The ACA Decision Is In

The Supreme Court decision on the constitutionality of the Affordable Care Act is finally in.

Before it was announced, most people seemed to think that the individual mandate would be overturned. 

It did not play out that way.  The individual mandate was upheld – not under the Commerce Clause of the Constitution, but as a tax.  Justice Roberts proved to be the swing vote.

Also left intact are the expansions of Medicaid eligibility and, as a result, the entire law, with all of its consumer protections.

However, there is a major caveat here.


States can opt out of the expansion of the Medicaid program without jeopardizing the rest of its Medicaid funding.  In other words, the Court is allowing a state to refuse to expand Medicaid eligibility to 133% of poverty and to refuse to cover all of the ACA-mandated basic benefits in its program.  If it does, it will only have to give up the new federal money that pays for these benefits.

The consequences may be devastating for lower income people if a state decides to make them scapegoats for a decision it finds otherwise unpopular, and I will be writing more about this in a couple of days. 

The Court's decision is considered to be a major political victory for President Obama.  That may or may not prove to be true in the short term.

And the biggest blow may be felt by those who still believe that a private health insurance marketplace – unsubsidized by the government – has a bright future in America. 

Here’s why.

While the individual mandate will affect as little as 2% of the population directly (because most people who can afford insurance already have it), it was also government’s the last gasp “carrot and stick” approach to convincing people to buy a product – health insurance – that few people actually want or like.

“If you buy insurance,” the federal government has said through ACA, “we’ll subsidize it to the tune of a $9,000 tax credit for a family of 4 making $60,000.  If you refuse, we’ll impose a tax penalty of $2,085 on you.”

“No deal,” said 61% percent of Americans in a poll released this week.  If insurance were popular, would people have to be forced to buy it?

That’s why John Boehner has already announced that he will try to repeal the mandate through legislation, and this will likely become a major political campaign issue this year.

The truth is that ACA is going to have little effect on overall health spending in America, and even with the individual mandate in place the share of health costs paid by private insurance is going to go down. 

To understand why, take a look at the 2012 health spending projections made by CMS personnel and reported in the article entitled National Health Expenditure Projections, published online by Health Affairs in June 2012 and in the July 2012 print issue. 

CMS projects that overall health spending – now at $2.6 trillion a year – will increase by over 62%, or 5.7% annually, through 2021, to $4.5 trillion per year.  The ACA effect?  Under 5% of that, or a cumulative 3.1%, well within the rounding error!   

With two exceptions, ACA won’t change too dramatically who pays the bill.  As is clear from the chart above, only two categories of payers will see their share shift by even 2%.  The first is the Federal share of the Medicaid program, largely because the federal government was paying 100% of the cost of the Medicaid expansion.  The second is the out-of-pocket, or self-pay, share, largely because fewer people would be uninsured.

The biggest surprise?  The share of health expenditures to be paid by private insurance goes down by 1% over the next ten years, in spite of the individual mandate that everyone who can afford it must carry health insurance!

What this means is that even with ACA upheld, we will continue our excruciatingly slow and tortuous march toward a governmental payer, Medicare or Medicaid for all, basic health care financing system.  But for "Medicare for all" advocates – it probably won’t happen in your lifetime.

For all the arguments I and others will make in the coming days that the impact of ACA and the Supreme Court’s ruling on healthcare financing may now be overstated, another truth is that it remains the most significant piece of health care financing legislation to pass Congress since Medicare and Medicaid.

And that the Supreme Court has affirmed this.

This is the first in a series of five OHPM columns on the impact of the Supreme Court decision on the Affordable Care Act.  Tomorrow: What the Decision Means for You  

Holding Your Breath

Here’s why you don’t need to be holding your breath while awaiting the announcement of the Supreme Court’s decision on the Affordable Care Act.

Its immediate impact on you may be a whole lot less than you think.

And here’s why you should be holding your breath.

How the Court rules could ultimately determine whether private health insurance or public health insurance is the way we finance health care in the future.

The reason is this.  ACA expanded both the role of private insurance and public insurance in providing healthcare coverage in the future.  It added a projected 13 million people to the private insurance rolls and 17 million to Medicaid. 

The 13 million were added to private insurance primarily through a mandate that individuals who can afford it buy insurance.  The 17 million were added to Medicaid through a mandate that the states expand the Medicaid-eligible population.

The Supreme Court was asked to rule on the constitutionality of both mandates at the same time. 

If it chooses one over the other – by finding one expansion constitutional and the other unconstitutional – it may well determine just how health financing unfolds for decades to come.

Here are a few things to keep in mind as you listen to the result.

• Despite all the rhetoric, ACA will have little long term effect on overall health spending.  The cost of health care services is projected to rise by an average of 5.7% per year over the next ten years, from $2.6 trillion to $4.5 trillion.  The amount that the entire Affordable Care Act will contribute to this increase is not 100%, or even 50%.  It is around 5% – or an average of three-tenths of 1% per year.

• The share of the nation’s health care bill that private insurance will pay in 2011 is 34 percent, much of which is either paid or subsidized by government.  If all the provisions of the Affordable Care Act – including the individual mandate – remain in place through 2021, then private insurance will pay 33% of the bill, one percent less than it pays today.

