HealthLawProf Blog

KY Governor-Elect Bevin and Health Care Federalism Post-ACA

Matt Bevin will soon become Kentucky's Republican Governor, which has created consternation regarding his plans for discontinuing Kentucky's successful implementation of the Affordable Care Act (ACA).  While on the campaign trail, Governor-Elect Bevin first promised to end the Medicaid expansion; then he promised to cap new Medicaid enrollment; and then he promised to reject "Obamacare" but keep Medicaid expansion on Kentucky's terms.  Governor-Elect Bevin also promised to dismantle Kynect, widely considered a model state-run health insurance exchange.  Each of these promises leads to a complex realm of statutory provisions, governance choices, and inter-governmental dynamics.  Each also has real implications for the neediest in our health care system as well as the ongoing negotiations between the federal government and the states in a post-ACA, post-NFIB federalism world.  

First, could Governor-elect Bevin completely end the Medicaid expansion in Kentucky?  Yes, but not instantaneously.  The Medicaid Act creates a right for any person who meets its eligibility requirements to be enrolled upon approval of her application. The Medicaid Act has mandatory eligibility categories and optional eligibility categories, and the federal government must match state funding by at least 50 cents on each Medicaid dollar.  As enacted, the ACA built on this design by expanding eligibility to anyone under age 65 earning less than 133% of the federal poverty level, and the expansion was mandatory.  States would have been required to enroll the newly eligible population and could not alter the expansion without a waiver from the Department of Health and Human Services (HHS).  The ACA funded 100% of the cost for newly eligible beneficiaries until 2017, then decreases the match gradually to 90% over the next several years.

States that complied with the ACA submitted State Plan Amendments to HHS to expand eligibility; Kentucky was one of them.  But, NFIB v. Sebelius made the ACA's Medicaid expansion unenforceable by HHS, or "optional."  HHS issued guidance after NFIB explaining that states could opt-in to expansion at any time and that they could subsequently opt-out. Although HHS opined that post-expansion opt-out (my phrase) is consistent with NFIB, it has not clarified how such an opt-out would work.  Because Governor Beshear expanded Medicaid by executive order, Governor-Elect Bevin would be able to reverse expansion at the state level with another executive order.  But, Kentucky would also need to submit a State Plan Amendment to HHS for approval, which can take 2-3 months when non-controversial.  The state would also need to determine whether the newly eligible beneficiaries (approximately 400,000 people) are eligible for Medicaid through another category of eligibility, such as pregnancy or disability.  Some would qualify for tax credits to purchase insurance in the exchange, but many would not qualify for Medicaid or tax credits at that point.  Beneficiaries have a right to appeal dis-enrollment, but for most that appeal will not lead anywhere.  So, post-expansion opt-out would not occur immediately or without cost, but it is possible.

Second, could Bevin cap enrollment?  No.  States cannot limit enrollment of Medicaid beneficiaries under the Medicaid Act; they may only do so if they have a specific waiver granted by the Department of Health and Human Services (HHS).  HHS has explained that capped enrollment will not be approved because it is inconsistent with the universal coverage goals of the ACA.   

Third, could Kentucky amend Medicaid expansion like Indiana, which Bevin has admired in public remarks?  A waiver from HHS is necessary to expand Medicaid differently than the ACA required.  So far, such waivers have been granted to seven states, underlining states' empowerment after NFIB to negotiate a version of health care reform that Congress never envisioned.  In addition to that vertical cooperative federalism, states are experiencing noticeable horizontal federalism, learning from one another what concessions can be won from HHS. Republican governors of waiver states have touted that they expanded Medicaid their way, spinning the waivers as a win for red state values.  And, many of the concessions granted by HHS have reflected a more typically conservative agenda.  For example, Arkansas, Michigan, Iowa, Indiana, Pennsylvania, New Hampshire, and Montana have negotiated compromises such as placing the newly eligible population in the exchanges with federal Medicaid dollars supporting their purchase of private plans ("premium assistance"); required premiums and co-payments, especially for people earning more than 100% of the federal poverty level; wellness requirements; limiting payment for non-emergency use of ambulances and imposing co-payments for ER use; private third-party administration; and other adjustments.  Notably, HHS rejected work requirements, which reflect "able-bodied" rhetoric that is so politically prevalent.  (In a forthcoming paper with Jessica Roberts, I debunk the myth of self-reliance in health care, which underlies the work linkage proposals.)  

