Health Reform on Hold While US Supreme Court Determines Its Future

The Supreme Court of the United States heard oral arguments in March on
the constitutionality of the landmark health care reform legislation entitled
the Affordable Care Act just days after the 2-year anniversary of it being
signed into law. The Affordable Care Act (ACA) is considered to be one of the
most prominent legislative enactments of the Obama administration and has the
potential to impact virtually everyone. O&P consumers and the providers who
serve them will feel the impact of the decision just like all Americans,
whether the law is upheld or invalidated.

The law establishes a minimum coverage requirement — also known as
the individual mandate— to ensure that all Americans have access to, at a
minimum, an “essential” set of health care benefits. A penalty is
imposed on individuals without such coverage starting in 2014, with certain
exceptions. The ACA also expands Medicaid eligibility to individuals with
incomes below 138% of the federal poverty level. Between these two provisions,
more than 30 million Americans are expected to be newly insured starting in

  Peter W. Thomas
  Peter W.

These provisions, especially the requirement to purchase health
insurance and the Medicaid expansion, are extremely controversial. On these
issues, a Supreme Court decision will determine in June if Congress overstepped
its bounds in passing this law. The Supreme Court’s decision in this case
is one of the most anticipated in recent history and will clearly define the
Supreme Court’s 2012 term due to the importance of this case to health
care for all Americans, as well as the political controversy and the impact the
decision could have on the national elections in November.

Dynamics of health insurance

If fully implemented, the ACA will dramatically change the dynamics of
purchasing health insurance in the United States, particularly for those
Americans with disabilities and chronic conditions. For example, for the first
time in history, discrimination based on health status in the insurance market
will be prohibited. This has tremendous implications for people with injuries,
illnesses and health conditions of all kinds, including conditions requiring
orthotics and prosthetics.

For instance, all pre-existing condition exclusions will be prohibited
beginning in 2014. In addition, the ACA requires new insurance plans to cover
“rehabilitative and habilitative services and devices” in the
individual and small group markets, which provides a presumption of coverage
for orthotics and prosthetics but such coverage still has yet to be fully
clarified by the federal and state governments — a key issue for patients
requiring orthotics and prosthetics, as well as prosthetists and orthotists.

The day the Supreme Court accepted the ACA case for argument marked the
day the law had the potential to be overturned. But most constitutional legal
scholars doubted the prospects of the law being held unconstitutional, with
some notable exceptions, until the arguments were undertaken. After oral
argument, however, conventional wisdom suggests that the Court appears to have
given greater credibility to the legal challenge than expected. It is dangerous
to read too much into oral arguments, however, and by now the Justices are
working on their written opinions behind closed doors, to attract at least five
out of nine votes to resolve the case.

Day 1: The Anti-Injunction Act

On the first day of oral arguments, the Court discussed whether the
Anti-Injunction Act (AIA), a tax law, applies to the penalty for not acquiring
health insurance coverage as mandated by the Affordable Care Act (ACA). The
Anti-Injunction Act is a 19th Century law that provides that no suit for the
purpose of blocking implementation of a tax will be heard by a court until such
time as the tax is paid and contested. The penalty for failing to obtain
insurance coverage under the ACA will not be able to be contested until April
15, 2015. The argument, therefore, is that the Court should not even hear the
challenge to the law until at least that date. Much of this argument turns on
whether the penalty is considered a “tax” under the AIA and the Court
heard extensive oral argument on that point.


This would be the easiest way for the Supreme Court to dodge a decision
in this entire case. If the Court finds that the AIA applies to this case, the
Court would not rehear the case until 2016 or 2017 (by the time the case makes
its way up the federal court system to the Supreme Court). By that time, the
law would be fully implemented and turning back the clock on the individual
mandate, the Medicaid expansion, and the myriad provisions of the law would be
unrealistic. Only if the Court finds that the penalty for failing to purchase
insurance is not a tax, and thereby the AIA is not implicated, will the Court
move to the question of whether the individual mandate is constitutional.

Day 2: The minimum coverage provision or “individual mandate”

On day two, the Supreme Court heard arguments on whether Congress has
the Constitutional authority to require individuals to purchase private health
insurance or pay a penalty for not doing so. An essential element of the
argument surrounds the Constitution’s Commerce Clause and whether there
are two separate commercial markets at issue (health care services and health
insurance). Opponents of the individual mandate insist that there are two
separate markets and that Congress is impermissibly mandating that people
participate in one market (insurance) in order to resolve issues and problems
with the other market (health care services).

