In what has become something of a Washington tradition, the Supreme Court again upheld the Affordable Care Act on Thursday, in the third major case from Republican challengers to reach the high court.
The margin this time was larger, 7-2, as the High Court appears less and less interested in revisiting the health care law through the judiciary.
Democrats hailed the ruling as a boost to their signature law, and Republicans were left to figure out a path forward on health care amid another defeat.
Here are five takeaways:
This could be the last gasp of repeal efforts
It is impossible to ever fully rule out another lawsuit challenging the health law or another repeal push if Republicans win back Congress.
But after more than 10 years of fighting the Affordable Care Act, GOP efforts at fighting the law are seriously deflated, as many Republicans themselves acknowledge.
“It’s been my public view for some time that the Affordable Care Act is largely baked into the health care system in a way that it’s unlikely to change or be eliminated,” said Sen. Roy Blunt (Mo.), a member of Senate GOP leadership.
Asked if he still wanted to repeal and replace the law, which was the GOP rallying cry for years, Sen. Chuck Grassley (R-Iowa) said instead, “I think I want to make sure it works,” before attacking former President Obama’s promises about the law’s benefits.
Even Sen. Josh Hawley (R-Mo.), who helped bring the lawsuit against the health law as attorney general of Missouri, said Thursday that the Supreme Court had made clear “they’re not going to entertain a constitutional challenge to the ACA.”
Supporters of the law said it is now even more entrenched, despite years of GOP attacks.
“The war appears to be over and the Affordable Care Act has won,” said Stan Dorn, senior fellow at the health care advocacy group Families USA.
Still, not all Republicans are throwing in the towel on at least verbally attacking the law.
“The ruling does not change the fact that Obamacare failed to meet its promises and is hurting hard-working American families,” said House GOP leaders Kevin McCarthy (Calif.), Steve Scalise (La.) and Elise Stefanik (N.Y.).
And there is at least one ACA-related lawsuit still working its way through the lower courts. Kelley v. Becerra challenges provisions of the health law around insurance plans covering preventive care including birth control.
The Supreme Court was fairly united
The margin of victory for the health law was fairly large, with even more conservative justices such as Clarence Thomas, Amy Coney Barrett, Brett Kavanaugh and John Roberts ruling to uphold the law, joining the opinion from liberal Justice Stephen Breyer.
The court’s other two liberals, Sonia Sotomayor and Elena Kagan, also joined the majority of seven. Two conservatives, Justices Samuel Alito and Neil Gorsuch, dissented and would have struck down the law.
Through the three major Supreme Court cases on ObamaCare, the margin of victory has risen from 5-4 to 6-3 to 7-2.
“There’s a real message there about the Supreme Court’s willingness to tolerate these kinds of lawsuits,” Andy Pincus, a visiting lecturer at Yale Law School, said of the growing margin of victory.
The case was decided on fairly technical grounds. The Court ruled that the challengers did not have standing to sue, given that the penalty for not having health insurance at the center of the case had been reduced to zero, so it was not causing any actual harm that could be the basis for a lawsuit.
Republicans did get some vindication in that Democrats had fiercely attacked Barrett during her confirmation hearings for being a vote to overturn the health law, when in fact she ended up voting to maintain the law.
The ACA is stabilizing
The early years of the Affordable Care Act were marked with the turbulence of a website that failed at launch, premium increases, and major insurers dropping out of the markets given financial losses.
Now, though, the markets are far more stable. For example, 78 percent of ACA enrollees now have the choice of three or more insurers, up from 57 percent in 2017, according to the Kaiser Family Foundation.
Democrats, now in control of the House, Senate and White House, were able to pass earlier this year expansions of the law’s financial assistance to help further bring down premium costs.
The Biden administration announced earlier this month that a record 31 million people were covered under the ACA, including both the private insurance marketplaces and the expansion of Medicaid.
“We are no longer in the Affordable Care Act, ‘How’s it going to go? Is it going to survive?’ mode,” said Frederick Isasi, executive director of Families USA. “We really are in a whole new phase. It really is: ‘How do we improve it?’”
Republicans face questions on their health care message
The Republican health care message for years was summed up with the simple slogan “repeal and replace.”
But now those efforts have failed in Congress, in 2017, and have failed for a third time in the courts.
That leaves uncertainty about what the Republican health care message is. The party has famously struggled to unite around an alternative to the ACA, so there is no consensus alternative for the party to turn to.
The statement from McCarthy, Scalise, and Stefanik calling the ACA “failed,” shows that party leaders are not fully ready to accept the law.
