The ACA Is Constitutional, but What's Next?

Most reasonably-well-informed citizens, and certainly everyone concerned with health care, is well aware that the Supreme Court concluded its most-recent term with the Chief Justice joining the Court’s so called “liberal” wing in National Federation of Independent Business v. Sibelius, in upholding essentially all of the Obama Administration’s Affordable Care Act (“ACA”), including its most controversial provision – the “individual mandate” --  not under the Commerce Clause, as its proponents argued, but under the tax power.  The Court’s majority also upheld, but limited, the controversial Medicaid expansion provision of the ACA. The expansion survives, but if a State declines to participate in the expansion, it can’t be constitutionally deprived of the federal Medicaid funding that it previously had received.

Victory proclamations and hand-wringing aside, one notes that the mere fact that the ACA  has passed judicial muster leaves open a myriad of milestones and questions. The Act, after all, runs on for hundreds of pages and most of them have nothing to do with the mandate or with the expansion of Medicaid. That said, Epstein Becker & Green is dedicating this blog to discussing the issues that are yet to be determined as the ACA regime goes forward.

The New Regime Already Has Begun: Many provisions of the ACA are already in effect including guaranteed access to insurance even if a person has a pre-existing condition, coverage for young adults, closing of the Medicare gap known as the "doughnut hole", small business tax credits and the imposition of a pharmaceutical manufacturer’s fee based on market share. This year saw the launch of Accountable Care Organizations, a part of the ACA that is intended to address quality and cost issues by allowing providers to organize and combine and then to share in savings achieved by meeting various performance targets.  Additional provisions will take effect through 2018, for example . . .

Hospital Value-Based Purchasing Program: Beginning on October 1, 2012, Medicare will implement a value-based purchasing program under which value-based incentive payments will be made in connection with discharges from hospitals that meet specified performance standards related to quality. Efficiency measures are to be added in 2014. Funding for these payments is to be generated through reducing Medicare IPPS payments to all hospitals (in an increasing amount each year), but all such reductions are returned to hospitals through incentive payments in the same year. The secretary will make the performance scores for hospitals on the measures publicly available. Also in 2012, there will be value-based purchasing demonstrations established for critical access hospitals and certain other hospitals excluded from the VBP program. The VBP program will require many regulations and the challenge to hospitals to maintain financial performance and efficiency will be great.

Hospital Readmissions Reduction Program: Also starting with discharges occurring on or after October 1, 2012, Medicare will reduce payments to hospitals (though some are exempted) that are determined to have an "excess readmissions ratio" as defined by the secretary. This is a complex provision that includes a formula for payment reductions that not only require substantial regulatory activity but likely will lead to controversy. 

And Beyond?: Certain knowledge about the ACA and the future will depend upon the outcome of the upcoming presidential and congressional elections and the determination of who will control the political agenda and the likely budget sequestration that will follow. For example, the “maintenance of effort” provisions of the law are already in effect. The question will be whether they stay in effect, or whether States are empowered to cut back on Medicaid and other eligibility. Litigation, which some consider our national sport, also is likely to test the many regulations that the Secretary must promulgate under the ACA.  Assuming that the ACA is not completely dismantled by the incoming Congress, and the probabilities do not favor that, much of the activity will be in the States. The primary concern will be the State’s difficulty (or, in some cases, inability) to afford even the modest increase in the State share of the Medicaid increase. We expect that almost every State ultimately will opt in but not until there are delays and administrative modifications negotiated with the federal government.  It is not unlikely that there will be caps on Medicaid expenditures imposed by State legislatures and the proliferation of Medicaid managed care programs, run on a capitated basis, to deal with the administration of the program to an increased eligible population.  Many are already asking whether the Supreme Court’s holding will allow a State to opt into the expanded Medicaid program but later to opt out while being guaranteed federal payments at the elevated level. We look forward to addressing that in future blog posts. The other State-based issue is that of the Exchanges. Some States are well along the way towards setting them up. Others have yet to begin. It is a certainty that there will be at least some federally administered exchanges which may likely become politically controversial as their proponents look to expand them into a quasi-public option.

Needless to say, there is plenty to talk and write about as the ACA moves forward. We look forward to discussing them and to hearing your comments and questions.

For more information, contact the author at sgerson@ebglaw.com.