HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Friday, December 7, 2012

A new straw man argument for challenging the ACA

Two of the architects of the original challenge to the individual mandate have just published an op-ed in the Wall Street Journal that promotes a new theory by which they would challenge the ACA's constitutionality.  The meat of their argument is as follows:

If the mandate is an indirect tax, as the Supreme Court held, then the Constitution's "Uniformity Clause" (Article I, Section 8, Clause 1) requires the tax to "be uniform throughout the United States." The Framers adopted this provision so that a group of dominant states could not shift the federal tax burden to the others. It was yet another constitutional device that was simultaneously designed to protect federalism and safeguard individual liberty.

The Supreme Court has rarely considered the Uniformity Clause's reach, but it cannot be ignored. The court also refused to impose meaningful limits on Congress's power to regulate interstate commerce for decades after the 1930s, until justices began to re-establish the constitutional balance in the 1990s with decisions leading up to the ObamaCare ruling this summer. And although the court has upheld as "uniform" taxes that affect states differently in practice, precedent makes clear that a permissible tax must "operate with the same force and effect in every place where the subject of it is found," as held in the Head Money Cases (1884). The ObamaCare tax arguably does not meet this standard.

ObamaCare provides that low-income taxpayers, who are nevertheless above the federal poverty line, can discharge their mandate-tax obligation by enrolling in the new, expanded Medicaid program, which serves as the functional equivalent of a tax credit. But that program will not now exist in every state because, as a matter of federal law, states can opt out. The actual tax burden will not be geographically uniform as the court's precedents require.

Thus, having transformed the individual mandate into a tax, the court may face renewed challenges to ObamaCare on uniformity grounds. The justices will then confront a tough choice. Having earlier reinterpreted the mandate as a tax, they would be hard-pressed to approve the geographic disparity created when states opt out of the Medicaid expansion. But that possibility is inherent in a scheme that imposes a nominally uniform tax liability accompanied by the practical equivalent of a fully off-setting tax credit available only to those living in certain states. To uphold such a taxing scheme would eliminate any meaningful uniformity requirement—a result that the Constitution does not permit.

Just a little unpacking shows how specious these arguments are.  Article I, section 8, clause 1 is an enumerated power for Congress to raise taxes so that it would not be as powerless as the Confederation had been (the Articles of Confederation did not give the fledgling national government the ability to raise its own money by taxes or otherwise).  It is an empowering clause.  The clause's minor limitation, designed to prevent "undue preferences of one state over another" (US v. Ptasynski, 462 U.S. 74, 80-84 (1983)) states "all Duties, Imposts and Excises shall be uniform throughout the United States" - the "Uniformity Clause."  About this clause, the Court wrote in 1983: "The one issue that has been raised repeatedly is whether the requirement of uniformity encompasses some notion of equality. It was settled fairly early that the Clause does not require Congress to devise a tax that falls equally or proportionately on each State. Rather, as the Court stated in the Head Money Cases, 112 U.S. 580 (1884), a “tax is uniform when it operates with the same force and effect in every place where the subject of it is found.” Id. at 594."

Congress has created a uniform tax penalty on individuals who fail to carry health insurance - Congress has not varied this tax by state, only by individual income.  Any 'geographic disparity' is created by the states themselves, not by Congress.  And, whether or not the Medicaid expansion existed, low-income individuals would be exempted from the tax penalty by virtue of their low income status -- just like other such exceptions that exist in the tax code.  Finally, Medicaid is not a tax credit.  Medicaid is a welfare-type program by which the federal government helps to pay for medical care by giving money to the states.  Individuals cannot count Medicaid benefits as income, Medicaid payments are not a taxable benefit, and welfare programs have never been deemed to be tax credits.  The Medicaid program is simply not "the functional equivalent of a tax credit;" Congress created tax credits for the exchanges, and they don't look like Medicaid...

Charging the federal government with 'disuniformity' when states always seek more flexibility within conditional spending programs seems hypocritical. Nevertheless, the ACA's challengers have a lot of money to fight their cause, so the new theory is worth noting.


