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Our Take: 5th Circuit Court of Appeals hears oral arguments in ACA lawsuit

Jul 15, 2019

Last Tuesday, three judges from the federal appeals court in New Orleans heard oral arguments regarding the ruling made last December in Texas v. United States. The district judge overseeing the case ruled that the Affordable Care Act (ACA)’s individual mandate is unconstitutional and, therefore, the entire ACA must be overturned.

Questions posed by two of the three judges during last week’s hearing — Judge Jennifer Walker Elrod, who was appointed by President George W. Bush in 2007, and Judge Kurt Engelhardt, appointed by President Trump last year — seemed to indicate that the judges are likely to side with the lower court’s decision regarding the individual mandate. It was less clear, however, which way they might go in terms of invalidating the rest of the ACA. Judge Carolyn Dineen King, who was appointed by President Carter in 1979, was silent during the arguments.

It could be months before the judges make their decision, and whichever side loses is almost certain to appeal. That means the case could end up with the Supreme Court just in time for the 2020 elections. Meanwhile, the Trump administration says it will maintain the ACA as it is, sans the penalty for not having coverage.

Our Take: We realize that you’re probably as tired of the political and legal battles over the Affordable Care Act as we are. Nonetheless, the scope and gravity of the potential outcomes make this case one to watch.

Some background on the case:

In 2012, the Supreme Court upheld the ACA’s individual mandate as constitutional, stipulating that Congress could legally impose a tax — that’s how Justice Roberts characterized the mandate — on people who do not have health insurance.

In February 2018, Republican officials in 20 states sued the federal government in Texas v. United States. They contended that because the Tax Cuts and Jobs Act of 2017 zeroed out the financial penalty for not having health insurance, the penalty could no longer be considered a tax by Congress, rendering the individual mandate unconstitutional. Further, claiming that the provision pertaining to the individual mandate can’t be severed from the rest of the ACA, the plaintiffs said the ACA must be invalidated in its entirety.

The Department of Justice (DOJ) basically refused to defend the law, but in May 2018 a group of Democratic attorneys general was granted intervenor status.

Last December, Judge Reed O’Connor of the U.S. District Court for the Northern District of Texas ruled in favor of the plaintiffs, but he also issued a stay and partial final judgment allowing the ACA to remain in place during the appeals process.

The current appeal was filed in January, and the House of Representatives, now controlled by Democrats, also was granted intervenor status. In the ensuing months, the DOJ modified its position on the case a number of times, essentially agreeing with the plaintiffs but seeking to preserve certain provisions of the law.

At this point, the appellate judges have several options:

1. They could decide that one or more parties have no standing and dismiss the case. The district judge didn’t address whether the plaintiff states have standing; instead, he focused on the two individual plaintiffs who later joined the case. Those two plaintiffs claim to have suffered a “constitutional injury” because they feel compelled by law to purchase health insurance — even though there’s no longer a financial penalty for not doing so. The panel of judges may have a different perspective. And, should they decide that the intervenors have no standing to appeal the ruling, that would leave the case without a defendant.

2. They could affirm or reverse the lower court’s ruling on the individual mandate. Judge Elrod suggested that lawmakers eliminated the penalty because they knew it was “the silver bullet” that would lead to the rest of the law being dismantled. The intervenors argued that without the penalty, buying health insurance is now a choice, not a requirement.

3. They could affirm or reverse the ruling on the mandate’s severability. The district judge concluded that the 2010 and 2017 Congresses intended for the mandate to be an inseverable part of the ACA. But in last week’s hearing, the intervenors argued that Congress left the other provisions of the ACA intact when it eliminated the penalty. Judge Engelhardt suggested that the court shouldn’t be the one to decide which provisions stay and which ones go, and wanted to know why Congress couldn’t resolve the situation by passing new laws for the individual provisions it wants to keep. Judge Elrod asked why provisions that had nothing to do with the individual mandate would need to be invalidated.

As we’ve noted previously, should Judge O’Connor’s ruling stand, the damage will be far-reaching. An estimated 20 million people get their health coverage through programs created under the ACA, and billions of dollars have been invested throughout the U.S. health care system based on the law.

If the ACA is struck down, insurers could reinstate annual and lifetime limits on coverage and cost-sharing requirements for preventive care, eliminate caps on out-of-pocket costs, go back to denying coverage for people with pre-existing conditions, resume charging certain people more because of their age, sex, or profession, and stop providing coverage for pregnancies, prescription drugs, and mental health. Premiums could soar.

Bundled payment models, Medicare payment formulas, provider performance measures, approvals for biosimilars, the Center for Medicare and Medication Innovation, elimination of the Medicare “donut hole,” permanent authorization of the Indian Health Service, even calorie listings on restaurant menus — all of these and more would be affected.

For now, we can only wait to see what happens. If the case is appealed again, as the pundits predict, the Supreme Court could choose not to accept it. Of note, the five justices who voted to uphold the constitutionality of the ACA’s individual mandate in 2012 are still on the court.

What else you need to know
A federal judge has blocked a Trump administration rule stipulating that drug manufacturers include wholesale prices in television advertising. On June 14, drugmakers Merck & Co., Eli Lilly, and Amgen, along with the advertising trade group the Association of National Advertisers, sued to prevent the rule from taking effect. The group argued that list prices do not reflect the cost of drugs after negotiated discounts and rebates with payers and pharmacy benefit managers, nor are they representative of what patients pay at the pharmacy counter.

In related news, the Trump administration scrapped its drug rebate rule, which would have forced payers to pass savings negotiated with drug manufacturers on to Medicare patients. A senior administration official, speaking on the condition of anonymity, told Reuters the rule was too costly and could have hurt chances for bipartisan legislation. “The decision was made that … it was not prudent to go forward with the rule right now, that it would be too disruptive, that the risk was probably too high, and that it might upset a legislative deal, which is our primary focus,” he said. 

President Trump signed an executive order designed to transform kidney care in the U.S. Goals outlined in the executive order include reducing new cases of end-stage renal disease (ESRD) by 25% in 10 years, increasing the percentage of patients with ESRD who receive dialysis at home or a kidney transplant to 80% by 2025, and doubling the number of kidneys available for transplant by 2030. After the executive order was announced, CMS revealed four new optional Medicare payment models, which will use incentive payments to improve kidney disease management. CMS also unveiled its “ESRD Treatment Choices” mandatory model, which will use incentives to encourage dialysis providers to move treatment into patients’ homes.

Boston-based Partners HealthCare announced that its Biobank has surpassed 100,000 participants. Those who participate in the program complete a brief health survey and family history, and supply a blood sample. Researchers are using the Biobank data to study how genes, lifestyle, and other factors contribute to disease. In some cases, they’ve been able to identify certain health issues before disease symptoms present, Partners said. Danville, Pa.-based Geisinger is involved in a similar initiative, with 200,000 patients enrolled in a DNA-sequencing program. In 2018, Geisinger said it was enrolling 1,000 patients in a pilot program recommending DNA sequencing as part of routine clinical care.

Evanston, lll.-based NorthShore University HealthSystem is merging with Swedish Covenant Health. In a statement, the organizations said they will maintain their respective physician and ambulatory care networks “while expanding access to innovative patient care models.” The deal is expected to close by year-end, pending customary approvals. 

Southfield, Mich.-based Beaumont Health System signed a letter of intent to acquire Akron, Ohio-based Summa Health. According to a press release, under terms of the agreement Summa Health would maintain local leadership, including a local board. A Beaumont spokesperson said the organizations would buy out Mercy Health’s stake in Summa; other terms of the proposed merger were not disclosed.

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