It is generally accepted that the issue of the constitutionality of the health reform law and the individual mandate will be decided by the U.S. Supreme Court. The only real question has been when that will be.
Now it looks as if it will be during the Court's next term, which begins next week. That means oral arguments by March, and a decision by June – during the 2012 presidential campaign.
On Wednesday, the Justice Department petitioned the Court to hear what is probably the key case concerning the health reform law: the case filed in Florida by 26 state attorneys general and the National Federation of Independent Business (NFIB). A federal judge in
Florida ruled in January that the individual mandate was unconstitutional and struck down the whole law. In August, a three-judge panel from the Eleventh Circuit Court of Appeals in
Atlanta agreed 2-1 that the mandate was unconstitutional, but did not agree that meant the entire reform law should be struck down.
After losing in the Eleventh Circuit, the Obama administration had two choices on how to proceed: go back to the Eleventh Circuit and ask for an "en banc" (entire court) hearing, or head directly to the Supreme Court. Because of the makeup of the appeals court, a ruling by all the judges probably wouldn't have differed from the ruling of the panel of three, so the administration probably would have lost again and had to appeal to the Supreme Court anyway. But it was widely believed that the Justice Department might go through the process anyway, to slow down this high-profile case's journey and make it more difficult for the Supreme Court to rule before the 2012 election. An after-election ruling would probably be better for the Obama administration than a ruling next summer, since a win would energize Republican opponents, and a loss would invalidate what is commonly seen as the President's signature achievement.
In a statement, the Justice Department said, "The department has consistently and successfully defended this law in several courts of appeals, and only the Eleventh Circuit Court of Appeals has ruled it unconstitutional….Throughout history, there have been similar challenges to other landmark legislation such as the Social Security Act, the Civil Rights Act and the Voting Rights Act, and all those challenges failed. We believe the challenges to the Affordable Care Act…will also ultimately fail and that the Supreme Court will uphold the law."
It was a busy day at the Supreme Court. Earlier, the NFIB had filed its own appeal of a portion of the Eleventh Circuit's ruling. The NFIB's petition says the Court should strike down the whole reform law because the individual mandate cannot be separated from the rest of the law. "Until this court decides the extent to which the ACA survives, the entire nation will remain mired in doubt, which imposes an enormous drag on the economy," the NFIB petition argues. "Individuals, employers and states will lack a firm understanding of their rights and duties when planning their affairs. Providers of health insurance will have no idea what rules will govern their industry. Government officials will not know what regulatory measures need to be developed."
A little later, the 26 states also filed a petition. "Time is of the essence," wrote former Solicitor General Paul Clement, who is representing the 26 states. "The grave constitutional questions surrounding the ACA and its novel exercise of federal power will not subside until this court resolves them."
Meanwhile, last week, another challenge to the reform law was heard by a panel of judges of the Court of Appeals for the District of Columbia Circuit. It is unclear when a decision will come in that case.
So far one appeals court (Cincinnati) has said the individual mandate is constitutional, one (Atlanta) has said it is unconstitutional, and a third (Richmond) dismissed a case saying that the penalty for not having insurance is a tax, and tax provisions cannot be challenged until the tax is actually paid (which won't be until 2014).
The national agenda
The deficit-cutting work of the super committee and the President's proposals for cutting the deficit are absorbing a lot of the energy in
Washington. Still, two other important health-related issues are also on the agenda this fall. They include:
The "doc fix"—The latest patch for the broken Sustainable Growth Rate formula expires at the end of the year. Unless Congress acts, the fees for doctors treating Medicare enrollees will decrease by 29.5 percent. Almost no one believes cutting physician fees to that extent is a good idea, but the problem is that repeal or even a long-term patch would cost about $300 billion. Proposals floated to fund the "doc fix" include elimination of the quality bonus payment demonstration for Medicare Advantage plans, which was enacted as part of the health reform law to offset overall payment reductions.
