Special Edition Health Care Reform Memo: June 29, 2012
Deloitte Center for Health Solutions publication
The health care reform memos are issued on a weekly basis, highlighting news from the previous week's activities in the administration and implications for the C-suite and various stakeholder groups.
My take: Supreme Court rulings on ACA
From Paul Keckley, Executive Director, Deloitte Center for Health Solutions
At the entrance of the Supreme Court building, there are turtles. It is reported architect Cass Gilbert chose the critter to symbolize longevity and the slow, deliberate pace of justice.
The scene yesterday on the steps of the high court seemed far from slow and deliberate. A boisterous crowd of thousands armed with signs and bullhorns waited anxiously. Then, reporters raced to camera locations from the lower entrance in the sweltering heat to file the story of the decade: at 10:10 am, the Supreme Court of the United States (SCOTUS) announced it upheld the individual mandate based on the legal theory that it is within Congress’s power to impose a “tax” to stabilize an interstate market.
The Court’s secretive opinions had been held tightly by its nine justices, 36 clerks and administrative personnel since votes were cast March 30. Of the Court’s 65 rulings in its current term, arguably none captured the curiosity of as many or directly impacted so much. The pace of the Affordable Care Act’s (ACA) progress through 17 District Court challenges, nine Circuit Court challenges, and oral arguments on March 26-28 was slow and deliberate. With yesterday’s ruling, the pace quickens.
The decision was a bit of a surprise: I expected the law to be upheld; I did not suspect the mandate would be upheld, nor its legal standing as a “tax” the foundational justification for the ruling.
States are now ground zero for health reform: the law puts enormous pressure on states to act quickly and decisively. Should they implement an insurance exchange, or default to a federally run alternative? Should the state’s Medicaid program be expanded per the law? And how quickly and effectively can states implement eligibility systems to optimize fraud detection and verify eligibility for government programs?
The ACA’s effectiveness in reducing costs will come into sharp focus: since March 2010, the ACA’s provisions around insurance coverage have been its marquee issue. Other features get less airtime, presumably because they’re more complex. Its spotlight now shifts to features that are intended to reduce costs-- eliminating fee for service incentives and payments for unnecessary care, improved coordination between providers, adoption of information technologies to coordinate care, and administrative simplification to reduce waste and paperwork. Will they work? In an election season and in an era when the economy is tepid, can the ACA’s cost reductions be accelerated or realized at all?
SCOTUS will not be forgotten: as the justices leave for teaching assignments in Malta, Innsbruck, and Venice, or vacation, I find myself reflecting on this sometimes flawed, always complex, but no less effective aspect of our democratic system. The Court is one of three branches of government, and perhaps its most stable: the justices do not face election nor pay undue attention to popular opinion. Instead, they seem laser focused on the letter of the law. They are its interpreters and protectors. And their word is final.
Thus, the ruling behind, it’s incumbent on every stakeholder in the U.S. health system to purposefully move forward with its implementation. For all, reducing costs is an imperative—per capita cost for the U.S. health system is unsustainable. Accountable care, clinical integration, and bundled payments should be priorities for hospitals. Improving efficiency and effectiveness of research and development is an imperative for bio-pharma manufacturers; improving their value-proposition and lowering health costs for employers and individuals a must for plans.
So while campaign combatants will likely continue the wars of words on every side of the ACA, it is no less the law, and its implementation is not optional.
Paul Keckley, Ph.D., Executive Director, Deloitte Center for Health Solutions
The Court issued two major rulings yesterday, both covered in the majority opinion:
In a 5 to 4 decision released yesterday, SCOTUS upheld the individual mandate of the ACA, characterizing it as a tax that is within the taxing authority of Congress. Justices Ginsburg, Breyer, Sotomayor, and Kagan joined Chief Justice Roberts in the majority opinion. Justices Kennedy, Scalia, Thomas, and Alito dissented. The Court rejected the applicability of the Commerce Clause to the individual mandate because the penalty applies only for the failure to purchase insurance, which is not commerce.
The Court upheld the ACA’s expansion of Medicaid in 2014 to include those with incomes of up to 133 percent of the poverty level vs. previous eligibility thresholds—unemployed parents making less than 37 percent of the FPL, and employed parents who make less than 63 percent. The Court held that the expansion was constitutional but that the penalty authorized in ACA—the potential to lose all of a state’s Medicaid funding—is not constitutional.
With this ruling, the Court answered the four questions brought to its jurisdiction:
|Is the individual mandate a violation of the Commerce Clause of the U.S. Constitution?||Violation of the Commerce Clause||The Court holds that the mandate violates the Commerce Clause. However, the individual mandate was upheld as within Congress’s power to lay and collect taxes.
|Is the individual mandate a tax or penalty? Does the AIA apply?||Mandate “functions as a tax”, but AIA does not apply||The Court holds that the AIA does not apply, because the ACA does not require that the penalty for failing to comply with the individual mandate be treated as a tax for purposes of the AIA.
|Is the individual mandate severable from the rest of the law? Is the entire law unconstitutional as a result of the centricity of the individual mandate to every other element?
||Not applicable||The Court does not reach severability issues, having upheld the mandate.|
|Does the federal government have the right to impose a minimum threshold of 133% of the federal poverty level for Medicaid eligibility? Is this a usurpation of states’ rights by the federal government?||Constitutional, but without penalty to states for non-participation||States have a choice about whether to participate in the expansion of eligibility and the Federal government does not have the power to terminate states' Medicaid funds if states do not participate (they can continue to receive funds for the rest of the program).|
Public attitudes: context
Through the period of the ACA’s passage and judicial challenges, the performance of the U.S. health system was perceived suboptimally. Deloitte Center for Health Solutions surveys of 30,000 adults indicated most considered the system wasteful, inefficient, and complex. At the same time, the majority “feared” a government takeover of the system, preferring privately run options:
“How would you grade the performance of the U.S. health system: A, B, C, D, or F?”
(grades A and B are “favorable” and grades of C and D are “unfavorable”)
Source: Deloitte Center for Health Solutions, Survey of U.S. Health Care Consumers (2009, 2010, 2011, 2012) data
Meanwhile, opinions of physician, employers, and consumers about ACA remained mixed:
Source: Deloitte Center for Health Solutions, Health Care Reform: Center Stage 2012
As a result, opinions for and against the ACA hit home—deeply personal, firmly rooted in personal experiences with the system and expectations about its future.
The Affordable Care Act is the law. Implementation is urgent.
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Today the Supreme Court ruled on the Affordable Care Act. What are the likely impacts for businesses and governments? Learn from the Deloitte Center for Health Solutions about what may result from the Supreme Court ruling and explore your options for moving ahead with health care reform.
National health reform: What now?
National health reform is here. The health reform bills (HR3590 and HR4872) are now law and will trigger sweeping changes and disruptions – some rather quickly and some over many years. The industry is asking, “What now?” At Deloitte, we continue to explore and debate the key questions facing the industry, and we look forward to helping our clients find and implement the right answers for their organizations. To learn more, visit www.deloitte.com/us/healthreform/whatnow today.
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