POLITICO: If mandate goes, will reform unwind?

If mandate goes, will reform unwind?

By: Jennifer Haberkorn
October 5, 2011 12:00 PM EDT

While the impending Supreme Court debate over President Barack Obama’s health law is steeped in politics, a ruling striking down a piece of the health care law would have significant policy implications, too.

If the mandate is struck the justices would have to decide how much of the law would have to come down with it — a complicated calculus at the intersection of law and health policy.

“It would create some very serious policy challenges,” said former Senate Majority Leader Tom Daschle, now a senior policy adviser at DLA Piper and a strong supporter of the law.

The law’s opponents — including the 26 states and National Federation of Independent Business, which filed the suit that the Supreme Court could review this year — say the mandate is so integral to the legislation that if it is struck, the whole law should fall with it.

At the other end of the spectrum, the 11th Circuit Court of Appeals said the mandate could come out of the law by itself.

The final language of the health law never explicitly addressed what should happen if a piece of the law was struck down. The House bill had language called a severability clause, which would protect the bulk of the law. The Senate bill, which ultimately became law, did not. An anticipated conference to merge the bills — and include the clause — never happened.

So that leaves some gray areas. The provisions most at risk are those requiring insurers to accept all comers and not deny patients who have pre-existing conditions.

The Obama administration has argued in some of the lower court cases that those rules should be removed from the law if the mandate is struck down because they’re integrally tied to the mandate. Insurers have made a similar case in court documents.

“The insurers correctly, in my opinion, argue that it’s very hard to get to universal coverage unless you have some form of universal financing,” Daschle said. “That’s what the mandate provides.”

Daschle says he’s “cautiously optimistic” that the court will uphold the mandate, but doesn’t see an exact alternative that can be put in place if it is struck down.

“I don’t think there’s any way to minimize the impact of the loss of the individual mandate requirement simply because of its critical relationship to universal coverage,” he said. “It’s one of the primary goals of this law.”

Some health policy experts have proposed various fallbacks — such as limited open enrollment periods, or late enrollment penalties — as alternatives to the mandate but it’s hard to see getting such changes to the law through the Republican-controlled House.

The health industry may have the most riding on the mandate ruling.

The mandate, while unpopular with many Americans, is perhaps the law’s greatest boon for industry: insurers get millions of more customers, hospitals face fewer uninsured persons in their ERs and drugmakers have more patients buying their medicines.

Take the mandate away, but leave the rest of the law and industry still has to face new costs: insurers will still have to accept all comers and pay new taxes, the device industry will still have to pay new fees, and hospitals face payment cuts.

“There’s $400 billion-plus of industry excise taxes and payments linked to this notion of more people insured and less bad debt,” said Paul Keckley, executive director of the Deloitte Center for Health Solutions. “If you take [the mandate] off the table, the math in the industry gets really, really challenging.”

Keckley said he expects a “very aggressive response” from industry if it appears the Supreme Court could strike the mandate and only the mandate. He called the mandate “the big promise” in exchange for the new costs the industry faces in health reform.

“I think it’s going to get really ugly,” Keckley said, “because they’re paying without the upside of the bargain.”

Keckley said the government’s suggestion that only the insurance provisions are tied to the mandate is too narrow.

“You’re not addressing the issues that the health system — the medical device industry, the pharmaceuticals, the hospital industry — face. You’re only addressing the issues of the insurance industry,” he said.

“There’s a lot of ways to slice the pie,” said Nina Owcharenko, director of the Center for Health Policy Studies at the Heritage Foundation, which argues that the mandate is unconstitutional.

“From our perspective, this law is not going to deliver what it has promised,” she said. “You take out the individual mandate, it just puts the demise probably on faster ground. Lose the individual mandate, then what’s the next shoe to fall?”

For the courts, it’s a legal question and not a policy one. Would Congress have passed the Affordable Care Act without the mandate?

Various trial courts that struck the mandate have dealt with the question in different ways. Judge Roger Vinson in Florida ruled the whole law had to come down.

The 11th Circuit Court of Appeals, which struck the mandate in August, left the rest of the law standing. The judges wrote it was futile to try to divine “legislative intent” and cited the Supreme Court’s strong presumption of severability and judicial restraint.

But it debated the issue of striking the guaranteed issue and pre-existing condition provisions over several pages of its opinion, because they “obviously have significant negative effects on the business costs of insurers because they require insurers to accept unhealthy entrants, raising insurers’ costs.”

The judges ultimately decided that even though the provisions are less desirable without the mandate, there wasn’t enough proof Congress wouldn’t have enacted them without the mandate.

One sentence that could have clarified the issue is a severability clause. The Senate bill that became law doesn’t have the phrase, commonly included in legislation, that declares that if one provision is declared unconstitutional, the rest of the law should be upheld.

It wouldn’t have been a cure-all, but it could have helped the government make the case that only the minimal provisions should be “severed.”

John McDonough, a former aide to Sen. Ted Kennedy, says Democratic aides didn’t put it in the Senate bill because they assumed it could be added in conference and wanted to rob Republicans of a talking point in the meantime. The House did have that language in its bill.

“By the late fall, Senate Republicans had begun to argue against the constitutionality of the individual mandate as a talking point against reform, and Democratic staffers decided to leave out severability to deprive Republican senators of a talking point against the law — Republicans would claim that the inclusion of severability showed the Democrats’ lack of confidence,” he wrote in his book, “Inside National Health Reform.”

The special election of Sen. Scott Brown (R-Mass.) eliminated any chance of a House-Senate conference. House Democrats were forced to accept the Senate bill and make limited repairs through the reconciliation process. But not everything could be addressed under reconciliation rules, and the severability language ended up on the legislative equivalent of the cutting room floor.


Source: http://www.politico.com/news/stories/1011/65213.html


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