Supreme Court Declines To Rule on Medi-Cal Reimbursement Suit & Supreme Court Review of the Health Care Reform Law

CAL/AAEM News Service calaaem.news.service1 at GMAIL.COM
Sat Mar 3 16:58:46 PST 2012


 

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Chapter of the American Academy of Emergency Medicine

February 23, 2012

 

Supreme Court Declines To Rule on Medi-Cal Reimbursement Suit 

 

CaliforniaHealthline.com
<http://www.californiahealthline.org/articles/2012/2/23/supreme-court-declin
es-to-rule-on-medi-cal-reimbursement-suit.aspx#ixzz1nYRyKc9J> 

 

 

On Wednesday, the U.S. Supreme Court declined to rule on a California
lawsuit that could determine whether Medicaid beneficiaries and providers
can sue states over reimbursement cuts, the Los Angeles Times reports
(Savage/Megerian, Los Angeles Times, 2/23).

 

The justices sent the case back to a lower appellate court, noting the
complexity of the case and the fact that some circumstances have changed
since it originally was filed (Doyle, Sacramento Bee, 2/23).

 

Background

The case stems from reimbursement cuts the California Legislature approved
in 2008 and 2009 to Medi-Cal, the state's Medicaid program.

 

Health care providers and Medi-Cal beneficiaries challenged the changes in
court, arguing that the payment cuts violated federal law that says Medicaid
rates must be "sufficient to enlist enough providers" so beneficiaries can
access care to the same extent as the general population in a particular
area.

 

The 9th U.S. Circuit Court of Appeals in San Francisco ruled that
beneficiaries could sue under the U.S. Constitution's supremacy clause,
which lets federal law take precedence over state law. California appealed
to the U.S. Supreme Court. The case before the high court is a consolidated
set of three separate lawsuits on the issue that had been filed by providers
and beneficiaries.

 

In May 2011, the Obama administration argued in support of California,
saying that no federal law allows individuals to sue states to enforce the
standard that Medicaid rates must be "sufficient to enlist enough providers"
(California Healthline, 10/3/11).

 

Details of Supreme Court Decision

The high court noted that since the case was filed, CMS approved some of the
proposed rate changes, while the state withdrew some others that are being
challenged in the case. The justices ruled 5-4 that the 9th U.S. Circuit
Court of Appeals should re-examine the case based on these changed
circumstances (Millman, Politico, 2/22).

 

The justices said that it is still up for debate whether the plaintiffs can
allege that the cuts run afoul of federal law if a federal agency has
approved them (Los Angeles Times, 2/22).

 

However, the justices suggested that the cuts should be challenged under the
Administrative Procedure Act (Pecquet, "Healthwatch," The Hill, 2/22).

Since the ruling did not affirm the lower court's decision to block the
reductions, the state has another opportunity to argue for its right to
implement the cuts to curb the budget deficit. For now, the state will
continue paying the higher reimbursement rate as it assesses the decision,
according to state officials.

 

Dissent

The court's four conservative judges dissented. Chief Justice John Roberts
said that Medicaid was created as a partnership between states and the
federal government, and as such, spending decisions should be made by those
entities, not through the courts (Los Angeles Times, 2/22).

 

Reaction to Ruling

Both sides claimed victory because the court did not rule in favor of one
side or the other, the Times reports.

 

James Hay, president of the California Medical Association, said the
decision is a "win for physicians and their patients."

 

Jim Humes, the state's executive secretary for legal affairs, said the
court's actions "recognize the authority of states to better manage their
health services programs" (Los Angeles Times, 2/23).

 

Implications

The case is particularly significant because the outcome could affect the
federal health reform law's expansion of Medicaid.

Lloyd Bookman, founding partner with law firm Hooper, Lundy and Bookman,
said, "If this case comes out adversely and states are allowed to cut rates
without fear of provider lawsuits, that could have an impact on the
mechanisms of the [reform law] because ... [it] depends on many millions of
people enrolled in state Medicaid programs" (California Healthline,
10/3/11).

 

 

 

 

March 1, 2012

 

Supreme Court Review of the Health Care Reform Law

 

NEJM.com <http://www.nejm.org/doi/full/10.1056/NEJMp1114933> 

 

 

Key Court Decisions Regarding the Affordable Care Act.

Later this month, the U.S. Supreme Court will examine the constitutionality
of the Affordable Care Act (ACA),1 potentially producing a landmark
decision. For most cases, the Supreme Court allocates 1 hour for oral
argument - 30 minutes for each side. For the health care reform case, the
Court has scheduled 6 hours for oral argument - the most time devoted to a
case in more than 45 years. These arguments will take place on March 26, 27,
and 28 (see boxSupreme Court Schedule for ACA Oral Arguments.), and the
Court's ruling will probably be announced in June.

 

Setting the foundation for the largest expansion of health care coverage
since Medicare was established in 1965, the ACA will reach approximately 32
million of the 50 million Americans who are now uninsured. It will do so in
two ways.

 

First, beginning in 2014, the ACA's "individual mandate" requires most
citizens and legal residents whose income is above the threshold for filing
federal income taxes to maintain health insurance or pay a financial penalty
- with exemptions for those who cannot afford coverage, have incomes below
100% of the federal poverty level, or lacked coverage for less than 3 months
of the year. Individuals with incomes between 100% and 400% of the poverty
level will qualify for income-based federal subsidies. The individual
mandate, when fully implemented in 2016, is expected to add 16 million
people to the rolls of the insured.