One reason – the individual mandate, at the crux of the rest of the legal challenge to ACA, will affect fewer than one in 50 Americans.

• States have claimed that the Medicaid expansion is the real budget back-breaker of the Affordable Care Act.  But a majority of the new Medicaid costs that states attribute to the Affordable Care Act are actually the costs of enrolling currently eligible people.  The Medicaid bill is going up either way; the only question is how big a share of new costs the federal government will pay.

The ACA decision may well be a momentous one politically, but I’m not really convinced about this. 

The only truly “politically framed” issue in the whole debate has been about the fairness of the individual mandate.  Presidential candidates Obama and Romney both opposed it, while public officials President Obama and Governor Romney both supported it.  Maybe one of them will get a lasting boost from the decision about its constitutionality; maybe not.

What will matter more for public policy in the near term is this:  whether either of the provisions, if ruled unconstitutional, is found to be severable from other parts of the law.  That’s because many other parts of the law, such as the consumer protections and the Medicare expansions, are popular and affect most of the voting public.

But neither of these things will matter most in the long term.  What will matter down the road is what we learn from the ruling about the fundamental health financing policy choice of at least the last fifty years – public or private?    

I’ll be looking at this question and more in a series of five OHPM columns that will be published over the next few days. 

The first column will be out tomorrow, shortly after the decision is announced. 

The second, on Friday, will be entitled What the ACA Decision Means for You.

The third, on Saturday, will discuss the implications of the ACA decision for the future of private health insurance.

The fourth, next Monday, will discuss the implications of the ACA decision for the future of Medicare and Medicaid.

The fifth, next Tuesday, will take a look at the post-ACA world for health, public health, and mental health policy.

Of course, if the Court delays its announcement at the last minute, then the columns' publication will be postponed as well. 

In the meantime, let’s just take a deep breath and see what the Court has decided.

If you have questions about this column, please contact gionfriddopaul@gmail.com.  Paul  Gionfriddo will be presenting on the implications of the Supreme Court's ACA decision on Friday, June 29, at noon, at the Mental Health Association of Palm Beach County.  For more information, click here.

Good News

Special Note:  The Supreme Court's decision on the Affordable Care Act is expected soon, and when it comes there will be implications for us all.  The OHPM publication schedule may change that week to provide timely analysis, and may publish more than once.

I remember how surprised I was the time I was told that a member of my family had hit his lifetime limits on some of his health insurance benefits.  He had about sixty more years of life expectancy!  I knew then that capping health insurance benefits could be a cruel and bankrupting blow to those who need them the most.

That’s why Monday’s announcement by UnitedHealthcare that, no matter what the Supreme Court decides, it will keep in place some of the new  Affordable Care Act-mandated consumer protections was good news.

As reported in Kaiser Health News, the nation’s largest health insurer said that it would keep free preventive services, allow children up to age 26 to stay on parents’ plans, and have no lifetime limits, among other things.

Humana and Aetna quickly followed with similar announcements.

These ACA provisions have already helped millions.

Around 25 million Medicare recipients alone used free preventive services they obtained through ACA in 2011.

And according to a report just issued by the Commonwealth Fund, 6.6 million young people up to the age of 26 are covered on their parents’ health insurance plans as a result of ACA.  This alone may already account for as much as a 2% reduction in the percentage of people who are uninsured. 

UnitedHealthcare’s announcement will be welcomed by the nine million customers it directly affects.

It may feel like a slap in the face to the President of the National Association of Insurance Commissioners, Kevin McCarty of Florida.   Just last week in the Miami Herald  he offered up a convoluted but spirited defense of insurance company overcharges to businesses and consumers when he dismissed ACA as “uninformed tinkering with the health care market.”

Not so fast, Commissioner McCarty. 

The insurers' announcements might also suggest something more – that those consumer provisions are clearly severable from the rest of the law. 

This could be very important.  If the Court finds either the individual mandate or the Medicaid expansion unconstitutional, severability could save other parts of the law – such as closing the Medicare donut hole – too.

There are now at least three good arguments why the Court may have to sever at least some parts of the law.

First, as is the case with almost every politically contentious law, ACA was an amalgam of legislative initiatives that were melded together into one bill.  Closing the Medicare donut hole, expanding Medicaid, funding prevention, and enacting a program of long term care insurance all stood on their own long before they were put together in one omnibus ACA bill.

Second, some provisions of the law have already been implemented (the consumer protections), modified (the prevention fund), or effectively repealed (the long term care insurance program) without affecting either the individual mandate or the Medicaid expansion.  

Third, the conservative Justices of the Court have been clear that when sections of a law can stand on their own, they should remain in place if even other sections of the law are ruled unconstitutional.

