PharmExec Blog

The Yin and Yang of the Court Decision on HCR

by Tom Norton

If you’re like me, you probably bounded out of bed on Thursday morning, took in all the news you could find about the Supreme Court and healthcare reform…and then you waited.  You waited patiently for the biggest legal call in American healthcare history.  And then, there it was.yin-yang

What did we learn?  Well, first, the mandate is confirmed.  The four “liberal” justices (Ginsberg, Breyer, Kagan, and Sotomayor) were joined, somewhat surprisingly, by the Chief of the Supreme Court, Roberts, a “conservative,” in declaring the mandate could stand, because in fact, it is really a tax…and since Congress, does, indeed, have the constitutional power to levy a tax, the mandate passes constitutional muster.

All right, so the mandate really is a tax.  If it is a tax, it would seem President Obama will have some explaining to do during the upcoming Presidential campaign as he was quoted several times in 2009 as saying, “It is not a tax.”  Probably the most memorable denial came during an interview with ABC-TV’s George Stephanopoulos (http://tinyurl.com/mkdxrd).  But that’s for another time…

More importantly, the mandate call assures that the rumbling, massive mechanism that the law has become over the last 2 ½ years will continue with its full development and deployment.  All the spending will continue; all the new Board appointments will continue; and all the new bureaucracies will continue to be populated and established. In short, HCR is fully on track for full implementation on January 1, 2014.

Or is it?

Give this some thought.  A second big decision was presented in Court’s announcement today.  However, it has not received much attention by the media. The call?  That a federal “threat” is implicit in the law if a state refuses to comply with the Medicaid mandates contained in the law.  Quoting from the opinion, Chief Justice Roberts is the writer:

The States, however, argue that the Medicaid expansion is far from the typical case. They object that Congress has “crossed the line distinguishing encouragement from coercion”… Instead of simply refusing to grant the new funds to States that will not accept the new condi­tions, Congress has also threatened to withhold those States’ existing Medicaid funds. The States claim that this threat serves no purpose other than to force unwilling States to sign up for the dramatic expansion in health care coverage affected by the Act.

Given the nature of the threat and the programs at issue here, we must agree. We have upheld Congress’s authority to condition the receipt of funds on the States’ complying with restrictions on the use of those funds, because that is the means by which Congress ensures that the funds are spent according to its view of the “general Welfare.” Conditions that do not here govern the use of the funds, however, cannot be justified on that basis. When, for example, such conditions take the form of threats to terminate other significant independent grants, the conditions are properly viewed as a means of pressur­ing the States to accept policy changes.

[P. 49 of the Opinion (http://tinyurl.com/7bxnmq5)]

So, Roberts, the guy who says indeed, the law’s mandate is OK, since it really is a tax, is also stating that what Congress has done with this law is create an environment of “threat” – with the Feds, and specifically, HHS Secretary Sebelius, dunning the States unfairly, correct?  Well, yes.  Exactly.

What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding. Section 1396c gives the Secretary of Health and Human Services the authority to do just that. It allows her to withhold all “further [Medi­caid] payments . . . to the State” if she determines that the State is out of compliance with any Medicaid requirement, including those contained in the expansion. 42 U. S. C. §1396c.  In light of the Court’s holding, the Secretary cannot apply §1396c to withdraw existing Medicaid funds for failure to comply with the requirements set out in the expansion.

[P. 55(http://tinyurl.com/7bxnmq5)]

So, where does that leave the States?  Walk away from complying with the law?  Yes, apparently, yes, according to Chief Justice Roberts:

As a practical mat­ter, that means States may now choose to reject the ex­pansion; that is the whole point. But that does not mean all or even any will. Some States may indeed decline to participate, either because they are unsure they will be able to afford their share of the new funding obligations, or because they are unwilling to commit the administra­tive resources necessary to support the expansion. Other States, however, may voluntarily sign up, finding the idea of expanding Medicaid coverage attractive, particularly given the level of federal funding the Act offers at the outset.

[P. 55(http://tinyurl.com/7bxnmq5)]

And Roberts applies the coup de grace here:

Instead, we determine, first, that §1396c is unconstitu­tional when applied to withdraw existing Medicaid funds from States that decline to comply with the expansion.  We then follow Congress’s explicit textual instruction to leave unaffected ‘the remainder of the chapter, and the application of [the challenged] provision to other persons or circumstances.’ §1303. When we invalidate an applica­tion of a statute because that application is unconstitu­tional, we are not ‘rewriting’ the statute; we are merely enforcing the Constitution.

[P. 56 (http://tinyurl.com/7bxnmq5)]

So what might happen as a result of this reading of the Constitution as it pertains to forcing the States to take on new Medicaid responsibilities that they might not want to accept?  Well, for starters, the 26 states that filed the lawsuit in the first place (http://www.healthcarelawsuit.us/) could, as group, say:  “We will not comply.”

What happens then?  The feds might say, “Well, we don’t care.  We’ll just roll your people into the new federally sponsored health insurance exchanges that the law provides for in each state, even if you don’t comply (per the law).

That’s fine, but then there’s the question of who will pay for those people?  Until 2019, it is all on the Feds.  But after that arrangement ends, gradually all those new Medicaid patients will be pushed into a state’s Medicaid program and become the responsibility of the state in which they reside.

But wait.  What happens if they happen to live in a state that refuses to comply with the HCR Medicaid law (think the 26), as per today’s decision by the Supreme Court?  Will they still get care going forward?  Good question.  A very good question.

Overall, thinking about the Court’s call today, I would suggest that a subtle “yin and yang” situation has been created with this split decision on the constitutionality of these two key sections of the new HCR law.  While “the mandate” is valid, the states, where administration of the new Medicaid aspects law will actually reside, can now fully and legally resist “threats” made by the feds regarding the implementation of the Medicaid mandate.  Thus, a strange dynamic has been created that pits the will of the new law’s federal creators against the hard and fast financial realities that all states face every day: a balanced budget.   In the middle of these two opposing forces stand 30 million new Medicaid patients who now believe they are going to receive medical care, effective January 1, 2014.

Stay tuned.  This is far from over and will be interesting viewing.  I guarantee it.

Tom Norton can be reached at tnorton@nhdcomm.com

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One Comment

  1. Denise L Harrison
    Posted July 5, 2012 at 6:36 am | Permalink

    Yes, more is yet to come with the new HCR. What the public debate often doesn’t discuss is that we are all already being “taxed” to pay for coverage for people who are uninsured. So, calling the HCR a “new tax” is false as there is nothing new in paying for the uninsured. So, what is hoped is that HCR will allow the US to join the rest of the economically developed world and provide a comprehensive health system, helping us to remain competitive globally.

    It will be interesting to see if States’ change their support for HCR depending on who is the governor and in the legislature. Today, the state is in; the next day it’s out.

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