Case Study 3.pdf Policy Snapshot: The Affordable Care Act: A Cauldron of Controversy 5 The requirement to obtain insurance could be satisfied in one of four ways: (1) employer-sponsored insurance, (2) individual insurance purchased through health exchanges created by the act, (3) an individual policy purchased on the open market, or (4) being enrolled in public insurance programs such as Medicare and Medicaid. An individual failing to obtain health insurance in compliance with the minimum benefit structure set forth in the act would be required to make a "shared responsibility payment" (SRP) to the federal government. Revenue from those payments was to be used in furtherance of the ACA's goals-expanding healthcare coverage. The amount payable as an SRP was established as a percentage of the household income, subject to a flat dollar amount floor and a cap related to the insurance market. The SRP would be "assessed and collected by the IRS [Internal Revenue Service] and reported on federal income tax returns. The penalty is the greater of $95 or 1% of income in 2014, $325 or 2% of income in 2015, and $695 or 2.5% of income in 2016, up to a maximum amount equal to the national average premium for bronze level health plans in the exchanges for the respective year" (Musumeci 2012). (The coverage levels of health insurance policies sold through the exchanges established by the ACA are categorized by names of precious metals. From highest to lowest, those are platinum, gold, silver, and bronze.) Arguments The proponents of the act (respondents) relied on the power of the Congress to regulate interstate commerce as provided in Article I, Section 8, Clause 3 of the US Constitution to justify the imposition of the individual mandate. They argued that Congress had a right under what is called the Commerce Clause of the Constitution, which regulates activity in interstate commerce, to impose an individual mandate because the absence of insurance negatively affected interstate commerce. They further argued that the geographic diversity among purchasers and insurance companies in the transaction to purchase insurance constituted "interstate commerce" within the meaning of the Constitution. Simply stated, the proponents advanced the proposition that the failure of so many Americans to have insurance affected the economy across state lines, that this was "interstate commerce" as contemplated in the Constitution, and that, therefore, the individual mandate was constitutional. Those seeking to overturn the ACA (petitioners) argued that Congress had no right to compel an individual to undertake a specific act, such as to obtain insurance, and that the ACA represented federal overreach encroaching on individuals' rights-each person should be able to decide for themselves if they needed to buy health insurance. They argued that the Commerce Clause was not applicable in this instance, because the concept existed to regulate activity. Here, opponents said, there was no activity but for the government compelling individuals to purchase insurance. 6 Longest's Health Policymaking in the United States Decision and Rationale The Court found that Congress did indeed have the right to regulate commerce. _ Dashboard 888 Calendar To Do Notifications... 1 77 Case Study 3.pdf Q POLICY SNAPSHOT THE AFFORDABLE CARE ACT: A CAULDRON OF CONTROVERSY To say that passage of the Patient Protection and Affordable Care Act (P.L. 111-148), hereafter ACA, was acrimonious and highly partisan would be an understatement. In the eyes of the proponents, Republicans were seen as obstructionist. Opponents saw Democrats-who at the time held the major- ity in both houses and the White House-as overstepping and high-handed in the way they managed the legislation. Whether one believes one side or the other is immaterial for this discussion. It was a bitter, hard-fought battle that left substantial political ill will in its wake. Ultimately, the bill passed on the narrowest of party line votes: 219 to 212 (4 not voting) in the House and 60 to 39 (1 not voting) in the Senate, with the Democrat-controlled Senate using a seldom-employed procedural device to thwart a Republican filibuster. Despite the rancor, or perhaps because of it, the episode provides some interesting lessons about the policymaking process. The bill was complicated; more than 900 pages long, it contained a multitude of provisions. Soon after its passage, a number of parties sued, claiming that the sweeping reform law was unconstitutional in several respects. National Federation of Independent Business (NFIB) v. Sebelius, 132 S. Ct. 2566, 567 US 519 (2012), was a landmark US Supreme Court decision that upheld Congress's power to enact most provisions of the ACA. This policy snapshot will focus on only two issues decided by the court to illustrate the health policy interplay between the legislative branch, the execu- tive