Re­form law lit­i­ga­tion heats up

Law’s fu­ture un­cer­tain; hos­pi­tals im­ple­ment­ing plans

Modern Healthcare - - Front Page - Joe Carl­son

With split de­ci­sions in the lower courts vir­tu­ally as­sur­ing that the U.S. Supreme Court will de­cide the fate of the Pa­tient Pro­tec­tion and Af­ford­able Care Act, hos­pi­tal lead­ers say they have lit­tle choice but to con­tinue im­ple­men­ta­tion plans de­spite lurk­ing un­cer­tainty about the law’s fu­ture.

A Repub­li­can-ap­pointed fed­eral district judge in Rich­mond, Va., struck down a key pro­vi­sion in the law Dec. 13, rul­ing that the Con­sti­tu­tion does not give Congress the le­gal right to force Amer­i­cans to buy health in­surance. A sim­i­larly crit­i­cal de­ci­sion is widely an­tic­i­pated from a Florida judge based on com­ments he made from the bench Dec. 16 dur­ing oral ar­gu­ments in a sep­a­rate case.

Yet two fed­eral judges ap­pointed by Demo­cratic ad­min­is­tra­tions have al­ready up­held the con­sti­tu­tion­al­ity of the law, rul­ing that Congress does have power to reg­u­late per­sonal health in­surance de­ci­sions that can pre­vent the whole­sale cost-shift­ing that oc­curs when large num­bers of peo­ple choose to pay fu­ture ex­penses out of pocket rather than by ob­tain­ing cov­er­age.

But since the Florida judge de­clined to is­sue an im­me­di­ate in­junc­tion against the law, hos­pi­tal ex­ec­u­tives say they don’t have the lux­ury of de­vot­ing their work­ing hours to the finer aca­demic and po­lit­i­cal points of the dis­cus­sion over the re­form law’s fu­ture.

“It’s a very in­ter­est­ing set of ar­gu­ments. But in the mean­time, we can’t sit and wait. We have to ex­pect that it will be im­ple­mented as en­acted,” said Leo Brideau, pres­i­dent and CEO of Columbia St. Mary’s, a two-cam­pus hos­pi­tal sys­tem in Mil­wau­kee. “If you look at the kinds of things we have to do to be pre­pared, they are things that, ir­re­spec­tive of the man­date, need to hap­pen any­way.”

The way Pres­i­dent Barack Obama’s ad­min­is­tra­tion tells it, strik­ing down the in­di­vid­ual man­date to buy in­surance would be like shoot­ing out a tire on a car: All the ma­chin­ery would still be there, but largely un­able to func­tion.

In prac­ti­cal terms, of­fi­cials say tak­ing out the man­date would ac­tu­ally give healthy peo­ple an eco­nomic in­cen­tive to drop their in­surance, be­cause they would know they could stop pay­ing and then re-ap­ply for cov­er­age when they get sick. That would drive up plan costs, giv­ing those with in­surance even more rea­son to drop cov­er­age—the so-called “death spi­ral” warned of by in­surance-in­dus­try ex­perts.

If the Supreme Court takes up the ques­tion of whether Congress can force Amer­i­cans to buy health in­surance, it will have a multi­bil­lion­dol­lar ques­tion on its hands. In 2009, hos­pi­tals pro­vided a record $39 bil­lion in care to pa­tients who did not pay for it, ac­cord­ing to the lat­est Amer­i­can Hos­pi­tal As­so­ci­a­tion statis­tics.

Of the 32 mil­lion Amer­i­cans who would re­ceive health­care cov­er­age un­der the re­form law, roughly half would get it through ex­panded Med­i­caid and the other half would get pri­vate cov­er­age through state-run health in­surance ex­changes.

