Archives for September 2011

End of Week Round Up

This week on Health Wolters Kluwer:

BREAKING: Obama Administration Petitions Supreme Court to Review PPACA Case

In a move some called inevitable, the Obama Administration petitioned the Supreme Court of the United States to review the ruling of the 11th Circuit Court of Appeals that found the individual mandate portion of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148)  was unconstitutional. In the majority opinion of that case, Chief Judge Joel F. Dubina wrote that Congress could not:

 “[M]andate that individuals enter into contracts with private insurance companies for the purchase of an expensive product from the time they are born until the time they die….The federal government’s assertion of power, under the Commerce Clause, to issue an economic mandate for Americans to purchase insurance from a private company for the entire duration of their lives is unprecedented, lacks cognizable limits, and imperils our federalist structure.”

The administration’s filing came on the heels of two others Wednesday morning, one from a business trade group and two individuals asking the court to find the individual mandate unconstitutional and inseverable from the rest of the bill, thereby invalidating the entire act; and the second from a group of 26 states that questions the individual mandate as well as the validity of PPACA’s conditions on states’ access to federal Medicaid funds, arguing that this is coercion.

In the petition the Obama Administration argues that Congress was well within its powers to create the individual mandate penalty. They also ask the court to address whether the Anti-Injunction Act bars the pre-enforcement challenge to the individual mandate provision, but do not address the issue of severability. In regards to the individual mandate, the administration argued that it “directly addresses the consequences of economic conduct that distorts the interstate markets for health care and health insurance – namely the attempt by millions of Americans to self-insure or rely on the back-stop of free care, and the billions of dollars in cost-shifting that conduct produces each year when the uninsured do not pay for the care they inevitably need and receive.”

Later in the day the Obama Administration filed a brief asking the Supreme Court not to review the 6th Circuit Court of Appeals decision in Thomas More Law Center, et al.. v Obama which held that the individual mandate “falls within Congress’s power to regulate activities that substantially affect interstate commerce.”

The filing by the administration all but assures that the topic of health care reform will be in the spotlight during the upcoming election cycle, with a decision most likely in June, prior to the November elections.


Great Expectations: CMS Lays Down The Rules For Saving Billions With Medicaid RACs

States now have final instructions on what is expected for their Medicaid Recovery Audit Contractor (RAC) programs, which are required to be in place at the beginning of 2012. The new Final rule, issued September 16 2011, put forth CMS’ expectations for the RAC program, with states expected to be in compliance in just three months. Vice President Joe Biden announced the release of the Final rule, along with revealing more efforts by the federal government to track state progress in reducing improper unemployment insurance payments as well as directing each cabinet secretary to “undertake a waste and efficiency review that will target unnecessary, wasteful and inefficient federal spending.” Vice President Biden also stated:

“Today’s announcements on cutting waste in Medicare, Medicaid and Unemployment Insurance shows that we can make our government more efficient and responsible to the American people. If we’re going to spur jobs and economic growth and restore long-term fiscal solvency, we need to make sure hard-earned tax dollars don’t go to waste.” 

The Medicaid RAC program is modeled after the Medicare RAC program, which HHS claims has already recovered nearly $670 million to date in 2011, almost an 800 percent increase in recovered taxpayer dollars compared to 2010.  The program is projected to save $2.1 billion over the next five years. If the Medicaid RACs fulfil HHS’ expectations, states should receive approximately $900 million in returned payments.

Section 6411 of the Patient Protection and Affordable Care Act (PPACA)(P.L. 111-148), enacted on March 23, 2010, directed states to establish Medicaid Recovery Audit Contractor (RAC) programs by Dec. 31, 2010. States must contract with one or more RACs, which will review Medicaid claims submitted by providers of services for which payment may be made under the state plan or a waiver of the state plan to identify over payments and underpayments.

Medicaid RACs will be required to:

  • (1) hire a minimum of one full-time medical director who is a doctor of medicine or doctor of osteopathy;
  • (2) hire certified coders unless the state determines that certified coders are not required for the effective review of Medicaid claims;
  • (3) educate providers, including notification to providers of audit policies and protocols;
  • (4) require RACs to include customer service measures such as providing a toll-free customer service telephone number; and
  • (5) limit the look-back review to a three-year period; and (6) establish a limit on the number and frequency of records requested by a RAC. States are encouraged to adopt specific program elements that are part of the permanent Medicare RAC program.

They will have the flexibility to design and implement their RAC programs in the following areas:

  • (1) medical necessity reviews;
  • (2) extrapolation of audit findings;
  • (3) external validation of accuracy of RAC findings; and
  • (4) types of claims audited.

The final rule took comments from several organizations under consideration and made changes from the proposed rule, released earlier this year. Medicaid claims that are more than three years old cannot be audited, each auditor must hire a licensed physician as a medical director, states much coordinate their Medicaid RAC activities with other auditors, as RACs cannot audit claims that are already under investigation by another entity, and states must set limits on the number of medical records that RACs can review in addition to the frequency that the RACs can request the records.

