When healthcarebigideas.com was launched with the New Normal Medicaid blog on May 8th, we certainly didn’t contemplate that the COVID-19 pandemic would continue to rage on for the next five months with no end in sight; or that the President and First Lady of the United States would become the latest victims of its spread last week. It is certainly possible that this latest development could cause a delay in either the Senate’s confirmation of the President’s recent Supreme Court nominee or the Supreme Court’s scheduled deliberations over the fate of Affordable Care Act (ACA). However, we believe that neither of those possibilities is likely to occur.

Consequently, Ruth Bader Ginsburg’s death will likely result in a Supreme Court made up of a 6 to 3 conservative majority when it hears arguments in the latest case to overturn the ACA (California v. Texas). This will make it much more likely that the ACA could be struck down. We do not pretend to understand constitutional law or the validity of the technical legal arguments being made to strike down the ACA in its entirety. For those of you interested in a deeper dive into those legal arguments, The Kaiser Family Foundation has provided an understandable summary and timeline of events in the case. 1

However, to borrow from Ruth Bader Ginsberg’s last communication with her granddaughter, it is our “fervent wish” that the Supreme Court will apply basic common sense and will take into account the stated intent of Congress when they make their decision regarding the ACA’s fate. In our view, although it is far from perfect, the ACA has played a central role over the past decade in providing a foundation to support enhanced access to more affordable and high-quality healthcare to all. Since that also reflects our mission, we feel compelled to add our voice to the ongoing debate over its fate.

As of last week, COVID-19 deaths had reached almost 209,000 in the United States. And although over the past five months the economy has partially recovered, with September unemployment data showing continued improvement to a level of 7.9%, there are still 12.6 million unemployed remaining. These levels are more than double the pre-COVID February unemployment levels of 3.5% and 5.8 million unemployed. Absent another stimulus bill which has to date been unattainable, it is very likely that October unemployment levels will increase substantially given that the previous CARES Act required employers who received federal grants or loans to not implement layoffs until October 1.

It has been widely reported that since 2014, 20 million people have obtained health insurance coverage through the ACA, either from Medicaid expansion or insurance exchanges. As we indicated in that initial May blog, Medicaid enrollment and spending growth have peaked in past economic downturns (e.g. 2002 & 2009).2 We have reported past estimates that up to 7 million of the newly unemployed may become eligible for Medicaid. One of the centerpieces of the ACA was the expansion of Medicaid eligibility, which has already resulted over the past decade in adding 12 million newly Medicaid eligible persons.3 If the ACA were overturned, that combined group of up to 19 million people would again become uninsured, thus requiring free care from an already financially vulnerable healthcare safety net.

In the decade since the ACA was passed, 36 states have implemented Medicaid expansion (either through ACA provisions or approved waiver programs); while another 2 states will be implementing Medicaid expansion in 2021. However, we find it both ironic and confounding that of the 18 states who are plaintiffs in the legal challenge to overturn the ACA, half of them belong to the group of 38 states that have either already implemented or will implement Medicaid expansion. They include Arkansas, Arizona, Indiana, Louisiana, Missouri, Nebraska, North Dakota, Utah, and West Virginia.

This illustrates the chaos surrounding the ACA and its various provisions. The latest Kaiser Family Foundation Tracking Poll showed that there was division along partisan lines regarding how the Supreme Court should rule on the ACA.4 Overall, 38% favored overturning the law (including 70% of Republicans), while 53% (including 82% of Democrats) opposed overturning it. However, a strong majority (72%) wanted the provision which provided pre-existing conditions protection to survive; and overall majorities ranging from 51% to 71% supported the other major provisions of the ACA. This helps explain why the federal government, which is not defending the ACA, recently requested that the Supreme Court limit its remedy and not eliminate the entire law.

In our view, the reasons the ACA has been such a lightning rod and has faced such strong opposition throughout its short history have to do with mandates generally and state economics specifically. Public health officials have certainly learned recently that many in the United States are outraged at mandates simply to wear masks to protect their fellow citizens! So, it is not surprising that similar outrage occurred with the ACA’s “individual mandate” to purchase insurance and the related requirement of “minimum essential benefits” for insurance plans. Any one size fits all solution to any problem in this country invites that response.

