What’s likely driving state challenges of PPACA coverage mandate

The constitutionality of the so-called “individual mandate” of the Patient Protection and Affordable Care Act (PPACA) — the law’s requirement that all Americans have a public or private third party payer covering most of their medical bills starting in 2014 — is under review in multiple U.S. Circuit Courts of Appeal.

Opponents of the mandate — including more than two dozen state attorneys general — contend the law is unconstitutional because it impermissibly forces someone to engage in commerce when they purchase coverage if not covered thorough their employment or a government program.

One of the more interesting arguments raised in the mandate’s defense this week in the 11th Circuit is based on EMTALA — the Emergency Medical Treatment and Active Labor Act of 1986.

Acting U.S. Solicitor General Neal Kumar Katyal noted the rationale behind the coverage mandate is to more equitably allocate the costs of medical care provided for those not privately covered or in a government health program by those who incur them.

“You can walk out of this courtroom and be hit by a bus,” Katyal told the court.  Without medical coverage, he argued, the treating hospital and the taxpayers will have to pay the costs of the emergency care, he added.

Under EMTALA, the hospital is required to assess and medically stabilize that bus accident patient regardless of medical coverage or his/her ability to pay.

Katyal is correct the hospital could end up eating some of the cost of providing the hypothetical bus accident victim’s care.  Hospitals also write off a significant portion of unreimbursed medical care as uncollectible debt or charity care.  That’s in large part why emergency room bills for those paying on their own are so stratospheric.

However, Katyal’s argument that taxpayers also foot the bill is questionable.

In December 2006, the New America Foundation (NAF) estimated that about 10 percent of California health care premiums are comprised of unreimbursed medical costs incurred by those without medical coverage.  The foundation’s study of this so-called “hidden tax” or “cost shift” is significant given that California is not only the nation’s most populous state, but also has more medically uninsured people than nearly all other states.

Bottom line: The burden of uncompensated medical care is borne privately, not by taxpayers.

That point aside, I suspect the real concern driving the challenge of the individual mandate derives from playing it out several years into the future.

Requiring everyone to have coverage may provide a temporary respite for the smallest and most troubled source of medical coverage: the individual market.  It’s already circling the drain of adverse selection. Bringing more individuals into the risk pool expands its ability to spread risk and generate premium dollars to offset rapidly rising medical treatment costs.

However, those rising costs are passed along as higher premiums.  That could well lead to some — most likely people under age 40 or 45 — to conclude they’d be better off paying the penalty for not having coverage and dropping out of the pool.

Then the individual market would be quickly be back on the brink of adverse-selection driven collapse where it stands today.  That in turn could lead the states and/or the federal government to step into the breach with a government run risk pool or by expanding Medicare/Medicaid for those unable to obtain affordable coverage on the individual market.

Either outcome likely has the states worried.  Recession-hammered states are strapped fulfilling their current obligations as well as meeting their share of state Medicaid programs. They probably don’t relish the prospect of maintenance of effort requirements for a new federal/state insurance program that would take the place of a defunct private individual insurance market.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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Frederick Pilot

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