Some of these waiver concessions may improve insurance coverage; for example, a person who earns close to 133% of the federal poverty level is likely to "churn" between Medicaid coverage and private insurance coverage, and the premium assistance model may make that movement smoother and less likely to result in loss of coverage (time will tell).  But, some concessions have harmful effects, such as enforceable premiums that drop coverage for anyone who does not pay, as studies have shown that cost sharing is a barrier to care for low-income Americans. Further, Indiana's waiver is arguably the most complex, raising questions as to why a complicated system should replace one that is relatively simple and working well (other than ideology).  Bevin says it's economics, but a Deloitte study performed for Kentucky showed that is not true.

If one thing is clear from states' negotiations with HHS, the agency is strongly motivated by increasing enrollment and by universal coverage policy entrenchment.  This could cut both ways for Kentucky, which would be in uncharted waters as a waiver-seeking state that could be the first post-expansion opt-out.  Kentucky's Medicaid expansion covers nearly 10% of the state's population, and HHS surely would take a very hard look at any waiver application that makes the already-insured lose coverage.  HHS would also be aware that timing is tricky, and Medicaid enrollment could disappear and then reappear for the newly eligible in Kentucky, leaving needy people with gaps in coverage (and thus gaps in care).  

Finally, could Governor-Elect Bevin dismantle Kynect?  Yes, a state-based exchange can be disbanded, but not immediately.  The open enrollment for 2016 that is underway cannot be stopped, and HHS wants a year's notice before a state moves to the federally-run exchange.  Dismantling Kynect will cost tens of millions of dollars according to current estimates.  And, the state must ensure that privately insured people do not lose coverage in an exchange transition.  

Kentucky has experienced the largest drop in uninsurance in the nation due to Governor Beshear's implementation of the ACA, and modifications enacted without due care could result in hundreds of thousands of people losing health care coverage.  Change for the sake of change may be an interesting political experiment to some, but it has real world implications for the low income individuals relying on regulatory stability for their health insurance access.  

 

 

Congress, too, is mystified by long-delayed Equal Access regs

Members of the House Committee on Energy and Commerce and the Senate Committee on Finance sent a letter today to Secretary Burwell, urging HHS to issue the Equal Access regulations that have been in limbo since 2011.  This is an important and much-needed call for action in the wake of Armstrong v. Exceptional Child Center, which shut down private rights of action for Medicaid providers seeking fair reimbursement from states in federal courts.  The letter explicitly recognizes the harm that the Court's recent decision will inflict on the Medicaid program, which I've written about on this blog (most recently here) in the context of both Armstrong and Douglas v. Independent Living Center.  

Though the draft regulations were not perfect, and in fact would benefit from putting some real teeth into HHS's review of states' payment decisions on equal access to care for Medicaid beneficiaries, they would at least ensure that HHS is actively overseeing states' payment rate decisions.  Currently, states are able to change rates with very little intervention from HHS, which often involves decreasing payment rates to balance state budgets.  Now that the Court has tasked HHS with enforcing the equal access provision, rather than the providers who HHS admittedly relied on to raise flags about states' low payment rates, HHS must complete the draft regulations.  Perhaps this direct plea from members of key committees will refocus HHS's attention on these important regulations.

"Very Real Consequences" for Medicaid and Beyond

Back in January, I commented on the oral arguments in Armstrong v. Exceptional Child Center, the Medicaid reimbursement case that the Supreme Court decided yesterday.  I noted then that Justice Breyer seemed confused about Medicaid's operation; that Justice Kennedy appeared to be on the fence; and that the four dissenters from Douglas v. Independent Living Center appeared wedded their 2012 position that no private right of action is available under the Supremacy Clause.  Sure enough, the Court eliminated private enforcement of the Medicaid Act's payment adequacy provision ("30(A)") against non-compliant states.  This decision is a major victory for states, a questionable victory for the Obama Administration, and a potential defeat for access to care in the Medicaid program.

Justice Scalia authored the majority opinion (joined by Justices Thomas, Roberts, Alito, and Breyer), which began with an intentional description of Medicaid as a Spending Clause program.  Justice Scalia noted that states agree to spend federal funds "in accordance with congressionally imposed conditions."  The majority then effectively constructed a clear notice rule for the Supremacy Clause, indicating that the Supremacy Clause provides a "rule of construction" but does not "create a cause of action" unless Congress "permits the enforcement of its laws by private actors."  Although purporting to empower Congress, the majority actually limited the reach of federal legislation by requiring Congress to explicitly confer private rights of action under federal laws.  As a Brief by Former Administrators of HHS made clear (in Douglas and again in Armstrong), Congress and HHS rely on private actions to enforce the Medicaid Act, in part because the law has such a broad reach and the agency's staffing is so limited.  Contrary to the majority's bizarre characterization of private enforcement of federal laws as limiting, in the Medicaid context, private enforcement is critical for implementing the purposes of 30(A), which was written to ensure equal access to medical care for Medicaid beneficiaries.  30(A) requires on-the-ground observation for assessing states' payment adequacy, which HHS cannot do without the assistance provided by privately initiated enforcement actions.

