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Editor's Note: This is a complimentary research note published by Healthcare Policy analyst Emily Evans. CLICK HERE to get daily COVID-19 analysis and alerts from our research team and access our related webcasts. |
Politics
Lyndon Johnson once said that "monumental legislation passes overwhelmingly or not at all."
He was referring not just to a historical fact; the Civil Rights Act and the 1965 amendments to the Social Security Act all passed both houses with significant majorities; but also to a necessary requirement of such legislative efforts.A master politician, President Johnson knew that legacy-making laws would not endure without broad consensus.
The Affordable Care Act, the most significant overhaul of the American health care system since those 1965 amendments to the Social Security Act, cleared the House of Representatives in March 2010 by a seven vote margin after some creative legislative moves on the Senate side.
Since then, the law has served as a fulcrum for political turmoil. In 2010, Republicans took control of the House, largely on promises to repeal the ACA. The Senate followed in 2015 on similar coattails, made longer by the botched roll-out of the insurance exchanges and the rapid increase in premium costs.
Since the law's passage, there have been countless legislative and legal challenges all of which have been in vain. The most recent of those has landed at the Supreme Court at the most disruptive of moments: six weeks before a contentious election.
The ACA's luck may have finally run out.
With the passing of Ruth Bader Ginsburg, Democrats are left with few good choices when it comes to the future of the health care law.
On the one hand, a delay in confirming a new justice until next year when, presumably, Joe Biden will be the president and power in the Senate may have shifted, means Democrats preserve their liberal block at the Supreme Court.
In a cruel twist of irony, it would also put the ACA in greater peril than before.
Assuming Justice Roberts sides with the minority as he has done before, the result is a 4-4 decision, in which case the appellate court's opinion would stand. That opinion found the individual mandate was unconstitutional and the trial court needed to determine what parts of the law, if any, were severable.
On the other hand, if Democrats do not block President Trump's nominee, Justice Ginsburg's successor is likely to be quite conservative and philosophically disposed toward striking the law down.
The only person worse off than Democrats when it comes to the ACA is Justice John Roberts. Keen to preserve the reputation of the court, Judge Roberts used his swing vote status to uphold the ACA in 2012. He may be able to do so again. Unlike Justices Roberts, Alito and Thomas, Neil Gorsuch and Brett Kavanaugh have no identifiable opinions on the constitutionality of the individual mandate.
Roberts' creativity, in the face of the political consequences of sustaining the lower court, should not be under-estimated especially in the face of calls to pack the court if Biden wins the White House.
However, by pressing not just one but two justices to join in overturning the appeals court, Roberts endangers his reputation as a jurist. After all, the State of Texas is following the roadmap laid out in Roberts' 2012 opinion that found the individual mandate was constitutional under Congress' authority to tax.
One advantage Roberts has over Democrats' plight is he will know the election's outcome by the time oral arguments are heard, making balancing his reputation against protecting the court easier.
Still it is, as a friend put it, Sophie's Choice.
Policy
One possible outcome, either at the Supreme Court or as a result of the Fifth Circuit's remand to the lower court, is that parts of the ACA can be severed from an unconstitutional individual mandate while others are too inextricably linked to be separated.
In our analysis from July 2019, Hedgeye legal analyst Paul Glenchur and I identified Title I of the law as most at risk. These provisions include:
- Health insurance market reforms such as community rating, age bands, guaranteed issue, etc.
- Requirements of Qualified Health Plans sold on the ACA exchanges
- Standards for Essential Health Benefits including certain requirements for preventive services
- Permanent reinsurance program individual and small group market
- Employer mandate and penalty
- Individual mandate and penalty
- Cost-sharing reductions, premium tax credits to support individual and small group markets
Notes on the Fifth Circuit decision can be found here and here.
It is hard to imagine that other parts of the law that allowed for Medicaid expansion and establishment of the Innovation Center would not be severable. However, we must note that the trial court judge, although he did not undertake the analysis the appeals court wants on remand, seems pretty hostile to the law in general and may not be inclined to "perform taxidermy on big game legislation," as one of the Fifth Circuit judges put it.
If, in the end, Title I goes down with the individual mandate, the most important change will be repeal of preventive services mandates in ERISA plans, a headwind for EXAS.
Less important will be the end to subsidies for individual and small group insurance which will be a modest headwind for those carriers that sell on the ACA exchanges. Only about 2% of the population is insured through the ACA exchanges and no one carrier dominates, so the impact is likely to be small.
If the entire law is struck down, the implications for Medicaid plans could be extreme. While expansion is voluntary, the enhanced federal match that makes it possible would disappear. The Innovation Center which incubates new payment models like bundles and is now charged with reforming drug prices would lose a key part of its authority: mandatory participation. Other parts of the law affecting public health and workforce are not likely to be material from our perspective.
Guaranteed issue, known by the shorthand of "pre-existing conditions" is a hot-button political issue but we question its actual economic impact. HIPAA limits on discrimination for pre-existing conditions would remain and the White House, Congress or both are very likely to act to mitigate adverse effects.
The fact is the value of the ACA is in its symbolism more than its execution. It represents one more step in fulfilling a dream of universal coverage and access that goes back to Harry Truman.
Yet, aside from Medicaid expansion and a handful of other programs, most notably the CMMI, it has fallen far short of its aspiration of disconnecting health insurance from employment and making it freely available and inexpensive. Constant assaults like the one before the Supreme Court have made a significant contribution to that outcome.
In other words, Lyndon Johnson was right.
Power
Notwithstanding its actual impact on the business and delivery of health care, the ACA is a potent political force among Democrats.
For Democrats, the ACA is a critical pre-cursor to fulfilling the dream of universal coverage. The law also creates a platform for a public option as the COOP provisions remain, even if these nonprofit insurers are mostly defunct. When used aggressively, demonstration models in Medicare and Medicaid could also serve the larger purposes of universal access. In short, the ACA is a necessary starting point for much of the party's base.
Republicans, on the other hand, appear to have moved on. The Republican National Convention had barely a mention of the issue that dominated their political narrative from 2010 through 2017. The party's position no doubt recognizes their poor record of keeping the promise to repeal. It also probably reflects the fact that the law has become increasingly less disruptive. Insurance markets have settled down as pent-up demand abated for services and shenanigans like DVA and FMS' aggressive steering of patients into exchange plans has been curtailed. So too have Americans come to like portions of the law like keeping children on parents' insurance until 26 and guaranteed issue.
The question is whether America has moved on.
The Kaiser Family Foundation's tracking poll shows 10% of Americans listing health care as their top issue, down from 26% in February. The economy, COVID-19, criminal justice and policing and race relations (32%, 20%, 16%,14%) now take the lead. If the Kaiser poll is any indication, it would appear that America now has bigger fish to fry. In that case, Democrats, married to the ACA and health care generally finds itself headed to an election talking about an issue that is becoming less and less relevant.
If Americans are putting the ACA in the rearview, Democrats have another Sophie's Choice: let the ACA dominate its narrative and lose the election or reduce its emphasis and alienate their base.