branch, and the judicial branch as well as the relationships of the states to the federal government: (1) the individual mandate and (2) the expansion of Medicaid. Parties to the Case and Its Origins The hostility of the political process carried forward to the legal forum. The litigation fairly reflects the partisan and interest group divide that had dominated the political debate. Florida, joined by 12 other states (all led by Republican 3 4 Longest's Health Policymaking in the United States governors or Republican attorneys general), filed a complaint (the formal docu- ment to begin a lawsuit) in the US District Court for the Northern District of Florida the day the ACA was signed into law. Subsequently, 13 additional states (also represented by Republican governors or attorneys general, with Lalas.) the NFIB, and several individuals joined in ard 898 Calendar To Do Notifications InboxCase Study 3.pdf Parties to the Case and Its Origins The hostility of the political process carried forward to the legal forum, The litigation fairly reflects the partisan and interest group divide that had dominated the political debate. Florida, joined by 12 other states (all led by Republican 3 4 Longest's Health Policymaking in the United States governors or Republican attorneys general), filed a complaint (the formal docu- ment to begin a lawsuit) in the US District Court for the Northern Dis of Florida the day the ACA was signed into law. Subsequently, 13 addition states (also represented by Republican governors or attorneys general, with two exceptions noted below), the NFIB, and several individuals joined the action as plaintiffs. The district court ruled the individual mandate was unconstitutional and, therefore, struck down the entire act as unconstitutional. The defendant (referred to as respondent in the appeals process) was Kathleen Sebelius, the secretary of the Department of Health and Human Services (HHS), being sued in her official capacity. (It is common for cabinet secretar ies to be defendants in litigation brought against the government.) After the district court rendered its decision, the federal government appealed to the 11th Circuit Court of Appeals. That court was divided, 2 to 1, in ruling that the individual mandate was unconstitutional but also held that the remainder of the ACA was "severable," meaning the rest of the act would survive as the law of the land. The Supreme Court agreed to hear the case on appeal from the 11th Circuit. Multiple special interest groups on both sides filed amicus curiae ("friends of the court") briefs. (Brief is the term for the document making a legal argument to a court.) These groups included a diversity of organizations, including the American Public Health Association and the American Academy of Actuaries. Of course, the 26 states bringing the suit (referred to as petitioners in the appeals process) filed briefs attacking the constitutionality of the ACA, while 13 other states filed briefs in support of the ACA. (Underscoring the political controversy surrounding the issue, the states of Iowa and Washington filed briefs on both sides. In those two states, the respective attorneys general and governors, of opposite political parties, disagreed on the constitutionality of the ACA, such disagreement squarely reflecting the partisan divide regarding the act.) Without delving too deeply into the processes of the Supreme Court, it is important to note there were four separate opinions composed by several of the justices. In some instances, a justice would join in part of a decision while dissenting from the rest. In order to cut through the thicket of those multiple decisions and dissents, suffice it to say there were majorities upholding the individual mandate and striking down the Medicaid expansion. The Individual Mandate The ACA requires every adult in the United States between the ages of 18 and 64 to obtain health insurance. Some groups were exempted from this require- ment: undocumented immigrants, elderly, and those people who already had insurance. A few other exemptions for much smaller populations that need not be identified here were also included. Policy Snapshot: The Affordable Care Act: A Cauldron of Controversy 5 The requirement to obtain insurance co.. CO_ Dashboard 3 898 Calendar To Do NotificationsQ Case Study 3.pdf implementation of the ongress to withhold states' Medicaid funding. That particular matter never arose, however, because the Supreme Court stepped in to limit the executive branch's authority to enforce provisions relative to the expansion of Medicaid. Finally, we see the states making conflicting determinations regarding the value of expanded Medicaid as a matter of policy and in two instances-Iowa and Washington-coming down on both sides of the issue. Policy Snapshot: The Affordable Care Act: A Cauldron of Controversy 9 Thus are demonstrated the multiple