The leaders added that “House Republicans are committed to actually lowering health care costs,” which has been a possible area for the party to focus that is not simply about repealing the ACA.
But any discussion of health care costs is fraught with complications. Republicans, for example, overwhelmingly oppose House Democrats’ legislation to allow the government to negotiate lower drug prices, arguing it would harm innovation from the pharmaceutical industry.
Grassley reached a bipartisan deal on somewhat less sweeping drug pricing legislation with Sen. Ron Wyden (D-Ore.) in 2019, but that bill went too far for many Republicans as well.
Democrats want to go farther, but face an uphill climb
With the ACA further entrenched, and control of the House, Senate and White House, Democrats are looking at ways to build on the health law.
The main health care proposal from the presidential campaign, a government-run “public option” for health insurance, has faded from the conversation and is not expected to be a part of a major legislative package on infrastructure and other priorities Democrats are pushing for this year.
While the health care industry has largely made its peace with the ACA, pushing for a public option or lowering health care costs means taking on a fight with powerful industry groups.
Progressives like Sen. Bernie Sanders (I-Vt.) have instead poured their energy into expanding Medicare benefits to include dental, vision, and hearing coverage, and lowering the eligibility age to 60.
Allowing the government to negotiate lower drug prices also could make it into the package.
“Now, we’re going to try to make it bigger and better — establish, once and for all, affordable health care as a basic right of every American citizen,” said Senate Majority Leader Charles Schumer (N.Y.). “What a day.”
Two influential advisory groups sent recommendations to Congress calling for a revamp of how health plans are paid in the lucrative Medicare Advantage program, culling how many models CMS tests and curbing high-cost drug approvals.
By many measures, the MA program has been thriving. Enrollment and participation has continued to grow, and in 2021, MA plans’ bids to provide the Medicare benefit declined to a record low: Just 87% of comparable fee-for-service spending in their markets.
But despite that relative efficiency, MA contracting isn’t saving Medicare money — actually, in the 35 years Medicare managed care has been active, it’s never resulted in net savings for the cash-strapped program, James Mathews, executive director of the Medicare Payment Advisory Commission, told reporters in a Tuesday briefing.
MedPAC estimates Medicare actually spends 4% more per capita for beneficiaries in MA plans than those in FFS under the existing benchmark policy.
To save money, Medicare could change how the benchmark, the maximum payment amount for plans, is adjusted for geographic variation, MedPAC said.
Under current policy, Medicare pays MA plans more if they cover an area with lower FFS spending, despite most plans bidding below FFS in these areas. At the same time, plans in areas where FFS spending is higher bid at a lower level relative to their benchmark, and wind up getting higher rebates — the difference between the bid and the benchmark — as a result.
“Because the rebate dollars must be used to provide extra benefits, large rebates result in plans offering a disproportionate level of extra benefits,” MedPAC wrote in its annual report to Congress. “Moreover, as MA rebates increase, a smaller share of those rebates is used for cost-sharing and premium reductions — benefits that have more transparent value and provide an affordable alternative to Medigap coverage.”
The group recommended rebalancing the MA benchmark policy to use a relatively equal blend of per-capita FFS spending in a local area and standardized national FFS spending, which would reduce variation in local benchmarks, and use a rebate of at least 75%. Currently, a plan’s rebate depends on its star rating, and ranges from 65% to 70%.
MedPAC also suggested a discount rate of at least 2% to reduce local and national blended spending amounts.
The group’s simulations suggest the changes would have minimal impact on plan participation or MA enrollees, but could lead to savings in Medicare of about 2 percentage points, relative to current policy.
Finding savings in Medicare, even small ones, is integral for the program’s future, policy experts say. The Congressional Budget Office expects the trust fund that finances Medicare’s hospital benefit will become insolvent by 2024, as — despite perennial warnings from watchdogs and budget hawks — lawmakers have kicked the can on the insurance program’s snowballing deficit for years.
Fewer and more targeted alternative payment models
MedPAC also recommended CMS streamline its portfolio of alternative payment models, implementing a smaller and more targeted suite of the temporary demonstrations designed to work together.
CMS is already undergoing a review of the models, meant to inject more value into healthcare payments, following calls from legislators for more oversight in the program. The agency doesn’t have the most stellar track record: Of the 54 models its Center for Medicare and Medicaid Innovation has trialed since it was launched a decade ago, just four have been permanently encoded in Medicare.
New CMMI head Elizabeth Fowler said earlier this month the agency will likely enact more mandatory models to force the shift toward value, as the ongoing review has resulted in more conscious choices about where it should invest.
