regulated.

If the individual mandate is found to be unconstitutional, it will be ascertained whether the mandate is severable from the ACA legislation.  The government will argue that there are only two areas of the ACA legislation that are related:  (1) commercial payors must cover people with preexisting conditions and (2) they must not charge them higher premiums for the preexisting conditions.  Supporters of ACA legislation acknowledge that these two conditions are not feasible if there are not enough individuals participating (and therefore purchasing) healthcare insurance, offsetting the higher cost of insurance.  Those opposing ACA legislation will claim that the individual mandate is interwoven throughout the entire ACA legislation, making the entire legislation unconstitutional if the individual mandate is found to be unconstitutional.

Finally, the Supreme Court will determine whether the Medicaid expansion is unconstitutional.  So far, only one court has heard this case and upheld the Medicaid expansion on the grounds that Medicaid is a voluntary program; therefore no coercion exists, and the federal government has a right to place conditions on states receiving federal funding.  The issue here centers on coercion.  The government will argue that states can opt out of the program or receive federal dollars for the program in other ways.

Implications

Possible outcome scenarios of the Supreme Court’s ruling are shown in the table below.

For the purposes of considering the scenario in which the ACA legislation is ruled unconstitutional, ECG believes that much of the recent direction and work in the healthcare market would not be impacted.  This is largely due to an economic driver and general agreement across healthcare stakeholders that healthcare costs and cost escalation are not sustainable.

If ACA legislation is found unconstitutional, some of the effects may include the following:

  • A growing uninsured population.
  • No funding for systems (e.g., health insurance exchanges) that would facilitate broader participation in healthcare insurance coverage.
  • Continued discrimination by payors against patients with preexisting conditions, which may exacerbate insurance cost increases.
  • Loss of funding for federal program care delivery innovation and research innovation.

The effective repeal of ACA legislation will not alter the focus on cost-reduction efforts, nor will it make the demand for improved patient outcomes go away.  The question for the industry will be whether healthcare costs can be decreased and patients’ outcomes improved by the private sector alone.

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