The question of who will run the Centers for Medicare and Medicaid Services (CMS) – The recess appointment of CMS Administrator Don Berwick also expires at the end of the year, and Senate Republicans have said they will block his permanent appointment. Will the Obama administration find some kind of work-around? Or will Berwick be replaced?
Meanwhile, here's a high-level look at the early stages of the deficit-cutting work.
The super committee at work
The Joint Select Committee on Deficit Reduction – or, as it's more commonly called, the super committee – has now had several closed-door and several public meetings. No one is revealing much of anything – for example, after one closed-door meeting last week, the panel's co-chairs, Sen. Patty Murray, D-Wash., and Rep. Jeb Hensarling, R-Tex., said only that the 12-member group was making progress.
"We had a very productive conversation today,"
Murray said. "Clearly, we all understand the tremendous time challenge in front of us and the tremendous challenge on the part of our country today for us to come to an agreement. We had a great discussion today to begin to frame that."
Hensarling said, "Every day that the committee meets, I believe there is progress."
Still, their job seemed to be made harder when the President and House Speaker John Boehner (R-Ohio) made conflicting demands. In a speech last week, Boehner said that tax increases should not be a part of the deal. Obama, however, promised to veto any deal that includes entitlement cuts but no new revenue from high-income Americans.
The President's deficit-reduction proposals
Last week, President Obama announced his proposals for cutting the deficit. They include collecting $1.5 trillion in additional revenue and saving $1 trillion by scaling back military operations in
Iraq and
Afghanistan. In addition, here are some of his notable proposed health care savings:
Cuts of $248 billion in Medicare growth in the next decade, and $72 billion in Medicaid growth
Starting in 2017, new beneficiaries would pay higher deductibles before Medicare coverage of doctors' services and other outpatient care kicks in ($25 more in 2017, 2019 and 2021).
Higher-income beneficiaries would pay higher premiums for Medicare Parts B and D, and the income threshold would be frozen so more people would have to pay the surcharge. (About 5 percent of people with Medicare now pay the higher premiums. The proportion would grow to 25 percent.)
Starting in 2017, new enrollees would pay co-payments for home health care that is exempt from co-payments now.
"Medigap" supplemental insurance premiums would increase.
Drug manufacturers would have to give Medicare additional discounts for prescription drugs bought by low-income beneficiaries.
Starting in 2015, the ability of states to use Medicaid provider taxes to increase federal matching funds would be phased down.
The formula for calculating Medicare payments to the states would be revised.
Starting in 2013, Medicare payments to hospitals for bad debts would be reduced. and so would payments to teaching hospitals.
The Independent Payment Advisory Board, whose powers have not yet gone into effect, would be strengthened.
In general, the response to the President's proposals has not been positive from either the Democratic or Republican side. The executive director of the progressive group Families USA said the plan "shifts the burden to states and ultimately onto the shoulders of seniors, people with disabilities and low-income families who depend on the program as their lifeline." A senior vice president of the American Hospital Association said the proposals were "disappointing and aren't helpful in terms of moving forward." Sen. Pat Toomey, R-Penn. and a member of the super committee, said, "With the deadline looming, we do not have time to waste on political games and pushing big tax increase that will only make our economy weaker."
Jacob Lew, director of the White House Office of Management and Budget, was one of the few who publicly defended the proposals, saying, "If you look at the details of what's in the plan that the President is sending to Congress, there is a lot of pain, and it's spread – it's spread broadly and, we think, fairly."
Challenge: Duals
The issue of cutting the health care costs of dual eligibles – that is, people who qualify for both Medicare and Medicaid benefits – is getting a lot of attention right now. But for years, members of Congress and health policy experts have struggled to deal with the interplay of the two government programs, as well as attempts to reduce spending and ensure quality of care. Sen. Ron Wyden, D-Ore., highlighted this history during a Senate Finance Committee hearing on the subject last week. "We have been treading water on this issue literally for decades, when I had a full head of hair and rugged good looks, and I was a director of the Gray Panthers," he said, recalling discussions 30 years ago.