 

The ACA also authorizes the creation of mostly state-administered insurance
exchanges through which individuals and small businesses may purchase
insurance policies. States have considerable latitude in specifying minimal
essential benefits that must be covered by all insurance policies offered.
Among other requirements, under the ACA, insurance companies may not deny
coverage or charge higher premiums on the basis of preexisting medical
conditions, are limited in their ability to rescind policies, and may not
place annual caps on coverage.

 

Second, the ACA extends Medicaid eligibility to all citizens and certain
legal residents with incomes of up to 133% of the poverty level, making an
additional 16 million people eligible for the federal-state program. States
not complying with the expansion risk losing all federal Medicaid funds. The
federal government will pay 100% of Medicaid coverage for the newly eligible
for the first 2 years and gradually reduce its contribution to 90% in 2020.

 

Challenges to both of these ACA provisions will require the Court to apply
the principle of federalism, which recognizes the division of power between
the federal and state governments. The U.S. Constitution assigns enumerated
powers to the federal government, reserving the rest "to the states
respectively, or to the people." The justices will determine whether, in
crafting the ACA, Congress exceeded its powers.

 

Numerous lawsuits have been filed against the ACA, but the Supreme Court
selected for review the case brought by 26 states and the National
Federation of Independent Business (Florida v. HHS) (see timelineKey Court
Decisions Regarding the Affordable Care Act.; an interactive timeline is
available with the full text of this article at NEJM.org). In that case, the
U.S. Court of Appeals for the 11th Circuit ruled that the individual mandate
was unconstitutional but that the other insurance reforms in the ACA could
stand.2 It further ruled that the Medicaid expansion was constitutional. In
reviewing the case, the Supreme Court will address four questions.

 

First, the Court will determine whether the Tax Anti-Injunction Act (AIA),
which dates back to the 1800s, precludes review of the ACA until after 2014.
The AIA provides that the legality of a tax cannot be challenged until the
tax has been assessed.3 If, as some contend, the individual mandate's
financial penalty is a tax under the AIA, no tax will be assessed until 2014
and a legal challenge now is premature. Others argue that the penalty is not
a tax intended to raise revenue but a financial incentive to comply with the
mandate. If the Court determines that the AIA makes review premature, it may
conclude that it should not decide the substantive challenges to the ACA.

 

If the Court determines that review is appropriate, it will next consider
whether Congress has the authority to require most U.S. citizens to purchase
health insurance or pay a penalty. The government argues that it has such
authority under the Constitution's Commerce Clause, which the Supreme Court
has interpreted as providing Congress wide latitude to regulate activity
that, when viewed cumulatively, has a substantial effect on interstate
commerce.4 Americans spend an estimated $2.5 trillion annually on health
care, which is indisputably a part of interstate commerce. The government
will also argue that Congress derives authority to mandate health insurance
coverage from its constitutional power to make laws that are "necessary and
proper" for executing other powers.

Challengers argue, however, that the mandate to purchase a product from a
private entity is unprecedented and constitutes an intrusion on individual
liberty. If this mandate is upheld, what else might the government force
individuals to buy? They further claim that regulating "inactivity," the
decision not to obtain health insurance, is outside Congress's power to
regulate interstate commerce.

 

Third, if the Supreme Court rules the mandate unconstitutional, it will
determine whether the rest of the ACA must also be overturned or whether the
mandate is "severable" from the rest of the law. ACA opponents argue that
the whole law must be overturned if the Court invalidates the mandate, in
part because the mandate is "inextricably intertwined" with the law's other
elements. The government argues that only two other portions of the law
would also have to fall if the mandate is invalidated: the requirements that
insurers cover people with preexisting conditions and not charge them higher
premiums. Without a mandate, these requirements would become infeasible.
Some authorities argue that Congress, not the Court, should decide these
questions.

 

Finally, the Court will consider whether the ACA's Medicaid expansion is
constitutional and whether states can be required to comply with it in order
to remain eligible for federal Medicaid funds. The principal point of
contention here is whether the ACA requirements "commandeer" or "coerce"
state functions in a way that exceeds federal authority. Although the lower
federal courts have consistently rejected this argument, the Supreme Court
has opted to review it. The government will argue that states operate
Medicaid programs voluntarily, contributing their own funds in order to
receive federal funding, and that Congress has broad power under the
Constitution's Taxing and Spending Clause to require state compliance as a
condition of receiving federal funding.

 

However the Supreme Court rules, the implications for health care in the
United States will be profound.5 At one extreme, the Court could strike down
the entire ACA, implicitly endorsing a more limited role for the federal
government in the regulation of health care and other areas. At the other
extreme, the entire law could be upheld. Intermediate rulings, such as
striking the mandate but upholding the Medicaid expansion, are of course
also possible.

 

If the Court upholds the ACA, the number of people with health insurance
coverage will swell by as many as 32 million. This result would put pressure
on providers to deliver more care. Currently, only about two thirds of
physicians accept Medicaid patients, so the burden of serving the newly
eligible populations would fall disproportionately on these physicians. The
ACA begins to address this problem with workforce-development provisions. In
addition, at least in the short run, health care costs would probably
increase, though the ACA contains some cost-control measures.

 

The Supreme Court's decision in this case could have a significant effect on
the presidential election, since the ACA, President Barack Obama's signature
legislative accomplishment, is already a hot-button issue. Public opinion,
which favors some parts of the law but not others, makes the political
calculus complicated. With all these factors in play, 2012 is shaping up to
be a momentous year for U.S. health care.

 

 

 

 

 

Marcus Williams &
Brian Potts MD, MBA
Managing Editors, CAL/AAEM News Service

 

 

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