contexts of health policy: federal legislative branch, federal executive branch (also as an advocate for the ACA and its defender in litigation), federal judicial branch, and states' executive branches. While it is not obvious here because this part of implementation would take place later, state legislatures likewise participated in this process when they voted to expand (or not) the Medicaid program, as structured in the ACA. As the readers engage further in this book, and this section particularly, they will find multiple contexts for health policy. References Musumeci, M. 2012. "A Guide to the Supreme Court's Decision on the ACA's Medic- aid Expansion." Kaiser Family Foundation. Published August 1. www.kff.org/ health-reform/issue-brief/a-guide-to-the-supreme-courts-decision. US Supreme Court. 2012. "National Federation of Independent Business v. Sebelius." Cornell Law School Legal Information Institute. Published June 28. www.law. cornell.edu/supremecourt/text/11-393.'vity. Here, opponents said, Case Study 3.pdf >mpelling individuals to purchase insurance. u Longest's Health palicymaking in the United States rashboard Decision and Rationale The Court found that Congress did indeed have the right to regulate Commg, however, the ACA was not such permissible regulation under the C'amme:cl' Clause. Chief Justice Roberts, writing for a majority of the Court, sajg. te The power to regulate commerce presupposes the existence of commercial activity to be regulated. If the power to \"regulate\" something included the power to crea, it, many of the provisions in the Constitution would be superfluous. . .. Our precedent also reflects this understanding. As expansive as our cases construing the scope of the commerce power have been, they all have one thing iy common: They uniformly describe the power as reaching \"activity.\" . .. The individual mandate, however, does not regulate existing commergial activity. It instead compels individuals to become active in commerce by purchas- ing a product, on the ground that their failure to do so affects interstate commerce, Construing the Commerce Clause to permit Congress to regu late individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional autharity. (US Supreme Court 2012) Having found the individual mandate impermissible under the Com- merce Clause, the Court instead turned its attention to the SRF component of the individual mandate. The Court said even though Congress did not label the payment a \"tax,\" it had the indicators of a tax. The SRP was to be collected by the IRS. Further, the payment was to be reported on an individual's federal tax returns; people whose incomes are so low that they are not required to file a tax return are exempt from the SRP; and the scheme structuring the payment is predicated on an individual's income, the number of dependents they have, and their tax filing status. In addition, the SRP produces revenue, the essential feature of any tax. Ergo, said the Court, the SRP is a tax. Further, Congress has broad power to levy taxes, even taxing a failure to act. It was on this basis that the Court found the individual mandate a permissible exercise of Congress's powerbecause the SRP is a \"tax within the penumbra of congressional power, the individual mandate is, indeed, constitutionally permissible. Expansion of Medicaid Federal law at the time of the ACA required Medicaid to provide insurance coverage for pregnant women and children younger than 6 years and whose household income was less than 133 percent of the federal poverty level (FPL) children aged 6 to 18 years whose houschold income was less than 100 pcrccn'z of FPL, parents and caregivers otherwise eligible for the former Aid for Fami- lies with Dependent Children program, and elderly and disabled individuals 3 ack Case Study 3.pdf Q Policy Snapshot: The Affordable Care Act: A Cauldron of Controversy 7 eligible for Supplemental Security Income. At the time, federal law excluded from Medicaid nondisabled, nonelderly adults without dependent children. States were permitted to seek waivers to extend coverage if the states so chose. Likewise, states were permitted to fund (and receive federal matching funds for) benefit coverage to those whose incomes exceeded federal minimums, but states could not reduce the scope of coverage established by federal law. In other words, states could increase the scope of Medicaid benefits, could increase provider payments, and could expand the number of covered individuals, but no state could reduce the program to below federally prescribed minimums. It is important to note that Medicaid is a voluntary program for the states. If states chose to participate, they would be required to meet the minimum federal standards to receive federal matching funds. At the time of the ACA, all states participated in Medicaid. As will be discussed further in chapter 3, using federal