What the Healthcare Law Ruling Means: 4 Points to Keep in Mind

Sticking to the basics, the Supreme Court essentially upheld the Patient Protection and Affordable Care Act in a 5-4 vote on Thursday. Some of the country cheered, while other segments of America sneered. However, like most news stories, the healthcare law decision runs deeper than its headline.

"While the Supreme Court upheld the individual mandate and in fact left a large portion of the ACA intact, a close reading of the decision conveys the complexity of the ruling and some real concerns for the provider community," says Susan Feigin Harris, JD, a partner in the Baker Hostetler Healthcare Practice group.

Here are four points for providers to keep in mind when thinking about the Supreme Court's ruling on the PPACA.

1. The individual mandate stays…as a tax. Chief Justice John Roberts — whom many thought would rule against the PPACA because of conservative leanings — was the swing vote to uphold the law, including its mandate that adults acquire health insurance. But unlike the four other justices who voted to keep the PPACA, he ruled the law did not hold because of Congress' constitutional power to regulate interstate commerce, the lead argument of the Obama administration.

"The Commerce Clause is not a general license to regulate an individual from cradle to grave, simply because he will predictably engage in particular transactions," Chief Justice Roberts wrote in his opinion.

Rather, the chief justice ruled the Supreme Court could uphold the law accepting that the PPACA's "penalty" for adults who fail to purchase health insurance is essentially a tax in sheep's clothing. It's a tax to incentivize people — much like the cigarette tax aims to get people to quit smoking. In the case of the PPACA's tax, it's meant to encourage individuals not covered by Medicaid or Medicare to purchase insurance.

And so, the individual mandate — an essential provision of the PPACA — stands.

2. Medicaid expansion is coming…maybe. Another curveball the Supreme Court threw on Thursday is the alteration of the Affordable Care Act's Medicaid expansion. Seven of the Supreme Court justices found the Medicaid expansion unconstitutional because the penalty for states failing to expand was overreaching. The PPACA originally imposed a penalty that would have taken away all Medicaid payments from states that didn't expand.

Perhaps the tricky part about the decision for providers lies in aspects of the ruling that remove the "teeth" from the law, says Rich Temple, Beacon Partners executive consultant. Specifically regarding Medicaid expansion, the Supreme Court ruled that HHS can only deprive states of new Medicaid funding called for in the PPACA's expanded Medicaid provision. The federal government cannot strip all funding from states that decide to opt out of expanded Medicaid coverage.

"It is unclear whether some states may opt out of taking the increased Medicaid funding, which would adversely impact the reduced levels of uninsured individual patients that providers were anticipating," Mr. Temple says.

Additionally, part of the PPACA includes $155 billion in federal Medicaid payment cuts, including significant cuts to disproportionate share hospital supplemental payments meant to compensate for the number of uninsured patients treated at the hospital. In the case of DSHs, the payments would not have been needed if there weren't any uninsured people, according to Ms. Harris of Baker Hostetler.

"With this ruling, there is absolutely no guarantee that a state will participate in the Medicaid expansion and that the number of uninsured will be reduced, yet DSH cuts remain," Ms. Harris says. "If a provider's state chooses to forgo the expansion, a provider could still be faced with significant numbers of uninsured patients and experience Medicaid payment shortfalls."

In a report addressing the Supreme Court's decision, McGuireWoods Consulting offers several new policy questions about Medicaid expansion, including:

  • Do states need to affirmatively opt in or opt out of the expansion?
  • If a state expands its Medicaid program, can it reverse the decision later or fold those individuals into the state exchanges when federal funding declines?
  • What is the financial impact on the overall cost of the decision on the PPACA?
  • Would individuals who would have been covered by Medicaid seek insurance through state exchanges?

The uncertainty of Medicaid coverage means there could be fewer covered people in the system than providers originally anticipated, according to the report.

3. Accountable care organizations and other healthcare delivery reforms will move ahead. Hospitals and health systems, along with physician groups and payors, will likely continue to seek to improve care and reduce cost inflation through integration, partnerships and acquisitions. ACOs and other integrated care delivery models, which have been sprouting up nationwide for the past few years, will most likely continue to grow. Also, experts predict more horizontal integration between hospital systems and physician groups, alignment and buyouts. Payors will also likely continue to get into the care delivery game in an effort to diversify and keep costs down.

A higher percentage of new healthcare beneficiaries may be in poorer health and have a higher risk of acute and chronic illnesses compared with Americans who have consistently had healthcare insurance. Healthcare providers are likely to receive lower levels of reimbursement for the healthcare services they provide to these new beneficiaries and will need to continue to coordinate care as much as possible, according to John Redding, MD, MBA, manager with Blue Consulting Services.

"Now, more than ever, healthcare providers must begin to test innovative healthcare delivery and payment models such as accountable care organizations, bundled payments, clinical integration, and the patient-centered medical home," Dr. Redding says. Ultimately, providers will need to "learn how to do more with less."

4. PPACA is here to stay for sure…until the November elections. Upholding the healthcare law means that hospitals and health systems should continue to prepare for reforms called for in the PPACA. But that doesn't necessarily mean the law will stick around for the long haul. While GOP members of the House of Representatives have voted to repeal the law and plan to do so again in a few weeks — holding them back is a Democratic-controlled Senate — the fall elections could change everything. The Supreme Court's ruling that the individual mandate is a tax may also provide Republicans more leverage to use against President Barack Obama, arguing that he raised taxes for the middle class.

Speaking at a podium in Washington, D.C., Thursday afternoon, hours after the Supreme Court's historic decision, GOP presidential candidate Mitt Romney vowed to make repeal of the PPACA a top priority.

"What the Court did not do on its last day in session, I will do on my first if elected as president of the United States," Mr. Romney said. "I will act to repeal Obamacare."  

Meanwhile, President Obama has come to embrace the term 'Obamacare' and has promised to continue the reforms of the PPACA if he's re-elected.

More Articles Related to the Affordable Care Act:

PPACA Ruled Okay: 8 Issues Hospitals Should Keep in Mind Moving Forward
AHA's Rich Umbdenstock: PPACA Ruling Gives Hospitals 'Much-Needed Clarity'
Healthcare Reform Decision Affirms Hospitals' Strategies

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