 Kathleen Sebelius joined Vice President Biden to discuss the release of the Medicaid RAC Final rule, stating:  

“Today we are building on an already successful program that targets improper payments in our health care programs and recovers those dollars, making Medicare and Medicaid more reliable and responsible. We simply can’t afford to see even one penny of our health care dollars wasted and expanding this program will help us reach that goal.”

CMS has also just released the first transmittal for it’s Medicaid Program Integrity Manual which will provide support and assistance to states as they begin using the RAC program and other program integrity efforts. States are encouraged to use this reference point to understand the goals of Medicaid program integrity, improve communication and transparency of program integrity and educate outside entities of the evolving functions of the new Medicaid Integrity Program.

Yet Another Ruling On The Individual Mandate

A recent ruling by a federal district court in Pennsylvania reflects a slightly different view of the issues in challenges to the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148). So far, appeals courts have differed on three fundamental issues:

  • (1) Do the federal courts have jurisdiction to rule on the validity of the law now?
  • (2) Is the charge to be assessed against individuals who won’t buy insurance a tax or a penalty?
  • (3) Does the requirement that individuals carry insurance whether they want to or not go beyond  Congress’ power under the Commerce Clause  of the Constitution?

The decisions that the courts do not yet have jurisidiction have been based on either or both of two grounds. First, the matter is not yet “ripe” and the challengers do not have standing. In other words, individuals can’t sue because they haven’t been harmed yet.  The law is not yet effective and the challengers may not be affected at all.  Challengers other than individuals cannot sue because they are not affected by the individual mandate.

Second, if the court finds that the assessment for noncompliance with the mandate is a tax, the Anti-Injunction Act (AIA) deprives the courts of  jurisdiction to prevent the enforcement or collection of a tax.  As we discussed recently, the Fourth Circuit ruled that the assessment is a tax under the AIA because the the purpose of the AIA is to allow the government to collect revenue without the obstacle of challenges to the law. The party objecting may always challenge the validity of the charge afterward. A charge may be a tax for purposes of the AIA but a penalty for other purposes.

The courts that have ruled on the Commerce Clause  issue have differed in their view of what constitutes participation in, or an effect on, interstate commerce. If individuals’ refusal to buy insurance is considered a decision to make the rest of us pay for their care when they need it, that decision affects interstate commerce. But if the decision is solely an exercise of the freedom to choose how to spend one’s money, the court is more likely to accept  the argument that Congress cannot require anyone to buy anything.  In the  Eleventh Circuit decision striking down the individual mandate, the court  reasoned that choosing not to purchase insurance was not economic activity, so that a requirement to purchase  insurance compelled people to enter the stream of commerce. The court also noted that the economic effects of the decision, the  shifting of the individuals’ health care costs to others, would not be felt until an unknown time in the future.

In contrast, the Sixth Circuit framed the choice not to purchase insurance as a choice to self-insure, the exercise of one of several options to pay for health care,  affecting the market for health care services in which nearly everyone participates at some point. The court viewed the  individual mandate as an integral part of the regulatory scheme, necessary to counteract the incentive to wait to buy insurance resulting from the guaranteed-issue and preexisting condition provisions.

This most recent district court decision falls somewhere in between. The court did not find the lawsuit premature.  The couple claimed as a present injury the choice not to buy as nice a car as they wanted because they needed to allow for the cost of insurance. The need to change spending habits in order to afford insurance when the mandate becomes effective was sufficient to establish injury. The court had ruled previously that the Anti-Injunction Act did not apply.

As to the relationship to interstate commerce, the court noted that in recent memory, the Supreme Court has struck down only two laws on the ground that they exceeded Congress’ power under the Commerce Clause. Both were criminal laws which contained no “jurisdictional hook”.  One criminalized possession of a gun in schools; the other made violence against a victim because of gender a federal crime. In both cases, the court found that the activity regulated as not economic activity, and the connection between the law and interstate commerce was too tenuous.

All the courts that have considered the issue agree on two points. First, the individual mandate reaches farther than any law previously enacted under the Commerce Clause. Second, none of the Supreme Court’s rulings points inexorably to one conclusion.  Arguably, the only clear limit on the power to regulate interstate commerce is that the activity regulated be economic, connected with commerce in some way. A choice to self-insure or shift one’s own risks to the public is economic activity affecting commerce, according to the Sixth Circuit. However, the district court in Pennsylvania would not go so far; it reasoned that an individual’s  choice not to buy health insurance has no effect on commerce until he or she  obtains health care services and fails to pay. Because the mandate applies before an individual has entered the market for services, the court found, the Commerce Clause does not support it, at least until the Supreme Court rules otherwise.