The pressure to cut the deficit and health care costs has renewed interest in the issue. Dual eligibles are some of the states' most expensive, chronically ill patients. They account for 16 percent of all Medicare beneficiaries, but 27 percent of the spending. They account for 15 percent of all Medicaid beneficiaries, but almost 40 percent of Medicaid spending.
At the hearing, the only witness was Melanie Bella, the director of the new Medicare-Medicaid Coordination Office. She pointed to coordinated care arrangements as a key element in controlling costs and promoting better care for dual eligibles. She said that of the 9 million duals, only 100,000 are currently in coordinated care programs (through either a Medicaid managed care arrangement or Medicare Advantage-type arrangement). Her office's goal is to get one million into coordinated care in 2012, then build on that progress.
To that end, states have until Oct. 1 to submit letters of intent for demonstration projects on aligning their Medicare and Medicaid payment systems. Fifteen states have already received grants of up to $1 million to test their own care-coordination programs, which vary in the way they integrate payments and contract with different types of private health plans.
Meanwhile, a new report commissioned by the industry group America's Health Insurance Plans and written by Kenneth Thorpe, professor of health policy at Emory University, has found that as much as $125 billion could be saved over the next decade by enrolling dual eligibles in team-based coordinated care programs. Here are some more of the report's findings:
"Over half of all dual eligibles are under treatment for five or more chronic conditions."
"Some of these conditions, including diabetes, pulmonary disease and hypertension, are potentially manageable."
"Current Medicare and Medicaid policies provide little incentive for the states to rely on health plans and team based care programs."
Thorpe proposes that states enroll every dual in a health plan (but give them the choice to opt out), let health plans design their own evidence-based approaches (must include preventive care, transitional care, medication management, and other specific functions), and make health plans responsible for "coordinating, integrating and developing each of the care-coordination functions."
"States could also contract with other entities such as community health teams or other forms of medical homes."
The paper concludes, "Expanded reliance on health plans and other coordinated care approaches for dually eligible beneficiaries can achieve significant savings while improving quality of care….Policymakers should seriously consider greater reliance on these strategies as action on deficit reduction initiatives moves forward."
What health insurance data will do
For the first time, private sector health insurance claims data will be available just as Medicare claims data is available to policymakers, regulators, researchers, analysts and consumers. Humana and three other health insurance companies – Aetna, Kaiser Permanente and UnitedHealth care – have agreed to supply their claims data to the newly formed Health Care Cost Institute, an independent, nonprofit entity "committed to creating the nation's most comprehensive source of information on health care costs and utilization, and promoting research on the drivers of escalating health care costs and utilization in the U.S." The data, of course, will be de-identified. It will include more than 5 billion medical claim records representing more than $1 trillion of health care activity from more than 5,000 hospitals and a million service providers from 2000 through the present. And it will be updated regularly to ensure its usefulness.
HCCI's mission is to promote independent research and analysis on the causes of rising health spending, to provide more transparent information on what is driving health care costs, and to help the nation get greater value from its health spending.
The institute's governing board is made up of national physician leaders and academic researchers, many of them well known, including Jonathan Gruber, a health care economist at MIT, Harvard Provost Alan Garber, Harvey Fineberg, president of the Institute of Medicine, and Elizabeth Nabel, president of the Brigham and Women's/Faulkner Hospitals.
Starting in 2012, the institute hopes to produce scorecards of trends in health care utilization and cost.
Steep cost climb in 2011
The Kaiser Family Foundation's annual survey of employers' spending for health care coverage showed the average cost of a family plan increased 9 percent this year, to $15,073 – three times the growth in 2010. Coverage for single employees grew 8 percent, to $5,429.
Workers paid an average of $921 toward the premium of single coverage and $4,129 for family plans.