Ron Pol­lack, ex­ec­u­tive di­rec­tor of Fam­i­lies USA, which filed a friend-of-the-court brief in the Florida case, re­jected claims from con­ser­va­tive crit­ics who ar­gued in court Dec. 16 that the in­di­vid­ual man­date to buy in­surance im­pinges on Amer­i­cans’ free­dom and lib­erty.

“There is a con­verse to that. There is also the free­dom and lib­erty of peo­ple who did ex­er­cise their per­sonal re­spon­si­bil­ity (to have in­surance) and are hav­ing other peo­ple’s health­care bill foisted upon them” through cost-shift­ing, he said.

How­ever, Baker Hostetler at­tor­ney David Rivkin, who ar­gued on be­half of re­form law op­po­nents in court Dec. 16, said it was stun­ning to see how far past es­tab­lished le­gal prece­dents law pro­po­nents were will­ing to go to ac­com­plish their goals in the re­form law.

“The statute in­flicts more dam­age on the Con­sti­tu­tion than any other statute in Amer­i­can his­tory,” he said in an in­ter­view af­ter the hear­ing. “It threat­ens to warp the very key

ar­chi­tec­tural el­e­ments of our con­sti­tu­tional sys­tem,” in­clud­ing un­der­min­ing in­di­vid­ual lib­erty and state sovereignty.

The case in Pen­sacola, Fla.—which fea­tured 20 states as plain­tiffs and an­other eight states, 47 in­ter­est groups and more than 70 leg­is­la­tors fil­ing friend-of-the-court briefs—was dif­fer­ent from the rest be­cause the judge also heard ar­gu­ments on whether Congress has the right to force states to ex­pand their Med­i­caid pro­grams. It’s not clear how U.S. District Judge Roger Vin­son might rule on that as­pect.

On Dec. 13, U.S. District Judge Henry Hud­son of Rich­mond, Va., ruled that the law’s Min­i­mum Es­sen­tial Cov­er­age Pro­vi­sion that re­quires Amer­i­cans to buy in­surance or pay a fine was not backed by any clear lan­guage in the Con­sti­tu­tion or fed­eral court prece­dent.

“De­spite the laud­able in­ten­tions of Congress in en­act­ing a com­pre­hen­sive and trans­for­ma­tive health care regime, the leg­isla­tive process must still op­er­ate within con­sti­tu­tional bounds,” Hud­son wrote. “The Min­i­mum Es­sen­tial Cov­er­age Pro­vi­sion is nei­ther within the let­ter nor the spirit of the Con­sti­tu­tion.”

The only other fed­eral district court judges who have ruled di­rectly on the ques­tion of con­sti­tu­tion­al­ity—in Detroit and Lynch­burg, Va.—con­sid­ered the same set of ar­gu­ments and re­duced the is­sue to the same es­sen­tial ques­tion: whether the de­ci­sion not to buy health in­surance con­sti­tutes an eco­nomic “ac­tiv­ity” that Congress can reg­u­late un­der the Com­merce Clause of the U.S. Con­sti­tu­tion.

But with the case lack­ing any clear prece­dent, the judges in Detroit and Lynch­burg reached op­po­site con­clu­sions as Hud­son, even though they worked from es­sen­tially the same set of facts.

“Far from in­ac­tiv­ity, by choos­ing to forgo in­surance (the unin­sured) are mak­ing an eco­nomic de­ci­sion to try to pay for health care ser­vices later, out of pocket, rather than now through the pur­chase of in­surance,” U.S. District Judge Ge­orge Steeh of Detroit wrote Oct. 7. “The plain­tiffs have not opted out of the health care ser­vices mar­ket be­cause, as liv­ing, breath­ing be­ings … they can­not opt out of this mar­ket.”

Robert Zirkel­bach, spokesman for Amer­ica’s Health In­surance Plans, cited a study com­mis­sioned by the trade group in 2007 find­ing that in seven states that im­ple­mented in­surance re­forms with­out a per­sonal man­date, con­sumers ex­pe­ri­enced mar­ket dis­rup­tion and much higher costs.