Proponents of the mandate claim that these markets are so inextricably
intertwined that they cannot be viewed as separate and distinct. As such, they
believe that Congress may regulate both in an integrated manner. In their view,
the uninsured who do not participate in the insurance market are already
affecting those in the service market by leaving unpaid bills that must then be
subsidized by those in the insurance market. As a result, proponents suggest
the ACA is a necessary and proper extension of Congressional authority to
regulate interstate commerce and address a national problem.

The real question here is whether the federal government has any limits
to regulate people’s lives if it decides that Congress can force
individuals to purchase a product (ie, health insurance) they may not want. The
government’s lawyers offered some principles to help establish such limits
but did not offer clearly defined limitations to federal power in answers to
repeated questions from some justices. Justice Kennedy, the key moderate on the
Court, even went so far as to say that if the court finds the mandate
constitutional, it would alter the relationship of the federal government to
the individual in a fundamental way. While this signals an unwillingness to
allow the mandate to stand, Justice Kennedy made other statements during the
course of the hearing that suggested he may be willing to uphold the mandate.
Of course, only if the Court strikes down the mandate would the issue of
severability, the subject of the next hearing, be relevant.

Day 3, part I: Severability

During the morning session on the third day of arguments, the Supreme
Court heard arguments regarding whether the remainder of the Affordable Care
Act must be invalidated if the individual mandate provision is found to be
unconstitutional by the Court. Much of the questioning and discussion focused
on who should be responsible for repairing the provisions in the law —
Congress or the Court? Additionally, the Court was struggling to identify which
provisions of the ACA constituted the “heart” of the legislation and,
if the mandate were overturned, whether the remainder of the Act in its
entirety, or some subset of insurance provisions, should be overturned as well.

Because none of the parties to the lawsuit argued what the lower court
had ruled — that all of the other provisions of the law can stand if the
mandate is struck down — the Court appointed H. Bartow Farr, III as an
amicus curiae or “Friend of the Court” to argue that point. Farr
noted that the Court should not immerse itself in speculating upon whether
Congress would have enacted other ACA provisions in the absence of any specific
provision and whether any statutory revisions are uniquely Congress’ duty
to address.

Perhaps the most surprising aspect of this hearing came from the
conservative wing of the Court, which argued that if the mandate — which
constitutes one paragraph in the ACA — is declared unconstitutional, the
entire 2700-page law should go down with it. The argument appeared to be that
without the mandate, it was not clear what Congress would have passed and,
therefore, the Court should wipe the slate clean so Congress would not be
encumbered to fix a law whose “heart” had been extracted but
virtually everything else lay intact. This would appear to be a textbook
example of “legislating from the bench.” Nonetheless, the discussion
gave additional credibility to the prospect of the entire ACA law being struck
down, despite the long shot odds. The final take-away from the oral arguments
was that if Congress strikes down the mandate, they will be immersed in
determining which ACA provisions are stuck and which remain intact.

Day 3, part II: Medicaid eligibility expansion

During the afternoon session on the third day, arguments were heard
regarding the law’s expansion of Medicaid eligibility and whether this
expansion coerces States unlawfully by threatening the denial of all federal
Medicaid funding if they do not accept federal funding under the new Medicaid
eligibility category. In its questioning, the Court seemed intent on
determining whether the expansion was just a generous offer or, instead, an
offer that the States cannot afford to refuse.

Surprisingly, little time was spent trying to ascertain whether there
was a limiting principle to the states’ coercion argument. In other words,
if the Court were to find that the Medicaid expansion of the ACA is coercive
and unconstitutional under the Constitution’s spending clause, what would
the implications of adopting that argument be for a multitude of other federal
programs in which states are compelled to follow federal requirements as a
condition of receiving federal funding?

Those with an intimate understanding of Medicaid law were disappointed
in the depth of understanding by the Court on this issue. Prior to oral
argument, there was a general sense in the health care bar that this issue was
not a major concern, nor a likely candidate for serious introspection by the
Court. After the oral arguments, there is greater-than-expected concern that
the Court may latch onto this aspect of the case to invalidate a key provision
of the ACA. However, if the individual mandate is held unconstitutional and not
severable from the remainder of the ACA, the Medicaid expansion issue will be

Implications of the decision

It is always hazardous to predict the outcome of any given case, let
alone a case as important, complex and politically charged as this one. In
particular, oral arguments can signal the thinking of particular justices but,
traditionally, they are not reliable indicators of the ultimate outcome of a
case. The Justices are currently drafting opinions, negotiating positions and
outcomes, and enaging in compromise to forge a majority. While it seems clear
that there are coalitions on the Court on opposing sides of these issues, the
question is: What position or positions will any undecided members gravitate to
as a result of this tug of war? Much of the focus seems to rest on Justice
Kennedy, frequently the Court’s swing vote.

