With the long-awaited ruling by the Supreme Court on the Affordable Care Act (ACA)—notably the Court’s assertion that the individual mandate is constitutional, as well as its finding that the requirement that states expand their Medicaid coverage or lose all Medicaid money is coercive—some seem to think that “uncertainty” related to the ACA has ended.
In fact, nothing could be further from the truth.
Medicaid Issues Continue
Although the constitutionality issue has been laid to rest, several other legal skirmishes have already arisen. Alabama, Maine, and several other states are challenging the requirement that states continue all Medicaid coverage that was in place as of 2010 until the Medicaid expansion occurs in 2014. Of the 26 states that challenged the expansion itself (which calls for states to provide Medicaid coverage to all those below 138% of the poverty level, regardless of age or parental status), 6—including Texas and Florida—have already said that they won’t expand their programs. Five other states are leaning in that direction. The rest of the states that joined the challenge are still deciding what to do.
Traditionally, states have more energetically participated in programs when the federal government pays a large proportion of the costs. For example, some states that had not aggressively enrolled all of their Medicaid-eligible children exhibited much greater effort to enroll children in the S-CHIP (Children’s Health Insurance Program), for which the federal government pays a higher proportion of costs than for the traditional Medicaid program.
For the Medicaid expansion, the federal government will cover 100% of the costs for newly eligible individuals for the first 3 years, gradually sliding to 90% of costs over the next 4 years—which suggests that most states may ultimately choose to participate in the expansion, whatever they are saying now. Wisconsin, for example, has said it will “wait and see” before making a decision.
Unfortunately, the way the law was drafted, poor populations in states that choose not to participate are particularly vulnerable. In states that do participate, people whose income is below 138% of the federal poverty level are eligible to receive Medicaid; those whose income exceeds that amount may qualify (on a sliding scale) for a subsidy to purchase insurance from an exchange. But under the ACA, in states that choose not to participate in the Medicaid expansion, individuals who have incomes below 100% of the federal poverty line and who do not qualify for Medicaid in their state (most childless adults) are also ineligible to receive a subsidy. This gap in assistance exists because when the ACA was passed, Congress thought very poor individuals wouldn’t need a subsidy to purchase insurance because they would be covered by Medicaid. A future Congress might allow for people either to participate in Medicaid or to receive the subsidy to purchase private insurance. In fact, an earlier version of the Senate bill did just that: it allowed people who were at or above the poverty line to participate in the exchange rather than in Medicaid if they wished.
Health Insurance Exchange Challenges
States are in various positions of readiness when it comes to establishing their insurance exchanges, which are basically insurance markets. The exchanges are supposed to be operational by fall 2013 so that coverage can begin by January 2014. Because of the concern that some states might not be ready on time, the law provides for a federally run exchange as a backup to the state-run exchanges. By regulation, states are allowed to take over running their own exchanges whenever they are in a position to do so. This is not a small issue. Current estimates are that, at least initially, there could be a federal exchange in one-third to one-half of the states.
However, the law was written with language that provides subsidies to people to defray the cost of insurance plans offered through an exchange established by their state. The question now is whether that allows for residents to receive subsidies to apply to exchanges run by the federal government. A rule issued by the Obama Administration allows for subsidies for insurance purchased through either state or federal exchanges, but challengers are saying the language of the law is clear and explicit, limiting the subsidies to apply only to insurance purchases through state exchanges. Ultimately this issue will probably end up in the courts. The likely challenger will be an employer who is penalized when 1 or more employees receive a subsidy for insurance from a federally run exchange. Under the law, some employers who don’t offer coverage or who offer inadequate coverage will be subject to penalties whenever an employee receives the subsidy.
The ACA and the 2012 Election
Chief Justice Roberts made it very clear that he and the court were not opining on the wisdom of the ACA, only on its constitutionality. As has already become obvious, the 2012 election will in part be a referendum on the Act as well as on the economy. This is as it should be. The way to change unpopular legislation is to elect a Congress and a President who pledge to change it in ways that meet the demands of the electorate. Of course, there are usually a variety of issues that are important to people, and each of us has to choose the representative, senator, and president who on average best represent our views. Still, continuing, repealing, or substantially changing the health care law is likely to be one of the deciding factors, even if not the determining factor.
The 2012 election is not the last say on the ACA. Just as Medicare has some legislated changes in most years—some small and some large—it is likely that there will be many changes to the ACA in the years to come. Given the immensity of the Act, it is especially likely that there will be important statutory changes over the next decade as some unintended consequences or changed situations reveal themselves. But the most important opportunity for large-scale change will be in 2012, before the most significant portions of the law are implemented.
Most of us have been so focused on the constitutional issues of the ACA that we seem to have forgotten about some of the other crucial issues also facing the country, including sequestration, the automatic spending cuts that are scheduled to go into effect next January if a joint congressional committee and Congress fail to develop a plan for $1.5 billion in deficit reduction; the debt ceiling; the expiring tax law changes; the “doc fix,” legislation that averted drastic payment cuts to physicians who treat Medicare patients, due to expire at the end of this year; and ultimately the need to reform our entitlement programs. These are more than enough reasons to expect an uncertain future, no matter who we are or what we do.
About the author: Gail Wilensky, PhD, is an economist and Senior Fellow at Project HOPE, an international health foundation. She directed the Medicare and Medicaid programs, served as a senior adviser on health and welfare issues to President George H. W. Bush, and was the first chair of the Medicare Payment Advisory Commission. She is an elected member of the Institute of Medicine.
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