Here’s the way Justice Roberts, writing on behalf of a 5-4 majority that included Justices Scalia, Thomas, Kennedy, and Alito spelled it out on page 28 of the Opinion of the Court in Free Enterprise Fund v. Public Company Accounting Oversight Board, (2010):

“Generally speaking, when confronting a constitutional flaw in a statute, we try to limit the solution to the problem,” severing any “problematic portions while leaving the remainder intact.”  Ayotte v.  Planned Parenthood  of Northern New  Eng., 546 U. S. 320, 328–329 (2006).   Because “[t]he unconstitutionality of a part of an Act does not necessarily defeat or affect the validity of its remaining provisions,” Champlin Refining  Co. v.  Corporation Comm’n of Okla., 286 U. S. 210, 234 (1932), the “normal rule” is “that partial, rather than facial, invalidation is the required course,” Brockett v.  Spokane Arcades, Inc., 472 U. S. 491, 504 (1985).”

UnitedHealthcare didn’t go all the way in its announcement. 

It did not, for example, say that it would honor the minimum loss ratio requirements in ACA, or cover all children with pre-existing conditions.  And it could be argued that what insurers have the right to do voluntarily isn’t the same as what the government has the right to impose.

But its announcement and those of other insurers – coming in advance of the release of the decision – clearly puts more pressure on the Court. 

And make a move toward better health insurance – one that happened only because of the government’s “uninformed tinkering” with the health care market. 

Supreme Court Ruling Against Individual Mandate Could Result in Care Denial to Poor

Opponents of the Affordable Care Act (ACA) are now looking to the Supreme Court to overturn the 2010 law before time runs out on them.

After ACA became law eighteen months ago, they were optimistic that they could beat back several of its key provisions.  These included the minimum medical loss ratios, the expansion of Medicaid, the health insurance exchanges, and the individual mandate.

A brief review of the current status of each shows why the individual mandate is the last one standing.  But as the arguments for and against it have crystallized in the Courts, they show how the Supreme Court could open a Pandora’s Box best left closed.

 Minimum loss ratios

ACA mandates that all private insurance plans will have to pay at least 80 to 85 cents in benefits for every premium dollar collected, or rebate the difference to policy holders beginning in 2012.  Opponents argued that many existing plans would be forced out of the market because of high administrative costs.

However, the federal government has approved several short-term waivers from the requirement, deflating opposition.  Also the Center for Medicare and Medicaid Services has told Florida that it must meet the 85% minimum loss ratio in its public Medicaid program, too.  Once private insurance rebates start to flow to consumers in 2012, the remaining opposition will likely melt away.

Medicaid Expansion

Beginning in 2014, everyone below 133% of poverty will be eligible for Medicaid.  The 26-state lawsuit against the ACA – the one most likely to be taken up by the Supreme Court this term – argued that the Medicaid expansion imposed an unconstitutional financial burden on the states.

But the Courts have already ruled against the states on this one, and so the Medicaid expansions will go forward in two years unless Congress changes the law.

Health Insurance Exchanges

Beginning in 2014 states will have to have exchanges through which consumers will purchase health insurance.  Only plans offering the minimum benefits mandated by ACA can be offered on the exchanges.  Some state regulators argued that they did not have the authority to enforce the “minimum benefit provisions” mandated by ACA.  Florida decided to establish its own exchange that will not meet the ACA requirements.

However, a dozen other states are already moving forward with their approved exchanges, undercutting “lack of state authority” argument and putting Florida out on a limb.   

The Individual Mandate

Beginning in 2014, a system of subsidies and penalties will go into effect to encourage people to purchase health insurance.  Those making up to 400% of poverty will receive subsidies for health insurance, but all those above 133% of poverty who refuse to purchase insurance will have to pay a federal income tax penalty.

The crux of the legal argument against the individual mandate is that it is unconstitutional for the Federal government to impose a tax penalty on an individual for refusing to purchase a consumer product.  However, opponents have conceded that it would be Constitutional to impose such a mandate at the time of service.

Judge Stanley Marcus, one of the judges who heard the appeal that may now go before the Supreme Court, made this clear in his dissent.

He wrote that “the plaintiffs and, indeed, the majority have conceded, as they must, that Congress has the commerce power to impose precisely the same mandate compelling the same class of uninsured individuals to obtain the same kind of insurance, or otherwise pay a penalty, as a necessary condition to receiving health care services, at the time the uninsured seek these services.”

So what the Supreme Court is being asked to decide is not “if” the individual mandate is constitutional, but “when.”

Some legal experts don’t think that there is much of a distinction in this. 

But if the Supreme Court feels differently, and ultimately decides that it is Constitutional to impose the tax at the time of service, but not in advance, then this may well open up a Pandora’s Box that we would all rather stay tightly closed and locked.

Even a narrow ruling against the “pre-tax” could have a far-reaching unintended consequence for indigent, uninsured people.  These people include many of the over 50 million uninsured people today and the 22 million who will still be uninsured after ACA implementation.  A Supreme Court ruling that holds that people could be forced to pay at the time of service could also be construed as permitting providers to deny care to those who cannot afford it.

Opponents hope that a Supreme Court ruling against “pre-taxing” will result in a political unraveling of the law. It could well happen, but not in the way they intended.

If you have questions about this column or wish to receive an email notifying you when new Our Health Policy Matters columns are published, please email gionfriddopaul@gmail.com.