The majority then cited Chief Justice Roberts' dissent in Douglas to support its position that Congress deliberately excluded private enforcement from the Medicaid Act.  This is simply not true. Congress did not "foreclose" or "exclude" private enforcement from the Medicaid Act, either in 1965 when Medicaid was enacted, or when 30(A) amended the Act.  In fact, Congress debated language that would have prevented providers and beneficiaries from seeking relief in federal court when states violate the Medicaid Act, but Congress never has added such language to the Medicaid Act.  Nevertheless, the majority concluded that the Secretary of HHS is solely responsible for enforcing 30(A) pursuant to her authority under 42 U.S.C. §1396c to withhold Medicaid funds from non-compliant states.  The Secretary is reluctant to withhold funds in Medicaid because such an act would harm beneficiaries, but the majority did not engage this quandary, instead deeming 30(A) judicially unmanageable, even though lower federal courts have guided states toward adequate payment decisions for years.  The majority also seems to be setting up HHS to fail; if the agency actually withheld Medicaid funding, the state might respond with a claim of coercion under NFIB v. Sebelius, thereby further undermining the program's operations.  (Justices Scalia, Thomas, Alito, and Kennedy would have struck down the Medicaid expansion in its entirety under the newly crafted doctrine of coercion in that case.)

The majority circled back to Medicaid's status as a spending program in Part IV of its opinion, which Justice Breyer did not join, and which may resurrect a theory of spending programs as being like contracts and unlike other federal laws.  Though the Court has long relied on the Pennhurst contract analogy for federal conditional spending programs, in some cases (e.g. Barnes v. Gorman), the Court has suggested that the "third party beneficiaries" of spending programs have no enforceable rights in those programs.  The majority opinion very briefly noted that "contracts between two governments" cannot be enforced by beneficiaries of those contracts - citing Justice Thomas's concurrence in PhRMA v. Walsh - as if the federal government and the states were co-equal sovereigns.  This dicta brings all Medicaid provider and patient actions into question, whether they are raised under the Supremacy Clause or section 1983, the other avenue for Medicaid private enforcement.  The majority thus opened the courthouse doors to further eroding of conditional spending statutes in the context of the Medicaid Act. [more after the jump]

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Replacing the Affordable Care Act?

With the future of the Affordable Care Act in doubt after last week’s hearing before the U.S. Supreme Court, Republican lawmakers are busily preparing back-up legislation. New options should not be necessary—the government should prevail against those challenging its interpretation of the Act’s premium subsidy provisions. But it is prudent to consider alternatives in the event that the Court rules against the government.

While most of the ideas being floated would do little to bring health care insurance to the uninsured, there is an option that really could expand access to coverage while also containing health care spending. And it could be attractive to Republicans and Democrats alike on Capitol Hill.

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Oral Arguments in King v. Burwell, and thoughts about additional implications for the case

Oral arguments ran over an hour in King v. Burwell today (transcript available here). As many are aware, the question in this case involves whether the IRS appropriately interpreted the ACA to authorize tax credits for insurance policies purchased on both state-based and federally-based health insurance exchanges.  The plaintiffs claimed that the IRS has acted illegally in providing tax credits through federally-run exchanges, and if they are successful, the IRS will immediately cease offering subsidies to individuals who have purchased health insurance in federally-run exchanges.  

Reading oral arguments is always less satisfying than hearing or witnessing them, but reading the tea leaves is still irresistible when justices appear to reveal their positions.  For example,  Justices Kagan, Sotomayor, Ginsburg, and Breyer appeared to agree with the arguments put forth by the United States. Justices Scalia and Alito appeared to agree with Mr. Carvin and the plaintiffs, though Justice Alito appeared open to some of statutory answers being provided by Solicitor General Verrilli toward the end of his argument.  The Chief Justice was almost silent during the oral arguments, and Justice Kennedy raised his favorite topic, federalism, and whether Carvin's interpretation of the ACA can lead to unprecedented coercion of the states, raising a fatal constitutional consequence for what should otherwise be an exercise in legislative interpretation.

This line of questioning is worth considering for a moment.  Readers are probably aware that the doctrine of coercion was merely a theory until the Court breathed life into it in NFIB v. Sebelius.  In that decision, the Court held that the ACA's Medicaid expansion was unconstitutionally coercive because states, in the plurality's view, had to choose between expanding Medicaid to childless, non-elderly adults or losing all of their Medicaid funding.  But, the structure of Medicaid is quite different from the structure of the exchanges.  If a state rejects Medicaid funding, then that state has no Medicaid program within its borders - this form of cooperative federalism facilitated the coercion analysis in NFIB, because the states successfully argued that they could not realistically leave the program.  The exchanges, on the other hand, epitomize 'backstop federalism' - if a state rejected funding to create a state-based exchange, then the federal government would step in (and it did).  

