Eric M. Huebscher is the President and CEO of Huebscher & Co.
He has over 30 years of management experience in with a specialized emphasis on healthcare operations, finance and regulatory compliance and oversight.

5 2012

U.S. Supreme Court and Health Care: Proper Forum for the Reform Debate?

ABI Health Care Committee News / Volume 9, Number 4 / November 2012
by: Eric Huebscher

Editor's Note: This is the fourth in a series of articles on health care-related issues. The first three focused on health care restructuring efforts by a wide range of health maintenance organizations from across the country. This article looks at the recent decision by the U.S. Supreme Court and whether the decision defined health care for the future or possibly exacerbated an already contentious issue. View previous articles in this series: first, second, third.

In the first three articles, the spiraling cost of health care and the attempts made by insurance organizations to reign in those costs by shifting expenses to the insured was examined, as well as the insurance company tool of requiring referrals and authorizations in order to receive specialty care. Neither of these concepts resulted in the expected outcome, as evidenced by Centers for Medicare and Medicaid Services' (CMS) cost projections. The outcome was not a reduction in expense but rather an increase in the administrative burden and cost to providers of care, as well as an exponential expansion in the type of insurance products offered to the public. Today's health insurance choices are so varied and complex that in some instances, they require trained professionals to explain the benefits to the consumer. This trend is not helpful and only confuses an already complex decision-making process. The third article discussed a pragmatic, simplified approach to reigning in the cost of healthcare by attacking the root causes of excessive expense and system abuses.

The potential impact on the overall health care industry from the recently enacted Affordable Care Act (the "Act") was also discussed. The Act's main concept is to expand coverage to those who currently do not have insurance, the so-called mandate. It further defines how the cost of this expanded coverage will be funded through a number of untested costsavings initiatives. (In the third article, I wrote that the CMS chief actuary stated in his white paper on this topic that the savings assumptions contain significant risk and uncertainty.) The Act also suggests that those who do not comply with the mandate would be subject to a financial penalty. The Act appears to possibly encourage, or in some instances force, entry into an already inefficient and cumbersome system.

On June 28, 2012, the Supreme Court ruled 5-4 that the Act's mandate aspect was constitutional, and thus allowed the U.S. government to impose upon the states the obligations and requirements contained therein. While there are many other aspects of the Act that could—and indeed will—be debated, this article attempts to address whether the Court's decision has actually helped to advance the fundamental question of reform.

The Act is quite complex and involves many different components of the health care system. Society has almost fixated on the mandate component of the Act, while in some cases ignoring other equally important aspects. As an example, the Act mandates that all medical providers implement an electronic health record (EHR) system or face financial penalties; the Act also requires a mechanism for the establishment of Accountable Care Organizations (ACO). The latter structure is an attempt to bring together structurally sound components of the health care system in an attempt to provide a more organized and efficient delivery model. Both the EHR and ACO, if successfully implemented, will result in financial gain to the provider networks that implement these and other parts of the Act. The cost of these payments is based on untested financial modeling by the CMS chief actuary.[1]

The essence of the Supreme Court's decision was that the U.S. government can impose upon the states a mandate to require citizens to purchase health insurance or face a monetary penalty to be collected by the Internal Revenue Service. A baseline question to be answered is whether the financial penalty is sufficient to encourage or possibly force those that would ordinarily go without insurance to purchase it. The answer is somewhat complicated, only paralleled to the complexity of the Act itself. Assuredly, there will be those in society that will game the system in order to avoid the financial penalty, just as there will be those who do not consider the penalty harsh enough to purchase insurance. In the latter instance, the continued use of the already inefficient health care system will persist and possibly worsen. Further, as a result of the decision, many states have begun to opt out of the mandate's Medicaid portion.[2]

In a somewhat ironic turn of events, the U.S. Department of Justice (DOJ) has come out somewhat aggressively toward hospitals and other providers for what they consider possible abuses on the use of the above-noted EHR system component. A recent New York Times article[3] suggests that the government's Medicare system has already seen an increase in more than $1 billion in expenses to what they attribute to the use of EHRs. The article suggests that EHR's are possibly encouraging increased or enhanced coding, resulting in higher billing for the same services when billed without the EHR. This result should not be a surprise to the DOJ. In virtually every other case of introducing electronic efficiency in society, there has been an increase in both completeness of the assigned task and those that use the efficiency for illgotten gains. Similarly, many organizations are either in the process of forming ACOs or have already completed the alignment and restructure. It is still unknown if these steps will result in improved care or provide a mechanism for those providers that join together to force insurance companies to pay higher fees, thus creating the possibility for anticompetitive or monopolistic provider networks.

Where do we go from here? The outcome of the 2012 presidential election may shed some light as to the how the Supreme Court decision will impact society. One party is suggesting an immediate repeal of the mandate, while the other is touting its recent success. In my opinion, the health care debate should never have elevated itself to be decided on constitutionality grounds. Notwithstanding the merits of the mandate, the core of the health care issues continues to be cost, efficiency and access. If the Court is to rule in favor of the best interests of the people, I am not sure a 5-4 decision results in a resounding throw of the gavel or but a mere thud.

  1. CMS National Health Expenditure Projections; July 2011
  2. The Medicaid portion was subsidized by the federal government in the earlier years of implementation. At some point, however, the states are left to fend for themselves and many believe that the increased costs would not be sustainable to their respective state budgets.
  3. New York Times, Abuse of Electronic Health Records, September 25, 2012


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