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Health Care Reform - Now What?

Intensive media reporting over the past several weeks on the arguments in the Supreme Court on the validity of the Affordable Care Act has healthcare providers wondering "what happened and what does it mean for me and my organization?"

What Happened?
Prior to the oral argument in the Supreme Court, only one circuit court of appeals had held that a portion of ACA (the mandate to purchase health insurance) was unconstitutional, and that decision was a narrow 2-1 vote and expressly rejected invalidating any other provisions of the legislation. The constitutionality of ACA, with the mandate, had been upheld by numerous other courts. Accordingly, many legal scholars and those with Supreme Court experience generally predicted that the constitutionality of the ACA would be affirmed.

However, tough questioning by several of the justices thought to be key members in determining the constitutionality of the law has caused many of those scholars to question their earlier predictions. For more information read "In Court, Sharp Questions on the Health Care Law's Mandate," New York Times 3/27/12; "Supreme Court's Health-care Ruling Could Deal Dramatic Blow to Obama Presidency," Washington Post 3/28/12; and "Justice Kennedy Tough on the Insurance Mandate," The National Journal 3/27/12. The Court is expected to issue its decision in the last week in June. In the meantime, what does this development mean for the way you should be conducting business in the healthcare world?

What It Means and What You Should Do
If the Court were to rule against the government, it could (a) invalidate the mandate to purchase health insurance and nothing else, (b) invalidate the mandate and the guaranteed issue and community rating provisions that are most closely connected with the mandate, (c) invalidate the mandate as well as the rest of ACA on the premise that Congress would not have passed the legislation without the mandate and/or (d) invalidate the Medicaid expansion. These possible outcomes could have a significant impact on healthcare providers and practitioners both as purchasers and providers of health care. Actions you may wish to consider taking in the approximately three months before the decision is issued include the following:

1. Carefully consider whether you should make major investments in programs that are entirely dependent upon ACA to go into effect (e.g., ACOs under the Shared Savings Program);
2. Ensure that contracts related to programs under ACA have a provision that would allow you to terminate the contract if the legislation authorizing the program is invalidated or materially changed; and
3. If you receive (or have received) an offer of a grant with respect to a program under ACA (under the CMS Innovation Center Challenge grant program for example), have the proposed grant contract reviewed to determine if it has a provision permitting the government to demand a refund if the program is invalidated, and check with the granting agency to see if the grant will continue if ACA is invalidated.

You may well see states deferring or slowing down activity establishing Health Insurance Exchanges and other ACA-related programs until the Supreme Court issues its decision.

Independence at Home Under an Adverse Supreme Court Ruling
The Independence at Home (IAH) program is in a stronger position relative to other programs authorized by ACA for the following reasons:

  • IAH is in no way related to the individual mandate, and the prevailing view is that the Court is less likely to invalidate unrelated provisions of the ACA legislation (although it is possible).
  • CMS could implement the IAH demonstration under their general authority to conduct demonstration programs. (This is particularly a likely course of action since implementation has begun and Acting Administrator Tavenner and others in CMS seem favorably disposed toward the program.)
  • IAH has enjoyed strong bipartisan support in Congress and was embodied in standalone bills in the House and the Senate (H.R. 2560, S. 1131), while other programs (e.g., Shared Savings, bundling, Patient Centered Medical Home) were not.
  • IAH has a strong record of significantly reducing health care costs where they are the highest, and health care costs are likely to increase dramatically if the ACA legislation is invalidated. If CBO or the CMS Actuary conclude that IAH generates any significant savings, it will be enacted as a permanent Medicare benefit quickly. By contrast, neither ACOs nor Patient-Centered Medical Homes are required to achieve any savings, and studies have shown that they generally do not. See, e.g., "Medical Home Cost Savings Questioned," Fierce Healthcare 3/17/12.
  • Programs under the CMS Innovation Center Challenge grants will be handicapped because they will have to first offset the value of the grant before they can show savings.
  • There will be fewer other programs competing for CMS' attention.

The underlying cost problem of the healthcare delivery system will only become worse if any provision of ACA is invalidated. The projected $575 billion reduction in Medicare costs over 10 years required by the legislation will not occur. CBO has projected that insurance premiums in the individual market will rise by 15%-20%. See "Could the Health-care Law Work Without the Individual Mandate?" Washington Post 3/27/12. IAH is specifically designed to reduce healthcare costs where they are the highest, and the model has proven effective. So the need and the opportunity for full implementation of the Independence at Home program will grow if any of the ACA legislation is invalidated.

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