Healthcare: What’s Next?

August 1, 2012       Mark Hrywna      

While some of the nation’s largest charities applauded the decision by The Supreme Court of the United States earlier this summer to uphold the Patient Protection and Affordable Care Act (ACA), when it comes to implementation it’s a cloudy picture of what exactly is next.

By a 5-4 vote on the final day of its session, June 28, the nation’s highest court upheld the individual mandate and the majority opinion by Chief Justice John Roberts interpreted the penalty for not purchasing insurance as a tax. Seven of the nine justices agreed that the federal government could not tie all Medicaid funding to a state’s participation in the expansion of Medicaid.

Writing the majority opinion, Roberts opined that Congress has the power to tax and spend. Associate Justice Anthony Kennedy, writing the dissent, retorted that the “act before us is invalid in its entirety.” The individual mandate was seen as keying the high court’s decision. Overturning it could have affected the other key issues to be decided. Republican leaders immediately vowed to repeal the law, which the U.S. House of Representatives has voted on in the past. Efforts have always stalled in the Democrat-controlled U.S. Senate.

The American Cancer Society, Susan G. Komen for the Cure and the American Heart Association, among other charities, cheered the ACA decision. Provisions in the bill will provide healthcare to 30 million uninsured Americans as well as eliminate annual and lifetime caps on in­surance benefits and the ability for insurers to reject people for pre-existing con­ditions. It also mandates coverage of the routing costs for clinical trials and preventive services like cancer screenings.

It’s probably too early to tell exactly how the decision will impact nonprofits simply because everyone was “totally surprised by the decision,” said Stephen Finan, senior director of policy at with American Cancer Society’s Cancer Action Network (ACS CAN), in Washington, D.C. What is known is that the law is constitutional so implementation can go forward, he said. All reforms remain in place with the only significant change coming out of the Supreme Court decision being that Medicaid expansion is voluntary. “Expansion and this population could be affected, but the rest of the law will go forward,” said Finan.

The ACA requires states to expand their Medicaid programs by 2014 to cover all individuals younger than 65 with incomes below 133 percent of the federal poverty line. The court ruled that the federal government can withhold future funds — but not existing funds — from states if leaders decided not to expand Medicaid.

Medicaid is currently only required to cover the disabled, the blind, the elderly and, needy families with dependent children. The federal government would pay 100 percent of the costs of covering these newly eligible individuals through 2016, before gradually decreasing its payment to a minimum 90 percent. Medicaid spending is estimated to rise by $100 billion per year, almost 40 percent more than current levels, according to the decision.

An estimated 17 million people covered by Medicaid expansion, according to Finan. To the extent that a state doesn’t provide it, that state’s Medicaid population likely will remain uninsured.

Leaving aside the politics involved, the ACA is so intertwined, it makes sense to Ed Haislmaier to just start over on health care reform. “Once you start pulling off one thing, another unravels,” said the senior research fellow in health policy at The Heritage Foundation, a conservative policy research organization in Washington, D.C.

By making Medicaid expansion optional, he said it’s reasonable to presume that a number of states will not do it – “at least not the way Congress envisioned.” Despite the administration’s promise of full funding for several years, leaders in 27 states already have said those states will not participate in Medicaid expansion.

The other problem is whether the administration will have in place what’s necessary for states to move forward, even among willing partners on Medicaid expansion, he said. There are components that the administration has to determine, such as a system to screen people against tax data or defining for insurers what exactly are essential benefits so actuaries can price it, Haislmaier said.

“Insurers will show up and play if you pay them, but will they get that done,” Haislmaier asked rhetorically. The administration is in no rush to discuss essential benefits before the election because of an anticipated “food fight among interest groups” but the system is supposed to be in place in just 14 months. “Are they going to have this out in time for people to do this, even in a state that wants to do it,” Haislmaier said.

The ACA reduces payments by the federal government to hospitals by more than $200 billion over 10 years. With nearly universal health coverage, the theory is that uncompensated “charity” care will be reduced, increasing hospital revenues that will offset government reductions in Medicare and Medicaid reimbursements, according to the decision.

In talking to hospital executives, William C. McGinly said many are preparing for decreases in revenue of 15 to 20 percent during the next four to five years because of reduced reimbursements. “If you’re anticipating 15 percent less, that’s millions you’ll see in reduced revenue. You’ve got to do things to drive out costs,” said McGinly, who is president and CEO of the Association for Healthcare Philanthropy (AHP) in Falls Church, Va.

“Hospitals are a 24/7 business no matter what. It’s not like a manufacturer that can add a second shift to production if there’s demand,” he said. “So much of that cost is labor that’s very expensive.” He added that changes are already being felt in some hospitals. A floor might be staffed with a skeleton crew and as more patients come, nurses or doctors are brought in on an on-call basis, said McGinly, which is designed to drive out cost and retain quality and patient satisfaction. The continuing soft economy is another level of uncertainty which will make things tough in philanthropy, McGinly said, predicting people will hesitate when it comes to donations. Reimbursement cuts bolster “the case for philanthropy in a lot of ways too, particularly if you’re making a strong case for what philanthropy is doing,” he said.

“Substantively, I don’t see anything happening” before November’s presidential election, Haislmaier said, but it will be interesting to see what happens in the lame duck session afterward, particularly with expiring tax cuts that require attention.

“The difficulty the administration has, politics aside, is there’s not a lot of reasons for a state to put the effort in,” said Haislmaier, administering a federal program and federal rules. Officials in some states have said they don’t plan to pursue setting up a health insurance exchange, instead letting the federal government set one up for their state. NPT

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