Thursday, July 19, 2012

The Supreme Court ♥ Health Reform: What it Means and What's Next

As the dust begins to settle after the Affordable Care Act's post-SCOTUS ruling, it is worth recapping what actually happened and what it means for the future of American health care. This can be broken down into a few major themes:

1) The Individual Mandate: Upheld by a 5-4 vote
Starting in 2014, every qualifying American citizen will be obligated to have health insurance coverage. While my correct prediction wasn't entirely accurate, I'll point out that I was in the extreme minority among my peers and colleagues in even coming close! That being said, I will admit I did not sleep much the night before the ruling, and I may have PTSD from the moment of sheer terror when CNN initially botched the call.

In the ruling's supporting opinion, Chief Justice Roberts explains that the mandate does not fall under the jurisdiction of the Commerce Clause. Rather, he interprets it as legal through the Taxation Authority granted to Congress. In it's simplest interpretation, yes, the mandate is a tax. More accurately, though, it is a monetary penalty on those individuals who choose not to purchase health insurance. No, this is not 'the biggest tax increase on the middle-class in our history', as the vast majority of rational Americans desire some form of health insurance (and don't forget that there will be exemptions from the mandate for individuals who can't afford insurance even with the Exchange subsidies, for those with religious objections, and up to three months for those between jobs). For the handful of individuals that take Freedom to the extreme of voluntarily foregoing health coverage, they will see an annual penalty on their tax returns that will theoretically subsidize the health care these individuals will almost certainly receive at some point in their lives. It is also worth noting that the law explicitly prohibits the IRS from 'aggressive efforts to collect the penalty' (i.e. threatening jail-time), and will most likely occur through withholding of tax refunds. The CBO projects around 4 million individuals will forgo insurance and pay the penalty, most likely young healthy individuals who feel they are healthy enough to go without it. Here is a great breakdown from the Kaiser Family Foundation of how this works:

2) Involuntary Medicaid expansion: Overruled by a 2-7 vote
The ACA included language that obligated states to expand their Medicaid eligibility to 133% of the Federal Poverty Level ($15,000 for an individual, $30,000 for a family of four in 2012), potentially expanding eligibility to 16 million more Americans. This expansion would be fully funded by the federal government for ten years, and 90% federally funded thereafter. If states refused, they could lose all existing Medicaid funding. The Court felt that this was beyond Congress' authority, though, and determined that this expansion should thus be completely voluntary. While the provision turns out to be a great deal for states, counties, businesses, health providers, and patients, several conservative governors have jumped on the opportunity to refuse this piece of Obamacare. Unfortunately, these are the states that have some of the highest uninsured rates and would precisely be the ones who would benefit the most. Here is a breakdown of the most recent state-level stances, and go here for the interactive version:

While many of the quick responses from the likes of Rick Perry and Bobby Jindal may merely be political pandering in an election season, the chorus of local opposition will undoubtedly rise from county hospitals, health insurers, state medical societies, and patient advocacy groups. These should be interesting developments to watch after the elections.

3) Looking Ahead
The ACA has now survived all three branches of government, and the 'full repeal' mantra will slowly lose steam in the public view. Clearly, the November election will truly determine the fate of the law's effectiveness, as a complete Republican takeover could gut many of the financing mechanisms even without a Senate super majority. For now, the SCOTUS seal of approval will allow the state-based health insurance exchanges to move full steam ahead. Many state legislatures will still opt out of creating their own exchanges, but the law allows for a national exchange to fill these gaps. In the meantime, the law continues to quietly roll out new benefits, with the most recent resulting from the Medical Loss Ratio standard for health insurers, where health plans are required to spend 80 cents of every dollar they spend on actual health care services instead of marketing, profits, and overhead. And if they don't? Then their customers get a rebate check for the amount they underspend on actual care, which was the case this year for 12 million Americans, to the tune of $1.1 billion.