In its report, MedPAC pointed out many of CMMI’s models generated gross savings for Medicare, before performance bonuses to providers were shelled out. That suggests the models have the power to change provider practice patterns, but their effects are tricky to measure. Many providers are in multiple models at once, and the same beneficiaries can be shared across models, too.
Additionally, some models set up conflicting incentives. Mathews gave the example of accountable care organizations participating in one model to reduce spending on behalf of an assigned population relative to a benchmark, but its provider participants could also be in certain bundled models with incentives to keep the cost of care per episode low — but not reduce the overall number of episodes themselves.
“The risk of these kinds of inconsistent incentives would be minimized again if the models were developed in a manner where they would work together at the outset,” Mathews said. MedPAC doesn’t have guidance on a specific target number of alternative models, but said it should be a smaller and more strategic number.
Curbing high-cost drugs in Medicaid
Another advisory board, on the Medicaid safety-net insurance program, also released its annual report on Tuesday, recommending Congress mitigate the effect of pricey specialty drugs on state Medicaid programs.
High-cost specialty drugs are increasingly driving Medicaid spending and creating financial pressure on states. The Medicaid and CHIP Payment and Access Commission (MACPAC) didn’t recommend Congress change the requirement that Medicaid cover the drugs, but recommended legislators look into increasing the minimum rebate percentage on drugs approved by the Food and Drug Administration through the accelerated approval pathway, until the clinical benefit of the drugs is verified.
The accelerated approval pathway, which can be used for a drug for a serious or life-threatening illness that provides a therapeutic advantage over existing treatments, allows drugs to come to market more quickly. States have aired concerns about paying high list prices for such drugs when they don’t have a verified clinical benefit.
That pathway has faced growing scrutiny in recent days in the wake of the FDA’s high-profile and controversial approval of Biogen’s aducanumab for Alzheimer’s disease.
Several advisors to the FDA have resigned over the decision, as it’s unclear if aducanumab actually has a clinical benefit. What aducanumab does have is an estimated price tag of $56,000 a year, which could place severe stress on taxpayer-funded insurance programs like Medicare and Medicaid if widely prescribed.
MEDPAC also recommended an increase in the additional inflationary rebate on drugs that receive approval from the FDA under the accelerated approval pathway if the manufacturer hasn’t completed the postmarketing confirmatory trial after a specified number of years. Once a drug receives traditional approval, the inflationary rebate would revert back to the standard amounts.
The recommendations would only apply to the price Medicaid pays for the drug and doesn’t change the program’s obligation to cover it.
- Tenet, a major U.S. health system, has agreed to sell five hospitals in the Miami-Dade area for $1.1 billion to Steward Health Care System, a physician-owned hospital operator and health network.
- The deal also includes the hospitals’ associated physician practices. Dallas-based Steward has agreed to continue using Tenet’s revenue cycle management firm, Conifer Health Solutions, following the completion of the deal, which is expected to close in the third quarter.
- Further underscoring Tenet’s strategic focus, the sale will not include Tenet’s ambulatory surgery centers in Florida. Tenet will hold onto those assets as its ambulatory business becomes a bigger focus for the legacy hospital operator.
Dallas-based Tenet continues to bet on its ambulatory surgery business.
It’s noteworthy that this latest billion-dollar sale does not include any of its surgery centers in Florida, but half of its hospitals. Jefferies analyst Brian Tanquilut said the ambulatory segment now becomes even more important as it will contribute a majority of consolidated earnings in the near term.
That’s a significant leap from 2014 when earnings from the ambulatory unit represented about 4% of the company’s earnings.
The money generated from the sale could also pay for more ASCs, under Tenet’s unit, United Surgical Partners International (USPI), further bulking up Tenet’s ASC portfolio that already outnumbers its competitors.
Tenet is traditionally viewed as a hospital operator, even though its surgery center footprint dwarfs its hospital portfolio. Tenet operates 310 ASCs following a $1.1 billion deal in December to acquire 45 centers from SurgCenter Development. Tenet said Wednesday it operates 65 hospitals.
Of Tenet’s 10 Florida hospitals, Steward will buy up half, including Coral Gables Hospital, Florida Medical Center, Hialeah Hospital, North Shore Medical Center and Palmetto General Hospital.
Tanquilut said that leaves Tenet in control of its “core” south Florida business in the Boca and Palm Beach market, located about 75 miles north of the Miami area where Tenet is selling its hospitals.
During the volatile year of 2020, Tenet was able to post a profit of $399 million for the full year, which includes provider relief funding. As recovery continues, Tenet posted a profit of $97 million during the first quarter, which also includes federal relief due to the pandemic.