How Vulnerable To Challenge Is The Patient Protection And Affordable Health Care Act Of 2010?

Tuesday, March 1, 2011 - 13:29

Editor: Patrick, your background on the Hill as deputy staff director and chief health counsel to the House Energy and Commerce Committee has given you front-row insights into the Patient Protection and Affordable Health Care Act of 2010. King & Spalding has formed a multidisciplinary task force to assist clients in every facet of this legislation. Who are the members of this task force besides yourself and what disciplines are covered?

Morrisey: We have many task force members who are providing assistance to employers and providers regarding the intricacies of the new healthcare reform law. Our firm includes over 200 practitioners who handle different aspects of the business of healthcare. We work soup-to-nuts on employer issues, provider issues, corporate, antitrust, fraud and abuse, litigation, regulatory and strategic matters to help companies succeed in this new environment. Our hallmark is that we connect the dots for companies between all of the varying disciplines of healthcare law. Under this law, it isn't enough to involve an expert in only one particular part of the law - everything is interconnected.

Our professionals include individuals who have experience in virtually every type of healthcare transaction. We have a terrific roster of attorneys with deep healthcare expertise, including a former U.S. assistant attorney general in charge of the Justice Department's Criminal Division, a former U.S. principal associate deputy attorney general who oversaw the Justice Department's criminal and civil healthcare fraud enforcement efforts, the current president of the American Health Lawyers Association, two past presidents and two current directors of the American Health Lawyers Association, the chairman of the Food and Drug Law Institute, a director of the Health Care Compliance Association, two former FDA associate chief counsels for enforcement, a former chief health counsel for the House Energy and Commerce Committee, a committee charged with jurisdiction over Medicare, Medicaid, the FDA, health insurance and public health matters, and a senior investigative counsel for the Senate Finance Committee. In addition to me, the leaders of our task force include Glen Reed, Rick Shackelford, Dennis Barry, Ken Raskin, Gary Eiland and Jon Harris. We have a dynamite team.

Editor: Do you expect the current challenges to the Act will be effective in having it declared unconstitutional by the Supreme Court?

Morrisey: At this point, the legal efforts challenging the individual mandate are gaining steam. While no one can predict with certainty what will happen if the case goes before the Supreme Court, the two district court decisions in Virginia and Florida dramatically increase the possibility that the mandate will be set aside. The more challenging question may be, if aspects of the law are deemed unconstitutional, how, if at all, will the Court sever specific provisions from the base text? For example, if you operate under the assumption that the entire law will not be thrown out, what provisions would likely be struck if the mandate is deemed unconstitutional? It's an interesting and challenging exercise to think through how a court would view the question of severability and which provisions would be vulnerable to deletion. We believe it would be beneficial for companies to think through these issues and contemplate what will happen in the post-lawsuit environment.

Editor: What modifications should be made to improve features of the legislation, such as deregulating the new healthcare exchanges, so that high-deductible and catastrophic coverage can be purchased?

Morrisey: The exchanges should be provided with much greater flexibility to permit alternative benefit packages, such as high-deductible, catastrophic coverage. The current rules will result in a race to the bottom, in terms of plan design, and do not reflect the variable needs that exist within the population. Congress was trying to spread risk across the entire population, but when you micromanage to the extent we have seen under ACA (Affordable Care Act), you lose creativity, flexibility and competitive forces - which are ultimately needed to reduce costs. Exchanges aren't inherently problematic, but the benchmark benefits offered within them must provide more flexibility so that we don't end up with one-size-fits all benefit designs.

Given the overall flaws with fundamental aspects of the law, it would be far preferable to scrap the law outright rather than nibble around the edges. But we may not have that luxury; everything depends upon what happens in the 2012 elections.

If Congress did revise the law piecemeal, there are a number of provisions that could be modified. The full list is too long to include in this article, but here's a start:

First , the tax increases need to be eliminated. We cannot reduce healthcare costs through new taxes. By definition, imposing new taxes on the items and services that are part of the benefit package will increase the costs that are passed on to consumers.

Second , the funding mechanisms for healthcare reform need to be far more sustainable. You can't rob Peter to pay Paul and use Medicare cuts to pay for a brand new entitlement. It doesn't help this new benefit and dramatically limits our ability to bring Medicare into solvency.

Third , the law does precious little to reduce healthcare costs. While increasing access to care is important, failure to reduce costs will only cause insurance premiums to spiral upwards. Among other ideas, any amendments to ACA should include medical liability reform and caps on damage awards.

Fourth, the law dramatically expands the power of government to regulate healthcare. Unfortunately, some of the changes, including the provisions governing medical loss ratios, will likely increase healthcare costs. For example, if plans are incentivized to only provide "medical" services in order to meet the MLR thresholds, then they will likely reduce their investments in fraud and abuse prevention and other mechanisms, which may lower the amount of costs in the system. The MLR provisions need to take into account the importance of non-medical services that provide value to the system.

Beyond these ideas, amendments to ACA should expand the Act's focus on the new payment models designed to reduce costs and increase quality. For example, accountable care organizations (ACOs) hold promise as a model that may increase the integration and coordination of healthcare providers. But almost a year after passage of ACA, we still haven't seen a proposed regulation. Most analysts believe that ACO reforms are moving very slowly, even though there is bipartisan agreement that this approach should be tested more aggressively.

Finally, Congress should reevaluate the new regulatory infrastructure that has been imposed on employers. We should realize that when the administration is required to spin out over 700 waivers in order to prevent employers and labor unions from dropping coverage, something fundamental is wrong with the underlying regulations.

Editor: Can you discuss the enforcement of the Act?

Morrisey: One of the most underappreciated aspects of the new law is that the government will now be involved in almost all facets of the healthcare delivery system. Several hundred pages of the Act were dedicated to reducing fraud and abuse in the healthcare system; these provisions will be rigorously enforced, as the law provides the government with significant new monies to go after problematic practices. This means more agents, more prosecutions, and more subpoenas for companies, placing even greater emphasis on undertaking risk assessments and updating compliance plans now.

One of the other interesting provisions (and one not frequently discussed) is the expansion of the False Claims Act to transactions within Health Insurance Exchanges. Not only does this represent a dramatic increase in the breadth of federal prosecutorial authority, but it will add yet another interesting dimension to large employers' decisions as to whether to directly participate in the exchanges in 2017.

Editor: In the State of the Union message, President Obama noted that there should be limits on caregivers' liability. How do you expect this proposal to be received if submitted to Congress?

Morrisey: While medical liability reform is sorely needed, any meaningful proposal that places caps on damage awards will likely have an uphill path to enactment in the current Congress. The House will likely pass some sort of medical liability reform legislation, but then the bill may end up stalling on the Senate side because backers of tort reform lack the 60 votes needed to overcome a filibuster.

Editor : Tell us something that we don't know about healthcare reform.

Morrisey: The new Center for Medicare and Medicaid Innovation (CMI) established under ACA possesses broad new authority to waive and modify virtually any provision of Medicare and Medicaid law, including any policy dealing with fraud and abuse, benefit coordination, payment amounts for items and services provided under Medicare and Medicaid, and fundamental aspects of how these federal programs are managed. CMI will need to meet certain criteria before it institutes a waiver, but this provision provides the federal government with an almost unprecedented amount of leverage in its healthcare dealings with employers and the healthcare industry. While many entities in the healthcare system are focusing on the new power of the Independent Payment Advisory Board, people should be paying closer attention to CMI. This center may become one of the most important parts of the Department of Health and Human Services' decision-making power in future years.

Please email the interviewee at pmorrisey@kslaw.com with questions about this interview.