On June 28, the Supreme Court ruled 5-4 to uphold most of the Patient Protection and Affordable Care Act, President Obama's health care reform law. The opinion upheld the individual mandate requiring most U.S. residents to have health insurance, while striking down the government's threat of withholding existing Medicaid payments to states that choose not to participate in the expanded Medicaid program called for by the ACA. The decision is a landmark one, and now with a final ruling that the law is constitutional, the health care sector can move forward with more clarity.
I've been thinking about the ACA and how it will affect health IT. Although the ruling did not directly touch on IT, it will define the health care landscape and the amount of money spent on improving it in the future. With that backdrop, I've identified key takeaways from the decision and where I see health IT moving forward post-Supreme Court decision.
EHR Incentive Program
The HITECH Act, embedded in the American Recovery and Reinvestment Act, created the Medicare and Medicaid Electronic Health Record Incentive Programs. The ACA did not modify or remove the incentive program. As a result, even if the Supreme Court had struck down the ACA in its entirety, there would have been no direct effect on the EHR incentive programs.
Those of us working to transform health care through the best use of IT continue walking the path toward meaningful use of EHRs. Due to the high uptake of the EHR incentive programs on behalf of eligible professionals and eligible hospitals, it has become readily apparent to agencies within the government (HHS, CMS and ONC, in particular) that the incentives are integral to expanding the effective use of EHRs, and thus, lowering health care costs, increasing care efficiencies and, ultimately, improving patient care.
ACOs
Accountable Care Organizations are one of the biggest potential cost control mechanisms built into the ACA. The ACA created the Medicare Shared Savings Program, thus allowing CMS to create ACO contracts by which the ACOs would accept responsibility for a set of Medicare patients with a mission to improve quality of care and lower costs. The MSSP allows ACOs to receive a portion of the costs saved by their creation, thereby creating a powerful incentive for participation. This financial opportunity resulted in the creation of 32 ACOs as of December 2011; as of July 10, that number has skyrocketed to 154.
The threat posed by a complete overturn of the ACA worried many in the new ACOs. Normally, a significant law such as the ACA has a severability clause, which states that if any portion of the law is found to be unconstitutional, the rest of it will remain in effect. The lack of this clause in the ACA would have made it extremely easy for the Supreme Court to rule that if the mandate was found unconstitutional -- as many expected it would be -- then the entire law would be invalid. As a result of such a hypothetical outcome, the primary financial incentives under the MSSP for ACO creation would have been struck down.
We should soon see a significant increase in the number of ACOs, as many of them have been in the background, waiting for the court's decision. They can now progress to full implementation without fear of governmental revocation. Similar programs will be created and will underscore the importance of quality care and cost packages emphasizing the importance of accountability. While the MSSP still allows for fee-for-service payments, the message is clear: Health care needs to change its fundamental philosophy to one that centers on the patient, not the payer. The survival of ACOs is one example of that philosophical shift being put into action.
Administrative Simplification
The rules regarding administrative simplification were another significant cost reduction measure in the ACA. In a nutshell, the rules focused on establishing efficient measures for health care stakeholders to streamline their business operations. The rules build upon HIPAA standards and require HHS to create industrywide standards for electronically checking a patient's care eligibility and the status of a health claim. In addition to those standards, the ACA also makes it easier for a health plan to send a payment to a provider electronically by creating standards that allow a health plan to electronically send the payment, as well as the Remittance Advice notice, in the same transaction. HHS recently projected a total savings of $16 billion over the next 10 years, when HIPAA and ACA regulations are fully implemented.
As the court's ruling upheld this provision, the sector will now move forward creating these standards.
If the court had not taken the route that it did, regulations from HHS that took effect Jan. 1 would have been moot. It would have been left up to the market to come up with industrywide operating standards while somehow forcing stakeholders to adhere to them. The cost savings projected by HHS would not be achieved, and health plans, payers and providers would not have been pushed to develop new administrative simplified measures to increase efficiency and improve patient care.
Medicaid
Perhaps the most significant part of the ruling for our purposes dealt with the Medicaid directive to the states. Under the ACA, states are to expand their existing Medicaid programs to include non-dependant adults with incomes of up to 133% of the poverty line; adults would not normally be eligible for Medicaid, which has in the past been open only to children and their parents, people with severe disabilities, pregnant women and seniors. These requirements varied by state with some casting a wider net on which of its citizens qualified for Medicaid. The ACA aimed to reconcile those differences and to provide coverage to more Americans.
The ACA calls for the federal government to pay the entire cost of the new enrollees from 2014 to 2016. After that, Medicaid payments decrease to 90% by 2020, forcing states to carry the additional 10% cost burden. Further, the ACA mandated the removal of all federal Medicaid funding from any state that did not comply with the Medicaid expansion plan.
The question before the court focused on whether this penalty amounted to coercion by the government, forcing the states into the new program. The court held that the substantial financial penalty levied on the states effectively left them with no choice but to join, and thus, infringed on their rights to stay sovereign. In its ruling, the court left the program intact, but threw out the threat of removal of all Medicaid funds. Rather, the court ruled that the states could choose whether to expand their coverage to additional low-income adults or not.
This ruling has immediate effects in health care. The ruling must be placed in a broader context than just the questions answered by the court. With the mandatory Medicaid expansion program eliminated, some states likely will choose not to participate, leaving many non-dependant adults without insurance if they choose to pay the penalty for doing so. It also limits the amount of federal money flowing into the market and diminishes the federal government's involvement in providing care.
Final Observations
The U.S. is extremely unique -- in a good way! It's amazing to see the political machine work so flawlessly. In a single opinion, Chief Justice John Roberts (no relation to author) was able to overcome the overtly political impression many Americans had of the court. In addition to upholding the biggest social policy law in decades and appeasing conservatives by limiting the reach of the Commerce Clause and "federal coercion," Roberts also put his name in the history books as a rational, unbiased thinker
The future of health IT is bright. The Supreme Court has now spoken, and the health IT sector is continuing to grow despite the apparent road blocks. ACOs will continue to receive their funding, the push for administrative simplification and EHR adoption are unimpeded and Medicaid is not diminishing by any stretch. So hang on for the ride; the next couple of years can, and will, see tremendous growth.
Written with the assistance of HIMSS Foundation Institute for e-Health Policy Intern Ryan Minarovich, J.D. Candidate at Santa Clara University School of Law.