December 7, 2012 | Permalink | Comments (0) | TrackBack (0)

Thursday, December 6, 2012

Some thoughts on the ACA and Women's Health

The ACA benefits women in insurance markets through such mechanisms as elimination of preexisting condition clauses, prohibitions on rescission, open access to ob/gyn services, and prohibiting lifetime caps on insurance coverage.  In addition, the Institute of Medicine recommended that contraception be covered as a preventive health service, making it so that millions of women can access key preventive care without cost-prohibitive co-payments (assuming ongoing litigation does not eliminate this essential health benefit.)  These access-enhancing elements of the ACA help women, who statistically are poorer, need more medical care, and live longer than men, to gain access to preventive and regular healthcare and to keep the insurance that they have.  On the other hand, the most common surgical procedure for women in the United States may become more unsafe (especially for poor women), because the ACA prevents insurance payment for abortions through both public and private insurance. 

The Hyde Amendment has attached as a rider to DHHS funding since 1977, and it limits Medicaid and the Children’s Health Insurance Program to paying for abortions when the woman's life (or girl's life) is in danger and in instances of incest and rape.  Thus, poor women have always had a three-front war in reproductive health: they have less access to contraceptives and therefore are more likely to have unintended pregnancies; they are less likely to be able to obtain an abortion because Medicaid almost never pays for the procedure; and few doctors participate in Medicaid, reducing poor women’s ability to find physicians to provide their healthcare.  The ACA helps to address the first problem, but the second and third are complicated by the ACA’s strictures.

State restrictions on private insurance coverage of abortion have existed for a number of years but have not been prevalent.  For example, some states have prevented private health insurers from providing abortion coverage through their general policies; enrollees have to pay separately for an abortion rider on their policies.  Other states refuse to allow abortion coverage for state employees.  And, federal law has facilitated opting out for reasons of conscience that have affected women with private insurance.  The ACA appears to take these private insurance restrictions farther by requiring riders on policies obtained through the health insurance exchanges regardless of whether the exchange is established by the federal government or the states.

The paradox of the ACA is that it creates new obstacles to reproductive health at the same moment that it attempts to improve women’s health.  Treating women’s medical care as a political trading card diminishes the status of women in the polity and has actual ramifications for their health.  This is especially true for the poor and low-income women who rely on Medicaid and who will be relying on the tax subsidies available for purchasing private insurance in the exchanges.   Thus, while the ACA addresses some of the payment problems that have plagued low-income women, it also exacerbates existing access problems.


December 6, 2012 | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 5, 2012

ACA NPRM: Essential Benefits


HHS published the NPRM concerning essential health benefits (EHBs) for qualified insurance plans on November 26, 2012. Comments must be submitted within 30 days of November 26--that is, on December 26, 2012.  HHS has already received about 11,000 comments in response to an earlier bulletin about its planned approach to defining EHBs.

Several important features of the proposed rule might be particularly noteworthy for blog readers.

    --State-mandated benefits enacted before December 31, 2011, will count as part of the EHB for that state--so states will not have to pick up additional costs associated with these benefits.

    --States may select a "base-benchmark" plan from among the following options, a design chosen to enable ease of transmission from current market conditions but with the risks of allowing continuing gaps in coverage and considerable variation among states:

        --The largest plan by enrollment in any of the three largest small group insurance products in the state's small group market

        --any of the three state employee plans with the largest enrollment

        --any of the three national federal employee plans with the largest enrollment

        --the commercial non-Medicaid HMO with the largest enrollment in the state 

    --States are encouraged (but not required) to seek public input before selecting a benchmark plan, and to have a selection process that is open and transparent.

    --There are provisions for supplementing base benchmark plans that do not include coverage for any one or more of the 10 categories of benefits required by ACA; an example is pediatric vision services.  There are also some uniform definitions of categories; for example, pediatric care includes all care up to age 19. Mental health and substance abuse treatment benefits must be provided at parity as required under the 2008 Mental Health Parity and Addiction Equity Act.

    Plans may provide a variety of pharmacy benefits.  However, plans must cover at least the greater of one drug in every category and class, or the number of drugs in each category and class as the EHB benchmark plan.

    --Appendix A to the NPRM lists benchmarks selected by states to date, and indicates what a default benchmark would look like for states that have not selected a benchmark plan. The default will be the largest plan by enrollment in the largest product in the state's small group market. States have until the closing of the comment period (Dec. 26, 2012) to make or change their benchmark selection.