Since the in­di­vid­ual man­date pro­vi­sion doesn’t kick in un­til 2014, ob­servers in the le­gal com­mu­nity say judges and ad­vo­cates ap­pear to have plenty of time to sort out the con­fu­sion.

Health­care lead­ers would beg to dif­fer.

Of­fi­cials from 46 states gath­ered in Washington last week to dis­cuss the best ways to es­tab­lish the health-in­surance ex­changes (See story, p. 10). Health sys­tems across the coun­try have be­gun lay­ing the lengthy ground­work to es­tab­lish ac­count­able care or­ga­ni­za­tions, med­i­cal homes and other in­no­va­tions in de­liv­ery de­scribed in the law. And in­sur­ers have been im­ple­ment­ing rules that re­quire ex­panded cov­er­age for chil­dren on par­ents’ plans, among other re­forms.

Ac­cord­ing to news ac­counts of the Dec. 16 hear­ing, even Vin­son ques­tioned how some of the pro­vi­sions in the law could be over­turned, such as one that gives nurs­ing moth­ers lac­ta­tion ar­eas in the work­place. “How can you pos­si­bly undo some of these things?” Vin­son asked in court.

With the case now head­ing to the Supreme Court by all signs, a cen­tral ques­tion has be­come whether the court’s Lib­er­tar­ian-minded swing vote, Jus­tice An­thony Kennedy, would vote with lib­er­als or con­ser­va­tives. Kennedy was ap­pointed by Ron­ald Rea­gan.

Each of the four key cases has bro­ken along party lines, or ap­pears highly likely to do so. If that pat­tern re­mained, con­ven­tional wis­dom would hold that Obama’s ad­min­is­tra­tion faces an up­hill bat­tle in de­fend­ing the re­form law be­fore a Supreme Court of­ten de­scribed as a 5-4 con­ser­va­tive ma­jor­ity.

“If this case goes to the Supreme Court to­day, I think the Supreme Court in­val­i­dates key pro­vi­sions of this law,” said Adam Win­kler, the UCLA School of Law pro­fes­sor who penned an ar­ti­cle last week ti­tled, “The courts, not Congress, are the biggest threats to Obama’s agenda.”

The As­so­ci­ated Press has re­ported that al­though Vir­ginia Gov. Robert McDonnell urged the Obama ad­min­is­tra­tion to ask the Supreme Court to take up the case im­me­di­ately, of­fi­cials with the Jus­tice Depart­ment re­jected that sug­ges­tion and urged the high court to fol­low the nor­mal ap­peals process.

Brideau, the CEO at Columbia-St. Mary’s, said he still has faith that the Supreme Court will con­sider the case solely on its mer­its and not on par­ti­san lines.

“The Supreme Court, at least his­tor­i­cally, has been above that kind of po­lit­i­cal fray and has ruled on the Con­sti­tu­tion. My hope would be that they would look to the prece­dent of the right of Congress to reg­u­late in­ter­state com­merce,” he said. “That’s what they’re sup­posed to do, and that’s what I hope they will do.”

The AHA’s se­nior vice pres­i­dent for fed­eral re­la­tions, Tom Nick­els, also said he was not concerned that hav­ing a con­ser­va­tive ma­jor­ity on the court au­to­mat­i­cally means the jus­tices will strike down Obama’s sig­na­ture do­mes­tic ini­tia­tive.

“There are a lot of 5-4 de­ci­sions go­ing both ways,” Nick­els said, adding that it’s not clear when the court might take up the case or whether the com­po­si­tion of the court would re­main static over time: “This will be de­ter­mined in the fu­ture.”

“De­spite the laud­able in­ten­tions of Congress in en­act­ing a com­pre­hen­sive and trans­for­ma­tive health­care regime, the leg­isla­tive process must still op­er­ate within con­sti­tu­tional bounds.” —Henry Hud­son, U.S. district judge

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