Initially, it was unclear what Justice Kennedy was pursuing in his federalism questioning, because he seemed to indicate that he perceived the Medicaid-style federalism at work in the exchanges.  He later clarified, however, that he was concerned about the ramifications of the challengers' theory, that Congress intended to deny subsidies in states that refused to establish exchanges, thereby obliquely and opaquely threatening states by refusing to offer tax credits to their citizens.  Not only is this interpretation of the ACA plainly wrong, but it would also create a bizarre conditional spending situation where the states did not know they were being threatened until long after they decided to reject federal policy.  Justice Kennedy indicated that this reading of the statute would result in a "serious constitutional problem" that should be avoided, and he is right.  But, he was also skeptical about the actual language of the statute, so the U.S. cannot yet breathe easy.

 One additional observation for now - the impact on health insurance access will be even greater than the parties discussed.  If the IRS ends subsidies for insurance policies purchased through the federal exchange, the current tally indicates that approximately 8 million people will lose the subsidies that make insurance affordable for them.  While they will not be subject to a tax penalty for failure to carry health insurance, they also will not be able to afford health insurance.  That is immediately clear.  But, the ripples will be greater than the 8 million, because some states that have obtained waivers to expand Medicaid are placing their newly eligible Medicaid populations into the exchanges.  If the exchanges experience a death spiral due to increased premiums and loss of covered lives in the risk pool, then the exchanges become a very unstable way to provide Medicaid coverage and likely become unaffordable for states.  Demonstration waivers are supposed to be budget neutral, which would become impossible in plans like Arkansas' if the plaintiffs win this case.  Further, low-income individuals tend to churn between Medicaid and private insurance coverage - but if the insurance offered through federal exchanges is not subsidized, then they will churn into uninsured status, thereby increasing dramatically the number of lives affected by this decision.  

Of course, if the Court upholds the IRS interpretation of the ACA, then we can all go back to waiting for the next challenge to come along.

Cost Containment and Cost Shifting

With Harvard professors protesting their increased responsibility for health care costs, we are seeing just the most visible aspect of the recurring cycle described in “Tragic Choices.” As Guido Calabresi and Philip Bobbitt observed in that book, society tries to defuse societal conflict by hiding its rationing choices through implicit forms of rationing. Thus, for example, health care insurers relied on managed care organizations in the 1990’s to contain health care costs with the premise that managed care would preserve health care access and quality while squeezing the fat out of the health care system.

But after a time, the public realizes what’s going on and rebels against the implicit rationing policy. Hence, managed care’s effective cost containment strategies, such as limited networks of physicians or primary care gatekeeping, were dumped, and health care costs began to climb again.

What did health care insurers turn to after abandoning serious managed care? Shifting more of the costs of health care to patients through higher deductibles and higher copayments. Insurers didn’t need to identify limits on their coverage because individuals would respond to their higher out-of-pocket costs by hesitating to seek care. Costs would be contained by “market forces” rather than rationing. But the Harvard professors and other Americans are now rebelling against the shifting-of-costs policy, just as Calabresi and Bobbitt predicted in 1978. (Indeed, they even included the shifting of costs as an example of an implicit rationing strategy.)

Of course, cost shifting raises a number of concerns, including the fact that patients often do not distinguish well between necessary and unnecessary care when cutting back their doctor visits in response to cost shifting.

Where do we go from here? The Affordable Care Act includes many provisions designed to reward high quality care, and maybe we’ll see some meaningful cost containment out of them. But more likely, health care insurers will need to find another form of implicit rationing that will work for a while until the public rejects it.

For more discussion of the "Tragic Choices" cycle and the change from rationing through managed care to rationing through cost shifting, see here. For more discussion of the barriers to explicit rationing, see here.

[cross-posted at Bill of Health.]

ACA: The Miracle Policy?

As health care cost inflation has slowed markedly, some observers have cited the Affordable Care Act (ACA) as a major factor—even though the moderation in health care spending began before ACA’s enactment. To be sure, some of ACA’s important cost containment provisions may be playing a role, such as its push for accountable care organizations and its emphasis on paying for quality of care rather than just quantity of care.

