By now, you have likely heard analyses of last week’s Obamacare-killer King v. Burwell Supreme Court case. But what will make a real difference to you and your organization?
Here are the three things you most need to know about the case:
- Which outcome you should be most concerned about.
- If the plaintiffs win, here’s what would be hurt most: our struggle for better, cheaper healthcare.
- Why the “states rights” argument means — surprise — that they probably won’t.
This is a bit long, but bear with me for a moment. This could affect you and your organization big time, and very quickly.
Background:
There is a sentence in the massive Accountable Care Act that describes who gets subsidies: people getting coverage through the exchanges created by the states. What about those covered through the federal exchange? It doesn’t mention them. Bad sentence, mischievous little sentence.
Other parts of the bill, of course, describe how the federal government will create an exchange for citizens of states that don’t build their own, and the whole bill operates on the core idea that millions of people who can’t afford health insurance will have some help from the government to pay for it. That’s what the ACA is built on. But this one sentence does not mention the federal exchange, only the state exchanges.
A year and a half after the bill was passed, someone noticed this sentence and filed suit: “Aha! See! Congress never meant for people covered through the federal exchanges to receive subsidies!” That is the case that the Supreme Court heard last week. We will hear what they decided in June.
What is the outcome you should be most concerned about?
There are several ways the case could be adjudicated. The Court could, of course, find against the plaintiffs and let the law continue to operate as it has. That’s one way.
Or the court could find for the plaintiffs, but grant a stay, saying that the subsidies can continue until the Congress changes that one mischievous little sentence. Or until each state either creates its own exchange, or creates the legal framework and outsources all the implementation to the federal exchange, as some states already have done.
Note that both of these scenarios require Republicans in Congress or in state legislatures to do something active and positive to extend Obamacare’s writ. Hmmm. That’s not exactly a gimmee. So politically either of these scenarios would tend to leave the law in place as is, at least until whatever political realignment follows next year’s elections.
The outcome you should be most concerned about? The Court finds for the plaintiffs, but with no stay. The 8.5 million Americans who have applied this year in the 34 states using the federal exchange lose their subsidies instantly. Most drop coverage. Some states will scramble to set up exchanges, some won’t. It will already be summer, with many legislatures not in session. Even for those who pass exchanges, there will be precious little time to set them up before the 2016 open enrollment period. So insurance markets will be disrupted even in those states. In the states that do not take action, premiums will spike as the federal subsidy dollars dry up. Without that support, many insurance companies are likely to withdraw from those markets, sending premiums up further and narrowing consumer’s choices. And healthcare bottom lines will be hit hard — by law, 80% of that subsidy money (and of the individual’s premiums) was going straight through the insurance companies to pay for procedures and tests and visits.
Ouch.
What would be hurt the most?
What would be hurt the most: The struggle for cheaper healthcare. The ACA is far from perfect. It’s sausage all the way down. But for healthcare it has been a huge catalyst to reorganize in new ways, to find new revenue streams to pay for real prevention, real population health management, to offer bundled payments and risk-based contracts, to aggressively assemble networks to offer seamless care. Insurance markets have similarly sought new payment structures to harness the consumer choice built into the high-deductible plans of the ACA and similar employer plans, structures like reference pricing and accountable care organizations. On both the payer and provider side, we have been seeing creative ways to get around the pervasive code-based fee-for-service payment system that has created such out-of-control healthcare markets.
We are already years into that reorganization.
All of these creative, aggressive attempts to beat a path toward better, cheaper healthcare are not based directly on the ACA. But they certainly are based on the new market structures and assumptions that the ACA has catalyzed. All of these strategies will be slowed, sidelined, or thrown into confusion as the insurance markets across much of the country struggle to rebuild themselves differently.
The worst part will be the simple uncertainty. Warts and all, if we know the basic outlines of the law for this year and next year and for years after that, we can create strategies for how to survive in the new environment and even use it to create better, cheaper healthcare. If the law gets its legs knocked from under it, that means that the whole idea of healthcare reform is still strongly in play, and will not be fully settled for years to come. In that atmosphere, payers and healthcare organizations alike will be forced to hunker down, to strategize defensively, to bet the future only on businesses and revenue streams that seem to still be working right now, and not on any new, creative strategies. It will be a big step backward.
Why the “states rights” argument may actually defeat the challenge to the law
There is one legal principle under which the plaintiffs are likely to lose the case, a principal the Roberts Court has been particularly strong on. Under this principal, The Court must interpret the intent of the whole law. If one interpretation of one sentence seems to renders the whole law unworkable, the Court must interpret that sentence in a way that is congruent with the whole law. If Congress passed a law, the Court must assume that it intended to pass that law, not a booby-trapped version that would self-destruct on close inspection.
But there are other legal principles that are even bigger hurdles for the plaintiffs. The Roberts Court seems more intent on carefully delineating the line between federal power and state prerogatives than on anything else — and you could hear this in the lines of questioning last week.
There are two principals involved. One is simply that the federal government cannot place coercive burdens on the states, forcing the states to do the federal government’s job. If Congress had really intended to say, “You must create your own exchanges, or none of your citizens can receive federal subsidies,” that would have been just such a coercive burden. It was on exactly that basis that the Roberts Court ruled that states did not have to expand Medicaid — the ACA said they had to, or they would lose all their Medicaid money, and the Court found that was coercive, so it tossed that provision of the law.
The other principal is that when the Congress intends to create a burden on the states, it must do so in clear and unambiguous language. It has to lay it out in the clear so that it can be debated and contested. If Congress, in this mischievous sentence, actually intended to coerce the states into building their own exchanges, it did not do so in clear language, but in language that no one even noticed for a year and a half, and whose meaning reasonable people can debate. So the Court likely will be reluctant to interpret the sentence that way.
These are issues that consume the Court much more than the bottom lines of hospitals or the suffering of people with no health insurance. But these issues tilt the Court, I believe, toward letting the law stand as is.
So be concerned. Be very concerned. But not too much.