Is King v. Burwell a ‘Downward Death Spiral’ for Revenue?
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- King v. Burwell – a critical landmark lawsuit aimed to actively unravel core components of the Affordable Care Act (ACA) – is a heavily trending topic this week as the healthcare industry awaits the Supreme Court’s upcoming ruling.
Three-hundred and fifty state lawmakers and leaders among 33 states have written to both chambers of Congress this month “to leverage the opportunity to free our country” if the Supreme Court rules in favor of the plantiffs.
“Health care is profoundly personal and our constituents have no interest in seeing Washington politicize it once again,” these letters state, addressed to John Boehner, Speaker of the House of Representatives, and Mitch McConnell, Senate Majority Leader. “They want freedom, flexibility and peace of mind knowing they can access affordable care when they need it from providers they choose. They want reforms that will help everybody.”
A subsidy shutdown may not be good news for healthcare providers as coverage benefits hospitals saw on behalf of the ACA may soon dissipate. “As part of the legislative compromise to fund the law’s coverage expansion, the major hospital trade associations agreed to $269 billion in Medicare and Medicaid payment cuts over a decade, including lower reimbursement rates and reductions in payments for providing free care to uninsured patients,” confirm Joel Ario, Managing Director at Manatt Health Solutions, Michael Kolber, Associate at Manatt, Phelps & Phillips, LLP, and Healthcare Attorney and Deborah Bachrach, JD, Partner with Manatt, Phelps & Phillips. “In exchange, hospitals, clinics, and physicians were to receive millions of patients newly covered under Medicaid or federally subsidized commercial insurance,” they add.
What are the greater implications of King vs. Burwell?
In light of the aforementioned news, Susan Feigin Harris, Esquire, Healthcare Partner at Baker & Hostetler, LLP spoke with RevCycleIntelligence.com about King v. Burwell’s overarching context and possible implications regarding what’s next on the healthcare horizon.
Feigin Harris describes her King v. Burwell experience seated behind Justice Scalia last March at the Supreme Court’s oral arguments as her own personal Super Bowl. “I was mesmerized from start to finish,” says Feigin Harris. “Now, we wait.”
Regarding the greater implications of King v. Burwell as a monumental challenge to the ACA, Feigin Harris confirms if tax credits are soon ruled as illegal, Congress and the Administration need to act swiftly to ensure those who have purchased health insurance coverage on a federal exchange remain insured, says Feigin Harris. The GOP has already floated as 4 or 5 solutions should the ruling go to King, Feigin Harris notes.
Because King v. Burwell involves an agency’s interpretation of the law and the associated regulations issued, the manner in which the case is written may largely impact subsidies, Administrative Procedures Act cases, and beyond, says Feigin Harris.
Feigin Harris says if the Supreme Court rules for King, a lack of immediate intervention from either Congress or the Administration conceptually means that individuals who purchased insurance on a federal exchange, such as in her home state of Texas, could lose their subsidies, leading to losses in insurance coverage.
Feigin Harris identified concern regarding what economists have proclaimed an impending “dreaded downward death spiral” resulting from a King verdict.
“Subsidies reportedly account for about 72 percent of the insurance payments for exchange plans. Without subsidies, those individuals who are relatively healthy wouldn’t be able to afford and pay for their health insurance. So, if you’re relatively healthy and you can’t afford health insurance without the subsidies, you’ll probably drop it, which means premiums will rise and there will be more adverse selection,” predicts Feigin Harris. “Those individuals who are very sick who cannot afford to give up their insurance, regardless of whether or not they have the subsidy, will find a way to become insured. The community of people who will be insured will be very sick, leading to higher premiums. It is predicted that insurance premiums could rise over 400%,” she explains.
Within the state of Texas alone, Harris says about a million beneficiaries could potentially lose their insurance coverage. Reimbursement, in turn, may suffer accordingly, Harris surmises.
“The concern for healthcare providers, CIOs, and executives is that you’re going to have a much larger number of individuals who are uninsured coming to your ERs without any ability to pay. The amount of uncompensated care will rise again and we will have solved no problems,“ Feigin Harris states.
Feigin Harris predicts that if such occurs, it will detrimentally set the healthcare industry back. “The healthcare community needs certainty,” she says. “A lot of people have never heard of King v. Burwell, but they will be significantly impacted by the case in coming days.”
“I don’t have the sense that there’s going to be an easy resolution. The American people have a right to look to Congress and say you need to resolve this, but I’m not sure that will come very quickly,” Feigin Harris states.
“Hospitals and physicians would prefer to work with patients who have access to insurance. To the extent that that’s at risk, to the extent that individuals may lose that coverage, it just makes things so much more difficult in terms of just providing services and making sure from a financial perspective, you can continue to be financially viable,” maintains Harris.
Speculation abounds that access to affordable care will soon end under the ACA. A subsidy shutdown would mean over 9 million individuals without coverage will suddenly lose their insurance through the individual market, moving towards a 76 percent decline by next year. Premiums are likely expected to rise by about 50 percent next year as more drop their coverage.
“We have a tendency to forget we’re all paying for care one way or the other,” Harris says. “It’s something we all need to be concerned about.”