Or maybe cost containment is simply the result of a recession that has reduced the spending power of Americans, with a significant contribution from an important pre-ACA trend (about 20 percent of the cost slowdown according to one study). For some time, employers and insurers have been increasing the public’s “skin in the game” by increasing the individual’s share of health care costs through premiums, deductibles and copayments. We’ve known for a long time that making health care more expensive for patients can discourage them from seeking care, so it isn’t surprising that higher patient costs would help contain health care spending. But we also know that patients don’t always distinguish between unnecessary care that can be forgone and necessary care that should be sought.

Time will help us sort out the causes of health care cost containment—if indeed it persists. In the meantime, we should be careful to distinguish between what we would like to be true and what we know to be true.

[cross-posted at orentlicher.tumblr.com]

Dynamic Medicaid Expansion

Yesterday's reports on the annual meeting of the Republican Governors Association indicated disarray over the Medicaid expansion, and an opinion piece in the NYT highlighted the common story that only half of states are expanding their Medicaid programs.  If CMS is counting, then this tally is correct, as the federal agency can only account for those states that have submitted the proper documentation for expansion.  But this is not the only way to consider the states' decisionmaking regarding the expansion.  I have just posted a short essay preliminarily detailing research I have performed over the last several months, which reveals that many states currently counted as "not participating" are acting to expand their Medicaid programs.  Here is the abstract:

In the run up to the ACA’s effective date of January 1, 2014, the sleeper issue has been the Medicaid expansion, even though Medicaid stands to cover nearly a quarter of the United States citizenry. While the national press has portrayed a bleak picture that only half of the states will participate, the Medicaid expansion is progressing apace. Though this thesis may sound wildly optimistic, it is more than predictive; it is empirically based. I have gathered data on the implementation of the Medicaid expansion during the crucial months leading up to the operation of the insurance provisions of the ACA, and it is clear that most states are moving toward expansion, even if they are currently classified by the media as “not participating” or “leaning toward not participating.” The data thus far reveals counterintuitive trends, for example that many Republican governors are leading their states toward implementation, even in the face of reticent legislatures and a national party’s hostility toward the law. Further, the data demonstrates dynamic negotiations occurring within states and between the federal and state governments, which indicates that the vision of state sovereignty projected by the Court in NFIB v. Sebelius was incorrect and unnecessary.

 

Dartmouth Institute Publishes Atlas of Medicare Part D Areal Variations

The Dartmouth Institute has just published its Atlas of areal differences in utilization of prescription drugs by Medicare Part D recipients.  The Atlas--unsurprisingly but disturbingly--details significant differences.  Pharmaceutical interventions are classified as effective, discretionary (where there is diagnostic or therapeutic uncertainty), and likely to be harmful in the patient population at issue.  A caveat, however, is that the report measured prescriptions filled and thus may underestimate actual provider behavior.

An initial variation involved sheer numbers of prescriptions, with a high average of 63 per year in Miami and a low average of 39 per year in Colorado (overall, the average was 49 standardized 30 day prescriptions filled per year per Part D beneficiary).  In general, the Mountain West had the lowest prescription average and the Rust Belt and Appalachian states the highest.  These differences could not be explained primarily by overall burden of disease but instead appear to reflect variations in provider prescribing practices.  For example, the American Heart Association recommends use of beta blockers in heart attack patients for three years post-attack.  However, rates of prescriptions for these drugs in the first six months ranged from highs of 94% to lows of under 68%, and persistence in the next six months was only slightly lower, ranging from highs of 92% to lows of under 68%.  Variations in statin use were even greater, ranging from just over 91% in Ogden, Utah, to below 45% in Abilene, Texas.  Interestingly, there was little correlation between effective use of beta blockers and effective use of statins.

The other two therapies analyzed in the Atlas were treatment of diabetes and treatment of patients with fragility fractures.  Diabetic patients fared somewhat better than heart attack patients, albeit still with significant variations.  Osteoporotic patients, however, fared dismally, receiving a high of 28% and a low of 7% with filled prescriptions for drug to combat osteoporosis after fragility fractures in sites other than the hip (such treatment is recommended to decrease the risk of future hip fractures).

Most interesting of all, there was no correlation between drug expenditures and measures of effective care.  In other words, patients in some regions may be spending a great deal on their drugs (paid for under Part D), but receiving far less benefit that patients in other regions who spend a great deal less.

[LPF]

 

Federal-State Tensions in Fulfilling the ACA's Promises

[Cross posted today at Constitution Daily:]

The Affordable Care Act expresses many goals, but its heart is the desire to create a health insurance home for all Americans.  The American healthcare system historically exists at the pleasure of a number of stakeholders and is not a coherent whole. This lack of system is reflected in the consistent tensions that underlie American healthcare, most notably federal power versus state power; the collective versus the individual; and the individual versus the state.  In creating near-universal health insurance, the ACA has resolved one of those tensions, individual versus the collective, in favor of the collective.  To that end, the ACA eliminated many of the practices health insurers used to cherry pick policyholders, which excluded people who need medical care from their risk pools.  In so doing, the ACA represented a federal choice to make all people insurable, whatever their wealth, age, medical history, sex, race, or other distinguishing factor. 