The survey also shows the cost of family coverage has more than doubled since 2001, when premiums averaged $7,061 (this is compared to a 34 percent gain in wages over the same period).
The survey includes data on both fully-insured and self-funded plans. It shows that 60 percent of covered workers are in partially or completely self-funded plans, a trend that has been increasing. (Note: The fact that premiums are increasing for both fully-insured and self-funded employer plans is evidence that these increases are being driven by rising claims costs.)
Half of workers at small firms with individual policies now have annual deductibles of $1,000 or more, compared with 16 percent in 2006. At large firms, the share has grown from 10 percent to almost a third.
Employers are mainly coping with rising health-care costs by moving their workers into plans with higher out-of-pocket costs like deductibles, co-pays, and co-insurance.
The political arguments over health reform's contribution to the cost increases are already starting. In the past year, some new mandates have gone into effect, such as the requirement for new plans to offer preventive care without cost-sharing and for children to be able to stay on their parents' health plans until age 26. The Kaiser survey showed that about a quarter of people with employer-sponsored plans gained the preventive-care benefit last year.
Karen Ignagni, CEO and president of America's Health Insurance Plans, said, "This report is just the latest warning that far more needs to be done to address the rising cost of health care. Policymakers in
Washington and the states need to focus on all of the factors that are driving premium increases: soaring prices for medical services, changes in the covered population that has resulted in an older and sicker risk pool, and new benefit and coverage mandates that add to the cost of insurance. Reducing health care cost growth will make it easier for consumers and employers to afford coverage, ease the burden on federal and state budgets, and put our vital safety net programs on sustainable and fiscally responsible paths."
Meanwhile, early responses to an annual survey released by the benefits firm Mercer last week say that per-employee health care benefit costs will increase 5.4 percent in 2012, the smallest increase Mercer has seen in 15 years. Employers surveyed said they have been trying to contain costs by raising deductibles, increasing employee contributions, and moving employees to lower-cost health plans. They also reported that if they made no changes to their plans, their benefit costs would increase by 7.1 percent instead.
More grants to states for rate review
Last week, the Department of Health and Human Services awarded $109 million in grants to 28 states to help them strengthen their rate review processes. HHS already had awarded $46 million to 45 states and D.C. a year ago.
The health insurance industry group AHIP responded in a blog post, "Highly publicized provisions such as premium rate review may make for good sound bites, but literally do nothing to address the soaring cost of medical care." Robert Zirkelbach, an AHIP spokesperson, said, "The current focus on rate review ignores the soaring cost of medical care that is driving up the cost of coverage and taking up a greater and greater share of federal and state budgets."
Steve Larsen, director of the Center for Consumer Information and Insurance Oversight, said that the rate review process "at a minimum" ensures that premiums "really reflect underlying costs."
Meanwhile, an analysis of government data by AHIP shows that premium increases rose in direct proportion to health care cost increases from 2000 to 2009.
Health reform briefs
Two surveys – one by the government and one by Gallup – show that the number of young adults 19-25 covered by insurance has grown by about a million since a provision in the health reform law allowing them to stay on their parents' policies took effect.
The Kaiser Family Foundation has released a 50-state survey that provides a comprehensive look at state Medicaid managed care programs. The survey found that two-thirds of Medicaid enrollees nationally are in comprehensive managed care programs. It also documents their diverse approaches.
The National Association of Insurance Commissioners wrote a letter last week to the super committee, asking members to not prohibit first-dollar coverage in Medigap supplemental insurance policies as some deficit-cutting groups have recommended. They said that change would be disruptive to seniors, particularly if it was applied to existing policies.
The
Institute of Medicine says that on Oct. 7, it will announce its recommendations on "essential health benefits" to the Department of Health and Human Services. The essential health benefits package that is then determined by HHS will be the minimum health insurance plan offered in state-based health exchanges beginning in 2014.