December 5, 2012 | Permalink | Comments (0) | TrackBack (0)

Medical Loss Ratio Data Analysis

With SCOTUS and the election behind us we are starting to see not only major regulatory packages but also some data on the impact of ACA provisions. Michael McCue and Mark Hall have important data and analysis on the impact of the Medical Loss Ration rule, here. From their conclusion:

[O]verall changes in financial measures that appear related to the MLR rule benefitted consumers in 2011 by reducing insurers’ total overhead—both profit and administrative costs—by $350 million. The individual market contributed the largest component of this decrease in total overhead, with a decline of $560 million. However, the small- and large-group markets offset a third of this decrease by increases in total overhead of $36 million and $174 million, respectively, in 2011…

Initially, the new minimum loss ratios appear to be producing important consumer benefits in the indi- vidual market, but much less so in the group markets. Although insurers have reduced their administrative costs and paid substantial rebates in all three market segments, the rule has not reduced total overhead mar- ket-wide in the small- and large-group segments. For that to occur, stronger measures may be needed, either in the form of rate regulation, tighter loss ratio rules, or enhanced competitive pressures.


December 5, 2012 | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 4, 2012

First Amendment & Pharma: Taking Freedom of Information Seriously

Back in 2011, the AJLM had a symposium issue anticipating major issues in 1st Amendment limits on FDA restrictions on off-label marketing. It was a prescient move. Just as it did in Sorrell, the Second Circuit is using free speech jurisprudence to significantly expand pharmaceutical companies' freedom of action to promote drugs: 

The ruling, in United States v. Caronia, involved the conviction of Alfred Caronia, a former sales representative for Orphan Medical, which was later acquired by Jazz Pharmaceutical. Mr. Caronia was selling Xyrem, a drug approved for excessive daytime sleepiness, known as narcolepsy. He was accused of promoting it to doctors as a treatment for insomniafibromyalgia and other conditions. . . .

 “The government clearly prosecuted Caronia for his words — for his speech,” the majority wrote, concluding later “the government cannot prosecute pharmaceutical manufacturers and their representatives under the F.D.C.A. for speech promoting the lawful, off-label use of an F.D.A.-approved drug.”

The lone dissenting judge, Judge Debra Ann Livingston, vigorously disagreed, arguing that by throwing out Mr. Caronia’s conviction “the majority calls into question the very foundations of our century-old system of drug regulation.” She argued that if drug companies “were allowed to promote F.D.A.-approved drugs for nonapproved uses, they would have little incentive to seek F.D.A. approval for those uses.”

Judge Livingston also dissented in Sorrell, but her concerns were dismissed by a Supreme Court that (at least according to this essay) "declared 'information is speech,' a holding so broad and potentially far-reaching that the Court could not possibly have literally meant what it said."  

How will pharma firms use their new freedom of maneuver? They have sponsored a great deal of research, and are sure to use many forms of information and advocacy to promote more off label uses.  But cases like Caronia may end up a Pyrrhic victory, given a growing crisis of confidence about the validity of drug marketing strategies.  As the Washington Post reported last week, "Doctors have grown deeply skeptical of research funded by drug companies."  It's far too easy for firms to promote their rosiest results, while keeping negative outcomes out of the public eye.

As the First Amendment continues to undermine the extant FDA model of information control, it's time for the agency to take the logic of decisions like Sorrell and Caronia seriously, and to engage in more information dissemination.  Make full clinical study reports available publicly, or, at the very least, to groups like the Cochrane Collaboration, whose analyses of Tamiflu are raising major concerns about its maker's efforts to promote its prophylactic purchase.  The best way to deal with an off-label promotion "free for all" is to make critical information about drug effectiveness free, for all.  

PS: For more background on the issue of biased research, check out the excellent video by Ben Goldacre below: 



December 4, 2012 | Permalink | Comments (0) | TrackBack (0)

Monday, December 3, 2012

Evading Cost Containment

In its effort to contain health care costs, the Affordable Care Act includes an important initiative to test bundled payments for hospital care. Instead of separate payments to hospitals, physicians and other providers, Medicare and Medicaid will employ a single global payment that the different providers then can allocate among themselves. (Under some versions of bundled payments, there will be partial bundling of payments.)

While a promising way to reduce health care costs, we need to worry whether providers will compensate for the lower income from bundled payments by increasing the number of patients admitted to the hospital for care. Indeed, as 60 Minutes reported last night, hospitals already may overhospitalize people to pad profits.


December 3, 2012 | Permalink | Comments (0) | TrackBack (0)