Despite the redirection this leveling of the health insurance playing field represents, the ACA did not craft a coherent whole out of the American healthcare system.  Instead, the ACA remodels the preexisting, unstable healthcare system.  In building on the old foundation rather than starting anew, the law retained the historic role of the states in regulating medical matters.  To that end, the ACA urged the states to implement two key aspects of its insurance modifications: Health Insurance Exchanges and the expansion of the Medicaid program.  The federal government has the power under the Spending Clause to create a federally-run insurance mechanism, but it chose instead to employ cooperative federalism to keep states engaged in healthcare policymaking.  The trouble is that some states have not been cooperating with these central legislative goals.

 The Exchanges, or Marketplaces, are an instrument through which qualified private health insurance plans can be purchased by individuals or small businesses.  The states were offered federal funding to create their own state-run Exchanges, which were operative as of October 1, 2013 (Tuesday last week).  Many states created Exchanges, but many rejected them as an expression of their distaste for the ACA.  Predictably, many of the states that have refused to create their own Exchanges were the same states that challenged the constitutionality of the ACA.  While there is value in dissent, the states that refused to create Exchanges invited more federal power into the state, because rejecting the federal offer for funding to create a state-run Exchange did not halt Exchanges from coming into existence. Instead, the ACA tasked the federal government with operating Exchanges in states that did not create their own.  While expressing a desire to protect their state sovereignty, these states have invited federal authority into their borders.  Though the Exchanges at both the state and federal levels have experienced some technical glitches this week, it appears that many people are eager to purchase insurance through them and that they have been successful at doing so.  The states that rejected Exchanges have not stopped implementation of the law, but their actions have other notable ramifications.

The Medicaid expansion was designed to catch childless adults under age 65 and below 133% of the federal poverty level in Medicaid’s safety net.  As with other modifications to the Medicaid program over the years, the expansion added a new element to the Medicaid Act that states could reject, but they could lose all of their funding if they made that choice.  The day the ACA was signed into law, states challenged the expansion of the Medicaid program as unconstitutionally coercive.  They succeeded on this claim in NFIB v. Sebelius, and the Court rendered the expansion optional for states. Immediately pundits began to question whether the states would participate in the Medicaid expansion. 

Though national media tallies make it appear that just over half of the states are participating in the Medicaid expansion, in reality the number is and will be much higher.  In almost every state reported as “leaning toward not participating,” and in many states reported as “not participating,” some significant act has occurred to explore implementation of the Medicaid expansion.  Some states have special commissions or task forces researching expansion; some state governors have indicated a desire to participate and have included the expansion in the budget; some legislatures have held debate or scheduled it for the next session; and so on.  Though some states will not have their Medicaid expansions running by January 1, 2014, it seems very likely that most if not all states will participate in the expansion in the relatively near future.

 In the meantime, state non-cooperation will have a direct effect on some of the nation’s poorest citizens.  People from 100% to 400% of the federal poverty level are eligible to receive tax credits for purchasing insurance in the Exchanges.  In states with no expansion, people above 100% of the federal poverty level who would have qualified for Medicaid will still be able to obtain insurance through federal subsidies in the Exchanges.  But, people who are below 100% of the federal poverty level will be too poor for tax-credits and living in states that have not yet expanded their Medicaid programs, therefore they will not be able to enroll in Medicaid either.  These very low income people will not be penalized for failing to carry health insurance, but they will not have health insurance either.  These individuals will get caught in a health insurance black hole that exists in part because the Court allowed states to refuse Medicaid expansion and in part because of state resistance to partnering in the implementation of the ACA.   

State cooperation in the Medicaid expansion is even more important than state participation in the Exchanges, because many thousands of people may not get the access to health insurance that is the promise of the ACA.  The debate over the meaning of federalism that swirls around political and academic circles will have a direct and important effect on the people who can least afford it.  The good news for them is that Medicaid’s history indicates that all states eventually participate in the program and its amendments, but this week’s implementation of the Exchanges keeps access to medical care through health insurance tantalizingly out of reach.