funds as an inducement for states to engage in certain policies has long been recognized as constitutionally permissible. The terms of the ACA changed the structure of Medicaid dramatically. It required that Medicaid provide coverage for everyone whose income was less than 133 percent of FPL. The inducements were both a carrot and a stick-the carrot was that the federal government would pay 100 percent of the cost of expansion from 2014 to 2016, at which time there would be a gradual reduction to 90 percent of the cost by 2020. Federal support would remain at 90 percent of cost thenceforth. The stick was that the ACA authorized the secretary of HHS to withhold all federal Medicaid funding for states that failed to expand coverage as provided in the ACA. Arguments The petitioners to the Court argued that the federal expansion of Medicaid, from a practical perspective, was a "new" program. They also stated that this provision of the ACA was again federal overreach, this time in violation of the states' Tenth Amendment purview of police power-that only the states, as separate sovereign entities from the federal government, had the right to determine the best course of action to be taken in protection of the public's health, safety, and welfare within their respective borders. The respondents, defending the ACA, argued that the Medicaid expansion, like Medicaid itself, was voluntary; that states could decide not to participate; and that, for this reason, the act did not violate the Tenth Amendment rights of the states. Decision and Rationale The Court compared Medicaid as it existed before the passage of the ACA to what the ACA created within the program. There are dramatic differences. Fundamentally, the ACA mandated that Medicaid cover everyone (not other- wise specifically exempt) with incomes of less than 133 percent of FPL. This 8 Longest's Health Policymaking in the United States (3 ( Dashboard 898 Calendar To Do NotificationsCase Study 3.pdf Q 8 Longest's Health Policymaking in the United States provision went well beyond the pregnant women and children, caregivers, and elderly and disabled people covered by the then-existing Medicaid program The Court found that this was basically a "new program." The justices observed that it is permissible for Congress to attach con. ditions to the receipt of federal funds it provides to, in effect, do indirectly that which it could not do directly-regulate the public's health, safety, and welfare-because those matters remain the sole province of the states. In this case, however, the Court ruled that the structure of this initiative was consti. tutionally flawed. States did not have adequate notice to consent to this new program-which was a vastly more comprehensive coverage scheme than the existing Medicaid program. The Court reasoned that this provision was unduly "coercive" and amounted to a "gun to the head" because the penalty for noncompliance by the states was the potential loss of all federal Medicaid funds (US Supreme Court 2012). In other words, the ACA provided that states needed to expand their Medicaid programs or face the possible loss of all fed- eral Medicaid funds. The Court concluded that this was not "voluntary" and that this particular structure did not conform to the precedents of the federal government's inducing the states to undertake certain activities. The Court's remedy for this conundrum was to vitiate the HHS secre- tary's authority to enforce the expansion. The Court ruled that the secretary could not withhold any state's Medicaid funding for noncompliance. The enforcement mechanism was an "economic dragooning that leaves the States with no real option but to acquiesce." As a practical matter, the Court seized the "gun to the head," effectively making the Medicaid expansion provision voluntary for the states (US Supreme Court 2012). The Interplay of Policy Preferences This policy snapshot highlights the policy preferences (and outcomes) from a variety of sources, all of which are explored in more detail throughout the book. Here we see the will of Congress expressed in the passage of the ACA in its final form. We see the executive branch poised to collect a fee under one legal rationale, only to see that rationale completely changed by the Supreme Court. Similarly, the executive branch, as part of the implementation of the act, was empowered by Congress to withhold states' Medicaid funding. That particular matter never arose, however, because the Supreme Court stepped in to limit the executive branch's authority to enforce provisions relative to the expansion of Medicaid. Finally, we see the states making conflicting determinations regarding the value of expanded Medicaid as a matter of policy and in two instances-Iowa and Washington-coming down on both sides of the issue. Policy Snapshot: The Affordable co-- 3 To Do Notifications _ Dashboard 888 Calendar