Beyond King v. Burwell


Our current health care system rides on the outcome of King v. Burwell. This landmark U.S. Supreme Court case addresses a vital component of the Affordable Care Act (ACA): tax credits that give millions of low- and middle-income Americans the ability to pay for health coverage. This year, 11.4 million people signed up for private health insurance through state and federal exchanges. If the U.S. Supreme Court strikes down the tax credit provision, approximately 8.2 million people in 34 states risk losing their insurance coverage. As a result, premiums are likely to increase for those who are insured while an estimated $22 billion decrease in spending by uninsured patients could depress the entire health care system. Oral arguments in King v. Burwell begin today, March 4, and a decision is likely by the end of June.

King v. Burwell, however, is not the only case health administrators should follow. Below we’ve summarized other important cases before the U.S. Supreme Court this session. To provide additional context and analysis, Sara Rosenbaum, JD, the Harold and Jane Hirsh Professor of Health Law and Policy at the Milken Institute School of Public Health at the George Washington University, weighs in to explain possible implications for the health administration community.

King v. Burwell

Background: The tax credit provision of the ACA authorizes subsidies to low- and middle-income people who purchase health insurance on state-run exchanges. The federal government set up exchanges in states that failed to create their own. To accommodate residents of these states, the IRS extended tax credit eligibility to people buying insurance on the federal exchanges. The U.S. Supreme Court will decide whether the IRS is authorized to do so, a ruling that has far-reaching implications on the viability of the ACA.

Professor Rosenbaum’s Take: Nearly all the people who are enrolled through an exchange receive subsidies, and a ruling in favor of the plaintiff would mean that millions of people would lose their subsidies. If they lose their subsidies, they would not be able to afford the coverage. Insurance companies would immediately have to raise their rates by almost 50 percent just to stay solvent, and, of course, nobody would buy those higher rates. The insurance industry would pull out of states that do not have subsidies, and you would literally have the insurance market disappear. There would be no individual insurance market left.

For health care providers, the results would be a disaster, particularly for hospitals that have seen extraordinary relief as a result of the Affordable Care Act. If, all of a sudden, there were no Medicaid expansion and no subsidy markets, then all of the gains these hospitals have seen would be reversed. And the same is true for other kinds of providers: for medical practices, for health centers and for the pharmaceutical industry. Any part of the health care industry that depends on insurance as the payment mechanism is watching this case and understands the enormous seriousness of it.

Armstrong v. Exceptional Child Center

Background: The federal Medicaid Act requires states to pay Medicaid providers reasonable rates for their services. Idaho cited budgetary reasons for declining to raise its Medicaid reimbursement rates despite recognizing that reimbursement rates fall below the costs providers incur to care for Medicaid-eligible patients. The Supreme Court will decide whether the Supremacy Clause of the U.S. Constitution, which gives federal law precedence over state law, grants providers the right to sue the state’s Medicaid program under the federal law.

Professor Rosenbaum’s Take: What’s at stake here is the ability of health care providers, hospitals, nursing homes and rural health clinics to go to court. When all else fails and a health care provider can’t get the agency or the state legislature to address the issue and the federal government does nothing, can the health care provider go to court to have the issue examined? It’s not a promise that the health care provider is going to win. It’s just the basic question: Are the courthouse doors open to you?

It’s possible that the court will say that Congress has not specified any ability of a provider to go to court, and the provider will be left potentially with no remedies. It’s not clear how low state Medicaid payment rates could fall, and it’s also unclear whether providers would start to sue the federal government more. If this happens, they would argue that the federal government has essentially allowed unlawful contact to take place and is failing to carry out its enforcement obligations under federal law. But getting the federal government to enforce the law is difficult because of a principle known as prosecutorial discretion. The government has a lot of discretion over whether or not to enforce a law or how to go about enforcing it. This could leave providers and beneficiaries with no real remedy in the case of substandard Medicaid payments. At a time when we have 70 million people on Medicaid, this is a real problem.

For health care providers, the results would be a disaster, particularly for hospitals that have seen extraordinary relief as a result of the Affordable Care Act.

North Carolina Board of Dental Examiners v. Federal Trade Commission

Background: The North Carolina State Board of Dental Examiners is a state agency that has the statutory authority to stop individuals from practicing dentistry without a license. The board sent cease and desist letters to several non-dentists who offered teeth-whitening services in spas and mall kiosks, which had the intended effect of banning anybody but dentists from offering these lucrative teeth-whitening services. The Federal Trade Commission (FTC) accused the board of unfair competition, and the board argued that it was exempt from antitrust laws. The U.S. Court of Appeals ruled that the board is operated by market participants — dentists elect other dentists to the board — so it is considered a private actor that is governed by federal antitrust laws. The U.S. Supreme Court agreed that the board’s actions amounted to illegal suppression of competition.

Professor Rosenbaum’s Take: This is a very interesting case, and there are people who say this is the most important case of the term because of its long-lasting consequences for medical care and health policy.

So, what’s the consequence for the ruling? Just because licensing boards have the ability to regulate medical practice in a state does not mean that they get to do whatever they want. They have to act in ways that clearly further the state’s interest as expressed by the state. For example, a state board introduces restrictions on hospital practices that are done in the name of quality (but didn’t get thoroughly vetted through a rulemaking process), or goes after certain hospitals for violating the board standards. Without a strong regulatory framework, a medical provider cannot assume that that board is acting with state action. So, essentially, this case sets a very high bar for public boards acting with the imprimatur of a state. If you are a state board, you better pay attention to this case and how you conduct your business. It has to be open, transparent, subject to the regulatory process and subject to the oversight process. You can’t just pick off your competitors.

A Look Ahead: Preparing for the Aftermath

While the ruling for North Carolina Board of Dental Examiners v. Federal Trade Commission has been decided, the fates of the Affordable Care Act and Medicaid reimbursement rates hang in the balance in King v. Burwell and Armstrong v. Exceptional Child Center. With the means to treat millions of people and operate thousands of health care facilities on the line, it’s vital that health care administrators understand these cases and plan for the storm ahead.