More states are expanding Medicaid than you might think

Big news in the world of ACA implementation: CMS approved Arkansas' proposed waiver for an alternative mechanism for Medicaid expansion, which is to be called the Arkansas Health Care Independence Program.  Arkansas proposed a premium assistance program, wherein newly eligible Medicaid beneficiaries will obtain insurance through the Arkansas health insurance exchange by receiving financial assistance for premium costs.  This will place the new Medicaid population in qualified health insurance plans, i.e. private health insurance, which is administratively more expensive than government-sponsored insurance, but it may help to deal with the problem of "churn" between Medicaid and Marketplace-based private insurance.

CMS's approval of Arkansas' Medicaid demonstration program is significant for a number of reasons, but here I'd like to focus on what I think is one of the biggest: this waiver approval will pave the way for other states that are "undecided" to finally declare their intent to expand their Medicaid programs.  I believe this will happen relatively quickly, because most states are already working on expansion.  You would not think this is true from the national media's reporting on the Medicaid expansion.  If you have been following any of the many color-coded maps depicting the five possible categories of expansion (expanding, not expanding, leaning toward expanding, leaning toward not expanding, and alternative model), you would think that just over half of the states are participating in the Medicaid expansion.  The national media has gotten this story wrong, because they do not pick up on the negotiations, investigations, committees, special commissions, and other ways in which the "leanging toward not participating" states are actually exploring how they can expand their Medicaid programs.  To understand how dynamic the state decision making is, you have to track the local newspapers that follow every move of the state legislatures and their conversations with their governors (which I have been doing all summer).

After NFIB v. Sebelius was decided, I wrote that most states would still expand their Medicaid programs.  It appears that most states are now working toward Medicaid expansion in some form.  In future posts, I will explain this dynamic federalism story in more detail.  For today, I will emphasize that CMS has opened the door to more state waivers, which will lead to more states expanding their Medicaid programs.  Though I am not necessarily on board with federalism by waiver, espcially given states' history of waiver mistakes and failures, I do think that in this instance, alternative expansion is better than no expansion.  Otherwise, many of our poorest citizens will be left out of the attempt at national insurance coverage, not paying a penalty, but not having access to much-needed healthcare either.    

Another ACA Delay--and a Proposed Solution

This past week, the New York Times published a story about yet another delay in the implementation of the Affordable Care Act.  Earlier this summer, NPR also reported the delay, which concerns total limits on out of pocket costs that consumers can be required to pay.  Under ACA, beginning in 2014 consumers were supposed to have to meet only one out of pocket limit--$6,350 for an individual and $12,700 for a family--including all deductibles and co-payments.  But the Times story reports that insurers have been granted a year's grace in implementing this requirement and quotes an administration official as attributing this decision to the inability of insurance plans to communicate with each other in determining out of pocket costs. 

Both stories emphasize the plight of patients who are covered under separate medical and pharmacy benefit plans.  Pharmacy plans in particular may have very high copayments, without annual limits.  Patients with expensive drug needs for diseases such as multiple sclerosis are especially hard hit by these benefit structures.

As I ruminated on this delay, it occurred to me that the problem of the plans' inability to communicate with one another is the plan's problem, not the patient's.  To say the least, it does seem rather unfair to have patients bear all of the costs of the delay. 

Moreover, there is a model that could have been used to implement the single limit:  submission of claims for out-of-network care.  Patients do this all the time and receive reimbursement to the extent covered by their plans.  The payer has a record of the claim and can credit it against the patient's deductible.  Why couldn't this model have been applied to the problem of multiple plans for patients?  It would be simple.  These are primarily patients with employer-provided plans.  All that would be needed would be to stipulate which plan is primary for the purpose of maintaining the single out of pocket total.  Medical plans are used to maintaining such totals. If the medical plan were stipulated to be the primary plan, all the patient would need to do would be to submit records of out of pocket payments under their pharmacy plans.  When patients meet the out of pocket total for the year, they would no longer be responsible for copays or deductibles from the primary plan.  How would other plans know about this?  Patients will receive records from their primary plans that they have met their deductible for the year.  They would then be responsible for submitting these records to their other plans--after which the other plans would no longer be able to charge copays or deductibles.

This approach, to be sure, puts the burden on patients to solve the communication problem.  But I'm surprised notbody seems to have entertained this suggestion, in a health care climate that heralds patient responsibility.  Perhaps the difficulty instead is that the multiple-plan structure emerged as a way to limit health care costs for payers by shifting costs to consumers.

[LPF]

US v. Windsor: Some Constitutional Uncertainty, Many Healthcare Implications

The Court's decision striking down section 3 of DOMA in United States v. Windsor was unsurprising, yet still a relief to many.  Section 3 defined marriage for federal statutory purposes to mean only marriage between one man and one woman.  Based on the late March oral arguments in Windsor, as well as Justice Kennedy's majority opinions in Lawrence v. Texas and Romer v. Evans, the common wisdom was that federalism would be the prevailing reasoning because the states historically have governed family law matters, including marital status.  One of Justice Kennedy's projects has been revitalization of the Court's enforcement of federalism to protect the states, especially as a method to protect individual liberties (see, e.g., Bond v. United States). 

