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Health care attorney shares thoughts on Supreme Court ruling
e-Reports, Aug. 6, 2012
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“Something for everyone” may be one way to characterize the June 28 U.S. Supreme Court opinion challenging health reform legislation. That’s because:

  1. States got their Medicaid argument, blocking forced expansion of eligible persons and benefits through withholding all federal Medicaid funds.
  2. The administration got its mandate to citizens and small businesses for purchasing comprehensive insurance coverage, with the rest of the legislated program in place.
  3. Conservatives got their argument preventing a major expansion of federal power through the commerce clause of the U.S. Constitution.

Mixed results
Goals will fall short (1) if most or many states opt out of a Medicaid expansion, and (2) if most individuals and small employers opt out of purchasing or furnishing health insurance for themselves or employees and, instead, pay the smaller penalties (now “taxes”), additional funds and covered persons to help finance “universal coverage.” However, continuing requirements for “community rating” for health policies, plus the requirement of “guaranteed issue,” “guaranteed renewability” and no pre-existing condition exclusions arguably need the larger base of premium payers from the healthy non-utilizer population. If this does not materialize, commercial insurance rates will rise fairly dramatically.

The legislation already provides for increases in many different taxes to help pay for the federal portion of the program. The steep increased cost, while not achieving legislative goals, may cause the whole program to (1) remain or be increasingly insolvent, and (2) continue as a lightning rod for criticism, changes, repeal efforts and a constant flow of new ideas. This results in a picture of instability for this large segment of the economy.

What’s key for you
Apart from attempts at universal coverage and new ways to finance the program, the mainly intact legislation details steps to move the entire industry from fee-for-service to quality or performance-based payments. Ultimately, the move will be to some form of capitated payment (now called population cost management).

To the extent the revenue side of the legislation may underperform due to the Supreme Court opinion and other factors, this cost-cutting side for providers will only be perceived as more important.

That means commercial payers and federal programs will double-down on pressure to implement all manner of delivery and payment “reforms” to curtail cost increases. Such increases would come normally from natural inflation and higher utilization in the coming boomer retirement years.

Part of the cost-cutting side includes increased focus and pressure by government on “program integrity,” meaning more audits, refunds, fraud and abuse investigations and efforts to recover funds judged to be misspent.

Opportunity amid crisis
Yet, recall the oft-quoted Chinese wisdom about a crisis also being an opportunity. Reforms are taking the form of delivery structure changes (integration) and payment (quality, bundling). Almost all integration and quality reforms center on physicians’ professional and business practices, methods, behavior and judgment.

Physicians will make the decisions that reduce or increase costs of care. And while health systems have capital to set up infrastructure, doctors still exercise the professional judgment that is the basis of all care. The skill of physicians needs to be harnessed to lead the effort in the industry’s quality improvement and integration strategies.

Physicians can look at the changes as the end of an era or the beginning of national efforts to recapture the reins. 

It’s a crisis and an opportunity.

Tom Neal, J.D., partner

Krieg DeVault LLP, Carmel

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