Many learned observers of the arguments suggest that striking down the
entire law is the least likely outcome, mainly because of the chaos it would
cause, such as questioning which reforms that have already been implemented can
still stand, which provisions do not stand, and how to proceed going forward.
An outright invalidation of the entire law may require CMS to retroactively
adjust Medicare provider reimbursements and providers would insist on
retroactive reimbursements. CMS may also have to recoup Medicaid funds from the
states. Those currently covered under the private insurance of their parents
until age 26 years may lose coverage overnight and children’s pre-existing
conditions may again become excluded for coverage. In addition, state high risk
pool funding may have to be rescinded, to name a few of the many provisions
that have already gone into effect.

For members of the O&P community, a number of policies that were
incorporated into the ACA will be subject to great uncertainty and will have a
direct impact on the provision of orthotics and prosthetics if the ACA is
revoked. Several of the insurance protections impact patients and, thereby,
O&P providers in a meaningful way. These include the prohibition on
pre-existing condition exclusions for children, the prohibition on lifetime and
unreasonable annual dollar limits on essential health benefits, and coverage of
O&P care for millions of people who are currently uninsured.

Since passage of the ACA, the O&P organizations have worked hard to
ensure that the term “rehabilitation services and devices” is
intended to cover orthotics and prosthetics in the essential benefits package
that all private health plans must cover in 2014. If the entire ACA law is
struck down, the essential health benefits package obviously goes with it. This
would leave large numbers of Americans with no insurance coverage or a
realistic path toward coverage anytime soon. Insurance companies would continue
to use medical underwriting and current insurance tactics to limit and restrict
coverage of O&P services and devices to the maximum extent possible.

There is also the impact of revoking the law on the various Medicare
payment and coverage changes in the ACA. For instance, with regard to O&P
reimbursement, the newly-imposed “productivity adjustment,” which was
responsible for a modest decrease in the O&P fee schedule in 2011, would no
longer be valid. This would mean that the CPI-U adjustment would go into effect
without a decrease based on the productivity adjustment. This is a good thing
for the O&P community at least in the short term, but when applied across
all providers, this would seriously erode the integrity of the Medicare Trust
Fund in the long term.

Conversely, there are provisions in the ACA that are very concerning for
O&P providers that would no longer be relevant if the law were revoked. For
instance, the medical device tax that is applicable to medical device
manufacturers would be revoked before going in to effect. This would eliminate
any possibility that O&P manufacturers could get caught up in that excise
tax. In addition, the ACA created the Independent Payment Advisory Board
(IPAB), which many providers consider a “Super MedPA.” Invalidation
of the entire ACA would mean that IPAB would never go into effect. IPAB has
unprecedented power to make payment changes with little oversight and thereby
could potentially reduce reimbursement and access to O&P services in the


If all or part of the ACA is declared unconstitutional, it is assumed
that Congress would have to quickly step in to avoid mass confusion and
disruption in the health care field. However, there would be little consensus
in Congress to pass anything relating to health care, at least until after the
November elections, and perhaps much farther into the future than that. In the
event the entire law is nullified, the Department of Health and Human Services
would need to determine for each provision:

a) Whether it has legal authority to maintain the

b) The administrative consequences of undoing versus maintaining a
provision; and,

c) The political impact of undoing versus maintaining the provision.

CMS and the Obama Administration, however, expect the ACA to be found
constitutional and, at least publicly, have not engaged in contingency planning
if the mandate were to be stuck down.

If the Court determines that the individual mandate is unconstitutional,
and also strikes down the guaranteed issue, pre-existing condition, and other
insurance provisions, then the state-based exchanges and the essential health
benefits packages will also likely fall as well. The exchanges and minimum
benefits are being constructed in anticipation on an influx of insurance
consumers into the individual and small groups market. But absent a mandate and
absent the requirement for insurers to cover people with pre-existing
conditions, it is difficult to ascertain whether the other provisions of the
law can work effectively.

Although it is unlikely that the Court will rush to adopt the
Anti-Injunction Act arguments to delay decision in this case, this argument may
become more appealing if internal discussions and negotiations between justices
do not produce a majority opinion in the case. If the justices are simply not
able to achieve five votes on any given draft opinion involving the mandate or
the Medicaid expansion, they may have little choice but to adopt the AIA
argument and delay consideration of this case until a later day.

A decision in this case is expected in late June or early July, setting
the stage for this to be a significant issue in the fall Presidental campaign
as well as many other elected offices, regardless of the outcome. — by
Peter W. Thomas, General Counsel, NAAOP; and Adam Chrisney, Senior Legislative
Director, Powers Pyles Sutter & Verville, PC.

For more information:

Peter W. Thomas, JD, is general counsel for the National
Association for the Advancement of Orthotics and Prosthetics.

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