And so it was.  Justice Kennedy provided both structural and substantive reasons for striking down section 3 of DOMA.  From a structural perspective, Justice Kennedy's majority emphasized traditional state dominion over marriage, writing: "By history and tradition, the definition and regulation of marriage ... has been treated as being within the realm of the separate States."  Though the opinion walked right up to the federalism line, it stopped short of holding that DOMA exceeded congressional authority or violated the Tenth Amendment.  Instead, the majority moved forward on substance and held that the federal government cannot take away the marriage right and its attendant societal status once conferred by the states.  To do so was a violation of gay couples' liberty and dignity.  The Court also hinted at an equal protection analysis, condemning Section 3 as creating second class marriages in states that recognize same-sex unions.  The majority applied only rational basis review, rather than heightened scrutiny, holding that DOMA was motivated by anti-gay animus and served no legitimate governmental purpose. 

Neither the federalism, nor the equal protection, nor the due process analysis was either complete or clear cut, and each opens more questions than it closes.  For example, Justice Kennedy views the experiment of the states to protect individual liberty, and here, it happens that twelve states do protect liberty, more than the federal government.  But, this view of federalism's aspirational work does not address the 37 or so states that do not protect the liberty interests of their gay citizens from state discrimination let alone the federal government's limited view of gay rights.  And, this reversion to assessing traditional state law domains does not advance modern conceptions of federalism that acknowledge most state law is ineffibly intertwined with federal law by virtue of statutory interconnectedness, conditional spending, or other cooperative federalism mechanisms.  Instead, Justice Kennedy seemed to be reaching back to the dual sovereign model of doctrinal federalism.

Fortunately, this regressive model of federalism does not seem to hinder the work that Windsor is likely to do with regard to DOMA's far-reaching effects on healthcare.  For example, marital status influences not only access to affordable private health insurance (which is usually easier and cheaper through marriage), but also qualification for the Federal Employees Health Benefits Program as well as Social Security, the gateway for Medicare at age 65.  Section 3 also affected Medicaid enrollment and spend-down requirements for the elderly entering nursing homes.  The Medicaid/DOMA issue was presented to the Court in a petition for certiorari that the Court has not granted or denied yet.  Back in October, I highlighted the First Circuit's decision in Massachusetts v. Department of Health and Human Services, which was mentioned in passing by Justice Kennedy as a case that would suffer vacatur if the Court dismissed for lack of standing.  It seems fair to read approval of the First Circuit's decision into Kennedy's cite, which makes me think the Court will not grant the petition.

In addition to public and private health insurance issues, some healthcare delivery issues are likely to be resolved by Windsor as well.  For example, many stories have detailed how hospitals have turned away same-sex partners under the guise of HIPAA privacy.  Other tales have highlighted how substituted decision-making at the end of life can devolve to estranged family members when same-sex partnerships are not recognized as giving the gay spouse decisional authority that would ordinarily be given without a second thought to a heterosexual spouse.  Doctors' offices have refused to recognize same-sex spouses as parents of children who need medical attention.  And, care for infants of same-sex couples may become easier now that the Family Medical Leave Act will apply to same-sex marriages.  It seems that the federal recognition of gay marriage that will flow from Windsor will be beneficial in many healthcare situtations, even in states that do not recognize same-sex marriage.  Federal agencies have much work to do interpreting the word marriage in the coming days, but it seems that these decisions will facilitate a more functional approach to families' experiences in the healthcare system.

[NH]

Tax credit litigation on the move

For those of you who thought we could forget about ongoing ACA litigation, here's a little update: the issue of premium assistance through tax credits for insurance purchased in federal exchanges is alive and well.  The plaintiffs in the recently filed Halbig v. Sebelius claim that the ACA does not permit tax credits in federally run exchanges (opponents state that this is merely a statutory oversight, as I wrote in September.)  A nice summary of the ongoing litigation on this issue was published yesterday on California Health Line. 

These challenges seem to reveal the angst that the ACA is producing as the January 1, 2014 deadline creeps nearer.  They also seem to reveal the upside-down federalism occuring in the states that have rejected the state-based exchanges.  Those states have exercised their sovereign prerogative, but they are also inviting more federal power into the state, which aggrandizes federal power.  Though I don't think these cases have a strong chance of success, if the plaintiffs are successful, undoubtedly we'll see more testing of the fence by states and private litigants.

[NH]