The United States Supreme Court recently heard three days of oral arguments regarding several legal challenges to the two-year-old health care reform bill. The challenges revolved around Medicaid expansion, severability, and the infamous individual mandate. As I write this article, the court has already voted on each of these issues in a private session, and the results of their vote will be released sometime in June of this year.
Having listened to the oral arguments and much of the commentary following the arguments (yes, I am that much of a geek), it seems to me that we can reasonably predict how seven of the nine justices will vote. Justices Ginsburg, Breyer, Sotomayor and Kagan all seem to be clearly in the camp that would rule the law as being constitutional. Justices Scalia, Thomas and Alito all seem to be in the camp that would view the individual mandate as being unconstitutional, and possibly the entire legislation due to the issue of severability. That leaves us with Chief Justice Roberts and Justice Kennedy. Both offered up some very pointed questions to the Solicitor General, which leads many to believe that they will likely rule the individual mandate as unconstitutional. However, both made comments that could be viewed as supporting the constitutionality of the legislation as well.
As we wait for the ruling to be announced, I would like to take the opportunity to explore the various scenarios that could unfold based on the decisions reached by the nine justices.
Option 1: The Delay – One option before the Supreme Court is to not issue a ruling at all. There is a legal question that in essence says that the justices are not able to rule on a case until after damages have actually been experienced. Since no one has yet been forced to buy insurance through the individual mandate, and since Medicaid expansion has not yet taken place, the court could say that a ruling is premature and delay on ruling until after these things have happened, which would mean some time in 2015. Most court observers think this outcome is unlikely, but nonetheless, it is still possible.
Option 2: The Status Quo – The court could find that all parts of the law are constitutional and allow the reform bill to stand as is. In this scenario, we will proceed down the path set forth under the legislation. This means getting ready for health care exchanges and Medicaid expansion. The impact on physicians, if this does happen, is a mixed bag. On the positive side, more people will have insurance, and insurance companies will be more heavily regulated. On the negative side, Medicaid roles will go up, which will have a negative financial impact on most practices since Medicaid is of course the worst payer for most physicians. In addition, the impact of health care exchanges will put significant price pressure on insurance companies. Their reaction to this price pressure will be to reduce costs as much as possible. Remember, what insurance companies call “costs,” physicians call “revenue.” This will likely mean difficult payer negotiations, reductions in reimbursement rates and increases in utilization management. I recently spoke to an insurance company executive about this issue and he blatantly said, “The bottom line is doctors better get used to making less money in the future.”
Option 3: The Surgical Option – Another outcome is that the court could remove the individual mandate and leave the rest of the legislation in tact. Under this option, they would “surgically” remove the individual mandate and try to let the rest of the law survive. During the oral arguments regarding severability, several justices referred to the individual mandate as “the heart of the legislation.” In my opinion, this is an accurate description. The individual mandate is the key ingredient that holds the entire thing together; without it, the rest of the law essentially falls apart. The reason is simple insurance theory. In order to pay for the people who are going to get health care, you have to have large numbers of people who don’t need health care paying into the insurance pools. You simply cannot increase benefits and reduce underwriting options without adding large numbers of healthy people to the pool. So, if the individual mandate is struck down, we could see some very dramatic changes to the insurance industry. Several industry experts have predicted that if the individual mandate is struck down, leaving the rest of the legislation still in tact, this could result in significant increases in premiums and possibly cause many insurance companies to leave the marketplace altogether. This scenario is probably the worst possible outcome.
Option 4: The Never Mind – The final option before the court is to throw out the legislation as a whole by ruling the individual mandate as unconstitutional, and ruling that it cannot be severed from the law. If this happens, we are back to the drawing board. All of the changes that have taken place over the last two years will go away. While many might feel like this is a good thing, it’s important to focus back on the reasons why this whole discussion began in the first place. If the Supreme Court strikes down PPACA, the factors that led to its passage will need to be addressed in some fashion. We will still have around 40 million people in the United States with no insurance coverage. We will still have insurance costs that are putting a stranglehold on business, and Medicare expenses that are rising faster than we can pay for them.
So what does this all mean? In my opinion, it means we are in for some very rough times and it’s hard to predict what the future holds. Something needs to change, and it will. As of now, it’s just unclear what will change and by how much. All we can do at this point is wait for the verdict from the Supreme Court and prepare ourselves for the possible outcomes. Stay tuned!
Ron Howrigon is the President & Founder of Fulcrum Strategies (www.fsdoc.com), a physician advocacy and managed care consulting group, where he represents thousands of physicians across the U.S., helping them to effectively deal with their managed care relationships. For information, call 919.436.3373.