But the primary reason the ACA is being challenged again relates to state economics. As we have mentioned before, unlike the federal government, state and local governments cannot run ongoing annual budget deficits. Even with the enhanced matching funds (90% match for newly eligible Medicaid recipients) provided under the ACA for states which expand Medicaid eligibility, non-expansion states still fear their share of additional Medicaid funding responsibilities may not be sustainable in the future. The reality is that the current COVID-19 economic crisis has only further supported that position.5

The other arguments ACA opponents have made are that ACA health plans are still unaffordable even with federal subsidies and ACA health plan experience has been negative, which has resulted in a lack of choice in many geographical areas. The truth is that although federal subsidies generally make the insurance premiums affordable for low income individuals, other factors impacting affordability result from high healthcare prices in the commercial market. These factors include:

The most affordable ACA plans typically include large deductible and co-insurance requirements, which results in significant medical debt for low income subscribers.
The healthcare exchange plans that are competing in the commercial individual insurance market tend to be relatively small. As a result, many plans have not had the scale to negotiate favorable rates with providers or withstand large cost outliers which negatively impact profit.

There has certainly been a learning curve since 2014 for all the participants in the ACA health insurance exchange markets, but that should be expected given that the ACA essentially created a new national health insurance market for individuals, for which there was scarce actuarial experience. Despite these obstacles, ACA healthcare exchange enrollment was still 10.6 million in 2019; and according to The Centers for Medicare and Medicaid Services (CMS), there are 175 insurance carriers operating in ACA healthcare exchanges in 2020, while premiums in the federal exchange markets have declined for past two years.6

Some other important ACA provisions have also provided boundaries for insurance company profits and helped introduce more innovative payment methodologies. The ACA required minimum medical loss ratios of between 80-85% of premiums for health insurers. This provision was intended to limit any incentive for insurers to limit or deny medical care and to protect employers and enrollees from unreasonable insurance administrative costs or profits.

This provision has really come into play in 2020, when most elective medical procedures and physician office visits were delayed during the second quarter; and for which many areas remain far below pre-COVID 19 levels. Insurers recently reported second quarter profits which far exceeded the previous year’s performance due to low medical cost ratios. Consequently, many insurers have already started to issue rebates to their enrollees to remain within the ACA’s acceptable medical cost ratio corridor.

The ACA also introduced the Center for Medicare & Medicaid Innovation (CMMI), which is expected to save Medicare $18 billion from 2017-2026. 7 Although some argue that those savings represent a drop in the bucket for a $1 trillion combined federal program, CMMI has significantly influenced how both insurers and providers measure the value they are providing to their patient populations. Given that the Medicare Hospital Insurance Trust Fund is projected to run out of cash reserves by 2026, 8 our view is that every bit of cost savings helps. The fact is that value-based purchasing is gaining momentum and changing the fee-for-service health care financing system will be a multi-year effort.

We will be watching with great interest as the Supreme Court addresses California v. Texas in November. We certainly are hopeful that despite the rhetoric and legal technicalities, they will decide not to throw the baby out with the bathwater.

M.B. Musumeci, The Kaiser Family Foundation, Explaining California v. Texas: A Guide to the Case Challenging the ACA, September 1, 2020
The Kaiser Family Foundation, Medicaid Financing: The Basics, Figure 4, March 21, 2019
R. Garfield and R. Rudowitz, The Kaiser Family Foundation, Eliminating the ACA: What Could It Mean for Medicaid Expansion? Oct. 1, 2020
Hamel Kirzinger Munana & Brodie, The Kaiser Family Foundation, 5 Charts About Public Opinion on the Affordable Care Act and the Supreme Court (Figure 2), September 22, 2020
S. Armour, Coronavirus Pandemic Renews Push for Medicaid Expansion in GOP-Led States, May 11,2020
M. Ollove, The Pew Charitable Trusts, Obamacare Premiums on Federal Exchange to Drop in 2020, October 22, 2019
M. Brady, Modern Healthcare, CMMI nudges providers toward value, but progress is limited, March 14, 2020
T.Barrow and M. Brady, Modern Healthcare, COVID-19 could cause Medicare reserves to run out before 2026, April 22, 2020